Insights | 04.07.21
In the Future, the Bias Will Likely Be for Annuities
Although both employers and their employees see the value of guaranteed lifetime income options, differences appear among 401(k) and 403(b) providers when it comes to retirement plan design, according to a survey by TIAA. The survey found 403(b) plan sponsors are more likely to see income replacement as the biggest influence on their plan decisions (46 percent vs. 30 percent of 401(k) plan sponsors) and to consider the retirement income replacement ratio (41 percent vs. 21 percent) and retirement readiness (37 percent vs. 19 percent) as key metrics of their plan’s success. 403(b) sponsors (82 percent) are also more likely than 401(k) sponsors (67 percent) to believe their participants are extremely/very interested in guaranteed lifetime income annuities. Tim Walsh, senior managing director at TIAA, says, historically, not-for-profit and private higher education plan sponsors did not offer defined benefit (DB) plans, so they used annuities to provide retirement benefits to employees even before the Internal Revenue Code was drafted in the 1950s to only allow annuities in 403(b) plans. “So, a lot of 403(b) plan sponsors have always used them and they tend to be more comfortable with them,” he says.
Read the full article on PlanSponsor.