More evidence of momentum continuing to build for hybrid 401(k)s featuring in-plan guaranteed income and managed accounts options with today’s announcement that Nationwide has made Income America 5ForLife available for managed account programs on its platform.
According to a 2022 Nationwide Retirement Institute survey, seven in 10 plan sponsors are interested in guaranteed lifetime income investment options and nearly half (48%) of participants report they are interested in contributing to one as part of a managed account. Nationwide is seeing this interest translate to greater traction for its suite of in-plan guarantee solutions, leading to today’s announcement.
As in-plan guarantees are not a one-size-fits-all solution, Nationwide now provides two ways for plan sponsors and participants to access Income America 5ForLife, a series of bank-maintained collective investment funds for which Wilmington Trust, N.A. is trustee.
One is Income America 5ForLife in Managed Accounts. Starting this month, Income America is available as an investment option to the managed account programs on the Nationwide platform, starting with Nationwide ProAccount. This provides a new solution for the “do-it-for-me” investor that wants advice on how to invest their retirement plan assets, but needs help in determining an appropriate allocation to a guaranteed lifetime income investment option.
The second way is via the Income America 5Forlife Target Date Series that launched in 2021 and continues to be available. Participants can contribute to or transfer assets into one of these funds, which are a great option for plans and participants looking for a simplified “help-me-do-it” solution built into a target date fund.
According to Nationwide’s 2022 survey, more than half of participants are interested in guaranteed lifetime income investment options as part of a target date fund.
“When the SECURE Act of 2019 opened the door for the expansion of in-plan guarantee solutions, we were among the first to market with a suite of products to help participants protect their assets and convert their savings to income in retirement,” said Eric Stevenson, president of Nationwide Retirement Solutions. “Since then, we have been helping plan sponsors, financial professionals and consultants understand how protected retirement solutions like in-plan guarantees may be a fit for participants’ needs. These efforts are really starting to pay off with the traction in adoption starting to occur.”
Several industry leaders—including American Century Investments, Lincoln Financial Group, Nationwide, SS&C Technologies, Wilmington Trust, N.A., and Wilshire—came together to create Income America 5ForLife, a series of target date portfolios that provide guaranteed lifetime income. Designed to help retirement plan participants save for a more secure future, Income America 5ForLife is an innovative, unbiased, multi-insured, in-plan retirement income solution.
“Like Nationwide, we at Income America believe that all retirees deserve a protected retirement—one that offers a guaranteed stream of income during their golden years,” said Income America President Matthew Wolniewicz. “Designed with the participant in mind, Income America 5ForLife solves for this challenge and is easy for plan sponsors and advisors to implement. We look forward to our continued partnership with Nationwide as they roll out Income America 5ForLife to their participants.”
Columbus, Ohio-based Nationwide has been in the in-plan guarantee market as an insurer for over 11 years. In 2021, the company began introducing a suite of income solutions available through the company as a recordkeeper. Today, the company manages $1.4 billion in-plan guarantee assets for more than 5,500 plans. Overall, Nationwide Retirement Solutions administers nearly 32,000 retirement plans, with more than $165 billion in participant assets as of Dec. 31, 2022, and has over 2.7 million participants in the governmental 457, corporate 401(k) and not-for-profit 403(b) markets.
Interest in in-plan guarantees continues to grow
“The recent economic environment has driven greater interest in solutions that offer protection in retirement—whether that’s providing downside protection or helping ensure participants can turn their savings into a stream of income they won’t outlive,” Stevenson said.
According to Nationwide’s 2022 survey, more than four in 10 employees (41%) would likely roll over retirement savings into a guaranteed lifetime income investment option if they were able to. Plan sponsors reported high levels of favorability (75% private sector and 86% government) and comfort (64% private sector and 73% government) with the addition of guaranteed lifetime income investment options within employer-sponsored retirement plans.
Thanks to changes brought on by the SECURE Act and SECURE 2.0, LIMRA recently predicted that what it calls the “in-plan annuity market” will grow exponentially within the next two years.
“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,” said Bryan Hodgens, head of LIMRA distribution and annuity research. “Getting retirement plan advisors and consulting firms that advise employers comfortable with in-plan annuities is critical to success.”
Hodgens makes the prediction in a 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.
SEE ALSO:
• The Final Frontier in ‘Pensionizing’ 401k Plans Faces Similar Challenges from the Industry’s Past
• Large 401(k) Plan Sponsors Step Up Efforts to Keep Participants In-Plan Post Retirement
• State Street Embeds Annuity in New Target Date Series
• Nestimate Debuts Software Solution for In-Plan Guaranteed Income Products
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.