(BusinessWire) - Following the passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act in December 2019, the majority of defined contribution (DC) retirement plan consultants, 82%, report that they have gotten more comfortable recommending retirement income options to their clients, according to MetLife’s 2023 Retirement Income Pulse Check study. What’s more, an overwhelming majority of consultants, 93%, have taken some action regarding retirement income options.
"Since SECURE 1.0 made it easier to offer retirement income options in DC plans, we’ve seen both consultants and plan sponsors become more comfortable with these solutions," says Roberta Rafaloff, vice president, Institutional Income Annuities, MetLife. "In fact, our study found 60% of consultants say they are likely to consider purchasing an annuity option for themselves, showing they understand the security these solutions offer retirees."
Increasing Activity Around Guaranteed Retirement Income Options
Among the actions consultants have taken, 68% have conducted due diligence/evaluated the guaranteed retirement income options available in the DC market, 63% have met with their clients’ investment committees to discuss the addition of a guaranteed retirement income option, and 48% recommended that their clients consider incorporating a guaranteed retirement income option in their DC plan.
Consultants report plan sponsors are taking action as well, with 56% of consultants stating their plan sponsor clients have conducted due diligence and 55% state their plan sponsors have met with their investment committees to discuss the addition of a guaranteed retirement income option. Four in ten (40%) consultants say their plan sponsors have issued a Request for Proposal/Request for Information from insurance companies/annuity providers.
Potential Obstacles with Newer Solutions
Even though consultants and plan sponsors have taken positive steps in incorporating retirement income options into DC plans, some potential challenges remain. While low adoption rates have traditionally been attributed to lack of interest and negative impressions of annuities, 47% of consultants say the biggest issue that stands in the way of their clients implementing these solutions is that these products are complex and difficult for them to explain.
In fact, when asked to characterize the new solutions that have been introduced to the market since SECURE 1.0 passed – many of which are investment options with embedded income – 62% of consultants say they are difficult to understand.
"It may be tempting to offer products with many features to address the various potential needs of plan participants," says Rafaloff. "But a complex solution may not be successful, creating confusion for plan sponsors and participants. Simplicity should be the guiding principle when looking at these offerings. Immediate income annuities and qualifying longevity annuity contracts (QLAC) are products that tend to be much easier to understand."
The Importance of Simplicity and Guarantees
Consultants cite simplicity, along with guarantees, as the most important product attributes for retirement income solutions. According to the study, 96% of consultants state it is important (i.e., critical or very important) that the product guarantees money will not run out and the same percentage, 96%, report a product that is simple and easy for participants to understand is important when evaluating these solutions.
The Future of Guaranteed Retirement Income Options
As the market continues to evolve, consultants and their plan sponsor clients are showing growing interest in these solutions and are taking steps to offer them in DC plans. To date, one in 10 plan sponsors, 11%, say they have incorporated a guaranteed retirement income option into their DC plan post-SECURE 1.0. Among plan sponsor-clients that aren’t yet making retirement income solutions available to their plan participants, consultants say 27% of their clients are considering offering a retirement income option in their DC plan, many within the next 5 years.
About the Study
The survey was conducted online by Greenwald Research, in partnership with ISS Media, owner of PLANADVISER and PLANSPONSOR magazines, on behalf of MetLife between October 25 and December 9, 2022, among 74 defined contribution (DC) plan consultants. Consultants needed to be at least somewhat knowledgeable about various DC plan retirement income options; at least occasionally recommend DC retirement income options to plan sponsor-clients, or if not, be at least somewhat likely to in the near future; and, have at least one retirement plan client with $500+ million in assets.
MetLife, Inc. (NYSE: MET), through its subsidiaries and affiliates ("MetLife"), is one of the world’s leading financial services companies, providing insurance, annuities, employee benefits and asset management to help its individual and institutional customers build a more confident future. Founded in 1868, MetLife has operations in more than 40 markets globally and holds leading positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit www.metlife.com.
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March 8, 2023