The aging of the baby boomers in a defined contribution plan
world has revealed a weakness in many 401(k) and 403(b) plans: the
plans offer no systematic process for providing lifetime income.
(For 403(b) plans funded with annuities, the issue may be less
acute, but it still exists.) By "lifetime income," we
mean a source of money that won't run out during the
retiree's life.
Until now, plan sponsors have done a reasonably good job of
focusing on participant needs in saving for retirement but
haven't been as aware of the importance of addressing their
needs after retirement. There is no fiduciary requirement
to provide post-retirement help in a 401(k) or 403(b) plan; but
when plan sponsors decide to do so, they face a perceived
impediment -- fiduciary responsibility. In doing work for TIAA-CREF
and Lincoln Financial Group, we have been able to study the issues
and develop an answer to the concern.
