Most Plan Sponsors Agree Core Purpose of DC Plans is to Provide Income During Retirement
September 07 2016 - 3:31PM
Business Wire
~ MetLife’s 2016 Lifetime Income Poll
Reveals Plan Sponsors Want More Regulatory Clarity to Make
It Easier to Offer Guaranteed Income Solutions ~
A large majority of plan sponsors (85%) agree that the core
purpose of a defined contribution (DC) plan should be to serve as
an income source during retirement, according to the MetLife 2016
Lifetime Income Poll, released today. This represents a subtle but
significant sea change from the 9% of plan sponsors in a 2012
MetLife study who believed that the primary focus of their DC plan
was to provide retirement income, as opposed to retirement
savings.1
The Lifetime Income Poll gauged plan sponsors’ familiarity with
– and knowledge about – regulatory developments by the U.S.
Departments of Labor and Treasury to strengthen retirement security
among U.S. workers; nine in ten plan sponsors (94%) are familiar
with regulators’ lifetime income efforts. The full report examining
these findings is available at: metlife.com/LifetimeIncomePoll.
“No longer can DC plans exist solely as retirement savings
plans,” says Tim Brown, senior vice president and head of Life
& Income Funding Solutions with MetLife. “The core purpose of
today’s DC plans must be recast to move beyond retirement savings
to retirement income, by enabling plan sponsors to provide the
education, tools and solutions to help participants make their
savings last a lifetime.”
“Plan sponsors are signaling that they are ready to reframe
their DC plans to focus on lifetime income and provide their
participants with solutions to help ensure successful retirement
outcomes,” says Roberta Rafaloff, vice president, Institutional
Income Annuities with MetLife. “However, it’s also clear that
further regulatory clarity from the DOL and Treasury would make it
easier for plan sponsors to offer these solutions.”
The Poll found nearly all plan sponsors (96%) agreed that it
would be helpful if DC plan account balances were required to be
communicated as lifetime income – in addition to the total account
balance – on benefit statements. A nearly equal number of plan
sponsors (92%) agree that it is important for the DOL to provide a
workable safe harbor for annuity carrier selection criteria for
individual account qualified plans in order to make it easier for
plan sponsors to include income annuities in their DC plans. In
determining the adequacy of the solvency of a potential annuity
provider for their DC plan, 76% of plan sponsors surveyed would
prefer to be permitted to rely on certifications from the annuity
provider based on the regulatory process carried out by a state
insurance commissioner, rather than to conduct the solvency due
diligence process themselves as part of their regular due diligence
process for plan providers.
“Today, only six percent of plan sponsors say that their 401(k)
plan includes a guaranteed lifetime income option,” added Rafaloff.
“This number could rise exponentially once the DOL completes the
work on an updated safe harbor rule. Two-thirds of plan sponsors
whose plans do not currently include a guaranteed income option
reported that they would be at least somewhat likely to make income
annuities available for DC plan participants once the rule is
announced.”
Perspectives on DC Plan Design
In looking at DC plan design, plan sponsors overwhelmingly
recognize the importance of simplicity. Nine in ten plan sponsors
(90%) believe that it is in the best interests of plan participants
to keep plan design changes simple, since complexity, such as too
many choices and features, often leads to participant inertia.
Connected to this goal of simplicity, 58% of plan sponsors do not
believe that withdrawal solutions with minimum guarantees are easy
to understand for the average DC plan participant.
“Guaranteed lifetime income options in DC plans should be
simple,” adds Brown. “Adding complexity and features that
participants will not use, but which add costs, will not lead to
successful outcomes. Offering solutions, such as an immediate
income annuity or a qualifying longevity annuity contract (QLAC),
provide participants with a simple way to convert a portion of
their savings into reliable income.”
When asked about their approach to retirement income, nearly
eight in ten plan sponsors (79%) think that allowing plan
participants to take a partial lump sum and a partial annuity from
a DC plan is preferable to a plan design where participants must
take their entire account balance as either a lump sum or
an annuity. In addition, the Poll found that nearly three-quarters
of plan sponsors (72%) agree that offering only lump sum or systematic withdrawal
distributions may not always be in the best interest of plan
participants.
About the Study
The MetLife 2016 Lifetime Income Poll was fielded May 17-23,
2016. MetLife commissioned MMR Research Associates, Inc. to conduct
the online survey in cooperation with Asset International, Inc.
There were 212 DC plan sponsors who participated in the survey from
among the Fortune 1000TM companies, as well as the next largest
2,000 companies by DC plan asset size.
About MetLife
MetLife, Inc. (NYSE:MET), through its subsidiaries and
affiliates (“MetLife”), is one of the largest life insurance
companies in the world. Founded in 1868, MetLife is a global
provider of life insurance, annuities, employee benefits and asset
management. Serving approximately 100 million customers, MetLife
has operations in nearly 50 countries and holds leading market
positions in the United States, Japan, Latin America, Asia, Europe
and the Middle East. For more information, visit
www.metlife.com.
1 MetLife Retirement Income Practices Study, July 2012
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version on businesswire.com: http://www.businesswire.com/news/home/20160907006738/en/
MetLife, Inc.Judi Mahaney, 212-578-7977jmahaney@metlife.com
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