Interest rises in keeping retiree assets in-plan

April 19, 2021

"The SECURE Act helps, but there is still a lot to be learned," Mr. Martel said, referring to the Setting Every Community Up for Retirement Enhancement Act, which was enacted in December 2019. It provides a fiduciary safe harbor for DC plans that offer in-plan annuities if an annuity provider were to fail.

"There is uncertainty about what products will meet participants' demands," he said.

When asked the best way to deliver a retirement-income solution, the top choice among 11 options was a target-date fund, cited by 43% of consultants.

There was a three-way tie for second (36% of consultants): target-date funds with embedded income guarantees, income-focused fixed-income investments and target date-funds with a regular level payout — a predetermined payment for a specific period of time.

When asked what their clients' top five priorities will be this year, evaluating retirement income (57% of responses) ranked fourth behind reviewing target-date funds (68%), evaluating investment fees (64%) and evaluating administrative fees (61%).

PIMCO executives decided to take this question a step further by asking consultants what was the single priority for so-called "leading edge" clients, which Mr. Martel described as sponsors that are early adopters of new products or services.

For that group, the top priority, at 41% of responses, was evaluating retirement income. The next largest response was setting up a retirement tier, cited by 19% of respondents.

Describing a retirement tier, PIMCO researchers used a definition by Defined Contribution Institutional Investment Association as a group of products, tools and services that enable sponsors to go beyond asset accumulation to help participants nearing, at or in retirement.

Despite consultants' wishes, however, their clients haven't yet embraced the retirement tier.

On average, only 6% of their clients offer a retirement tier while 1% is implementing one. Sixty-three percent said their clients on average don't plan to offer or haven't considered offering a retirement tier. However, 30% are planning to offer or evaluate a retirement tier. The survey did not ask for the sponsor's timetable for doing so.