Nevin's Data "Points"

 It’s ironic that programs designed to provide retirement income pay so little attention to the realization of that objective. Still, some have said that this could be the year for retirement income—a combination of new offerings, volatile markets, and rising interest rates—and yet, it still seems that there are obstacles to overcome.  Here are six: 1. There is no legal requirement to provide a lifetime income option. Let’s face it, it’s a full-time job just keeping up with the plan provisions, standards, participant notices and nondiscrimination tests that are required by law. The notion that a plan sponsor would, in the absence of a compelling motivation take on extra work, and work that carries with it additional financial and fiduciary responsibility as well, doesn’t seem very realistic. Indeed, with no legal obligation to provide this offering, and an underlying concern that providing the option does involve taking on additional liability… 2. The safe ...

It’s ironic that programs designed to provide retirement income pay so little attention to the realization of that objective. That’s right—for the vast majority of participants today, creating that “paycheck for the rest of your life” remains a DIY undertaking. To this day only about half of defined contribution plans currently provide an option for participants to establish a systematic series of periodic payments, much less an annuity or other in-plan retirement income option.  However, the need for that solution is widely acknowledged—and there are some new, if somewhat familiar, solutions emerging.  Earlier this month, BlackRock garnered some  headlines  with news that not only was it building annuity contracts into a target-date fund series, but also that it had already lined up five large plan sponsors (with some $7.5 billion in assets) to implement the option as a default. That followed by a few months the March  announcement  of a c...

One of the great concerns of our industry — when we aren’t worrying if people have saved enough for retirement — is worrying about how those savings are going to last through retirement. Enter to that debate a recent report from the Government Accountability Office (GAO) that basically takes the Labor Department to task for not doing enough to encourage the use of lifetime income options in workplace retirement plans. Sure enough, it’s been hard for lifetime income options to get traction with retirement plans. The GAO rightly outlines a number of the concerns typically articulated with these options — which are well known to those who have looked to remedy the situation (see “ 5 Reasons Why More Plans Don’t Offer Retirement Income Options” ). GAO Alternatives So, what suggestions does the GAO have for the DOL? Well, the GAO has several specific suggestions, including that the DOL: do more to clarify the safe harbor for selecting an annuity provider; consider providing lega...

A frequent commentary on today’s plan designs is that they are more focused on accumulation than the eventual spend-down of those savings. It’s said that defined contribution plans too often not only facilitate lump-sum distributions, but, in design at least, encourage them. And yet, despite a growing awareness of the importance of retirement income planning, PLANSPONSOR’s 2014 DC Survey  finds that nearly half of plan sponsors offer no income-oriented products to their participants. Here’s five reasons plan sponsors give for not offering retirement income options. 1. There is no legal requirement to provide a lifetime income option. Let’s face it, it’s a full-time job just keeping up with the plan provisions, standards, participant notices and nondiscrimination tests that are required by law. The notion that a plan sponsor would, in the absence of a compelling motivation take on extra work, and work that carries with it additional financial and fiduciary responsibility a...