MetLife's 2016 Lifetime Income Poll Reveals Plan Sponsors Want More Regulatory Clarity to Make It Easier to Offer Guaranteed Income Solutions NEW YORK, September 7, 2016 - A large majority of plan sponsors (85%) agree that the core purpose of a defined contribution (DC) plan should be to serve as an income source during retirement, according to the MetLife 2016 Lifetime Income Poll, released today. This represents a subtle but significant sea change from the 9% of plan sponsors in a 2012 MetLife study who believed that the primary focus of their DC plan was to provide retirement income, as opposed to retirement savings.1The Lifetime Income Poll gauged plan sponsors' familiarity with - and knowledge about - regulatory developments by the U.S. Departments of Labor and Treasury to strengthen retirement security among U.S. workers; nine in ten plan sponsors (94%) are familiar with regulators' lifetime income efforts. The full report examining these findings is available at: metlife.com/LifetimeIncomePoll.
No longer can DC plans exist solely as retirement savings plans, says Tim Brown, senior vice president and head of Life & Income Funding Solutions with MetLife. The core purpose of today's DC plans must be recast to move beyond retirement savings to retirement income, by enabling plan sponsors to provide the education, tools and solutions to help participants make their savings last a lifetime.
Plan sponsors are signaling that they are ready to reframe their DC plans to focus on lifetime income and provide their participants with solutions to help ensure successful retirement outcomes, says Roberta Rafaloff, vice president, Institutional Income Annuities with MetLife. However, it's also clear that further regulatory clarity from the DOL and Treasury would make it easier for plan sponsors to offer these solutions.
The Poll found nearly all plan sponsors (96%) agreed that it would be helpful if DC plan account balances were required to be communicated as lifetime income - in addition to the total account balance - on benefit statements. A nearly equal number of plan sponsors (92%) agree that it is important for the DOL to provide a workable safe harbor for annuity carrier selection criteria for individual account qualified plans in order to make it easier for plan sponsors to include income annuities in their DC plans. In determining the adequacy of the solvency of a potential annuity provider for their DC plan, 76% of plan sponsors surveyed would prefer to be permitted to rely on certifications from the annuity provider based on the regulatory process carried out by a state insurance commissioner, rather than to conduct the solvency due diligence process themselves as part of their regular due diligence process for plan providers.
Today, only six percent of plan sponsors say that their 401(k) plan includes a guaranteed lifetime income option, added Rafaloff. This number could rise exponentially once the DOL completes the work on an updated safe harbor rule. Two-thirds of plan sponsors whose plans do not currently include a guaranteed income option reported that they would be at least somewhat likely to make income annuities available for DC plan participants once the rule is announced.
Perspectives on DC Plan Design
In looking at DC plan design, plan sponsors overwhelmingly recognize the importance of simplicity. Nine in ten plan sponsors (90%) believe that it is in the best interests of plan participants to keep plan design changes simple, since complexity, such as too many choices and features, often leads to participant inertia. Connected to this goal of simplicity, 58% of plan sponsors do not believe that withdrawal solutions with minimum guarantees are easy to understand for the average DC plan participant.
Guaranteed lifetime income options in DC plans should be simple, adds Brown. Adding complexity and features that participants will not use, but which add costs, will not lead to successful outcomes. Offering solutions, such as an immediate income annuity or a qualifying longevity annuity contract (QLAC), provide participants with a simple way to convert a portion of their savings into reliable income.
When asked about their approach to retirement income, nearly eight in ten plan sponsors (79%) think that allowing plan participants to take a partial lump sum and a partial annuity from a DC plan is preferable to a plan design where participants must take their entire account balance as either a lump sum or an annuity. In addition, the Poll found that nearly three-quarters of plan sponsors (72%) agree that offering only lump sum or systematic withdrawal distributions may not always be in the best interest of plan participants.
About the Study
The MetLife 2016 Lifetime Income Poll was fielded May 17-23, 2016. MetLife commissioned MMR Research Associates, Inc. to conduct the online survey in cooperation with Asset International, Inc. There were 212 DC plan sponsors who participated in the survey from among the Fortune 1000TM companies, as well as the next largest 2,000 companies by DC plan asset size.
About MetLife
MetLife, Inc. (NYSE: MET), through its subsidiaries and affiliates ( MetLife ), is one of the largest life insurance companies in the world. Founded in 1868, MetLife is a global provider of life insurance, annuities, employee benefits and asset management. Serving approximately 100 million customers, MetLife has operations in nearly 50 countries and holds leading market positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit www.metlife.com.
1MetLife Retirement Income Practices Study, July 2012
