AllianceBernstein, the investment management firm whose defined contribution unit claims to be the first 401(k) provider to offer annuitized lifetime income options as a qualified default investment, has announced the formation of a fiduciary service that will assume the responsibility for vetting insurance companies when offering lifetime income options to plan participants.
Under the service, AB will serve as a 3(38) fiduciary to sponsors. In that capacity, sponsors and plan fiduciaries will be fully relieved of fiduciary obligations relative to the selection and monitoring of lifetime income options.
AB, as a 3(38), will carry full fiduciary responsibility in selecting and monitoring income options.
Sponsors will still have the fiduciary obligation to prudently select the investment manager.
In a statement, AB said the new service will give sponsors more confidence in offering lifetime income options for participants, because much of the fiduciary burden in doing so will be alleviated.
“We think it is clear that policymakers and regulators have initiatives underway to encourage plan sponsor adoption of guaranteed income solutions,” said Richard Davies, Senior Managing Director, Defined Contribution at AB, in the statement.
“With our new fiduciary service, a plan sponsor can delegate responsibility to AB for its insurance product selection. This should make plan sponsors feel more comfortable in offering employees guaranteed income in retirement,” he added.
The new fiduciary service will be packaged with AB’s existing Lifetime Income Strategy Service, which deploys annuitized income options for plan participants.
The firm has created a platform that effectively functions as an annuity provider marketplace.
Under its new fiduciary service, AB guarantees that the products offered are fairly priced, and that the offering insurance companies meet sponsors’ fiduciary requirements to select sustainable companies.
The latter fiduciary requirement is often said to make sponsors hesitant to offer lifetime income options to participants.
AB addresses those concerns, it says, via the assemblage of the firm’s top insurance, credit, compliance, asset allocation, and technology and regulatory analysts and experts, all with the idea of assuring sponsors they can meet their fiduciary obligation to prudently select AB as a 3(38).
“We understand employees desire secure retirement income options from their workplace savings plan, but unfortunately many plan sponsors are concerned about taking on the fiduciary responsibility associated with offering these options within their plans,” said William Marshall, Managing Director, Defined Contribution at AB.
“With our new fiduciary service, we’ve put together a robust process for the selection and monitoring of insurers as well as the prudent assessment of the value of guaranteed income offered,” he added.