Is in-plan lifetime income the missing puzzle piece that helps participants bridge the retirement gap?

The SECURE Act paved the way for in-plan lifetime income (annuities) by protecting employers from liability if they follow the required due diligence requirements. Safe harbor requires an annuity provider to meet specific experience-based criteria, exhibit financial stability, and be properly state-licensed, to name a few. The Act also made these in-plan products more portable by allowing participants who retire or switch employers to in-effect rollover the contract to the new employer or an IRA without surrendering penalties or certain fees.

Advocates tout participant demand, plan sponsors' desire to improve participant outcomes, and recent legislative shifts as sensible reasons as to why the sponsor should launch these options in their retirement plans. With the decline in pensions, low relative interest rates, and rise in longevity, sustainable income options can be a way to bridge the gap and create longevity in your assets. As an industry veteran of retirement plans and income products, merging the two areas creates challenges for advisors, insurers, and plan sponsors.

Almost every article or presentation mentions the notion that a plan participant and plan sponsor like the benefits these products provide, but annuities carry a negative perception or connotation. William Shakespeare said, "A rose by any other name would smell as sweet." These products are annuities, and while they may get a bad rap, there are some dated perceptions and legitimate reasons these perceptions exist.

Who wouldn't want a portfolio or income stream that they cannot outlive, but it comes at a price? While sponsors and participants need to be open-minded, so should the insurers. A good starting point is to make them fully transparent and user-friendly. These new products should have simplified and fully disclosed fee structures to avoid added complexity and unnecessary add-ons. Fees make no sense in the absence of value, and the value should be evident.

Before you run out and add these products to your plan, please consult someone with experience in the area, as all products are not created equally. No single solution or product can solve the complexities of retirement planning, but pairing the appropriate product with a savings and spending strategy can improve outcomes.?