Cutting a clear path through the retirement income landscape

ELISE:
Good morning, everyone. Thank you, everyone, for joining our retirement income webinar today, Cutting a Path Through the Retirement Income Landscape. I wanted to introduce our panelists and really talk about the discussion we're going to have this afternoon. So, I'll introduce myself first. My name is Elise Thiemann, and I head up DC Investment strategy for State Street Investment Management. With me today are two excellent panelists, one from the plan sponsor side and one from the investment consulting side. So, Ben Roberge is an AVP with Unum for their financial well-being and retirement programs, and Darren Moran is a DC investment consultant and DC researcher at Aon. Darren will give us a broad view of what the retirement income landscape looks like today. And also, we'll talk a little bit about how he and Aon help plan sponsors evaluate and select retirement income solutions that are right and a good fit for their populations. Then we'll zoom in and double click and hear from a leading plant sponsor, Ben, who has implemented a few retirement income solutions in their DC program. So, Ben will tell us about his experience, not only navigating the landscape and evaluating solutions, but through implementation as well. Now, before we hear from the panelists, I do want to take a minute to really set the stage and just talk about why we're here today. So, in short, why we're here is that we are really looking to cut a clear path through the retirement income landscape. Specifically, what does that mean? You know, navigating the retirement income landscape can be incredibly daunting for plan sponsors. Navigating the challenge and faced with this sometimes-insurmountable challenge, some plan sponsors do nothing or they really kind of delay the decision. But with more Americans turning 65 this year than ever before, and with the presence of pension plans shrinking rapidly, doing nothing doesn't really seem like a viable option anymore. So, let's dig into it. Let's talk about where the landscape is today and how we can cut a clear path through it. This slide that we have up, it shows just a handful of some of the retirement income solutions available to DC plans today. And a big part of what makes this such a challenge for folks is that the breadth of what can be considered a retirement income solution makes evaluating them, comparing them, and even choosing one quite challenging. So, you can see we've listed some of them here. And unlike conducting a search for let's say, an active large cap equity strategy, evaluating retirement income solutions is not apples to apples. It's not even apples and oranges. It's more like apples, watermelons, grapefruit, and blueberries. The industry so far, the DC industry has created frameworks to help classify products based on their features. So, for example, categorizing retirement income solutions by whether they're guaranteed or non-guaranteed, or in plan or out of plan. And that's actually the color scheme that we've used on this page just to show what those classifications end up looking like. Other frameworks take the approach of categorizing products by their most salient qualities. So, flexibility, portability, liquidity, right? And really mapping out which solutions provide, and how much they provide of those features like flexibility or liquidity. This is a start, but from where we sit at State Street, this doesn't seem very helpful in terms of a decision framework. For example, how are plan sponsors supposed to evaluate a managed account program relative to adding partial withdrawals? How does a plan sponsor even know if their participants prefer guaranteed solutions or a non-guaranteed solution? Or if you're comparing features, how can you tell if your participants would value liquidity or flexibility more? The answers to all these questions are really determined by the participants themselves. So, we believe the first step in classifying this myriad of retirement income solutions is to focus on who the product is designed for rather than what is included. And how do we do that, especially with the heterogeneous participant population that all probably want different things in retirement? And the good news is that the DC industry already has a solution for this, and it's segmenting the population that the vast majority of DC plans use this type of segmented approach in building their DC investment menu. On the next page, what you'll see is that this is the typical structure of DC plans today. They typically structure their investment options within the plan into 3 buckets, and those buckets are distinguished by participant type. So, you can see on this page, we have “do it for me” participants, “help me do it”, or “do it myself” participants. Just to walk through this as an example, although I'm sure most folks on the call are familiar with this, but the “do it for me” folks, they're likely a little more unengaged. They need a default solution. They want an easy button for retirement investing and saving. And so, the accumulation option that's most popular for this type of participant is the Target Date Fund. This is typically the QDIA but target date funds far and away are the most popular option for a QDIA. The next row down is “help me do it”. These folks are a little more engaged. They want to take some ownership in building their portfolio. And for these folks, the plan typically offers a mix of passively and actively managed investment options. And finally, the “do it myself”. These participants are very engaged, very sophisticated, typically referred to as the vocal minority. These folks want as many levers as possible. So, something like a brokerage window is a great option for them. The reason I spent some time on this is that we can use the same tried and true structure and evolve it to serve not only accumulation, but decumulation as well. So, by putting yourself in the shoes of each type of participant and thinking what would this participant type want or need in retirement, you can start to identify which solutions might best serve each participant tier or group. On the next page, we have what we think is the evolved DC plan structure that not only serves accumulation but is evolved to serve decumulation as well. Let's take an example. Let's take that “do it for me” participant again. So again, this is an unengaged person when they're saving, maybe in retirement, that person is just someone who wants an easy button to just make a few selections and just receive some income in retirement. So, what does this type of participant want in retirement? He wants something easy and flexible, and because he doesn't want to dig too much into the details, he probably prefers a solution that he's already familiar with, is low cost and can provide predictable income for the rest of his life, so he doesn't need to think about it anymore. For this type of participant, a target date fund with a retirement income feature is a great solution. Moving on to the “help me do it” category. These folks are a little more engaged. They want a couple more puzzle pieces to put the solution together themselves. So, what do they want? They probably want flexibility, and some optionality. I think partial withdrawals is a great example of a solution that's a design for the “help me do it” participant. And then finally, the “do it myself” participant, super engaged, really sophisticated. This type of participant probably isn't going to use something like a target date fund with a retirement income solution. They want something very customizable, and they probably want something portable because they want to tinker and play around with something to get exactly what they want and probably take it out of the plan eventually. So, an annuity supermarket is a great option for this person as well. Taking a step back and really looking at this framework, and the reason that we're starting with this today is that we think this is a really important first step to help navigate the retirement income solution universe today. And I think we kind of touched on this as we went through the framework, but I think there are three key practical benefits of using this approach. The first is it helps you identify the most important features for each major segment of your participant population. So again, thinking through that do it for me participant. This type of tier, the features can be easily identified when we use this participant-focused lens. The “do it for me” participant, what do they want? Something low cost, predictable, automatic, flexible, easy to use, and backed by some level of guarantee because they just want to set it and go. The second benefit in practical application of this approach is this also allows plans and their consultants to easily slot available solutions into the tiers. And that creates a meaningful apples to apples comparison within each category. It also helps you understand kind of the corollary to that. It also helps you understand what to exclude from your comparisons. So, you probably don't need to compare and contrast an annuity supermarket up against a target date fund with retirement income option because they serve different participants. The participant that's going to use that target date fund solution probably is never going to use the annuity supermarket and vice versa. And that leads to the third key benefit, which this structure and this type of framework allows plans to cater to the unique needs of individuals in a scalable way. What you'll see is that this plan structure has a couple of different retirement income solutions. What we find is that they actually don't compete with each other, they almost complete each other. And I think this last point is worth emphasizing. As a plan sponsor, it may be very hard to find one retirement income solution that works for every single participant in your plan. But you're probably able to find one retirement income solution that fits all of your “do it for me” folks, for all your “help me do it” folks, and “do it myself”. And I think the other point I'll mention is that from a segmentation standpoint, this is really using kind of industry standard. If as a plan sponsor, there's natural segmentation in your population, you can use the same exercise, but applied to your own segmentation. For example, if you're a plan that has a big divide between salaried and hourly workers or a big divide between retail and corporate manufacturing. Thinking about what that type of participant would want or would need in retirement income, that is where we think is a good place to start. So, you can narrow down that universe and create more meaningful comparisons. I think with that, we can take the slides down and we can just start to have a conversation about what I laid out, but also more broadly about where we're seeing the industry today. I think with that we would like to bring up Darren and Ben and Darren, I'll start with you. Before we get into the framework and the comparison, just to take a step back for a second. Can you give us a sense of where the industry is today in terms of retirement income and adoption. First movers, fast followers, broad adoption. Where are we and where are you seeing the activity from your and Aon's perspective?

