Retirement Income Fails to Draw Focus

BOSTON ( TheStreet) -- Only one-third of plan sponsors at Fortune 1000 companies would describe their retirement benefits philosophy as supporting employees' efforts to "create retirement income for the future," according to research released this week by MetLife ( MET).

MetLife's inaugural Qualified Retirement Plan Barometer looked at whether the largest U.S. companies are moving toward an approach putting equal emphasis on retirement savings and creating lifetime income. It found that good intentions on this front are often not matched by plan realities.

Met Life
MetLife says it plans to issue regular reports on its Qualified Retirement Plan Barometer.

"More than eight in 10 plan sponsors do not set income replacement goals for their qualified plans," the study says. Of those that do, the median replacement goal set is 62%, "well below the recommendations of most experts." Fewer than half of plan sponsors have written policy statements that deal with more than just investment issues, and less than one-third of them address retirement income in these statements.

"While the majority of plan sponsors provide education about the need to save for retirement and the risks of investing, very few concentrate on retirement income-related issues such as longer life spans, longevity risk, how to create retirement income, the pros and cons of taking a lump sum versus periodic payments and when to begin taking Social Security benefits," Cynthia Mallett, vice president of product & market strategies for MetLife's Corporate Benefit Funding Group, said in a statement. "Given their current focus, plan sponsors -- even those who fund traditional defined benefit plans -- appear to be undercommunicating with employees about the importance of retirement income."

While 77% of plan sponsors report that their employees are aware of company-provided materials available to them pertaining to the importance of saving for retirement, just 58% think that the materials, tools and/or other support their company provides participants gives them a clear idea of how to generate retirement income from their plans.

Fewer than half of plan sponsors say all their employees get participant statements that show their balance and what it would convert to as an income stream in retirement. For those with a defined-benefit plan, just 44% get information on income earned to date.

Among companies offering a defined-benefit plan, just 20% said they provide "extensive materials on the pros and cons of taking a lump sum vs. a periodic income distribution from a DB plan," the study says.

Many plans have eliminated or avoided adding an annuity distribution option in their defined-contribution plans for a number of reasons. Chief among them are fiduciary liability concerns and the administrative issues related to offering annuities. For those plan sponsors that do not offer lifetime annuity options from their defined-contribution plans, more than half (54%) cite fiduciary concerns as a reason.

-- Written by Joe Mont in Boston.

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