Make sure that “in-plan” annuity products are delivered clearly and in a way that defined contribution plan participants can understand, advises “Guaranteed Annuities in Defined Contribution Plans,” a new report form Financial Research Corporation, Boston.
These are products that provide guaranteed income options inside of DC plans. But, they are new and need to be simple to explain and understand, says Luis Fleites, a vice president at FRC and the author of the report.
Without sufficient clarity, DC plan investors and participants may experience a “disconnect” when measuring the value of such guarantees versus the cost, he cautions. They may also experience a disconnect when comparing the solution (to their guaranteed retirement income need) with other available products.
What to do? The report suggests that product manufacturers do the following: