As defined benefit plans near extinction, investment management firms are preparing to offer annuities as options to 401(k) plans, according to Pensions & Investments.

Only two major providers now offer annuities as investment options for 401(k) plans in an effort to guarantee retirement income: Genworth Financial and MetLife.

Prudential Retirement Services is gearing up to offer annuity-like funds by the end of 2006.  ING is also considering an annuity fund.

According to Fred Conley, president of the institutional retirement group at Richmond, Va.-based Genworth, 401(k) plans have begun to take over as the preeminent retirement savings tool. "The question has become, how do you help these people that are saving money...to have income they cannot outlive," he said.

Genworth began offering ClearCourse, an annuity fund, in 2005. With every contribution, plan participants purchase a piece of the annuity pie that will provide income for 20 years or life, whichever turns out to be longer. This way income is a sure bet.

With this new option, participants start and stop payments at their own liberty, and the assets invested in the fund are managed by Stamford, Conn.-based GE Asset Management.

Annuities fit well with 401(k) plans, according to Scott Sleyser of Prudential Retirement based in Newark, N.J. "During the last five years, we offered old-fashioned payout annuities and many sponsors haven't offered them. We expect by year-end 2006 to come to market with a suite of annuity-like products [made] to look like living benefit products; they will have guarantees," said Sleyser.

He also added that the annuity options must be designed so that they appeal to plan sponsors, this way they will allow them into plans. Prudential spoke to many plan sponsors regarding the annuity option, many of who seemed interested.

ING Financial Horizons President, Bill Lowe, claims that ING officials are currently monitoring how the market takes to annuities, before ING itself enters the market.

"The guarantees that have been offered are clearly something that the public has indicated are desirable," said Lowe. "We have offered annuities for a long period of time (as individual accounts) and a lot of folks like the option since the annuity is one of the few vehicles that guarantee income. Right now we are seeing it as a good rollover choice product."

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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