On May 3 Nationwide introduced the 401KIncome proposal in response to a Request for Information from the Department of Labor and Department of Treasury to obtain ideas on the subject of lifetime income options in retirement plans. Nationwide’s proposal provides a strong incentive for employers with defined contribution plans to purchase a guaranteed stream of income by using fixed income deferred annuities as the investment option for the employer match.
Employees would still have control over and access to their own contributions, but the employer match would not be accessible for loans or early withdrawals. Employees could also choose to put their own deferrals in the defined benefit option.
The survey found that more than three-quarters (77 percent) of U.S. adults would support a 401k retirement plan where the employer match is designated solely to generate guaranteed income for retirement. Younger adults (defined as 18 – 44 years of age) were even more likely (85 percent) to say they supported such a retirement plan.
In addition, the survey revealed that 72 percent of U.S. adults said they agree that the 401k system should be adapted to include features that offer guaranteed income at the point of retirement.
Nationwide’s proposal would also promote greater use of 401k plans by giving employers a tax credit instead of a tax deduction for any employer match used to fund a guaranteed stream of income payments to participants, which could potentially increase the number of employees who have access to a retirement plan.
According to the survey, only 38 percent of adults currently have a 401k account and of those that don’t have a 401k account, 41 percent say it’s because their employer doesn’t offer one.
“The 401KIncome proposal would not only ensure matching contributions would be designated solely for retirement income, but also potentially help the millions of Americans who currently don’t have access to an employer-sponsored retirement plan gain access to one,” said Arvia.
