“As a result, plan sponsors must assess this new type of investment vehicle in light of their fiduciary duties, the likelihood of evolving regulations and potential future market impacts.”

The IRIC issue brief, “Effective Due Diligence for Guaranteed Lifetime Income Options,” highlights key issues and questions that plan sponsors should consider as they evaluate GLIOs for their own retirement plans and also conduct due diligence about specific products in the marketplace. The issue brief also provides an in-depth discussion about the appeal of GLIOs versus traditional investment options and helps plan sponsors address key issues such as:

• Are GLIOs a good solution for some, or all, of their workforce?
• What impact will offering GLIOs have on their retirement plan design and administration?
• What is the best way to offer a retirement income solution that will encourage workers to use it appropriately?

The issue brief also discusses various qualitative issues such as workforce risk profile and sophistication, participants’ current investments and savings levels, and the overall need for long-term income replacement to help plan sponsors determine whether adding GLIOs should be a top priority. Additionally, the brief provides a step by step approach to seeking the right partners, providers and plan design in cases where offering a GLIO makes sense for the organization.

IRIC notes that while adoption of GLIOs remains relatively low today, there are many signs that more employers will begin offering GLIOs, especially those employers who are looking to strike a balance between the cost and security of defined benefit plans and the higher risk of self-directed plans.

“We believe that plan sponsors should begin discussions with their investment committee on how to modify their due diligence process to determine whether a GLIO is appropriate for their plan and, if so, how to select the right GLIO for their workers. Organizations must ensure that GLIOs are consistent with their investment policy statements and benefits philosophy, in addition to following a diligent selection process. Further, they should make sure that potential partners can work within the existing plan infrastructure,” concluded Yahr.

To obtain a copy of the issue brief, “Effective Due Diligence for Guaranteed Lifetime Income Options,” please visit http://iricouncil.org/thought