Nearly half (45 percent) of all plan sponsors, and 55 percent of 403b providers (55 percent), say the passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 increased their interest in offering in-plan guaranteed lifetime income options, but there is an opportunity to educate plan sponsors on the legislation, as just half say they are familiar with the legislation, according to the recent TIAA Retirement Insights Survey.
Among plan sponsors who say they are familiar with the SECURE Act, many are still unfamiliar with specific provisions of the bill that can improve access to in-plan lifetime income solutions, including safe harbor protections (56 percent), annual lifetime income disclosure requirements (54 percent), and the provision that allows for the portability of annuities for participants (53 percent).
“It’s understandable that amid more than a year of economic uncertainty, plan sponsors would shift their focus toward meeting the immediate, day-to-day financial needs of their employees over longer-term savings goals,” said Doug Chittenden, Head of Client Relationships at TIAA. “However, there is a surging interest in guaranteed lifetime income in retirement – one that continues to trend upwards as both plan sponsors and participants view retirement savings as more than just an accumulation vehicle for getting to retirement – and an opportunity for plan sponsors to familiarize themselves with available in-plan guaranteed lifetime income options and SECURE Act provisions ahead of further retirement legislation likely to come later this year.”
More 403b providers than 401k providers are already familiar with in-plan guaranteed lifetime income options (73 percent v. 59 percent) and the differences between institutional and retail annuities (68 percent v. 50 percent). Plan sponsors who currently offer access to secure, guaranteed lifetime income consider them highly valuable for employees (86 percent), and 71 percent think the average employee would be interested in a lifetime income annuity. Among plan sponsors who say participants would not be interested, 55 percent say it’s due to a lack of understanding about the products.
As interest in guaranteed lifetime income grows, plan sponsors should revisit SECURE Act provisions and plan designs.
While the SECURE Act made it easier to include guaranteed lifetime income options in retirement plans, the Securing a Strong Retirement Act – often referred to as “SECURE 2.0” – is poised to implement further provisions that can help Americans save for retirement. Ahead of this legislation, plan sponsors should consider reviewing their plan designs to include:
Any guarantees are backed by the claims-paying ability of the issuing company.
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