401(k) Specialist Issue 1 - 2024 - 17

401(k) COVER STORY
more likely to leave money in plans, where
they have potentially two levels of fiduciary
support from the company fiduciaries and
any third-party advisor or consultant. "
In a highly regulated industry in which
plan sponsors have significant fiduciary
responsibilities, Principal's Teresa Hassara said
it's challenging to make swift decisions about
their benefit dollars without proper due
diligence.
" That said, I don't believe in-plan annuities
will ever gain high adoption until they are
part of the QDIA. It can be incredibly difficult
to manufacture a retirement income solution
tied to the QDIA that is suitable for all plan
participants but continual advancements in
technology to support data gathering and
personalization are making it easier, " Hassara
added. " This is where we should be moving as
an industry with plan sponsors, providers, and
financial professionals working collaboratively
to develop an infrastructure for communicating,
educating, and advising participants on
retirement income earlier in their lives. "
Colangelo adds that the clear and consistently
stated friendly provisions of the SECURE
Act and SECURE 2.0 are now helping annuities
be viewed as broadly acceptable.
" Auto enroll, auto escalate, QDIA and
TDFs all took many years to take hold, " he
noted, adding that even though regulation
made them permissable, there was hesitancy
in being the first over the wall. " In this case,
it has become so obvious that the DOL is
behind these, and committees' desire for
these are ahead of consultants introducing
them, leading to a more rushed environment
of, 'I better offer these to my clients or someone
else will' mentality. "
Winning the Game
While addressing challenges facing
widespread adoption of in-plan guaranteed
income solutions, the industry subject matter
experts 401(k) Specialist interviewed for
this article generally expressed optimism for
significant progress in 2024.
Perhaps the best reason for optimism,
QPA's Eickman concludes, is that at least a
couple of the nation's largest recordkeepers
have worked with outside guaranteed
income solutions to bring non-proprietary
solutions to their participants and will make
those available before the end of 2024.
" Those companies haven't developed their
own solutions with a revenue-producing
mindset, but instead have concluded: 'We
need to have these in order to compete in
tomorrow's marketplace.' "
For Income America, Colangelo says 2024
is the year. " With over 5,000 plans adding us,
and our solution being added to so many of
the biggest and best recordkeepers, demand
can now be met with actual available solutions,
leading to significant utilization, " he said.
Allianz Life's Gray cautions we are still in
the early stages of the in-plan guaranteed
income solutions game, but acknowledges
progress is being made. " There is still a lot of
work to do, but we are finally past the tipping
point on this. The focus, commitment,
and investment is there to make this idea
finally materialize and key stakeholders are
embracing it, " Gray said.
This year is about rising tides, Eickman
added, " which will float the boats of all who
have worked to develop modern, participant-first
income solutions. "
Annuities as a Bridge Strategy to Delay Social Security
A
nnuities are increasingly being looked at as a bridge to Social
Security-allowing people to delay claiming Social Security until
they at least reach full retirement age (67) and potentially until
turning 70, when they can claim the highest possible benefits.
At age 62, consumers face a choice that can impact the rest of their
lives: start or delay Social Security. If they claim at 62 in 2024, their
benefits would be about 30% lower than if they waited to claim until
67. And the Social Security Administration will add another 8% to
benefits for each year a person waits beyond full retirement age to start
claiming, up to age 70.
While the circumstances for people vary and there is no one
" correct " claiming age, the rule of thumb is that if you can afford to
wait, delaying Social Security can pay off for most people over a long
retirement. This is why many people are withdrawing money from
retirement accounts like 401(k)s and IRAs in amounts similar to what
they would be getting from Social Security, allowing them to hold
off on claiming Social Security and locking in higher payments down
the road. Annuities are also being utilized as a bridge strategy to help
people delay claiming Social Security.
One example is a new fixed indexed annuity introduced in January
by Nassau Financial Group called the Nassau Income Accelerator. The
single premium fixed indexed annuity with flexible guaranteed lifetime
income options is designed to help retirees delay, and therefore increase,
their Social Security and other retirement benefits.
" Our goal in developing this product was to offer much more flexibility
that would allow individuals to optimize all their retirement income
sources, " said Phil Gass, Chairman and CEO of Nassau.
By providing options to receive higher income in the early years, Nassau
Income Accelerator can help individuals delay their claim on Social
Security and other retirement benefits and achieve a higher annual
guaranteed income for life.
The Flex-Forward Income Benefit rider offers flexibility to choose
higher income payments early on in exchange for lower income
payments later. Consumers can elect the rider when the contract is
issued and decide later what date to start income and whether they
want level income for life or higher income for up to eight years.
If they choose higher income in early years, they also choose how
much higher.
" I expect to see more innovation around this idea, both for individuals
and within retirement plans, " said annuity expert Tamiko Toland of
Toland Consulting, LLC, in a recent post on LinkedIn. " While the annuity
is a great source of lifetime income above and beyond Social Security,
this product design gives a nod to the fact that the most efficient way to
increase guaranteed income is through a delayed claiming strategy. "
ISSUE 1 2024 | 401kSpecialist.com
17
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401(k) Specialist Issue 1 - 2024

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