6 Tips to Kickstart Succession Planning with Your Business Owner Clients
Here are 6 tips you can share with your business owner clients to help kickstart their succession planning.
This is a major reason why the advent of in-plan guarantee investment solutions is gaining traction with both Plan Sponsors and the employees they serve. These solutions offer participants an opportunity to grow their retirement savings with the confidence that they can generate guaranteed income they won’t outlive, removing at least one unknown for those trying to understand what their finances will like look like in retirement. Nationwide is seeing tremendous interest from Plan Sponsors in adding these solutions to their investment line-ups as a result.
However, a recent Nationwide Retirement Institute® study found some plan sponsors still hold a few key misperceptions about these guaranteed lifetime income solutions, which may be standing in the way of further plan and participant adoption. Let’s take a look at what we heard from Plan Sponsors who may still have some misgivings about these solutions, and address these concerns head on:
The Truth: Compared with what a participant may be used to seeing in their plan’s investment lineup, the fees for in-plan guaranteed lifetime income solutions could be higher. However, the overall cost is typically lower than similar investment options offered outside the plan. That’s because in-plan guarantees are offered within a group retirement plan where the participant benefits from reduced expenses.
The Truth: Many of these solutions are structured as a target date fund held within a collective investment trust. This offers a simplified experience that can provide access to growth potential while offering guaranteed lifetime income – all offered in one simple investment option in their retirement plan.
If a participant decides they want to access or do something different with their money, there is no surrender charge for moving money out of an in-plan guarantee investment option. That means they can access their money at any time during either the accumulation or decumulation phase, although doing so may impact their amount of guaranteed lifetime income in retirement.
The Truth: Generally, there is no explicit cost for plan sponsors. There is some additional work applying existing fiduciary standards in the evaluation and adoption of these solutions, which is consistent with any Plan Sponsor’s ongoing fiduciary duty to explore new or diversified solutions to ensure employees have the right menu of investment options to choose from. The work involved in evaluating or implementing these solutions is consistent with efforts most Plan Sponsors routinely implement to help ensure they are optimizing their investment line-up as part of their ongoing fiduciary responsibility.
The Truth: The SECURE Act of 2020 provides new safe harbor guidelines which helps protect Plan Sponsors from any fiduciary liability related to the selection of the guaranteed lifetime income product and the insurers who provide them. It is worth noting that the SECURE Act’s new safe harbor includes a clarification that a plan fiduciary is not required to select the lowest cost guaranteed lifetime income product. Other attributes such as features and benefits of the products and the financial strength of the insurer should be considered in conjunction with cost.
The Truth: According to Nationwide’s survey, forty-six percent of participants are interested in a guaranteed lifetime income investment option. And they’re ready to get started with one once their employer offers it, with 8 in 10 at least somewhat likely to rollover a portion of their current retirement savings into one.
Nationwide offers a list of considerations to help plan sponsors, consultants and advisors get conversations about in-plan guarantees started, as well as additional resources for financial professionals, advisors and consultants. Plan sponsors – Please contact your Nationwide representative