PLANSPONSOR - November/December 2024 - 14
UPFRONT
Income Solution Fees: a Primer
AS MORE plan sponsors consider incorporating
lifetime income options into
their
retirement
offerings-and more
such options come to market-these
sponsors have a range of considerations,
including as to fees.
" The key thing we advise fiduciaries
on is that fees, in and of themselves,
aren't bad or good, " says Michael Kreps,
a principal in Groom Law Group. " It's
just a cost, and you have to weight them
against the benefits being provided. "
Options such as retirement income,
Social Security calculators and incomeoriented
fixed-income funds have low costs,
but others are expensive. Overall, guaranteed
income options, such as in-plan annuities
or target-date funds with a guarantee,
cost more than nonguaranteed options,
given the higher risks with the former.
" We're talking about products with
many features, many considerations for
fiduciaries: the level of the guarantee, the
administrative support for the program,
the portability options and how it integrates
with the recordkeeper, " Kreps
says. " These have to be considered in
light of the fees. "
Generally, in-plan options tend to
cost significantly less than retail annuities.
Even so, costs are not the primary
reason plans hedge on an in-plan solution.
A 2023 LIMRA survey found that
just 19% of plan sponsors lacking an
in-plan annuity blamed cost. Instead, they
cited believing there is no worker demand
(26%), feeling it is the employee's responsibility
(22%) and having other benefits
responsibilities (22%).
Also, no great fee benchmarks are
available, Kreps concedes. Many of the
products are new, and the providers have
differentiated their offerings. However,
he says, the components can be benchmarked-e.g.,
the TDF or the lifetime
withdrawal benefit.
14 PLANSPONSOR.COM November - December 2024 Art by Antonio Uve
Common Fee Structures
Phil Maffei, senior managing director of
corporate retirement income products at
TIAA, categorizes most of the fees associated
with income into three buckets: transactional,
omnipresent and non-explicit.
Transactional fees occur when a plan
facilitates an in-plan annuity purchase
from an approved provider: The participant
pays a commission on, for example,
each $100,000 annuitized.
Omnipresent fees would apply to
some so-called living benefits, or guaranteed
lifetime withdrawal benefits in
managed-income or some target-date
products. These products typically include
both an investment management fee and
a guarantee fee, typically about 100 to 110
basis points, based on amount invested.
" The downside there is, if you decide
not to turn on the lifetime income option,
you've effectively paid for a benefit you
haven't received, " Maffei says.
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PLANSPONSOR - November/December 2024
Table of Contents for the Digital Edition of PLANSPONSOR - November/December 2024
Insights
Participant analysis
Rules and regulations
Upfront
The Retirement Industry 2024
PLANSPONSOR DB Administration Survey
Plan Sponsors in Conversation
Build and Equip
SECURE 2.0’s New Match
2025 ERISA Plan Compliance Calendar
Counting the Costs
A Provision Review
SCOTUS to Decide
Helping Transient Workers Save
PLANSPONSOR - November/December 2024 - Cover1
PLANSPONSOR - November/December 2024 - Cover2
PLANSPONSOR - November/December 2024 - 1
PLANSPONSOR - November/December 2024 - Insights
PLANSPONSOR - November/December 2024 - 3
PLANSPONSOR - November/December 2024 - Participant analysis
PLANSPONSOR - November/December 2024 - 5
PLANSPONSOR - November/December 2024 - Rules and regulations
PLANSPONSOR - November/December 2024 - 7
PLANSPONSOR - November/December 2024 - 8
PLANSPONSOR - November/December 2024 - 9
PLANSPONSOR - November/December 2024 - Upfront
PLANSPONSOR - November/December 2024 - 11
PLANSPONSOR - November/December 2024 - 12
PLANSPONSOR - November/December 2024 - 13
PLANSPONSOR - November/December 2024 - 14
PLANSPONSOR - November/December 2024 - 15
PLANSPONSOR - November/December 2024 - The Retirement Industry 2024
PLANSPONSOR - November/December 2024 - 17
PLANSPONSOR - November/December 2024 - 18
PLANSPONSOR - November/December 2024 - 19
PLANSPONSOR - November/December 2024 - PLANSPONSOR DB Administration Survey
PLANSPONSOR - November/December 2024 - 21
PLANSPONSOR - November/December 2024 - 22
PLANSPONSOR - November/December 2024 - 23
PLANSPONSOR - November/December 2024 - Plan Sponsors in Conversation
PLANSPONSOR - November/December 2024 - 25
PLANSPONSOR - November/December 2024 - Build and Equip
PLANSPONSOR - November/December 2024 - 27
PLANSPONSOR - November/December 2024 - 28
PLANSPONSOR - November/December 2024 - 29
PLANSPONSOR - November/December 2024 - SECURE 2.0’s New Match
PLANSPONSOR - November/December 2024 - 31
PLANSPONSOR - November/December 2024 - 2025 ERISA Plan Compliance Calendar
PLANSPONSOR - November/December 2024 - 33
PLANSPONSOR - November/December 2024 - 34
PLANSPONSOR - November/December 2024 - 35
PLANSPONSOR - November/December 2024 - Counting the Costs
PLANSPONSOR - November/December 2024 - 37
PLANSPONSOR - November/December 2024 - A Provision Review
PLANSPONSOR - November/December 2024 - SCOTUS to Decide
PLANSPONSOR - November/December 2024 - Helping Transient Workers Save
PLANSPONSOR - November/December 2024 - Cover3
PLANSPONSOR - November/December 2024 - Cover4
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