MetLife Retirement & Income Solutions
Five Steps to Creating Employee Retirement Security
According to MetLife’s latest research, nearly all workers and retirees (95%) say it’s important for retirees to have a source of guaranteed income they cannot outlive.1 With the ongoing shift from defined benefit (DB) pension plans to defined contribution (DC) plans, employees are required to assume more responsibility for making sure their savings lasts throughout retirement. For some employees who are faced with financial uncertainty, they may need to delay their retirement; others are unsure of how to make their savings last. By adding an income annuity as a distribution option to your DC plan, your employees get access to solutions that can convert a portion of their savings into a source of guaranteed income that they will never outlive—empowering them to confidently retire on time.
Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019
Adding a guaranteed income annuity as a distribution option can complete the cycle of retirement savings. Similar to selecting a plan investment option, plan sponsors have a fiduciary responsibility for how each of the features in its plan design operates, and in the case of an income annuity feature, this would focus on the selection of the insurance provider of the guaranteed income contract. The DOL guidelines, amended by the SECURE Act of 2019, established a fiduciary safe harbor for selecting a lifetime income provider, making it even easier for you to confidently offer annuities as a distribution option. The steps listed below are a guide to the safe harbor requirements for plan fiduciaries to follow.
Select an Annuity Provider
With respect to the selection of an insurer for a guaranteed retirement income contract, the requirements will be deemed to be satisfied if a fiduciary:
A) Engages in an objective, thorough, and analytical search for the purpose of identifying insurers from which to purchase such contracts;
B) Considers the financial capability of such insurer to satisfy its obligations under the guaranteed retirement income contract;
a. The safe harbor utilizes state insurance regulators and an annual certificate provided to the employer confirming an insurer’s solvency. The employer is able to rely on written representations from the insurer, which must confirm that the insurer has complied with certain regulatory, financial reporting and auditing requirements; undergoes an examination by the insurance commissioner in its state of domicile at least every five years; and, agrees to notify the employer of any changes in such circumstances.
C) Considers the cost (including fees and commissions) of the guaranteed retirement contract; and considers the cost (including fees and commissions) of the guaranteed retirement income contract offered by the insurer in relation to the benefits and product features of the contract, and administrative services to be provided under such contract;
D) Concludes that at the time of the selection, the insurer is financially capable of satisfying its obligations under the guaranteed retirement income contract and that the relative cost of the selected guaranteed retirement income contract is reasonable.