Growth in Engagement, Annuities, QLACs
Among the strongest trends of the outgoing year: growth in employee engagement in their financial wellness, use of annuities and offerings of qualified longevity annuity contracts (QLACs). And next year may bring more of the same. So say two recently released studies that look at what’s been happening in the retirement plan industry in 2015 and what one may look for in 2016.
The Year That Was
Employees showed greater interest and involvement
in their financial well-being in the first half of 2015, says Bank of America Merrill Lynch in its Retirement & Benefits Plan Services Plan Wellness Scorecard. The report says that employees are eager for resources that will help them manage their financial affairs. Furthermore, simplified enrollment, enhanced tools and accessibility and the opportunity to engage directly with someone who can provide assistance have met that demand.
The Insured Retirement Institute (IRI) took a somewhat different tack
, looking at what’s been happening with the retirement products affected by that heightened employee engagement. Figuring most prominently in IRI’s “State of the Insured Retirement Industry: 2015 Review and 2016 Outlook” is growth in sales and use of annuities, as well as offerings of QLACs. Key findings regarding emerging and continuing trends in 2015 include:
- Overall annuity sales are consistent, and fixed indexed annuities and investment-oriented variable annuities are growing rapidly.
- Buyer demographics continue to favor expanded used of annuities.
- QLAC offerings are expanding.
- Sales continue to shift among product types.
The Year Ahead
- Providers continue to be innovative in what they offer.
Looking into the 2016 crystal ball, Bank of America Merrill Lynch suggests that employers take the following steps:
- Encourage employees to maximize contributions and investment opportunities.
- Remember that the availability of Roth accounts enhances employees’ ability to prepare for retirement.
- Adopt a streamlined enrollment process to reduce barriers to enrollment and simplify decision-making, which in turn can facilitate action by employees.
- Consider adopting automatic features, including automatic increases.
- Offer online tools and in-person support to help employees manage their money.
And efforts to support and bolster that employee engagement go hand in hand with the trends that IRI anticipates in 2016, which will not come to fruition without them. IRI expectations include:
- Insurers will continue to innovate by placing lifetime income options in workplace plans.
- Insurers will continue to focus on developing FIA and IOVA products, and new products will support the continued growth of both.
- Use of volatility managed funds that offer guaranteed income is likely to continue.
IRI argues that the backdrop to it all is the Department of Labor’s (DOL) fiduciary rule. “The DOL’s forthcoming fiduciary rule looms large, potentially requiring new product designs and disrupting current distribution models,” says the IRI.