Evaluating retirement income solutions for DC plans: A five-step guide

Work + Save = Retire

It may seem like a simple formula to get to retirement, but each aspect can prove challenging. On the work and savings side, defined contribution (DC) plans effectively help millions of Americans save for retirement. As of December 2023, Americans had more than $10 trillion in DC plans set aside for retirement,1 but retirement plan savers are increasingly looking for help translating those savings into lifetime retirement income streams.

A recent survey found that 88% of baby boomers, 86% of Gen Xers, and 92% of millennials want access to retirement income options.2

Retirement income is one of many issues preoccupying plan sponsors

They are also tasked with expanding their financial wellness programs; protecting their plans from cyber threats; optimizing core investment menus; and understanding the implications of artificial intelligence. 

Following a structured framework when evaluating retirement income options can help simplify the review process, make it feel more manageable, and open the door to seeking help from expert resources.

Solving for retirement income

Uncertainty is at the heart of the various challenges associated with retirement income planning. Retirees face many risks, including longevity, inflation, market, health, and interest rate, to name just a few.

It’s important for plan sponsors to offer savers the tools, advisory services, and products needed to pursue a retirement income approach that is personalized, holistic, and advised. Empower research — Retirement income: A modern approach driven by advice — explains in detail the significance of these three pillars in driving retirement income solutions.


Focuses on creating a customized solution based on a detailed picture of an individual’s current situation, what they need, and their future goals.


Means obtaining a comprehensive picture of an individual’s total financial assets and expenses to best meet their goals and needs.


Entails working with financial professionals to help an individual map a path forward by addressing the risks they may face in retirement.

Different retirement income products may address some or all three of the above pillars. The key is to identify the types of retirement income products or solutions that work best for workers in a particular retirement plan.

Step-by-step: Demystifying retirement income products

A step-by-step approach can make the discovery and evaluation phase of retirement income products less daunting for plan sponsors

A good starting point is to take inventory of a DC plan’s participant base, design, and retirement readiness metrics to help determine what type of income solutions may prove most appropriate. Important considerations may include workforce demographics, the availability of a defined benefit plan (DB), participant investment preferences, or available participant distribution options — such as periodic or installment payments.

With an established baseline to help determine plan objectives, exploring five key considerations can help guide and facilitate the evaluation process.

Retirement income considerations

 To guarantee or not to guarantee?

Retirement income solutions seek to generate a lifetime income stream for retirees. That income stream can come from different sources, such as an existing DB plan, a guaranteed product, a traditional investment option like a managed payout fund, or a combination of products. The decision to offer (or not offer) a guaranteed product may be based on philosophical investment approaches. There is no right or wrong answer.

*Guaranteed retirement income provided by the applicable insurance company and subject to the terms and conditions of the contract and the claims-paying ability of the insurer.

It’s worth remembering that just because a guaranteed product is available, an individual doesn’t have to activate or annuitize that guarantee. Additionally, managed accounts offering guaranteed income as part of the service only include them in a participant’s allocation if deemed appropriate. Liquidity constraints of guaranteed products should also be considered to determine a workplace saver’s ability to withdraw their balance if needed.

Concerns about fiduciary risk are common with guaranteed income options. However, before excluding guaranteed products due to fiduciary concerns, sponsors should review the SECURE Act of 2019. The Act includes a safe harbor for the selection of lifetime income providers that may help mitigate some of these concerns.

Fiduciary safe harbor for selection of lifetime income provider

Section 204 of the SECURE Act of 2019 includes a safe harbor protection for plan fiduciaries when selecting lifetime income providers in individual account plans. If the safe harbor is met, the fiduciary has no liability for losses that may result due to an insurer’s inability to satisfy financial obligations under the contract.

There are three primary criteria that fiduciaries must meet to qualify for the safe harbor. They must:

In-plan vs out-of-plan option

A retirement income product can be found within or outside of an organization’s retirement plan


For plans subject to ERISA, if the product is found within the plan, it qualifies as a plan option and is subject to ERISA’s fiduciary requirements related to investment selection, monitoring, and documentation, among other factors.


With out-of-plan options, plan sponsors are not bound by ERISA regulations once a participant’s assets leave the plan, but plan sponsors are still held to fiduciary standards regarding the selection and monitoring of the provider.

