PLANSPONSOR - April/May 2018 - 11

Retirement Income Gaining Interest
Among Plan Sponsors and Participants
T
oday, employees are responsible
for investing their own retirement
assets, and they are also tasked
with making decisions about decumulation.
A recent MetLife survey called
" The Role of the Company " confirmed
employees recognize these responsibilities,
but they still want help from their
employer, viewed as a trusted partner.
Roberta Rafaloff, head of MetLife's
Institutional Income Annuities business,
spoke with PLANSPONSOR about how
employers can help guide employees in
terms of structuring retirement income.
PLANSPONSOR: Why is now an
important time for defined contribution
(DC) plan sponsors to be active
in the promotion of quality retirement
income outcomes?
Rafaloff: While employees must
manage their own DC plan participation,
employers can still have a tremendous
impact on retirement outcomes, especially
as they decide what investment
managers to hire, what the structure
of the plan will look like and, just as
important, what the plan distribution
options will be.
Today, employers are starting to ensure
that their DC plans have a focus on
retirement income. They are exploring
options that are available and trying
to decide which fit best with their
employees, culture and plan design.
Target-date funds (TDFs) and managed
accounts have gained popularity due in
large part to the mindset of " set it and
forget it. " We believe the same mindset
is prevalent when it comes to decumulation,
so we encourage participants to
consider an income annuity. With these
products, the retiree doesn't have to
actively manage investments to last
throughout
retirement.
Instead,
they
give a certain amount of money to an
Roberta Rafaloff (Photo by Christopher Lane)
insurance company upfront, and the
company ensures that
they receive an
exact amount of monthly income for as
long as the participant lives.
PS: How important is simplicity to
consider
in
structuring
is
retirement
benefits to promote quality outcomes?
Rafaloff: Simplicity
incredibly
important in the DC plan market. Once
you start adding complexity, people
shut down and inertia kicks in. This is
true of both employer and employee.
The employer needs a solution that's
easy to implement and recordkeep. The
solution must also be easy for the participant
to understand and utilize.
PS: Do plan sponsors see specific
barriers in terms of bringing retirement
income solutions to their plan
participants?
Rafaloff: Yes, they do. The Department
of Labor (DOL) did come out with a safe
harbor for plan sponsors that select a
401(k) annuity provider. However, most
plan sponsors feel that safe harbor isn't
strong enough. Additional guidance is
needed.
SPONSORED SECTION
Beyond a stronger safe harbor, regulators
could mandate lifetime income
disclosures on plan statements. This
would require annual plan statements
to show participants how much their
lump-sum balance translates to in terms
of guaranteed lifetime monthly income.
This would show people they don't
have as much saved as they think, and
encourage additional savings.
PS: In the DC plan industry today,
what distribution options are participants
typically presented with?
Rafaloff: There are a few common
options. First, they can take a lump sum
and roll it into an IRA [individual retirement
account]. Second, many plans offer
systematic withdrawals which allow for
flexibility but offer no guarantees. Finally,
there are retirement income distribution
options that are guaranteed, which allow
participants to either fully or partially
annuitize their lump sum.
PS: Has the level of interest in retirement
income solutions been growing
among DC plan participants?
Rafaloff: We
are
seeing
growing
demand among plan participants for
retirement income options. According to
the 2018 Retirement Confidence Survey
by the Employee Benefit Research Institute
and Greenwald Associates, four in
five DC participants express interest in
putting some or all of their money in
guaranteed lifetime income products,
regardless of whether the product is an
in-plan investment option or a separate
product purchased outside of the plan
upon retirement. n
PLANSPONSOR - April/May 2018

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