DARREN:
Yeah, certainly and great background there on the overall kind of retirement income landscape. I think you said it best that it's not a one size fits all solution. There are different people and participants that have different needs. So, approaching it in the framework that you had is kind of the same way that we think about it here at Aon. As it stands, where is the industry today? I would say that the retirement income industry is chugging along. I think we're finally out of the first innings to use that analogy of a baseball game seems to be kind of the way people think about it. And we have some runners on bases. We have some people and plan sponsors that have adopted solutions. We'll hear from Ben today at Unum. And so, I think we're really past that first movers phase of the industry and we have some adoption here and some momentum behind us. There's certainly no shortage of new solutions and innovation that's coming out from both the product development side, but also when you focus on the recordkeeper side and some of the functionality, you talked about partial distributions, but some of the innovative things and personalization that recordkeepers are doing goes hand in hand with the product side. The newer solutions that we've seen in the last few years, you know, the SSGA IncomeWise being one of them, certainly gaining a lot of traction, but I think it's also important not to lose sight of some of the other products that have been around for 10+ years. So, retirement income has been a very popular subject for a while. I think we kind of reignited some of that conversation coming out of Secure Act and new products and, and new solutions coming to market as that momentum started after Secure. The way that we talk to clients that are looking to implement something today, we're really talking to them about, you know, you aren't a first mover, you don't have to be the first one to try out this new solution. There are a lot of other plan sponsors that have done this, and there's that roadmap or framework about how we should go about evaluating solutions and thinking about different types of products and solutions for your plan demographics. As it relates to the data out there to kind of talk through like what is the uptake in retirement income, I'd say that's an area where we're still lacking a little bit. The data isn't great. One survey that we have quotes about 20% of plan sponsors are doing something beyond systematic withdrawals. So, we'll talk a little bit today about the low-hanging fruit and how people have tiptoed into retirement income through recordkeeping functionality, systematic withdrawals. What this survey is saying is that 20% of plan sponsors are actually doing more than that. I think that's proof in the pudding there to say that plan sponsors are starting to adopt more and more in the retirement space.

