PLANSPONSOR Roadmap: Retirement Income Options in DC Plans—Are They Really Needed?

Implementing a retirement income solution in a defined contribution plan is a long-term governance decision that has yet to be made, but is on the minds of, many plan sponsors, according to panelists at the 2026 PLANSPONSOR Roadmap session, “Retirement Income Options in DC Plans—Are They Really Needed?”

During the first session of PLANSPONSOR’s Retirement Income Livestream Series, experts discussed how the industry’s perceptions of retirement income have developed, and what considerations plan sponsors should make when evaluating offerings for their participants.

Sponsors should choose products that take a “do no harm approach,” said Craig Maalouf, the managing director of institutional defined contribution at Nuveen. Any product plan sponsors consider should have fees that are the same—if not lower—than those of a traditional passive target-date fund series.

Shift From ‘Obligation’ to Option

Maalouf said that when the DC industry first began discussing retirement income, plan sponsors had a perception that they would need most, if not all, of their participant base to utilize the benefit. Now, according to Maalouf, sponsors are thinking about offering retirement income without feeling pressure for participants to use it.

“If we know anything about DC participants, it’s that inertia tends to win,” Maalouf said. Despite participant interest in having a predictable stream of income, he said, “the reality is that the majority of [a] participant base probably won’t take the income benefit.”

John Bartlett, director of retirement services at CFS Investment Advisory Services LLC, said the industry is largely still in the stage of discussing, but not as much adopting, retirement income products. Bartlett said that several years from now, however—once the industry has a better understanding of the products and technology is available to show participants how their contributions affect their payouts—adoption could be more widespread.

According to Maalouf, plans that do not offer retirement income products often say they have not added an offering because their participants are not asking for them. Countering, however, Maalouf said that participants may demonstrate a need for a predictable stream of income but simply not know of a product that could deliver what they are looking for.

Retirement Income as a QDIA

Maalouf said that to have any impact on participants, a solution should be offered as a default. However, the income benefit should be “secondary” to the qualified default investment alternative, he says—the primary goal is for the sponsor to choose a “good default,” such as a target-date fund. Then, the income portion of it can be activated if the participant chooses.

Sean Kelly, the moderator of the session and a senior vice president and financial adviser at Heffernan Financial Services, added that many retirement solutions have features that do not “turn on … unless a switch is flipped.” Kelly said a QDIA that incorporates retirement income could behave like a traditional TDF but with the option for participants to activate an option for retirement income.

In deciding which products to offer participants, Maalouf said that the best method for sponsors is to first understand the spectrum of offerings available. At the same time, a sponsor should consider the plan’s objectives and participants’ needs.

Danielle Kelso, a senior institutional solutions consultant at Allianz Life Insurance Co. of North America, said she has observed plan sponsors generally wanting to “dig deeper” and learn more about the retirement income solutions available. She explains that understanding the difference between guaranteed products—which provide retirement income that a participant cannot outlive—and non-guaranteed products, which offer no such assurance, is a good first step.

On the non-guaranteed side, offerings like systematic withdrawal programs and managed accounts with payout features can help participants determine how much to withdraw from their savings each year, Kelso said. Theoretically, however, retirement income could run out if a participant spends all their retirement savings.

Annuities are the most prevalent guaranteed solution that sponsors offer, Kelso said. Some require annuitization of some of a participant’s account balance—which involves converting a portion of a balance into an annuity that makes a stream of income payments guaranteed to last as long as the participant lives. That feature could require the participant to cede access to some or all of their underlying account value. Other solutions, such as guaranteed lifetime withdrawal benefits, allow a participant to retain access to their account value both before and after income payments start.

“Regardless of the type, the goal of retirement income is to provide that steady stream of payments … that helps participants prepare for life after their last paycheck,” Kelso said. She recommended plan sponsors start conversations with their recordkeepers and advisers about the retirement income options available to them, as well as which fit their plan the best.