man looking at a laptop

The past few years have been a roller coaster ride for America’s retirement savers. COVID-induced market volatility in 2020 wreaked havoc on the nest eggs of retirement plan participants. In 2021, we all breathed a sigh of relief as markets and portfolios kicked into gear again. In the early stages of 2022, volatility staged a major comeback driven by inflation spikes and geopolitical conflict. As a result, many Americans are once again feeling stressed about whether their dwindling retirement savings accounts will be adequate to provide a secure retirement.

This is a major reason why the advent of in-plan guarantee investment solutions is gaining traction with both you and the employees you serve. These solutions offer participants an opportunity to grow their retirement savings with the confidence that they can generate guaranteed income they won’t outlive, removing at least one unknown for those trying to understand what their finances will look like in retirement. Nationwide is seeing tremendous interest from plan sponsors like you in adding these solutions to their investment lineups as a result.

Despite this, a recent Nationwide Retirement Institute® study found some plan sponsors still hold a few key misperceptions about these guaranteed lifetime income solutions, which may be standing in the way of further plan and participant adoption. Let’s take a look at what we heard from plan sponsors who may still have some misgivings about these solutions and address these concerns head on:

Misperception #1: 26% of plan sponsors are worried that fees passed on to employees are too high.

The truth: Compared with what a participant may be used to seeing in their plan’s investment lineup, the fees for in-plan guaranteed lifetime income solutions could be higher. However, the overall cost is typically lower than similar investment options offered outside the plan. That’s because in-plan guarantees are offered within a group retirement plan where the participant benefits from reduced expenses.

Misperception #2: 23% of plan sponsors are concerned that in-plan guarantee solutions are too complex.

The truth: Many of these solutions are structured as a target date fund held within a collective investment trust. This offers a simplified experience that can provide access to growth potential while offering guaranteed lifetime income – all offered in one simple investment option in their retirement plan.

If a participant decides they want to access or do something different with their money, there is no surrender charge for moving money out of an in-plan guarantee investment option. That means they can access their money at any time during either the accumulation or decumulation phase, although doing so may impact their amount of guaranteed lifetime income in retirement.

Misperception #3: 32% of plan sponsors are concerned that administrative costs are too high.

The truth: Generally, there is no explicit cost for your plan. There is some additional work applying existing fiduciary standards in the evaluation and adoption of these solutions, which is consistent with any of your ongoing fiduciary duty to explore new or diversified solutions to ensure employees have the right menu of investment options to choose from. The work involved in evaluating or implementing these solutions is consistent with efforts you routinely implement to help ensure you’re optimizing your investment lineup as part of your ongoing fiduciary responsibility.

Misperception #4: 29% of Plan Sponsors are concerned about increased fiduciary responsibility associated with in-plan guarantees.

The truth: The SECURE Act of 2019 provided new fiduciary safe harbor guidelines for Plan Sponsors in the selection and on-going monitoring of guaranteed lifetime income products and the insurers who provide them. Solution attributes such as features, benefits and the financial strength of the insurer should be considered in conjunction with cost. It is worth noting that the SECURE Act's new safe harbor includes a clarification that a plan fiduciary is not required to select the lowest cost option. To review a full list of fiduciary considerations, see our guide:

Misperception #5: 15% of Plan Sponsors believe their employees are not interested in guaranteed lifetime income investment options.

The truth: According to Nationwide’s survey, 46% of participants are interested in a guaranteed lifetime income investment option. And they're ready to get started with one once their employer offers it, with 8 in 10 at least somewhat likely to roll over a portion of their current retirement savings into one.

Learn more about Nationwide's suite of in-plan guarantee solutions.
Nationwide offers a list of considerations to help you get conversations about in-plan guarantees started. To learn more, please contact your Nationwide Retirement Specialist.
Source: Survey Methodology: Edelman Data and Intelligence (DxI) conducted the online survey on behalf of Nationwide, July 19-August 4, 2021. Respondents included: 500 company plan sponsors, including business executives, business owners, human resources professionals and financial management professionals who are full-time workers at U.S. businesses with at least 10 full-time employees who are decision-makers for company retirement plans. This includes 401(k), 403(b), or 457(b) plans, 1,000 plan participants 45+ years of age who work full-time and have access to a 401(k), 403(b), or 457(b) plan through their employer.
Guarantees are subject to the claims-paying ability of the issuing insurance company.
These investment options may not be available in all states.