PLANSPONSOR - December 2017/January 2018 - 13

right ecosystem of tools, communication,
education, and investment opportunities,
they can go a long way toward helping
participants, even with the lack of a single
answer or strategy for the challenge of
building lifetime income. "
According to Tim Brown, senior vice
president and head of life and income
funding solutions with MetLife's retirement
and income solutions group, advisers
who can communicate how to convert
retirement savings into a lifetime-income
or drawdown strategy deliver great value
for plan sponsors and participants.
Brown says most plan sponsors believe
the safe harbor needs to be strengthened,
but he also points to an important caveat:
Insurance carriers have to abide by strict
state regulations, and part of the DOL's
guidance in this area, with respect to satisfying
the fiduciary duty of prudence, is to
allow sponsors to rely on state audits and
regulations for judging the appropriateness
and strength of an annuity provider.
Brown suggests it would be helpful
for advisers to educate plan sponsors about
the risks participants face when it comes to
choosing not to invest in lifetime income
products. He says, according to the Society
of Actuaries, 65% of Americans now age
65 will live to 85, and 25% will live to 95,
with some surpassing 100.
Annuities are often framed as investments,
Brown concludes, but they are
more properly thought of as income insurance.
" People don't look at their auto or
homeowner's insurance and say, 'Well I
should get a nice return on my premium.'
The return is protection. Advisers using
the term 'protection' will help plan sponsors
and participants take the right
actions, " he says. -John Manganaro
Policy Recommendations for Small Plans
Employers Offering a Retirement Plan†
MORNINGSTAR policy experts propose
two complementary solutions for improving
the number and quality of smallcompany
plans. First is to open multiple
employer plans (MEPs) in which small
firms band together and leverage a larger
amount of assets under management
(AUM) to provide a better plan. Such
plans would let employers offload many
of their fiduciary responsibilities and
spread costs and administrative burdens.
Second, Morningstar recommends an
automatic individual retirement account
(IRA) enrollment program-a single,
national program covering all eligible
Americans. -Rebecca Moore
, by Size
And Data Source
n Bureau of Labor Statistics n Census Bureau
81%
67%
48%*
18%
1 - 49 workers
50 - 99 workers
*All percentages are estimates.
†
100 - 499 workers
≥ 500 workers
Any type of plan, including defined benefit, defined contribution and cash balance.
Source: Morningstar analysis of Bureau of Labor Statistics and Census Bureau data
Expense Fees Are Twice as High for Small Qualified Plans as for Large Ones
1.42%
0.88%
0.80%
0.74% 0.68% 0.63% 0.58%
<$1
$1 - $5
39%
49%
91%
60%
0.52%
Note: Dollar amounts are in millions.
0.47%
0.37%
>$5 - $10 >$10 - $25 >$25 - $50 >$50 - $100 >$100 - $250 >$250 - $500 >$500 - $1,000 >$1,000
Source: Morningstar data as of August 9, 2017
PLANSPONSOR.com December 2017-January 2018 13
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