The SECURE Act could have a significant impact on retirement plan participants’ access to guaranteed lifetime income options, according to a study by TIAA. Forty-five percent of plan sponsors, including 55% of 403b providers say the act increased their interest in offering these options to participants within their retirement plans.
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Advisors have an opportunity to be powerful partners to plan sponsors, as only half reported being familiar with the act, and those who were familiar were still fuzzy on major elements, such as safe harbor protections (56%), lifetime income disclosure requirements (54%) and annuity portability (53%).
TIAA surveyed over 1,000 plan participants and over 500 sponsors, evenly split between 403b and 401k providers, for the report. The survey was conducted Oct. 26-Nov. 5, 2020.
“It’s understandable that amid more than a year of economic uncertainty, plan sponsors would shift their focus toward meeting the immediate, day-to-day financial needs of their employees over longer-term savings goals,” Doug Chittenden, Head of Client Relationships at TIAA, said in a statement.
Chittenden noted that a retirement plan is more than just a savings tool.
“There is a surging interest in guaranteed lifetime income in retirement—one that continues to trend upwards as both plan sponsors and participants view retirement savings as more than just an accumulation vehicle for getting to retirement—and an opportunity for plan sponsors to familiarize themselves with available in-plan guaranteed lifetime income options and SECURE Act provisions ahead of further retirement legislation likely to come later this year.”
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Just over half of sponsors already offer in-plan guaranteed lifetime income annuities, TIAA found, including 79% of 403b providers and 44% of 401k sponsors. Eighty-six percent believe employees find them extremely or very valuable.
Over a third of respondents said that helping participants save enough for retirement was the biggest influence on plan design. However, there’s room for improvement on features like automatic enrollment and automatic escalation. Just under half of plan sponsors automatically enroll participants, and 43% automatically escalate their contributions.
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