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Enhancing participant retirement security

November 16, 2021

Why lifetime income solutions are integral to defined contribution plans

Enhancing participant retirement security

Now that we have settled into a post-pandemic reality, it is a good time for defined contribution (DC) plan sponsors to re-evaluate strategically how well their plans provide participants resources throughout their full lifecycle, including the full accumulation and decumulation of their retirement savings. As defined benefit plans are further phased out, DC assets will be needed to generate income in retirement; however, most DC plans are currently ill prepared to do so. Where does lifetime income fit into this new world and role of DC plans? What do you need to know about how these solutions can fit into your plan? Why is now the time to consider them?

What are Lifetime Income Solutions?

Lifetime Income Solutions are products that help and guide participants in the decumulation of their retirement savings. Participants face a shift in risks during decumulation compared to accumulation, including uncertain life expectancy, inflation, liquidity and path dependency, to name a few. These products and solutions can address these risks in varying ways and range anywhere from the recordkeeping function of allowing systematic payments to complex annuity riders. Understanding your participant demographics is an important first step in determining which set of solutions best fits your population.

Why now?

A few key developments in the industry have been catalysts for growing interest from plan sponsors. The first is the SECURE (Setting Every Community Up for Retirement Enhancement) Act. Passed in late 2019, the SECURE Act had several provisions specifically related to lifetime income, including more clarity for the fiduciary safe harbor evaluation for an income/annuity provider within a DC plan. Fiduciaries now may rely on written representations from the insurer of their financial ability to satisfy its obligations — a welcome change from prior guidance to plan fiduciaries. Another provision increased the portability of income solutions to allow plan sponsors greater flexibility to add and remove income solutions from their DC plan. Additionally, the SECURE Act created the lifetime income disclosure which is scheduled to affect participant statements due for the second quarter of 2022 and mandates that a participant’s annual benefit statement must include an illustration of their account balance converted to a lifetime income equivalent. This is intended to strengthen attention paid by participants to their long-term retirement security. While not perfect, we expect this disclosure will result in greater demand for tools and resources, and that is exactly what is happening.

Participants are demanding innovation and predictability for their retirement assets, and a guaranteed retirement benefit is the number one priority among participants nearing retirement1

  • 80% of workers say it would be helpful if their employer offered education or advice on converting savings into income in retirement.2
  • 78% of workers expressed interest in placing some or all money from their retirement plan into a guaranteed lifetime income product purchased at retirement.2
  • 89% of participants agree that having guaranteed income in retirement would have a positive impact on their current well-being.3
  • 71% of retirees said they would have chosen a steady stream of income through retirement if given the choice.4

And the investment management and recordkeeping communities are responding. In just the past few months, target date fund providers have made changes to their philosophy to advance various income solutions. We expect that more asset managers will follow suit. Further, as it relates to the annuity safe harbor mentioned earlier, some investment managers are taking on the 3(38) fiduciary responsibility for the insurer selection, which can ease plan sponsor concern in that decision making process. Still, the ever-competitive market for DC recordkeeping and financial wellbeing providers shows new differentiation in participant tools.

How can we help?

Willis Towers Watson has developed a robust process for helping plan sponsors determine the lifetime income solution that fits their needs. The multi-phased approach includes reviewing the landscape, establishing beliefs and objectives, studying participant demographics and behavior, RFP coordination, modeling participant outcomes related to various strategies, and implementation assistance. Interest in lifetime income solutions has increased four-fold since 2017.5 We expect this trend to continue and are excited as DC plan sponsors focus on the full retirement experience and support of the plans they oversee.


1 2020 Global Benefits Attitudes Survey, United States. Sample: Full-time employees with an employer plan

2 Willis Towers Watson 2020 Global Benefits Attitudes Survey, United States. Sample: Full-time employees with an employer plan

3 2020 Retirement Confidence Survey Summary Report, Employee Benefit Research Institute, Greenwald & Associates

4 BlackRock 2021 Pulse Survey

5 Willis Towers Watson 2020 U.S. Defined Contribution Plan Sponsor Survey


The information included in this presentation is intended for general educational purposes only and does not take into consideration individual circumstances. Such information should not be relied upon without further review with your Willis Towers Watson consultant. The views expressed herein are as of the date given. Material developments may occur subsequent to this presentation rendering it incomplete and inaccurate. Willis Towers Watson assumes no obligation to advise you of any such developments or to update the presentation to reflect such developments. The information included in this presentation is not based on the particular investment situation or requirements of any specific trust, plan, fiduciary, plan participant or beneficiary, endowment, or any other fund; any examples or illustrations used in this presentation are hypothetical. As such, this presentation should not be relied upon for investment or other financial decisions, and no such decisions should be taken on the basis of its contents without seeking specific advice. Willis Towers Watson does not intend for anything in this presentation to constitute “investment advice” within the meaning of 29 C.F.R. § 2510.3-21 to any employee benefit plan subject to the Employee Retirement Income Security Act and/or section 4975 of the Internal Revenue Code.

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Michele Brennan
LifeSight US Business Leader

Cole Jacobs
Associate Director
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