Watson Wyatt found that nearly one in four employers (22%)
that sponsor DC plans currently offer an annuity as a distribution option, and
10% of those who do not offer one are considering adding it, according to a
press release. The survey found that the main reasons plan sponsors cited for
not offering an annuity were a lack of participant demand (56%) and
administrative complexity (36%).
“Annuities in 401(k) plans were rarely discussed a
few years ago,” said Robyn Credico, a senior retirement consultant at
Watson Wyatt, in the press release. “But in the recent economic downturn,
employees without traditional pension plans could not retire because their
401(k) balances were decimated. With this weakness in 401(k) plans now exposed,
more employers are exploring ways to minimize their employees’ exposure to risk
— including the use of annuities.”
The survey was conducted in March and April 2009, and
included responses from 149 employers.
Earlier this month, the Department of Labor announced that it will explore steps it can take to encourage employers to offer lifetime annuities or similar lifetime distribution options in their defined contribution (DC) plans (see DoL Set to Issue Annuity Project RFI).