PLANSPONSOR - February/March 2020 - 31

FEATURE
What sponsors should know
to navigate the new
safe harbor for annuities
A Changed
Perspective
W
hether you call them annuities, lifetime income
solutions or guaranteed income, the recent passage
of the Setting Every Community Up for Retirement
Enhancement (SECURE) Act has eased the way for employers
to offer these products in their retirement plan. Notable among
the act's provisions is a safe harbor clarification, which reduces
sponsors' potential liability in choosing a provider.
But while many employers may be eager to help participants
worried about outliving their income, questions remain
about the best way to incorporate these features into a plan-and
whether employees will actually use them.
" The SECURE Act, at a high level, creates a bit more flexibility
for plan sponsors and makes it a little easier for them to
offer in-plan annuities, " says Dylan Huang, senior vice president
and head of retail annuities at New York Life in New York City.
" I don't think that in itself will translate-at least not in the near
term-to a dramatic increase in adoption of in-plan annuities. "
The SECURE Act was one of the few bipartisan bills to pass
Congress late last year, amid growing agreement that workers need
more tools to adequately prepare for potentially a long lifespan in
retirement. Six in 10 employers surveyed by Willis Towers Watson
this past September, before the act's passage, said they would
consider adopting lifetime income solutions in the future.
Annuities and other similar products allow consumers to
buy into a contract-either all at once or via contributions-in
exchange for a guaranteed monthly payment for the rest of
their life. Most plan sponsors have not offered annuities as
investments in their plan, and many experts suggest this has
been partly from sponsors' fear of liability, if the insurer they
have chosen later fails.
Checking the Boxes
Under the SECURE Act, rather than having sponsors vet insurance
companies themselves to meet previously vague requirements,
sponsors may use documents the insurer itself provides
that prove it was vetted by insurance agencies and found viable.
" With the help of an adviser, it's going to be relatively easy
for plan sponsors to check the required boxes, " says Alexander
Papson, manager of fiduciary solutions at Schneider Downs
Wealth Management Advisors in Pittsburgh. " The regulations
really spell it out in extraordinary detail. "
In addition, the SECURE Act makes it easier for plan sponsors
to switch annuity providers without triggering tax consequences
for participants.
A Range of Products
Plan sponsors interested in adding in-plan lifetime income
options will be limited to those available on their recordkeeper's
platform. While options are relatively few for now, here are some
of the products they might see.
Art by Wesley Allsbrook
PLANSPONSOR.COM February - March 2020 31
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PLANSPONSOR - February/March 2020

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