IRIC Calls for Retirement Income Menu in 401(k)s

IRIC contends that employers historically have given relatively little attention to post-retirement years, when retired employees are responsible for investing and drawing down their account balances. In a recently published issue brief, “The Retirement Income Menu: An Idea Whose Time Has Come,” IRIC writes that the time for plan sponsors to consider offering a retirement income menu is now.  

“Unfortunately, most employees lack the time and skills to make effective decisions on generating retirement income from their account balances,” said Steve Vernon, President of Rest-of-Life Communications, a retirement education consulting firm and IRIC member who authored the issue brief. “Additionally, employees, faced with a bewildering array of financial products, institutions and advisers, typically make choices that may not best fit their situation, or are so paralyzed with fear that they don’t make any choice at all. A properly designed and communicated retirement income menu can go a long way toward helping retiring employees make the right decisions and generate reliable sources of lifetime retirement income.”  

The issue brief describes key features that plan sponsors should consider when developing and implementing a retirement income menu for plan participants, including: 

• What type and how many retirement income methods should plan sponsors offer to employees? 
• How should plan sponsors communicate the retirement income menu so that participants can make informed decisions about which retirement income method to choose? 
• Should retirement income choices be offered “inside” the plan (e.g., managed payouts administered by the plan administrator or annuities delivered by an insurance policy held in the plan’s trust) or “outside” the plan (e.g. rollovers into IRAs sponsored by mutual fund companies or rollovers to individual annuity contracts). 
• What fiduciary considerations should employers be concerned with when offering a retirement income menu? 

The issue brief also provides an example of a retirement income menu that offers six different choices including some that are inside and outside the plan.   

To obtain a copy of the issue brief, “The Retirement Income Menu: An Idea Whose Time has Come,” visit http://iricouncil.org/iricArticles.  

IRIC previously published an issue brief detailing why it believes plan sponsor concern about an adverse employee reaction to retirement income products appears to be unfounded (see "Report Encourages Adoption of Retirement Income Solutions").