As Joseph Ready, EVP, Director of Institutional Retirement & Trust, Wells Fargo, pointed out to attendees at PLANSPONSOR’s National Conference, retirement plan participants really like the concept of contributing to the plan and having that immediately translate to an income stream. However, there is confusion on how retirement income products work and how to translate their value.
For sponsors, there is concern about credit projection, cost and transparency, and portability for participants and among providers if there is a change in providers, Ready said. Providers are concerned with crating uniform recordkeeping and portability standards.
Immediate income annuities are more flexible, according to Jody Strakosch, National Director, Retirement Products-Strategic Alliances, MetLife. At retirement participants can convert assets to a guaranteed income stream and choose to cover their spouses, a cost of living adjustment, a premium refund, and partial annuitization – converting only some of their balances to a guaranteed income stream.
Strakosch contends a trial option would be a good idea, where participants are defaulted into an income stream for 24 months then have the option to opt out if desired. She also advocates using retirement savings for longevity insurance. At retirement, a portion of a participant’s balance would be used to purchase a preferred income annuity that would be paid at a later date.
James A. Lyday, Senior Vice President, Distribution, Prudential Retirement, told attendees that products that kick in at the time of retirement do not address the problems with savings accumulation. He advocates a guaranteed minimum withdrawal benefit within investment options which address both the accumulation and decumulation phase of retirement savings.
No matter what the retirement income solution is for retirement plan participants, Jim O’Shaughnessy, Sheridan Road Financial, says there needs to be a level fee structure and transparency among all products. In addition, he notes that an open architecture platform behind a retirement income product will aid in portability.Audio of the panel presentation is here.