Unlocking Value for Plan Sponsors: The Strategic Business Impact of In-Plan Annuities

By Meghan Nykorchuck

Historically, retirement plans have focused on helping workers accumulate savings. Today, the priority is expanding the focus to also ensure that those savings can reliably fund retirement income.

The Changing Retirement Landscape

The resources available to American workers to prepare for retirement have transformed significantly. As of March 2024, only 15% of private sector workers had access to a Defined Benefit (DB) pension plan. This has placed increased pressure on Defined Contribution (DC) plans, such as 401(k)s, to fund future retirement income needs.

Unlike DB plans, DC plans require individuals to manage their savings and withdrawals to ensure they do not run out of money, including making decisions based on unpredictable factors, such as life expectancy, inflation, and market performance.

High equity allocations, while beneficial for growth, increase the sequence of return risks for those nearing retirement with limited asset diversification. Unlike previous generations who benefited from pension plans that simplified retirement income planning and provided a baseline of guaranteed lifetime income, today’s savers face significant market risks and must navigate these complexities on their own. Many individuals lack both the knowledge to identify effective risk mitigation strategies and easy access to the necessary tools. 

The Regulatory Environment

Today’s receptive regulatory landscape allows plan sponsors to offer participants solutions for risk management and guaranteed lifetime income directly in employer-sponsored retirement plans. This can be achieved by supporting the integration of annuities. Annuities are the sole in-plan solution that provides guaranteed lifetime income while safeguarding against both longevity risk and market volatility.

The SECURE Act of 2019 marked a significant milestone by addressing various barriers to the adoption of in-plan annuities through improved portability (allowing participants to move annuity investments without losing guarantees), fiduciary protections (providing liability protections for selecting insurers), and income transparency (requiring annual disclosures translating account balances into monthly income estimates).

Recently, the U.S. Department of Labor issued an advisory opinion affirming that AllianceBernstein L.P.’s Lifetime Income Strategy qualifies as a qualified default investment alternative under the Employee Retirement Income Security Act. This endorsement strengthens the backing for guaranteed lifetime income and reinforces safe harbor protections for plan fiduciaries. Furthermore, the August 2025 executive order on private securities in DC plans underscores governmental support of innovation in DC plans. Together, these developments create a favorable regulatory climate, helping empower fiduciaries to explore and implement forward-thinking strategies that have the potential to enhance retirement security for participants.

Supporting the Business Case

The evolving landscape and regulatory environment offer substantial value to both plan participants and plan sponsors. For participants, the value is clear: access to guaranteed income solutions that enhance retirement security. For plan sponsors, the rationale is equally compelling.

Let’s explore five ways in-plan annuities can benefit plan sponsors:

1. Boost employee security and morale. In-plan annuities provide a guaranteed stream of income in retirement, helping to alleviate one of the biggest stressors many employees face: the fear of running out of money in retirement. At the same time, the addition of an in-plan annuity telegraphs another important message to employees – that their long-term financial health is important to their employer.

A recent report from the Allianz Center for the Future of Retirement^TM found that 78% of retirement plan participants believe that having an option to establish a secure foundation for lifetime income would indicate their employer’s commitment to their retirement preparedness and overall well-being. This commitment can help foster a sense of satisfaction and appreciation, because employees recognize that their employer is invested in their future well-being.

2. Bolster employee retention and recruitment. Employee benefits have an important impact on recruitment and retention. In 2024, more than half of employees reported that their benefits package was a key reason for choosing their current employer — a significant increase from 35% in 2017, according to WTW. In addition, EBRI’s 2025 Retirement Confidence Survey reported that 59% of employees identified financial well-being as one of the top areas where they seek employer support, surpassing other aspects like emotional, social, and physical well-being.

Strong retirement benefits, especially those offering lifetime income, are key in supporting financial well-being and can make an employer stand out in the job market. Employees who feel their retirement benefits are secure may also be more likely to stay with their current employer, which helps reduce turnover and hiring costs. Allianz found that nearly three-quarters of surveyed participants said the option for lifetime income would make them more loyal to their employer.

3. Enhance succession planning and talent mobility. Due to both our aging population and postponed retirement, the U.S. workforce is becoming progressively older.

While an aging workforce presents challenges such as higher wage costs, it also offers opportunities to tap into valuable knowledge and mentorship. Organizations need to actively remove barriers to flexible retirement to prevent stagnation and ensure smooth succession planning.

If delayed retirement stems from financial constraints rather than a genuine desire to continue working, it can place a strain on both employees and employers. The 2025 Enduring Retirement Model Study by MetLife reveals that 90% of plan sponsors acknowledge that workers are postponing retirement due to feeling financially trapped.

