Working within existing regulations for 401(k)s and other defined contribution plans, Nationwide Financial Services is proposing 401KIncome, a new choice for workplace savings that includes an annuity option.
Touting the offering as “a public policy solution that provides incentives for the funding of guaranteed retirement income while strengthening the current employer-sponsored defined contribution system,” Nationwide explains that 401KIncome recommends employers use their matching funds to purchase a lifetime guaranteed income stream.
The option would be fixed income deferred annuities, the purchase of which would serve as a tax credit for the employer, rather than a tax deduction. While employees would continue to have access to and control over their own contributions, the employer match would not be accessible for loans or early withdrawals.
“We need to improve the defined contribution system by addressing two issues,” said Anne Arvia, president of Nationwide Retirement Plans. “First, we need to increase the overall access to employer-sponsored retirement plans, and, second, we need to promote features within the defined contribution system that afford income guarantees similar to what was once provided by traditional defined benefit pension plans.”
Arvia added: “We believe the 401KIncome proposal can help improve the nation’s retirement outlook by strengthening the defined contribution system through the creation of lifetime income, improved investment diversification and increased plan access while providing greater incentives for use of the employer match—and ensuring those contributions are put away for retirement.”