Sponsors, Participants Warming Up to Guaranteed Income Options

A study found an increase in the number of retirement plan participants electing an in-plan guaranteed income option.

LIMRA Secure Retirement Institute calculated that 3 million participants have access to an in-plan income guarantee through their employee-sponsored retirement plan in 2014, a 32% increase from 2013.   

In addition, there was a 24% rise in the number of participants electing an in-plan guarantee, to reach 71,300 in 2014. In 2014, the number of retirement plans offering in-plan guarantees grew by 41%, totaling 33,500, and more than 132 billion in assets are in plans that offer an in-plan guarantee, up 27% compared with 2013.

The study found small plans (with less than $10 million in assets) are most likely to offer in-plan guarantees. In 2014, 31,000 small plans, 1,900 mid-size plans ($10 to 199 million in assets), and 80 large/mega plans ($200 million and more) offered in-plan guarantees to their workers. Smaller plans are more likely to offer in-plan income guarantees because the early in-plan guarantee products were developed by life insurers, which tend to be in the small and mid-size markets, LIMRA says. 

Total assets covered by an in-plan guarantee reached $3.6 billion, a 26% increase over last year. The average amount covered per participant is $50,000.

Prior LIMRA Secure Retirement Institute research reveals that consumers are most concerned about having enough money to last throughout their retirement. Eight out of 10 U.S. workers believe employers should provide ways to convert savings into retirement income. Younger workers are particularly interested in this option, with 90% of workers ages 18 to 34 saying they somewhat or strongly agree that employers should provide avenues to convert savings into income at retirement.

A guaranteed lifetime withdrawal benefit (GLWB) and deferred income annuities (DIA) are the two types of in-plan guarantees currently sold in retirement plans, according to LIMRA. These products allow participants in retirement plans to protect some of their savings to provide future retirement income while they are still working and contributing to their plans.