Hartford Life latest to offer 401(k) annuity investment

HARTFORD, Conn. — Hartford Life Insurance Co. is offering an annuity investment option for 401(k) plans, the third defined contribution provider to do so.

The Hartford Lifetime Income program allows plan participants to accumulate guaranteed future income within their 401(k) plan, said Joseph Eck, vice president of institutional sales. The investment has full liquidity with a guaranteed cash refund death benefit; it also allows a participant to purchase future income through dollar cost averaging. Using dollar cost averaging, a participant can limit the interest rate risk faced when making a single purchase of an annuity at retirement, said Mr. Eck.

ClearCourse, offered by Genworth Financial Inc., Richmond, Va.; and Personal Pension Builder, provided by Merrill Lynch Retirement Group, Pennington, N.J., and MetLife Inc., New York, are the two other annuity options now available to 401(k) plans.

Mr. Eck said the investment option will be especially attractive to sponsors that are freezing their defined benefit plans and looking to enhance their defined contribution programs.

"As pension plans wane and Social Security becomes less and less of a participant's guaranteed income, we believe this product will resonate with a majority of participants. Plan sponsors say that it looks and feels like a pension plan and will strengthen their employee benefit offerings," said Mr. Eck.

Stephen Shepherd, Hartford director of product development, added: "It's about replacement income. This is the option that plan sponsors like a lot. If you're scaling back your DB plan, this is a perfect segue from DB to DC. This option looks a lot like a pension plan."

Hartford Life made the product available in late June, and is targeting 401(k) plan sponsors with assets of $500 million and more, said Mr. Eck.

Hartford has high hopes for the new option. "We're looking to attract four to six large plans this year. But I would be surprised if we didn't exceed that," Mr. Eck said.

Hartford has talked to 140 of its plan sponsor clients. "So far we've talked to 16% of our over-$1 billion plans, 5% of (clients with) $500 million to $1 billion, and 4% of (clients with) $100 million to $500 million. We're taking them through the concept," said Mr. Eck.

In a February study conducted by EMI Strategic Marketing Inc., Boston, 88% of those investing in a 401(k) plans indicated they were interested in an investment option that would provide guaranteed monthly income. "The study also showed 47% had a desire to purchase a product like this," Mr. Eck said.

Mr. Eck said he expects the option to be adopted by DC plan clients quickly.

"A lot of options, like lifecycle funds and automatic (enrollment programs) have taken 10 to 15 years to get off the ground. We believe this will take off quicker because the large plan market is looking at scaling back their DB programs," he said.

While developing the program, Hartford gauged the interest of 20 record keepers to make sure the option could work with their systems.

"We got very positive feedback, "said Mr. Shepherd.

Fidelity Institutional Retirement Services Co., Boston, was one of the record keepers Hartford reached out to, said Mr. Eck. "They had a favorable response and were quite instrumental in helping us with the features. We're hoping they will offer it to their clients," he said.