Thanks to changes brought on by SECURE 2.0, LIMRA is predicting that what it calls the “in-plan annuity market” will grow exponentially within the next two years.
Bryan Hodgens, head of LIMRA distribution and annuity research, makes the prediction in a new report titled, “Securing the In-Plan Opportunity,” which also calls for annuity providers to step up efforts to educate plan advisors, plan sponsors and participants on the value of in-plan annuities to hasten their acceptance. The research also shows that workers’ need and desire to create a guaranteed income stream within their employer-sponsored retirement savings plans is high.
“The feeling in the industry is that near the end of 2023 and going into 2024, we’ll see greater adoption of in-plan annuities from the larger plans, and eventually the smaller plans will follow after that,” Hodgens said. “Getting retirement plan advisors and consulting firms that advise employers comfortable with in-plan annuities is critical to success.”
LIMRA research suggests that defined contribution (DC) plan advisors need more knowledge about in-plan annuities. Three in 10 advisors believe guaranteed income solutions need simplification for their clients to understand them better. Considering that financial advisors set up 93% of retirement plans, Hodgens noted that the industry should first focus on this group.
Precise and effective education will be essential for the successful adoption of in-plan guarantees. Hodgens suggests the industry should explain to advisors and consultants:
• How the SECURE Act removed historical obstacles for plan sponsors
• How the products will work
• The growing opportunity in the market
Additionally, the industry can educate all parties who would be involved with in-plan guarantees. For employers, help them understand plan design and Safe Harbor guidelines. Provide employees an understanding of how annuities work. Finally, show recordkeepers the proper technology they can invest in to support these plans.
Despite historically low adoption of in-plan annuities to date—LIMRA reports that just 14% of DC plans currently offer this option—the research shows that 70% of workers believe an in-plan guaranteed income solution should be an option in their DC plan.
Less than a quarter of younger workers (under age 50) have a defined benefit plan with the majority primarily relying on DC plans for retirement savings.
“While the need and interest are great, insurance companies still need to figure out how to explain the value of these products to several audiences—plan sponsors, participants, advisors, and consultants—to improve awareness and affect higher adoption rates,” Hodgens said.
Read the full report here: https://www.limra.com/inplanannuities
SEE ALSO:
• Despite Big Concerns, Plan Sponsors Know They Need Lifetime Income Options
• Bonnie Treichel Talks Retirement Income Solutions, New ESG Rule and SECURE 2.0
• ‘Income Blueprint’ Tool Evaluates In-Plan Guaranteed Income Options