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More 401(k) Sponsors Consider Annuities: Survey

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The number of employers planning to offer annuities to participants in their 401(k) plans is expected to grow, according to a survey by Watson Wyatt Worldwide Inc.

The interest in annuities comes as companies look for ways to provide workers with a steady distribution of benefits after they retire, according to WWW, Arlington, Va., a consulting firm.

WWW notes its findings come on the heels of an statement by the U.S. Department of Labor that it will explore ways to persuade employers to offer lifetime annuities or similar distribution choices in their defined contribution plans.

WWW found that 22% of employers that sponsor 401(k) and other DC plans currently offer an annuity as a distribution option, and 10% of those that don’t offer one are considering adding it.

Employees are increasingly looking at annuities because the recent economic crisis forced many older employees to postpone plans to retire when their account balances were devastated, notes Robyn Credico, a senior retirement consultant at WWW.

“With this weakness in 401(k) plans now exposed, more employers are exploring ways to minimize their employees’ exposure to risk–including the use of annuities,” Credico stated.

The main reasons plan sponsors did not offer an annuity were a lack of participant demand (56%) and administrative complexity (36%), the survey found.

The survey polled 149 employers.