PLANSPONSOR - September - October 2023 - 14

The Pluses and Pitfalls of SWPs
UPFRONT
D
epending on whom you talk to, systematic
withdrawal plans-where
retired participants take periodic " paychecks "
from their defined contribution
plan account-could be " low-hanging
fruit, " as a recent PGIM study calls it, or a
plan feature that is sometimes underripe.
For plan sponsors, the pluses are clear.
Because the accounts already exist and the
institutional players remain the same, the
option may be the most cost-effective way
for a plan to arrange for retirement income
" relative to adding new products and solutions, "
notes PGIM's " DC Solutions: The
Evolving DC Landscape. "
Mikaylee O'Connor, a principal and
senior DC strategist at PGIM and author
of the paper, calls systematic plan withdrawals
an " underutilized " resource-
one that plan sponsors without an
income strategy should consider. In fact,
she says, " You shouldn't be having retirement
income conversations until you can
at least start taking money systematically
14 PLANSPONSOR.COM September - October 2023
from your plan. "
When retirees leave their savings in
the plan, both they and the plan sponsor
benefit, as the investments retain the
institutional pricing and lower fees, says
Jennifer Doss, senior director of the defined
contribution practice at CAPTRUST.
Retirees also maintain control over
their money-overcoming well-publicized
objections about insurance products.
Participants can adjust the payment
arrangement, switch investments within
the plan and leave any assets remaining
when they die to heirs, says a white paper
from Voya Retirement, " Understand Your
Retirement Income Options. "
Moreover, the feature is apt to be available
on their plan. According to a white
paper from CAPTRUST, most recordkeepers
offer it.
Many sponsors have adopted it too.
" Nine out of 10 of our [plan sponsor] clients
[provide] a target-date fund with systematic
distributions, " says Bill Ryan, a partner in,
Art by James Yang
and head of DC solutions at, NEPC.
Says
Jason
Shapiro,
director
of
consultant relations at Columbia
Threadneedle Investments who works
with DC plans, " I can't think of any sponsors
I'm talking to today that don't offer
systematic withdrawals. "
At the same time, Shapiro says,
" usage is very low. " This may be because
the structuring of the feature lacks user
friendliness. " You often have a systematic
withdrawal feature that lives somewhere
on a recordkeeping platform, but it's not
directly tied into the open architecture
options in the plan, " he explains. " The
investments, depending on the recordkeeper,
[may
not] even live in the same
module. You have to exit your retirement
platform and go to a different retirement
income or wealth management platform.
" Tying it all together takes a really
concerted effort by recordkeepers, custodians,
managers, plan sponsors, consultants
to make sure this is easy for
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