Over the past 20 years since the rollout of the Pension Protection Act of 2006, workplace retirement plans have made major inroads on three major challenges: Auto enrollment which significantly increased employee participation in plans; Auto escalation boosted savings rates; and QDIAs helped ensure participant investments were properly diversified.
Scott Colangelo, Chairman and Managing Partner at Prime Capital Financial, is on a mission to “close the loop” on solving the last of four key retirement plan challenges by helping participants turn 401(k) plan savings into a dependable stream of retirement income.
During a “fireside chat” keynote session Tuesday as part of Prime Capital Retirement’s annual Qualified Plan Fiduciary Summit in Dallas, Colangelo was joined by American Retirement Association CEO Brian Graff, where one of the main topics discussed was increasing the utilization of in-plan guaranteed income solutions as a way to “close the loop.”
Colangelo noted that relatively few companies—and retirement plan participants—have adopted in-plan guaranteed income solutions to date, but it may only be a matter of time.
“In my mind, it’s sort of like target-date funds. Target-date funds took a while for people to generally accept them,” he said, but eventually as they became better understood and a default investment, “tidal wave of money went into them.”
Graff noted that the 401(k) is a wonderful savings plan, but it’s not a retirement plan—as in participants are left to fend for themselves when it comes to transitioning from saving for retirement to spending that savings in retirement.
“There’s no plan for retirement when you get there. DIY for participants when they get there is not the easiest thing for them to figure out,” Graff said to the room filled primarily with plan sponsors.
He added that TDFs eventually became so popular because over time everyone came to understand exactly what they were—plan sponsors, HR people, and of course participants.
“The problem with retirement income products right now is no one understands how they work. Literally not a single product in the marketplace is the same as another one,” Graff said. “Until the industry gravitates to a standard of some kind, maybe one that’s guaranteed and one that’s not, the confusion in the marketplace is going to inhibit adoption.”
Graff brought up the oft-cited example of what happens with too many choices. “If you have too many options on the menu, it freezes participant behavior. Same thing with plan sponsors. If there’s 100 different variations of something, all it’s going to do is lead to confusion. It also makes it very hard to do comparisons,” Graff said. “So we owe it all to you as an industry to figure out a path that we can all get behind that is relatively simple.”
Graff added that everyone follows the same standard, that means the solutions are compatible. If a participant switches jobs, and the new employer has the same standard but with a different manufacturer, it will be easier to roll it over to the new plan.
“That, in my opinion, is the only way we’re going to get to a significant pickup rate along the lines of what we saw with target-date funds,” Graff said.
Progress is being made on the ability to compare solutions front.
A new industry resource intended to provide a framework for helping retirement plan advisors, plan sponsors, consultants and fiduciaries evaluate retirement income options debuted recently from the Institutional Retirement Income Council (IRIC) and the SPARK Institute.
The Defined Contribution Retirement Income Solutions Evaluation Framework aims to educate on the full range of retirement income solutions available in the DC marketplace. The Framework provides standardized, side-by-side data on retirement income products from a wide range of leading providers, helping retirement industry professionals make informed comparisons of product structures, fee models, guarantee features, liquidity options, and portability aspects.
While the SECURE Act and SECURE 2.0 have significantly expanded the legal and regulatory options for plan sponsors to add retirement income choices to their DC plans, IRIC and SPARK Institute say adoption has been slow partly because plan fiduciaries, their advisors, and consultants lack a consistent, objective framework for comparing the available solutions.
With an increasing ability to make these types of comparisons, meaningful progress in adoption of in-plan guaranteed income solutions may be at hand.
No doubt Prime Capital’s Colangelo would like to see that, as during this week’s QPFS and in a recent LinkedIn post he emphasized that now is the time to work on increasing adoption and closing that loop while not forcing anything on participants.
“Our organization’s belief is that we as plan sponsors and advisors need to close that loop and provide guaranteed income at a certain age,” Colangelo said. “Our thought behind it is, you get them in, you get them saving enough, invested properly, and then you guarantee their income for life. Then, you’ve sort of closed that loop. You can put your head down as a plan sponsor and say, ‘I did everything, and in all four scenarios, they could opt out.”
Plan sponsor interest—and potential payoff
Despite the relatively low adoption to date, many surveys show plan sponsors express growing support for lifetime income solutions.
The recently released 2026 Lifetime Income Poll from MetLife found that 90% of defined contribution plan sponsors believe the core purpose of a DC plan “should be to serve as an income source during retirement.” Another 59% think 401(k) plans should offer lifetime income at retirement, and 54% support defaulting a portion of savings into guaranteed income.
While an increase in plan adoption of lifetime income tools won’t happen overnight, Metlife’s head of Institutional Income Annuities Roberta Rafaloff told 401(k) Specialist findings like this show a notable shift among plan sponsors that could drive future implementation. “Sponsors increasingly recognize the gap between saving and spending. As platforms and solutions evolve, and sponsors gain confidence in offering these solutions, we expect adoption to increase.”
And that adoption could really pay off for participants. A recent BlackRock whitepaper found 401(k) participants who embed a guaranteed lifetime income solution within their target-date fund could see an average 22% increase in spending power.
The central finding that adding the guaranteed input component—not higher savings—can effectively reshape how much participants can spend in retirement is significant. By converting savings into “spendable income,” participants spend more confidently instead of underspending out of fear of running out of money.
SEE ALSO:
• Plan Sponsors Want Retirement Income Support in SECURE 3.0
• IRIC, SPARK Institute Launch Retirement Income Evaluation Tool
• Lifetime Income Boosts 401(k) Spending Power by 22%, BlackRock Finds