Products September 1, 2015

SPARK Issues Guidelines for Integrating Income Options in DC Plans

The SPARK Institute guidelines allow recordkeepers to translate information delivery and decision making supported by all lifetime income product providers to their own systems.
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The SPARK Institute released its guidelines on the integration of guaranteed lifetime income options on 401(k) and other defined contribution (DC) plan recordkeeping and web platforms.

The SPARK Institute guidelines allow recordkeepers to translate information delivery and decision making supported by all income product providers to their own systems. The common approaches are not specific to any one recordkeeper, middleware, or product solution. These new guidelines are completely voluntary for SPARK Members and are not a requirement for offering a lifetime income option.

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“We recognized the need to go beyond the existing SPARK income data standards and provide guidelines on the use of the data and product integration,” says Tim Rouse, executive director for the Institute. “Working through a member task force, we created the guidelines to support participant level guarantees and related messaging and disclosures for various income products on the market today.”

According to SPARK, although participant experience and related technology varies across recordkeepers, there are core functions that exist on all platforms, such as exchanges, withdrawals, loans, and required minimum distributions. While the focus of the guidelines is participant web-based transactions, they may be translated to other areas such as call center servicing.

“Having a consistent approach that supports all products will minimize the initial and ongoing costs and maintenance for the recordkeeper,” says Rouse. “These standards also reflect the extent to which guaranteed lifetime income products have adopted a standard approach.”

The new SPARK Guaranteed Income Touchpoint Guidelines are available at no cost to recordkeepers and providers of lifetime income products by contacting The SPARK Institute at 860-658-5058, or by e-mail at info@sparkinstitute.org.
Data & Research September 1, 2015

DC Participant Clients Likely Unable to Retire at 65

Six in 10 workers are not on track to meet their needs in retirement at age 65, according to a recent analysis.
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An analysis from Aon Hewitt reveals that most workers will likely need to work longer to save enough to maintain their standard of living in retirement.

Aon Hewitt’s analysis of 77 large U.S. employers, representing 2.1 million employees, projects the average worker will need to save 11 times their final pay at retirement (age 65) to keep their preretirement lifestyle. However, most workers are coming up short.

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Only one in five are on track to meet or exceed their needs in retirement at age 65. An additional 20% may be close to having reasonably adequate savings with some lifestyle adjustments. This leaves 60% of workers unable to afford to retire at age 65.

Aon Hewitt projects that age 68 is the median age U.S. workers will be able to retire with sound financial security, while 16% are not expected to have enough to retire even by age 75. Aon Hewitt notes that exact income replacement depends on the unique situation of each worker including age, income, anticipated retirement age and Social Security.

“The benefits landscape has changed over time and U.S. workers are now accountable for a greater portion of their financial needs in retirement,” says Rob Reiskytl, partner at Aon Hewitt. “Unfortunately, most are under-prepared. The most important thing they can do is to establish goals for the kind of retirement they want and determine a savings plan to meet those needs and desires. This might mean starting to save more now, delaying retirement by a few years, or making a conscious choice to retire with a lower living standard.”

A separate Aon Hewitt survey found that just more than half of workers (54%) have estimated their retirement needs, determined savings requirements or forecasted how much income they’ll need in retirement. Only 40% of workers have created a financial plan to achieve their retirement goals.

Highlights of Aon Hewitt’s sixth installment of The Real Deal Study can be downloaded from here.

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