Products & Services April 22, 2025

Comparing Insured and Non-Insured Payout Options

A recent issue brief from the American Academy of Actuaries examines the insured and non-insured options currently available that can be offered through employer-sponsored retirement DC plans.

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Comparing Insured and Non-Insured Payout Options

The following table presents a high-level comparison of the insured and non-insured options that are generally offered through employer-sponsored retirement plans.

*SPIA = Single Premium Immediate Annuity
†DIA = Deferred Income Annuities
‡QLAC = Qualified Longevity Annuity Contracts
GLWB = Guaranteed Lifetime Withdrawal Benefit

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Income guaranteed
for life		 PRODUCT TYPE
Insured Approaches Non-insured Approaches
SPIAs* DIAs† and QLACs‡ GLWBs Systematic Withdrawals
Yes Yes Yes, insurers provide benefits after account balance is depleted No
Liquidity PRODUCT TYPE
Insured Approaches Non-insured Approaches
SPIAs DIAs and QLACs GLWBs Systematic Withdrawals
Pre-income commencement Yes, premium not paid until payout commencement Usually (for plan-selected DIAs only, not QLACs) Yes, account balance
Post-income commencement No No Yes, account balance
Post-retirement death benefit to heirs Premium less benefits paid if “cash refund” feature is selected or any remaining “period certain” payments if that feature is selected (both have a “cost” of lower payouts) Remaining account balance
Downside protection PRODUCT TYPE
Insured Approaches Non-insured Approaches
SPIAs DIAs and QLACs GLWBs Systematic Withdrawals
Pre-income commencement No, in particular, participants are subject to point-in-time interest rate risk, which can be partially mitigated if premium is accumulated over time in a fixed income account that mimics annuity purchase rates Yes Yes, as soon as the “benefit base” is established No, but participants can mitigate downside risk by investing conservatively
Post-income commencement Yes Yes Yes No
Upside potential PRODUCT TYPE
Insured Approaches Non-insured Approaches
SPIAs DIAs and QLACs GLWBs Systematic Withdrawals
Pre-income commencement Yes, premium not paid until payout commencement No, guaranteed income locked in at time of purchase Yes, fund returns if the base product is a VA, market index if FIA; insurer may limit upside Yes
Post-income commencement No No Account value can grow with fund returns (VA) or market index (FIA), and guaranteed lifetime withdrawals under some designs Yes
Fees PRODUCT TYPE
Insured Approaches Non-insured Approaches
SPIAs DIAs and QLACs GLWBs Systematic Withdrawals
No explicit fee; instead the payout rate reflects the cost to provide the lifetime income guarantee There is an explicit or implicit product fee/cost (or both) that lowers returns Investment and administration fees to maintain the account—usually percentage of balance—but generally no fee if participant does their own systematic withdrawal
Simplicity PRODUCT TYPE
Insured Approaches Non-insured Approaches
SPIAs DIAs and QLACs GLWBs Systematic Withdrawals
Easy to understand Relatively simple Can be complex Range from easy to understand to complex

Source: American Academy of Actuaries, "Decumulation Strategies: Creating Lifetime Income from Defined Contribution Plans"

More on this topic:

What to Know About Adding Income to a Plan Lineup
Does the 4% Rule Still Stand?
Understanding and Evaluating Retirement Income Solutions
Beyond the Annuity Puzzle: Rewiring the Psychology of Lifetime Income

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