PLANSPONSOR - February/March 2020 - 33

FEATURE | A CHANGED PERSPECTIVE
products make sense-are risk averse
and don't want to part with their assets
in order to buy a guaranteed product. As
people move closer to retirement, there
are a variety of needs, and that's making
it hard for sponsors. "
Just as there is no one-size-fits-all
annuity product, there is no single education
solution. Employers will need to tailor
their approach to the demographics and
needs of their employees. For example,
most annuities do not make sense for
young people to purchase, because of
the many years they will be paying fees.
So, employers with a younger participant
cohort might stress them less than an
employer with many near-retirees.
Lau says to review any participantfacing
materials from an annuity provider
you are considering; make sure they are
written in plain English, with no financial
jargon. The industry as a whole
needs to improve its communication with
consumers and should consider standardizing
some of the language it uses, he says.
" Some products call the same features
by different names. Standardization of
language and simplicity of products is
really important, " he says.
Looking Ahead
In some ways, sources suggest, the market
for in-plan annuities may resemble the
one for target-date funds after passage of
the Pension Protection Act of 2006 (PPA).
Before being endorsed as a qualified
default investment alternative (QDIA),
TDFs were not widely used or well-understood.
But today they are the QDIA that
defined contribution (DC) plans use most
often and make up the majority of DC
fund flows.
" In 15 or 20 years, annuities will have
become an integral part of the defined
contribution plan, " says Frank O'Connor,
vice president, research, at the Insured
Retirement Institute (IRI) in Washington,
D.C. " It starts by changing the thinking of
participants to orient that toward, 'This is
my pensions that I'm creating, not a bucket
of money I can do what I want with.' "
-Beth Braverman
Lifetime Income Annuities Can Help
Baby Boomer Confidence as to Key Aspects of Retirement
n Own an annuity n Don't own an annuity
48%
20%
Will be
able to live
comfortably
52%
22%
Am
preparing
well
Source: Insured Retirement Institute
Does your plan offer any of the following features/
options to help participants build retirement income?
Systematic withdrawal plan
In-plan managed account
In-plan managed payout funds
In-plan annuities
Out-of-plan annuity
No income solutions
44.3%
24.4%
10.0%
9.2%
5.2%
47.7%
Source: 2019 PLANSPONSOR Defined Contribution Survey
Retiree Income Investment Preferences
Retirees prefer self-managed investments and control to
insurance guarantees. They were asked: Which of the following
approaches to managing assets and generating income in
retirement would you most likely take?
OPTION 1
Self-managed,
nonguaranteed
income
* Self-managed
investments
* Control over
assets/spending
* No income
guarantee
* Investment risk
Unsure
Combo
Source: EBRI/Greenwald Retirement Confidence Survey
45%
20%
9%
26%
OPTION 2
Single solution,
guaranteed income
* All-in-one solution
* Limited control
over assets/
spending
* Guaranteed
income for life
* Fees may be
higher
51%
25%
Will be able
to afford
health care
27%
16%
Will withstand
major market
correction or
recession
PLANSPONSOR.COM February - March 2020 33
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