ACLI-backed paper supports income guarantees in DC plans

To that end, the paper's authors recommend increasing DC plan rates via automatic enrollment and automatic escalation, either of which can boost savings rates. To help people better manage their assets in retirement, the authors also suggest eliminating regulations that discourage employers from incorporating into the plans guaranteed retirement income options, including annuities.

The paper also makes these recommendations for improving risk management of DC plans:

• Encourage the expanded use of qualified default investment alternatives (QDIAs) that provide automatic diversification and automatic rebalancing;
• Encourage continued innovation in the QDIA space to provide further diversification to plan participants, including such asset classes as agriculture, real estate and commodities;
• Encourage plan sponsors to incorporate guaranteed life income into their in-plan distribution options and to report participant accounts in terms of retirement income rather than solely as an account balance.

The paper adds that while only 17 percent of plan participants currently provide an annuity option, 56 percent say they think they would use such an option when they retire if it were provided to them.

"We would also support the creation of a safe harbor that provides plan sponsors with a clear way to meet their fiduciary obligation when providing retirement income options," the report states.