ELISE:
Interesting. Just to double click into the last point you made, in terms of where you're seeing those first movers and that industry traction, you're saying 20% of plan sponsors have done something above and beyond adding some plan designs and systematic withdrawals. What are they doing? And if we think about it in the context of that framework, is there a specific bucket of participants that plan sponsors seem to be most interested in solving for in terms of where the first movers are at, where are plan sponsors today focusing?

DARREN:
Yeah, I think it's important that you take each client individually. Each client, as you mentioned, has different demographics. It could be manufacturing, it could be more white collar, etc. And so, focusing on the type of client and then also looking at what is their holistic retirement package. I would say for an example, we have an Aon client that we work with that has an ongoing open pension portfolio. So, participants are receiving that guaranteed income from that source. And so, maybe a target date fund with an embedded annuity doesn't make sense for them. So, we worked for them to understand, okay you have this participant base that already has guaranteed income stream. What else could we do to help them facilitate retirement income out of their 401k and things such as a managed payout fund, which is fully liquid, is a great pairing to a traditional pension portfolio, and then more optionality for those participants want to get more creative or do it themselves, looking at that annuity shopping plaza as an additional alternative for them to consider. And again, this comes back to that one size doesn't fit all. And so while we have had a lot of these first movers adopt one strategy, I think what we're starting to see now is that plan sponsors are saying, okay that one strategy is good, but it's only good for one slice of the population, and we're starting to see them branch out and offer more solutions in the retirement income space.

ELISE:
Just playing off of that for a second thinking about where you see this going forward in the next 12 months, three years, right? You're saying the plans are starting to implement one solution and now we're also looking at a couple different solutions like what are you most excited about? Where do you see the industry going over the next 12 months and then three years?

