But Walsh at TIAA disagreed.
"Providing access to annuities inside retirement savings plans offers meaningful benefits to participants," he said. Among other advantages, he listed competitive pricing, since "institutionally-priced products leverage economies of scale. The oversight and due diligence that employers exercises over their plan help ensure that participants have access to competitive and beneficial offerings."
The problem lies not so much with the annuities themselves as with the barriers and ambiguities inherent in some legal guidelines. "Central to addressing this challenge is adopting policies that will increase in-plan access to annuities," Walsh said.
The current rules create uncertainty about how to assess what's appropriate to offer in a 401(k). "Evaluating the financial strength of any given annuity provider can be a complex process," he said. For instance, the Department of Labor's safe harbor guidelines, though intended to simplify the process, need clarification. "For that reason, many [employers] are reluctant to adopt in-plan annuities, even if they and their plan consultants recognize the value that annuity products can deliver.”
Walsh suggested adjusting the rules to allow fiduciaries to "rely on the true experts in evaluating an insurer’s financial strength—the state regulatory bodies.”
Accordingly, he supports bipartisan legislation recently introduced in Congress that "lays out the specific framework for this safe harbor." One such proposal is an amendment to ERISA called the Retirement Enhancement and Savings Act (RESA).
"Any part of RESA that helps cover more Americans in workplace savings plans and also spurs higher savings rates is welcome," said Jim Kais, a senior vice president and head of retirement plans at Ameritas Life Insurance Corp., in Lincoln, Neb.
Kais pointed specifically to a provision that provides a "fiduciary safe harbor" for selecting insurance carriers for in-plan annuities, thus eliminating "a key roadblock in offering lifetime income options," he says.
Given the slow pace of Congress, where this will lead is anyone's guess.
"The concept of in-plan annuities is still a fairly embryonic idea," said Kais. Plan sponsors, he conceded, "struggle with portability, cost containment, insurer risk, employee communication [and] benchmarking," as well as with whether annuities are appropriate for younger workers in the accumulation stage of retirement planning.