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Retirement Planning > Retirement Investing

LIMRA: DC in-plan guaranteed assets total $2.2B

By Maria Wood

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Guaranteed assets within defined contribution (DC) plans amounted to $2.2 billion at the end of 2012, LIMRA reports.

The organization recently began to track sales of these products, according to a statement from Alison Salka, corporate vice president, LIMRA retirement research. As it stands now, the market is small and driven mostly by small plans with assets under $10 million. However, with more than $5.1 trillion stashed in DC plans in the U.S., there is potential for growth. “We anticipate that more sponsors of larger plans will begin to offer these products to their participants,” Salka said in a statement. “Many employees look to create a guaranteed income stream from their accumulated assets. The industry has been working to address the issues like portability that have been a concern to sponsors.”

The study surveyed six companies, representing about 90 percent of the market, to determine aggregated sales on all recordkeeping platforms by plan size. Data were collected on the number of plans, number of participants and amount of assets in plans that offer in-plan guarantees.

Currently, notes LIMRA, two types of in-plan guarantees are sold: the guaranteed lifetime withdrawal benefit (GLWB) and the deferred income annuity (DIA). These options enable employees to deposit a portion of their DC plan funds into an instrument that provides future guaranteed lifetime income during retirement.

About 1.8 million participants currently have access to in-plan guarantees in their DC plans, reports LIMRA. In a consumer survey, the organization found that more than one-third of Americans with DC plans would be interested in an in-plan guaranteed product.

LIMRA’s study found that 1.8 million participants currently have access to in-plan guarantees in their DC plans. LIMRA’s survey of consumers found that more than one-third of Americans with DC plans would be interested in purchasing an in-plan guarantee product. “Given the limited understanding of these products by both employers and employees, it is likely that Americans will increasingly be attracted to in-plan guarantees as their access and understanding grow,” Salka stated.

Small retirement plans has been early adopters of in-plan guaranteed options. LIMRA reports that roughly 20,300 small plans offer in-plan guarantees, with 22 percent of these plans having at least one person covered by a guarantee. More than 1,200 midsize plans (those with assets between $10 million and $200 million) offer in-plan guarantees with 72 percent having at least one participant covered by a guarantee. Less than 100 large plans (plan assets of $200 million and above) have in-plan guaranteed choices in their menu, but all of these plans have at least one participant covered by a guarantee.

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