It’s not like they’re making it easy.
Many employers want to provide 401(k) retirement plans for employees to help them save towards an affordable quality of life in retirement. Yet the lawsuits, fees and the fact that it’s often their only source of retirement savings aren’t helping.
Neither is the “difficulty in identify retirement income solutions into which their participants may transition savings,” according to a new study from research and consulting firm Corporate Insight.
The New York-based firm interviewed more than 150 plan sponsors about retirement income solutions. Shockingly, they found limited number of plans are offering retirement income solutions
“While 64 percent of plan sponsors state that it is a high priority to implement a retirement income solution, only 16 percent currently have one in place,” writes analyst Keith Horbert on the Corporate Insight blog.
This massive disconnect stems from a lack of availability of sufficient one-size-fits-all solutions, solutions being too costly for participants, sponsors waiting on in-plan safe harbor before feeling comfortable to proceed and the solution being too complicated to explain to participants.
However, this lack of retirement income solutions may actually result from sponsors not believing there is sufficient participant interest in a solution: of plans without a retirement income solution, only 26 percent believe participants would have interest in one.
Construction of a Retirement Income Solution
“Sponsors are generally unsure of the best way to implement income solutions,” Horbert adds. “Survey results indicate in-plan solutions (41 percent) and a combo of in-plan and out-of-plan solutions (35 percent) are the most desirable. Out-of-plan solutions alone (14 percent) are highly undesirable, but plans with an asset size of more than $10 billion strongly prefer them (31 percent). “
Those currently with a retirement income solution in place more frequently considered in-plan solutions (55 percent), he concludes.
“Specific investment options are even more of a mixed bag: while 25 percent have considered a managed account with a payout option, the remaining options participants expressed interest in (in-plan annuities, out-of-plan solutions, combo in-plan/out-of-plan and annuities with a GMWB) all received similar interest (18 percent).
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