Out-of-plan options link to institutional platforms from which retirees can shop for guaranteed income options. These third-party annuity marketplaces include vetted insurers offering institutionally priced guaranteed products through a transparent and straightforward process. 

 Retirement income wrapper
and guarantee type

The packaging and delivery of retirement income products have evolved significantly in recent years

Traditional annuity options are still available, but now other multi-asset solutions are available, such as target date funds with guaranteed options included as part of the asset allocation.

Many plan sponsors and their participants are already familiar with certain types of investment options or advisory services, which can help reduce new product apprehension and facilitate educational efforts. For example, plan sponsors can choose from target date funds with a guaranteed income component or managed accounts that provide a full suite of advisory services along with professional investment management. As mentioned earlier, managed account options can offer either guaranteed or non-guaranteed retirement income options.

When considering a guaranteed option, the question then shifts to what type of guarantee would work best in the plan. Choices could include deferred income annuities, immediate annuities, guaranteed living withdrawal benefits (GLWB), guaranteed minimum withdrawal benefits (GMWBs), fixed index annuities, longevity annuities, and others.

Some key factors to consider include the:
  • Age at which an individual buys into the guarantee.
  • Timing of guaranteed payments.
  • Way payments are calculated.
  • Costs associated with the guarantee.
  • Opportunity for growth of the underlying assets.

Working with an insurance or investment expert to drill down on these options and figure out which options best match a plan’s needs and objectives may prove helpful.

Fiduciary duties

As with any retirement plan investment option, a fiduciary must go through a prudent process governing the offering of a retirement income product

That includes evaluating the reasonableness of fees, suitability of options, benchmarking, performance tracking, and assessing and monitoring insurers and investment managers.

With the increased availability of hybrid guaranteed products, it is important to distinguish between investment management and insurance fees. Fee structures could be different as insurance products may have implicit fees (built into the product) or explicit fees, such as those for a guaranteed annuity income rider. Experts can help facilitate this part of the analysis.

There are unique due-diligence functions associated with insurers, but as noted, the SECURE Act of 2019 provides some key protections related to insurance companies providing guarantees. Depending on the selected retirement income option and existing plan documents, plan document changes may also be needed.

Sample investment policy statement changes
  • Consider inserting language into the Investment Policy Statement that describes the type of retirement income vehicle the plan intends to use and list the criteria that will be used to evaluate and monitor it.
  • In the wake of the SECURE Act, consider including the guarantor’s representation letter — a letter confirming that the insurer is meeting certain key criteria — for lifetime income products as a part of the safe harbor criteria.

Fiduciaries should document any process and decision-making milestones to help satisfy ERISA’s fiduciary requirements.


Portability is a common concern with regard to the adoption of guaranteed products in DC plans

Recordkeepers and technology (middleware) providers have made great strides on this front, and recordkeepers and insurers can share data allowing for the tracking of lifetime income guarantees.

This may make it possible for participants to roll over a guaranteed income account to an IRA or for a plan sponsor to move the guaranteed plan option to another recordkeeper. Plan sponsors should explore the available portability options for both the plan and its participants.

Get Started

Legislation, product development, and technology advancements have helped mitigate many of the concerns associated with offering retirement income products in DC plans

However, savers are still likely to need help understanding how guarantees work, how to keep an accrued guarantee when leaving a workplace plan, and knowing if and when to trigger a guarantee. That’s why education and advice are critical to the successful adoption of guaranteed options, and partnering with a retirement income solution provider with robust plan sponsor and participant education is essential.

Following a step-by-step evaluation process can help organizations address their concerns in a manageable and systematic manner — and reduce the perceived complexity associated with these products. Plan sponsors do not have to navigate this process alone; they can turn to retirement income experts for professional guidance and advice.

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1 Investment Company Institute, “The U.S. Retirement Market, Fourth Quarter 2023,” March 14, 2024.
2 2023 Natixis Defined Contribution Plan Participant Survey.
3 Empower, “Empowering America’s Financial Journey™,” December 2023.
Risks associated with investment options can vary significantly, and the relative risks of investment categories may change under certain economic conditions.
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