PLANADVISER - January/February 2019 - 14

trendspotting
Various Approaches to In-Plan Income
Providers may offer the wrong solution for sponsors' need
THERE is a disparity in how different
groups of retirement industry stakeholders
approach in-plan retirement
income products, says the fourthquarter
2018 issue of " The Cerulli
Edge - U.S. Retirement Edition. "
Notably, according to Cerulli's
401(k) plan sponsor survey, plan sponsors
do not necessarily think only of
annuities when contemplating the
addition of an in-plan retirement
income
option. Yet,
recordkeepers
commonly point to an annuity-based
product as being top of mind for plan
sponsor clients.
While defined contribution (DC)
plan sponsor implementation of
in-plan retirement income solutions
remains low, Cerulli wrote, there was
also " a reinvigoration of the subject
in 2018. " With this renewed focus,
defined contribution investment only
(DCIO) product managers are getting
more involved in discussions about
new in-plan income opportunities.
" This shift involves plan sponsors
proactively inquiring as to how
the DCIO's in-plan retirement income
solution is structured and implemented, "
Cerulli wrote. " This inquiry
contrasts with prior years in which
DCIO managers described discussions
with plan sponsors on lifetime income
solutions that were either politely
listened to without any follow-up or
rebuffed outright. "
Based on a previous Cerulli survey
of 41 DCIO asset managers
representing
more than $3.8 trillion in DCIO
assets, close to half (41%) currently
offer an in-plan retirement income
product and another 10% are considering
adding one. For the 41% that
offer an in-plan retirement income
product, Cerulli wrote, target-date
funds (TDFs) are the most common
structure.
The research firm contends that
inclusion of a guaranteed component
is " not a prerequisite for an effective
retirement
income product. " But, at
the same time, a basic asset-allocation
shift to more conservative investments
" may not be enough to address
the diverse
financial
situations
investors near or at retirement age. "
Possibly Adding
Retirement Income
According to Cerulli data generated
in 2017, close to 13% of plan sponsors
surveyed said they expected to add or
were thinking of adding a retirement
income solution to their plan menu in
2018. Cerulli then asked this cohort
to identify what type of product they
were considering to fill that role.
the
" Th[e] data demonstrates that
financial
services
community,
including asset managers, recordkeepers,
consultants and plan sponsors,
talk past each other regarding
retirement income solutions, " Cerulli
reported. " For example, close to onefourth
(24.5%) of 401(k) plan sponsors
considering adding a retirement
income solution identify a broadbased
fixed-income strategy in a
mutual fund vehicle as the strategy
they would be most likely to offer
participants. " -John Manganaro
of
12 | planadviser.com January-February 2019 Art by Subin Yang
http://www.planadviserdigital.com/planadviser/january_february_2019/TrackLink.action?pageName=12&exitLink=http%3A%2F%2Fplanadviser.com
PLANADVISER - January/February 2019

Table of Contents for the Digital Edition of PLANADVISER - January/February 2019
