ING Encourages Use of Guaranteed Income Options in Retirement Plans

ING said it broadly supports investing in guaranteed lifetime income options within a retirement plan and strongly encourages employers to add this type of feature to their plans.

However, in its response to the government’s request for information on lifetime income options for participants and beneficiaries in retirement plans, ING said it believes it is essential that employers and those serving as plan fiduciaries be given the benefit of a streamlined fiduciary standard with more objective criteria than exists today under Employee Retirement Income Security Act (ERISA) regulations. In addition, ING said some of the administrative burdens that come with carrying annuities need to be eased in order to attract more employers to offer these types of products. 

While ING favors steps that would remove barriers to adding guaranteed lifetime income distribution options as well as provide incentives for these products, it does not believe the use of the products should be mandated. 

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According to ING’s response, in order for more Americans to embrace and understand the use of guaranteed lifetime income options, more needs to be done in terms of financial literacy and education.  “When individuals are participating in a workplace plan, it is often the best time—and for many, the only time—to reach them with materials, resources, and communications that can increase their financial literacy and positively influence their behavior,” ING said.  

ING noted that plans that offer lifetime income distribution strategies tend to present this option to employees as an “all or nothing” decision with respect to their account balance, so it favors steps that would encourage employers to make the election decision easier by encouraging individuals to complete a financial plan and then commit only an appropriate portion of their account balance to a guaranteed income stream, while retaining control of the uncommitted balance.

Nationwide Proposes Employer Tax Credits for Guaranteed Income

Nationwide Financial Services, Inc., has introduced 401KIncome, a public policy proposal that it said “provides incentives for the funding of guaranteed retirement income while strengthening the current employer-sponsored defined contribution system.”

The company said its proposal provides an incentive for employers with defined contribution plans to use the employer match to purchase a guaranteed stream of income. Nationwide also asserted that the proposal would promote greater use of 401(k) retirement plans, increasing the number of employees who have access to a retirement plan.

According to the firm, under the proposal, 401(k) plans would offer fixed-income deferred annuities as the investment option for the employer match. Plan sponsors would receive a tax credit instead of a tax deduction for any employer match used to fund a guaranteed stream of income payments to participants.

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Nationwide said employees would still have control over and access to their own contributions, but the employer match would not be accessible for loans or early withdrawals. Employees could also choose to put their own deferrals in the guaranteed income option.

“We believe the 401KIncome proposal can help improve the nation’s retirement outlook by strengthening the defined contribution system through the creation of lifetime income, improved investment diversification and increased plan access while providing greater incentives for use of the employer match and ensuring those contributions are put away for retirement,” said Anne Arvia, president Nationwide Retirement Plans, in a press release.

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