White Paper Urges Focus on Retirement Income

Plan designs should evolve beyond their focus on helping employees accumulate an adequate amount of retirement savings to a focus on encouraging participants to secure lifetime income during retirement, according to the Institutional Retirement Income Research Council (IRIRC).

In its first white paper, “Institutional Retirement Income Solutions: A Call to Action,” the IRIRC (supported by Prudential Retirement) discusses why defined contribution (DC) plan sponsors should consider adding retirement income solutions to their plans. Noting that defined contribution plan assets are projected to be the primary source of retirement income for future retirees, and in the 12-month period through October, research has found that 401(k) plans and individual retirement accounts dropped in value by $2 trillion due to market volatility, Martha Spano, IRIRC co-chair and West Division Practice Leader for Watson Wyatt, commented in a press release: “The current economic crisis has exposed the flaws in the existing retirement system.”

The white paper contends that employers’ roles are evolving and they are in a unique position to have the greatest impact in helping plan participants become more successful through the emergence of automatic enrollment, automatic deferral increases, and qualified default investment alternatives as plan features. The council also suggests that success of a DC plan should be based on whether the plan facilitates adequate retirement income and not on participation rates.

“The only way to quell the increasing public angst around the ability of Americans to retire in the future is for stakeholders from all areas of the retirement industry to come together and encourage plan sponsors to implement optimal retirement income solutions that address many of the problems retirees face in generating secure lifetime income,’ said Spano.

The white paper is available through www.irirc.com.