NEW YORK — The Retirement Group at Merrill Lynch has joined with Metropolitan Life Insurance Co. to bring 401(k) plan participants a fixed, deferred group annuity investment option called Personal Pension Builder.
While New York-based MetLife offers the product to employers on a voluntary after-tax basis, Merrill Lynch, also of New York, designed its product so that it is ERISA-eligible and can be funded with pre-tax dollars put into a 401(k) account.
"The biggest challenge we had was designing a product that would fit within ERISA," said Ron Albahary, chief investment officer of Merrill's Retirement Group. "Employers can include it (Personal Pension Builder) as another investment option in a 401(k) plan," he added.
"We've created an accumulation vehicle within a 401(k) plan where a person can build their own defined benefit plan," said Mr. Albahary. "For every dollar that a plan participant puts into PPB they get a specific future income benefit through a deferred fixed annuity product," he added.
Mr. Albahary said in a recent national survey conducted by Merrill Lynch, two-thirds of workers contributing to a retirement plan said they prefer investments that pay a regular, set dollar amount throughout retirement.
The PPB accumulation phase offers three guarantees:
&bul;a specific future income benefit amount (similar to a defined benefit plan) purchased at current prices;
&bul;income they (plan participants) accumulate for retirement that's guaranteed for life or a period of their choice based on the annuity purchase rate (including interest rate) being offered by MetLife on the date a contribution is made; and
&bul;the beneficiary's death benefit equal to the value of the annuity if the employee dies during the accumulation period. Or, a beneficiary can elect to convert that value to an annuity.