SURVEY SAYS: Are Participant Concerns Keeping You From a Retirement Income Option?

August 18, 2011 ( - The Institutional Retirement Income Council (IRIC) has, in a new issue brief, stated why it believes plan sponsor concern about an adverse employee reaction to retirement income products is unfounded. 

Now, you can read that report yourself (see Report Encourages Adoption of Retirement Income Solutions) – but this week I asked readers what they thought of that premise – and if participant response (or fears about same) played a role in their decision. 

With regard to the accuracy of that premise – perspectives were split, though I think it’s fair to say that a plurality of this week’s respondents were inclined to agree with IRIC.  Just under a third (31%) said they thought the concerns were unfounded, while another 9.5% were willing to go so far as to say they KNEW that was the case.

As it turns out, nearly a quarter (23.8%) admitted they had no idea if those concerns were founded or not, while another 2.4% said a defined contribution retirement income option didn’t apply to their plan.


However, on the other side were the following perspectives on the premise that plan sponsor concerns were unfounded:

9.5% - They've clearly never met MY participants/I KNOW it's inaccurate.

7.1% - I’m not at all sure that’s accurate

7.0% - I’m pretty sure that’s wrong

And then, just under 15% chose “other”, mostly saying that either their workforce didn’t care about such things (and thus they weren’t actually concerned about participants having an adverse reaction) – or that they (or they didn’t think plan sponsors) took participant reactions into account (and thus weren’t concerned about their potential reaction, adverse or otherwise).


Now, some may be surprised at that response – but from years of working with, and talking to, plan sponsors, I know that plan feature decisions are made – and deferred – for lots of compelling reasons.  This week that led me to ask how large a factor participant reaction was in that decision to add, or not add, a retirement income option.

The most common response – 43.6% - was that it was on “the list”.  However, one-in-ten (10.3%) said it was “way down the list”, and another 23.1% said that participant reaction was not a factor in their retirement income decision. 

Now, no one said that it was top of their list, but the remaining quarter said that it was “high on my list.”


I also asked readers if they had any thoughts on retirement income reactions, participant reactions, participant reactions to retirement income, or studies that focus on participant reactions – and got some interesting responses, including the following:

I'm tired of surveys and "thinkers" deciding what employees can handle and what they can't.  They have no idea the issues involved with manufacturing employees that can barely sign their own name, or in some cases can't.  That aside, I even have managers that sign up for "Step Ahead" to increase their contribution each year and then throw a fit and cancel it in January when it actually takes place.  Yes lawyers, doctors, economists, CEOs, etc. enjoy/accept all the enhancements and even understand them at times; the vast majority of other workers do not - at least not in the real world where I work.

The reactions don't matter, what matters is providing retirement income options since so many of us don't have the luxury of a DB plan to see us through our golden years.

Participants don't take the time to understand what is available until it's time to retire.  And, even then, accept what is there without really questioning it.

With the freeze on pay for several years, participants are extremely sensitive to any changes in other areas of compensation.  In general, the fear is any change has a hidden takeaway.

Lack of portability is the biggest concern with income solutions.  Participants will be less than pleased if they pay for an income solution during accumulation and the fiduciary then moves the options - a very real concern.

Participants welcome information - as long as it's presented in a manner they can understand.


It's not on our radar, for now at least. Most of our employees are "boomers" and covered by the DB plan. Most of them see the fixed income portion of their retirement income as the DB plan and Soc Sec. So, the DC funds are their play money (so I've been told more than once). Woe will come to sponsors whose employees are young bucks n' does (who will need a primary income stream from the DC) that don't include an such an option.

Income guarantees will encourage participants to stay invested in equities which will then enable them to participate in market rebounds like we have seen over the last two weeks. How many pre-retirees bailed and ;missed the rebound? Their future retirement income will forever suffer.

Predictions on participant reactions are so dependent on the culture and makeup of the workforce, generalizations are usually not accurate for any one organization...or in our case, when considering different segments of our workforce within the organization.  We still consider them...but it's not at the top of the list.

Participants aren't stupid (if they were, we should fire them).  They need the facts, in a language they can understand, and then they will make the right decision (for themselves).

I don't think participants are going to have an adverse reaction. If you add a retirement income product, it would be optional. However, I don't think many would opt for the feature. We have a cash balance pension plan which offers the choice of a lump sum or an annuity. The vast majority of employees, given the choice between a lump sum or an annuity, chose the lump sum. It's all about control. Employees do not want to give up control of a large sum of money. Some options, like guaranteed minimum withdrawal features hold some promise in addressing the issue of control but again, many plan sponsors haven't opted to add these features to their plans as we're waiting for the market to mature. It's one thing to say you have a retirement income product in your plan, it's another to make sure you chose a partner that's going to be around for the next 40-50 years. As we're all too aware, no firm is too big to fail.


But this week’s Editor’s Choice goes to the reader who noted, “I am surprised to read that plan sponsors are worried about what the employees will think. As long as it's just an option, I don't understand the concern. On the other hand, I think plan sponsors are worried about their own liability and concern about choosing the right product. A lot is at stake. I know I am.”

Thanks to everyone who participated in our survey!