Engagement and education gaps involving retirement income remain a major concern for plan sponsors within defined contribution plans (DC), finds a recent study by the Defined Contribution Institutional Investment Association (DCIIA).
According to the group’s latest study, “Decision-Maker Voices on Retirement Income: Opportunities and Obstacles,” plan sponsors are seeing low financial literacy and limited engagement surrounding retirement income.
The study, which surveyed 22 plan sponsors in the first quarter of 2025 with $108 billion in DC assets, interviewed employers on the nuances that come with implementing retirement income solutions.
Along with low engagement, plan sponsors acknowledged undergoing competing priorities in their plans like internal resource constraints and navigating committee dynamics. Others worried about legal and fiduciary risks in offering retirement income solutions, and some plan sponsors admitted to foregoing providing structured withdrawal options or actively encouraging in-plan decumulation. Most plan sponsors lack a formal decumulation strategy, reports DCIIA.
A good number of plan sponsors said they struggle to evaluate retirement income due to its complexity and lack of standards, and some had concerns over its liquidity and portability.
Looking ahead, plan sponsors say they expect to see a greater emphasis on lifetime income options in 2025 and 2026, and many are monitoring how their peers react and evolve to the product. While progress is likely to be gradual, momentum will build as employers share their experience in offering the feature, DCIIA reports.
“Plan sponsors appear most comfortable with solutions that emphasize personalization, flexibility, and optionality – balancing simplicity, security, and participant choice,” DCIIA researchers write. “Continued movement in this space may depend on greater peer adoption, accessible education and practical evaluation frameworks to guide decision-making.”
It’s a similar sentiment that panelists reiterated at the National Association of Plan Advisors (NAPA) 401(k) Summit in Las Vegas last week. In a panel examining low adoption on retirement income solutions, experts touched on the future of the feature in DC plans.
Bonnie Treichel, founder and chief solutions officer at Endeavor Retirement, along with Jeffrey Gratton, a senior vice president and managing director for Institutional Retirement at SageView Advisors, anticipate that SECURE 2.0 safe harbors will incentivize plan sponsors to adopt the solution with added protection.
“The safe harbor gives us protection and a form of liability if a set of conditions are met,” said Treichel during the panel.
DCIIA plans to further its research with a nationwide quantitative study of plan sponsors. This follow-up will examine barriers to retirement income adoption and include next steps for employers wanting to grow participation, and is expected to be released in Q3 2025.
SEE ALSO:
Despite Interest in Lifetime Income Options, Plan Sponsors Lag Behind
Retirees Prefer Spending Lifetime Income Over Savings
Plan Sponsors Focus on Retirement with Lifetime Income
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.