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Retirement Plan Trends Include Increased Involvement, Annuity Use & QLACs


The American Society of Pension Professionals & Actuaries (ASPPA) recently summarized the trends that they saw in their industry last year. In “Growth in Engagement, Annuities, QLACs,” their staff wrote about the increasing importance of multiple annuity types to their industry. They used information from two different retirement plan studies and found that one of the biggest trends is more employee involvement and interest in their financial well being. There is also an increasing use of annuities in retirement plans and an increase in Qualified Longevity Annuity Contracts (QLACs) being offered in plans. The ASPPA expects these 2015 trends to continue through 2016.

Bank of America Merrill Lynch found that more employees were involved in their financial planning during the first six months of 2015 in their Retirement & Benefits Plan Services Plan Wellness Scorecard. These employees are looking for information to help them better plan out their finances. Companies have met that demand by simplifying the enrollment process, enhancing tools and accessibility, and offering more face to face help. On the flip side of this study was the Insured Retirement Institute (IRI) study that researched how products have been affected by employees who are more engaged than ever. Their study, “State of the Insured Retirement Industry: 2015 Review and 2016 Outlook,” found that annuities are growing in sales partly because of their increased use in retirement plans and QLAC offerings are increasing as well. Total annuity sales have been consistent, but fixed indexed annuities and investment-only variable annuities are growing rapidly. More QLAC products are being offered as product innovation remains strong. The demographics of consumers favor greater annuity use, although product use is shifting to different types of annuities.

Both research teams also took a look ahead to this year. Bank of America Merrill Lynch offered some tips for employers. They think employers should continue to encourage workers to contribute the max to their retirement plans and even automate savings and increases. Employees are more likely to take action when the enrollment process is streamlined and their decisions are simple. Companies would also be wise to offer online tools as well as face to face money management support. These employee trends lead right into the future that the IRI sees for the industry. They believe that insurers will continue with innovation that gets lifetime income options into employee retirement plans. There will also be a strong focus on indexed annuities and IOVAs because they are in high demand right now. In addition, the IRI sees continued use of managed volatility funds to offer guaranteed income.

The major 2015 retirement plan trends were an increasing involvement from employees, more use of annuity products and a greater selection of QLACs within retirement plans. These trends are likely to continue this year, according to studies by Bank of America Merril Lynch and the IRI. The IRI pointed out that annuity product designs and distribution models will likely be affected by the DOL’s upcoming fiduciary rule, so the industry will be monitoring that closely.

Written by Rachel Summit

Follow Rachel, aka Finance Mama, on Twitter and Google+

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