Integrating guaranteed lifetime income solutions, like annuities, into DC plans helps address the challenges of an aging workforce. These solutions can help workers make the decision to retire or reduce hours on their own terms, backed by reliable income. A recent Allianz State of Lifetime Income Survey found that nearly 8 in 10 (79%) of participants would feel more comfortable about deciding when to retire if they had access to such products. This financial security benefits employers, too, by enabling smoother knowledge transfer and reducing workforce stagnation.

4. “Future proof” the retirement plan. Interest about in-plan annuities is gaining momentum, not only among employees approaching retirement, but also with younger generations who are facing declining access to traditional pension plans and the threat of reduced Social Security benefits in the future.

The Allianz Lifetime Income Survey reports that 78% of Millennials and 72% of Gen X workers are interested in contributing to an in-plan annuity through their employer-sponsored plan, compared to 64% of Baby Boomers. This increased interest is partly driven by reduced access to DB plans and concerns over potential Social Security shortfalls.

Research from the Urban Institute projects that 38% of early Millennials born between 1980 and 1989 — will have inadequate income at age 70, defined as falling below 25% of the annual national average wage or replacing less than 75% of pre-retirement earnings. This compares to 28% of pre-boomers (1937–1945) and early boomers (1946–1954), and 30% of late boomers (1955–1964).

When considering a potential Social Security shortfall, the percentage of early Millennials with inadequate age-70 income rises to 49%, with early Millennials in the bottom fifth of the lifetime earnings distribution (74%), individuals who did not complete high school (75%), and those with only a high school diploma (57%).

As interest in guaranteed retirement income solutions continues to rise, in-plan annuities can provide a level of protection and guarantees that participants are seeking today and will increasingly desire in the future.

5. Reinforce the plan’s purpose. To support participants throughout retirement effectively, it is important to provide guidance about transforming accumulated plan savings into sustainable monthly income. However, many current DC plans lack the necessary features to support participants during the decumulation phase.

Today, employers can strengthen DC plans by incorporating solutions that effectively manage longevity, market, and other financial risks. Adding such solutions to a plan can significantly improve the post-retirement phase by offering participants a reliable way to generate guaranteed lifetime income, while avoiding the liabilities, funding, and portability challenges inherent in traditional DB plans.

Overall, in-plan annuities are a strategic investment that can enhance both employee well-being and organizational success by providing stable, guaranteed retirement income. As economic uncertainty, Social Security shortfalls, and rising costs persist, the demand for guaranteed retirement income, and interest in in-plan annuities, will increase, reinforcing their business case.

Where Do We Go from Here?

Sustained regulatory support is important for ensuring that plan sponsors feel secure about fiduciary protection and advancing the adoption of lifetime income solutions. Two possible strategies that could further drive adoption include:

• Broaden the Safe Harbor — The SECURE Act provides a safe harbor for selecting annuity providers, but expanding this could further encourage adoption. A new provision could extend the safe harbor to cover not just protection against insurer insolvency, the financial solvency of the insurer, but also the reasonableness of fees and appropriateness of product design. In addition, specific protections could be included for these elements when a 3(38) fiduciary is responsible for managing the selection and ensuring the appropriateness of the solution for individual participants in a plan.
• Mandate Multiple Distribution Options — A more direct and comprehensive approach could require all defined contribution plans to offer a range of distribution options, including at least one guaranteed lifetime income option. Encouraging plans to evaluate the choices available to participants and equipping them with tools for navigating retirement income decisions could enhance retirement income security, increase resilience to risks, and alleviate some of the burden on participants in figuring out their income strategies.

Continued collaboration between regulatory bodies and industry stakeholders will be key to realizing advancements like in-plan guaranteed lifetime income solutions and helping ensure long-term financial security for retirees.

2025-06 

Meghan Nykorchuck is Senior Manager of Defined Contribution Insights at the Allianz Center for the Future of Retirement.™

Guarantees are backed solely by the financial strength and claims-paying ability of the issuing insurance company.

The Allianz Life Insurance Company of North America (Allianz) does not provide financial planning services or advice.

The Allianz Center for the Future of Retirement^TM produces insights and research as part of Allianz Life Insurance Company of North America. These views may change as market or other conditions change, and no forecast should be considered a guarantee.

The Allianz Life Insurance Company of North America is not affiliated with the Georgetown Center for Retirement Initiatives (CRI), but is a CRI Supporter Organization.

Although Allianz is a supporter of the Center for Retirement Initiatives, the views and opinions expressed in this blog post are the views of the author and do not reflect any policy or position of the Center for Retirement Initiatives.