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NOW: Just 7.3% of plans offer in-plan income products that guarantee monthly income, according to this year’s PLANSPONSOR DC Survey, while 3.6% offer in-plan income products that guarantee a base benefit, and 5.7% offer an in-plan income product that does not provide guarantees. Only 2.6% facilitate access to an out-of-plan annuity purchase/bidding service.
“There’s a dialogue about retirement-income products, but not much activity in terms of sponsors moving toward including these products in their plan,” says Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services in Baltimore.
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FUTURE: Many plan sponsors likely will look at alternate ways to help participants with retirement income. “With longevity increasing and people working longer, we anticipate older participants will stay in their plan,” says Jeanne Thompson, senior vice president at Fidelity Investments in Boston. “With that coming down the pike, more sponsors are looking to a ‘through’ glide-path strategy for their target-date fund.” A retired participant could then periodically withdraw money from the plan, if plan rules allowed.
A managed account with a drawdown feature that generates monthly income also is gaining traction among sponsors as an investment-menu addition, Borland says. Sponsors perceive that menu option as posing less fiduciary risk, she says.
“Compared with annuities, managed-drawdown funds feel like a natural extension of what is already in place in their plan,” she adds.
And plan design can help facilitate access to regular income in retirement. “More and more plans are implementing installment payments for retired participants, which are on a fixed schedule,” Borland says. “And some plans offer partial withdrawals, so people can get their money on an ad hoc basis, as [they] decide they need it.”