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.
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.