Following the passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act in December 2019, the majority of defined contribution (DC) retirement plan consultants, 82%, report that they have gotten more comfortable recommending retirement income options to their clients, according to MetLife’s 2023 Retirement Income Pulse Check study. What’s more, an overwhelming majority of consultants, 93%, have taken some action regarding retirement income options.
“In fact, our study found 60% of consultants say they are likely to consider purchasing an annuity option for themselves, showing they understand the security these solutions offer retirees.”
“Since SECURE 1.0 made it easier to offer retirement income options in DC plans, we’ve seen both consultants and plan sponsors become more comfortable with these solutions,” says Roberta Rafaloff, vice president, Institutional Income Annuities, MetLife. “In fact, our study found 60% of consultants say they are likely to consider purchasing an annuity option for themselves, showing they understand the security these solutions offer retirees.”
HR Technology News: JD.com Included in 2023 Bloomberg Gender-Equality Index
Increasing Activity Around Guaranteed Retirement Income Options
Among the actions consultants have taken, 68% have conducted due diligence/evaluated the guaranteed retirement income options available in the DC market, 63% have met with their clients’ investment committees to discuss the addition of a guaranteed retirement income option, and 48% recommended that their clients consider incorporating a guaranteed retirement income option in their DC plan.
Consultants report plan sponsors are taking action as well, with 56% of consultants stating their plan sponsor clients have conducted due diligence and 55% state their plan sponsors have met with their investment committees to discuss the addition of a guaranteed retirement income option. Four in ten (40%) consultants say their plan sponsors have issued a Request for Proposal/Request for Information from insurance companies/annuity providers.
Potential Obstacles with Newer Solutions
Even though consultants and plan sponsors have taken positive steps in incorporating retirement income options into DC plans, some potential challenges remain. While low adoption rates have traditionally been attributed to lack of interest and negative impressions of annuities, 47% of consultants say the biggest issue that stands in the way of their clients implementing these solutions is that these products are complex and difficult for them to explain.
HR Technology News: Pandemic-driven Work Changes are Becoming Permanent as Competition for Talent Continues
In fact, when asked to characterize the new solutions that have been introduced to the market since SECURE 1.0 passed – many of which are investment options with embedded income – 62% of consultants say they are difficult to understand.
“It may be tempting to offer products with many features to address the various potential needs of plan participants,” says Rafaloff. “But a complex solution may not be successful, creating confusion for plan sponsors and participants. Simplicity should be the guiding principle when looking at these offerings. Immediate income annuities and qualifying longevity annuity contracts (QLAC) are products that tend to be much easier to understand.”
HR Technology News: Sinequa’s Workplace Search Arrives to Transforms Employee Experience
[To share your insights with us, please write to sghosh@martechseries.com]