Employers are more inclined to offer annuities in their retirement plans, according to TIAA-CREF’s inaugural survey of defined contribution plan sponsors released Dec. 11.
More than 3 in 4 sponsors (76%) expect demand for annuities to grow over the next five years, with 42% planning to add an annuity to their plans in the next two years, the survey found.
More than half of plan sponsors (52%) said their interest was driven by increased adoption by other employers. The majority, 85%, also said employees need additional sources of guaranteed income beyond Social Security.
TIAA attributes the increased interest in lifetime income products in large part to the SECURE Act, which made it easier and less risky for employers to offer the products in their plans.
“Now that the SECURE Act has paved the way for in-plan annuities — perhaps the biggest change since the inclusion of target-date portfolios — employers say they expect the rate of adoption to be similarly quick,” TIAA said in its survey report.
Still, adoption may be hindered due to a lack of what TIAA refers to as annuity fluency among plan sponsors. Only 37% of sponsors, for example, said they can articulate the value and importance of annuities.
“Our research indicates that plan sponsors are open to offering lifetime income but need support to add it to their plans,” said Kourtney Gibson, CEO of TIAA retirement solutions, in a news release.
The online survey canvassed 500 C-suite decision-makers across 401(k), 403(b) and 457 plans between June and August 2024. Some decision-makers gave follow-up interviews through November.
