SPARK, IRIC Create Evaluation Framework for DC Retirement Income Products

The Institutional Retirement Income Council and the SPARK Institute announced Wednesday the launch of the Defined Contribution Retirement Income Solutions Framework, a document intended to help plan sponsors, advisers, consultants and fiduciaries compare retirement income products available to defined contribution plan sponsors. The guide is available to industry professionals through SPARK’s website.

The resource offers standardized, side-by-side profiles of the products, according to the announcement. The framework was created based on submissions from product distributors across the retirement income sector and covers the main categories of retirement income products available to DC plan sponsors, including:

• Deferred income annuities and qualifying longevity annuity contracts;
• Guaranteed lifetime withdrawal benefit solutions embedded into target-date funds and balanced funds;
• Guaranteed minimum withdrawal benefit products offered through collective investment trusts;
• Fixed indexed annuities with GLWB riders designed for in-plan deployment;
• Managed payout strategies; and
• Single premium immediate annuities accessible at retirement.

Kevin Crain, IRIC’s executive director, says the group made an initial attempt in 2021, using a spreadsheet, to inventory retirement income products. But then, the list was never updated again. Last summer, however, SPARK and IRIC teamed up to continue to the effort.

Crain says the project has allowed the industry associations to come together for the common good. He also refers to IRIC and SPARK as “agnostic” regarding the solutions plan sponsors adopt.

“We’re trying to educate the industry of all the potential options out there—guaranteed or not guaranteed,” Crain says. “When we can come together, it makes the message more concise and simplified for the end user.”

To allow key industry decisionmakers to decide which product, if any, is right for their plan, IRIC and SPARK organized the tool into five categories:

• Offering/eligibility: access method, market segment and the plan types supported;
• Fee structure: explicit guarantee fees, investment management fees and total costs;
• Account characteristics during accumulation: benefit base mechanics; equity market participation, impact of contributions, liquidity rules and principal protection;
• Income phase: excess withdrawal rules, guarantee details, payout rates at age 65, spousal options; and
• Guarantee–backing and portability: insurer ratings, rollover options and what happens if a participant leaves the plan that offered the income product or if the plan’s recordkeeper changes.

“The industry seems to be moving from interest to … evaluation to more potential adoption” of retirement income products,” Crain says. “We expect this [framework] to be a living thing, not a one and done.”