Small Plans Early Adopters of In-Plan Guarantees

Early adoption of in-plan guarantees has occurred most often on small retirement plans (assets less than $10 million), the research shows. Some 20,300 small plans offer in-plan guarantees. Twenty-two percent of these plans have at least one person covered by a guarantee.

More than 1,200 mid-size plans (plan assets $10 million to $200 million) offer in-plan guarantees with nearly three quarters (72%) having at least one participant covered by a guarantee. The study found that less than 100 large plans (plan assets $200 million and above) currently offer in-plan guarantees but all of these plans have at least one participant covered by a guarantee.

“We have recently starting tracking sales of these products,” said Alison Salka, corporate vice president, LIMRA Retirement Research. “While the current market is small and primarily driven by small-plan adoption, the potential is tremendous as there are more than $5.1 trillion in DC assets in the United States.”

Salka added, “We anticipate that more sponsors of larger plans will begin to offer these products to their participants. Many employees look to create a guaranteed income stream from their accumulated assets. The industry has been working to address the issues like portability that have been a concern to sponsors.”

In-plan guarantees provide retirement plan participants an opportunity, while they are still working, to use some of their plan assets to provide future guaranteed lifetime retirement income. Currently two types of in-plan guarantees are sold, the guaranteed lifetime withdrawal benefit (GLWB) and the deferred income annuity (DIA).

LIMRA found that 1.8 million participants currently have access to in-plan guarantees in their DC plans. LIMRA’s survey of consumers found that a more than a third of Americans with DC plans would be interested in purchasing an in-plan guarantee product.

“Given the limited understanding of these products by both employers and employees, it is likely that Americans will increasingly be attracted to in-plan guarantees as their access and understanding grow,” noted Salka.

LIMRA surveyed six providers, representing about 90% of the market, to determine aggregated sales on all recordkeeping platforms by plan size. Data were collected on the number of plans, number of participants, and amount of assets in plans that offer in-plan guarantees.