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In-Plan Income Is Crucial for DC Plan Success

An informative Issue Brief publication from the IRIC outlines ways DC plans can incorporate effective “de-accumulation” option. 

By John Manganaro editors@plansponsor.com | September 15, 2016

The Institutional Retirement Income Council (IRIC), a non-profit think tank for the retirement income planning industry, released a new issue brief on adding distribution options to defined contribution (DC) retirement plans. 

The paper, “The Evolving DC Plan – from Accumulation to De-accumulation,” addresses critical questions plan sponsors often ask and need to answer when evaluating whether to add distribution options to their DC retirement plans.

“With DC plans becoming the primary vehicle for employees to secure their retirement, today’s employees have a greater demand for features that can help them not only to save during their working years, but also to draw retirement income after they stop working,” IRIC explains.  “To help meet that demand, growing numbers of employers are considering adding various distribution options to their plans.”

According to the IRIC analysis, the most common options other than a lump-sum distribution are installment payments over a pre-determined period of time, periodic withdrawals without a fixed payment schedule, and an annuity. Some plans have found effective ways to implement these strategies, IRIC finds, but many more are not doing enough to ensure participant success on the back-end of the retirement savings effort.

“De-accumulation strategies are the natural next step in the evolution of retirement plan offerings,” suggests Robert Melia, vice president, product development, Retirement Plan Services, Lincoln Financial Group, and an IRIC adviser who co-authored the brief.  “While adding de-accumulation options can be beneficial to both plan sponsors and employees, the process of evaluating whether to offer one and which options make the most sense for an organization and their plan participants requires careful consideration.”

The IRIC issue brief provides answers to nearly a dozen frequently asked questions that can lead plan sponsors to a practical implementation of adding certain distribution options to a DC plan. The full Issue Brief is available online at http://iricouncil.org/thought

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