News | 09.05.19
Headwinds to Annuities in 401(k) Plans Persist
The uptake of annuities in 401(k) plans has been muted and slow for several reasons, including administrative and legal challenges. One of the big hang-ups seems to be a perceived legal barrier known as a safe harbor. Plan sponsors view the current safe harbor standard, which insulates them from legal risk, as difficult to satisfy, because it puts them on the hook for determining an insurer's solvency years down the road. The SECURE Act would make this safe harbor more palatable for plan sponsors but wouldn't necessarily lead to a flood of uptake, however. Administrative challenges—such as the fact that not all record keepers can administer annuity products and participants can't really roll an annuity over to a new employer's 401(k)—are impediments as well.
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