The Setting Every Community Up for Retirement Enhancement (SECURE) Act in 2019 made it easier to offer guaranteed lifetime income options, such as an annuity, in 401(k) and other defined contribution plans. Today, interest in these products is growing with an overwhelming majority (93%) of DC retirement plan consultants reporting that they have taken some action regarding retirement income options.1
At the same time, the follow-up to the Secure Act, in December 2022, introduced a number of new, time-sensitive updates. As recordkeepers and plan sponsors navigate the 92 provisions of Secure 2.0, it can be a challenge to figure out where retirement income options fit on their near-term roadmaps.
In response to these regulatory changes, recordkeepers must significantly scale up their capabilities – accommodating new account types, information storage requirements, changes to how they manage transactions, and more. Secure 2.0 also opened the door for an influx of new plans with tax incentives for small businesses, which likely means more questions from new, as well as existing, clients.
A simple and scalable solution
With all these moving parts, it’s no wonder why a recordkeeper might move guaranteed lifetime income further out on their roadmap. However, a number of modern, tech-enabled solutions exist that can help ease the technical and administrative weight of delivering in-plan, lifetime income options.
“With interest in these solutions on the rise, middleware can help recordkeepers grow their business alongside Secure 2.0 updates.”
Middleware offers a simple and scalable way for recordkeepers to offer, distribute, and service retirement income solutions. With interest in these solutions on the rise, middleware can help recordkeepers grow their business alongside Secure 2.0 updates.
With streamlined connectivity, middleware technology helps reduce long lead times and simplify plans to implement guaranteed lifetime income solutions. It’s an innovative approach driving a new era of defined contribution plans.
Instead of trying to rework the pipes that recordkeepers currently use to connect to investment products, these solutions are specifically designed to transfer data between recordkeeping systems and insurers.
It’s a centralized hub model that helps track participant and benefit information to and through retirement. Recordkeepers who’ve primarily focused on the accumulation phase of retirement may not have the infrastructure in place to support participants in retirement years – when they’d start taking income.
Middleware helps fill this gap – equipping recordkeepers with the technical capabilities necessary to service annuities through retirement years. It also supports seamless portability for participants and plan sponsors, and improves optionality.
Accelerating the speed of change
The defined contribution market is a complex ecosystem with participants, plan sponsors, advisors, institutional consultants, recordkeepers, third-party administrators, insurance companies, and legislators all playing a part.
Within such complex contexts, change is often slow, but middleware can help pick up the momentum – providing a holistic view of the DC landscape and creating these connection points. By easing administrative lift and improving speed-to-market of guaranteed lifetime income solutions, middleware can help deliver protected retirement income to more participants faster.
Regulatory requirements like the Secure Act will come up again in the future, upending operational and technology roadmaps. At the same time, product and technological innovation isn’t slowing down. Adopting a middleware solution allows recordkeepers to take advantage of new products and advances in technology with less resources required, so they can stay focused on regulatory changes – and supporting their plan sponsor clients.
