More Employers Considering Annuities in DC Plans

Watson Wyatt found that nearly one in four employers (22%) that sponsor DC plans currently offer an annuity as a distribution option, and 10% of those who do not offer one are considering adding it, according to a press release. The survey found that the main reasons plan sponsors cited for not offering an annuity were a lack of participant demand (56%) and administrative complexity (36%).

“Annuities in 401(k) plans were rarely discussed a few years ago,” said Robyn Credico, a senior retirement consultant at Watson Wyatt, in the release. “But in the recent economic downturn, employees without traditional pension plans could not retire because their 401(k) balances were decimated. With this weakness in 401(k) plans now exposed, more employers are exploring ways to minimize their employees’ exposure to risk—including the use of annuities.”

The survey was conducted in March and April, and included responses from 149 employers.

Earlier this month, the Department of Labor announced that it will explore steps it can take to encourage employers to offer lifetime annuities or similar lifetime distribution options in their defined contribution plans (see “DoL Set to Issue Annuity Project RFI”).