The Markets February 13, 2025

Income Target-Funds Reach $22B in Assets in 2024

A majority of workers participating in employer-sponsored plans (86%) said they want their employers to offer in-plan retirement income options.

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Assets in mutual fund and collective investment trust (CIT) target-date series rose 15% in 2024, reaching $3.97 trillion as of year-end, with income target-date fund series ending the year with $22 billion in assets, according to new research from Sway Research.

A dozen target-date fund series now feature some form of optional post-retirement income, four series of which were launched in 2024, according to the report—The State of the Target-Date Market: 2025—Examining Asset Trends Across Providers, Products, Vehicles, Management Styles, and Glide Path Structures.

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One of those newly launched funds—BlackRock’s LifePath Paycheck—finished 2024 with $16.4 billion of assets under management. The launch was so successful LifePath Paycheck finished the year as the 27th largest target-date fund series out of 150 tracked by Sway Research.

The post-retirement income is usually in the form of a deferred fixed annuity or group variable annuity with a guaranteed lifetime withdrawal benefit (GLWB). Most of the products rely on a small set of insurance providers, Sway found, including Lincoln (5 series), TIAA (4 series, including the Nuveen Lifecycle Income Index series, also introduced in 2024), and Nationwide (3 series). Equitable Financial and Brighthouse Financial underpin the BlackRock LifePath Paycheck product set.

Plan Sponsor and Participant Interest 

The growth in assets invested in such options comes as awareness builds about the need and desire for income solutions. A recent report from Greenwald Research found that participating in a DC plan alone will not be enough to allow workers to retire comfortably, and a majority of workers participating in employer-sponsored plans (86%) said they want their employers to offer in-plan retirement income options.

Slightly more than half of plan participants surveyed by Greenwald said they feel employers have a high level of responsibility for helping employees generate income or develop a withdrawal strategy in retirement. Meanwhile, plan sponsors are still concerned about the complexities of offering such strategies, the fees associated with them and the reputation of annuities and guaranteed lifetime income.

Only one-quarter of plan sponsors said they currently have at least one retirement income option in place, while another 30% said they are seriously considering implementing such options. Both plan sponsors and participants in the survey expressed the need for more education on retirement income options, as well as tools that help determine when participants should start receiving retirement income.

Data & Research February 13, 2025

ERISA Industry Committee Outlines Latest Employer Priorities

In its letter to Congress, ERIC urged lawmakers to ‘preserve and protect’ ERISA, maintain tax incentives in health and retirement plans, and impost health care cost transparency.

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The ERISA Industry Committee sent a letter on Tuesday to members of Congress stating its positions on several policy issues that affect large employer member companies that provide health, retirement and other benefits to workers across the country.

The public letter was released on the heels of the American Benefits Council’s release of its public policy strategic plan for employer-sponsored retirement and health plans for the next five years.

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ERIC’s letter touches on maintaining the current tax incentives in employer-sponsored health and retirement plans but mainly focuses on health care-related issues, such as enhancing high-deductible health plans and health savings accounts and creating more transparency about the cost of health care and prescription drugs.

The letter was specifically addressed to Senate Majority Leader John Thune, R-South Dakota, and Speaker of the House of Representatives Mike Johnson, R-Louisiana. According to ERIC, its letter is timely, as Congress considers instructions to individual committees as part of the budget reconciliation process.

ERIC’s letter stated that it is concerned by proposals to cap the federal income tax exclusion for employer-sponsored health coverage in the hopes of paying for the extension of the 2017 Tax Cuts and Jobs Act, a priority for President Donald Trump.

“Doing so would be a direct tax increase on working families, and would be detrimental to employment-based coverage–the single largest source of coverage for millions of workers and their families,” the letter stated. “ERIC strongly opposes any changes to this tax exclusion.”

ERIC also expressed its opposition to any proposal that would weaken incentives on which workers rely to save for retirement.

“Middle class workers rely on tax incentives, longstanding in the tax code, that promote responsible savings and drive investment,” the letter stated. “Reducing the amount Americans can save in tax-preferred vehicles or changing when savings [are] taxed are counterproductive, short-sighted policies that would only undermine the success of the retirement system.”

The comment appeared intended to discourage requiring more retirement-plan contributions to made on an after-tax, or Roth, basis.

In addition, ERIC asked the House Committee on Ways and Means to consider several recommendations to improve “health care affordability and competition.” ERIC highlighted specific health savings account-related bills that the group supports, such as the Telehealth Expansion Act to provide telehealth coverage for HSA beneficiaries and the Health Savings for Seniors Act to permit Medicare beneficiaries to participate in and contribute to HSAs.

Addressing the House Committee on Education and the Workforce, ERIC urged lawmakers to “protect and strengthen” the Employee Retirement Income Security Act of 1974. The organization also stated it opposes any attempt to mandate state reporting or other administrative obligations on companies that offer ERISA-regulated plans.

“Further erosion of ERISA preemption will adversely impact labor markets, disadvantage employees based on where they live or work, cause employers to cut back on benefit coverage, and raise the cost of health benefits—ultimately pricing some employees and their families out of coverage and undermining financial health and well-being,” the letter stated.

ERIC argued that one key way to strengthen ERISA would be to clarify that third parties performing services on behalf of plan sponsors for health benefit plans are subject to the same fiduciary duty to the plan as plan sponsors. ERIC released an issue brief in September 2024 urging Congress to deem pharmacy benefit managers as fiduciaries under ERISA, as PBMs increasingly have come under scrutiny for having “opaque business practices,” among other issues.

Another of ERIC’s requests to the Committee on Education and the Workforce was to “address out of control, unjustified premiums assessed to defined benefit pension plan sponsors to pay for the Pension Benefit Guaranty Corporation’s single-employer insurance program.”

ERIC wrote that PBGC premiums are set by Congress and that it has increased premiums several times in the last 12 years. ERIC urged the Committee on Education and the Workforce to take this opportunity to reduce further premium assessments to the “maximum extent possible.”

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