The number of employers planning to offer annuities to participants in their 401(k) plans is expected to grow as companies look for ways to provide workers with a steady distribution of benefits during retirement, according to a new survey.
In the survey, consulting firm Watson Wyatt found that nearly one in four employers (22 percent) that sponsor defined contribution plans currently offer an annuity as a distribution option, and 10 percent of those who do not offer one are considering adding it. The finding comes on the heels of an announcement by the Department of Labor in early December that it will explore steps it can take to encourage employers to offer lifetime annuities or similar lifetime distribution options in their defined contribution plans.
There are various kinds of annuity options in 401(k) plans that generate a guaranteed lifetime income. Some of these are investment options available to younger employees while they are still employed and contributing to their 401(k) plans, while others are available at the time of retirement.
The survey found that the main reasons that plan sponsors did not offer an annuity were a lack of participant demand (56 percent) and administrative complexity (36 percent).
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