DARREN:
Yeah, I would say over the next 12 months, we've been in talks with both recordkeepers, as well as product providers, and we're continuing to see new innovation there. So excited to see the new flavors of retirement income, and that's really across the full retirement income landscape. The innovations on the recordkeeping side, I think personalization is going to be another trend where not only do you have these options within your 401k program but how does a recordkeeper help communicate and educate a participant to help them know what is the best solution for them. I would say over the next three years, I would summarize it into three parts, and the first one is just more plan sponsors adopting and thinking about 401k plans more than just savings, so adopting retirement income solutions. The second one, which I've kind of already mentioned is for those that have already adopted a solution, it's continuing to build out that platform synonymously with the way you think about the accumulation side. You have these tiered structures, there's multiple options associated with it, trying to build that out more now in the retirement income space to give optionality to participants that have different needs. And then third, again, it's just coming back to that personalization and a shift in the way that participants and plan sponsors talk about 401ks in retirement. I think the industry for the last few decades, pretty much since 401k started, have thought about 401ks as a lump sum balance at retirement, and I think we need to re-engineer that with participants and retirees to think of it more so and what is this $500,000 actually mean to me in terms of monthly cash flow. And the more you start to get that into participants' minds of how you need to think from like a paycheck that they receive on a biweekly basis, I think the more adoption you'll see in the retirement income product landscape.

ELISE:
Yeah, I totally agree. I think that's really fascinating. I think there has been regulation about trying to change that mindset, right? We're starting to see that from Washington DC with the lifetime income disclosures, but those are a little scary if you look at them if you're young. They don't allow, right? So, it looks a little frightening. One point that you hit on that I wanted just to expand on is you mentioned recordkeeper integration. I think that is really something that is a bit different with retirement income solutions than with say like a large cap equity search, right, or a large cap equity manager. So recordkeeper integration is really important, but I guess how important is it to plan sponsors and to you guys when you're evaluating solutions? What I mean by that is a lot of these solutions come with tools, and part of it is education and helping people actually make an income election if they think it's right for them. So how important is it and how available is it to have these solutions fully integrated with the recordkeeper? And how common is it to have the modeling or advice sit outside on its own? Do you have a preference or a thought as to how important that is in terms of the efficacy of the solution?

DARREN:
Yeah, I think it's extremely important, if not one of the most important pieces. When you think about utilization, I think utilization will be higher, the more integrated and more resources from education and communication that you have built into the recordkeeping ecosystem. I think we've seen it before with other types of products within the 401k landscape. If you just have a micro site, it's just one additional step that participants need to take. And it's one additional step that they're likely not to take. So having it built into the recordkeeping ecosystem, education and communication are of the utmost importance in having a successful rollout for retirement income solutions.

ELISE:
Yeah, and I think it'll be interesting, Ben, to hear your perspective on that too as a plan who has a couple of different retirement income solutions, right? Like the integration and where my mind always goes when we start to talk about this is how do these tools talk to each other or at least talk to the recordkeeper and then making sure things are consistent to the extent possible. I know I have a couple other questions for you on your journey at Unum and in the plan, but I wanted to see if you had a thought or any considerations that you think are important in that regard from a recordkeeping standpoint.

BEN:
Yeah, happy to jump in on that because I completely agree with both of you. It's critically important we think about it really from the user experience perspective, and this is something that plan sponsors think about beyond the 401k plan. We're thinking about this with all the benefits and programs that we're offering our employees and retirees. We want it to be easy for them to engage with and make it a consistent, easy experience. So, to the extent that you can tie it in, make it a holistic experience for them. And then put the wrapper around the education and all of that versus having it link out to a different microsite. The more fragmented you get with it, the more friction points you add into the process, the less likely you are for people to both engage with it but also benefit from what you're doing. You could have the best solution in the world but if employees or retirees aren't able to easily engage with it, and a lot of that starts with the recordkeeper cause that's where they're going for their 401k plan, they're just not going to benefit from the experience.

ELISE:
Yeah, I totally agree. On our participant engagement team, we have a pretty great solution. It's not going to be successful if participants don't know it's there, if they don't know how to interact with it. I think through all of this, it's participant engagement it's how you integrate with the recordkeeper, how cohesive everything is, but also driving awareness and driving traffic to that site or to a specific part on that site, I think is really important too. Now I'm getting ahead of myself so let's back up a second. And Ben, if you could just walk us through your journey and your plan's journey as you navigated the retirement income landscape and just your journey through that process, that'd be great.

BEN:
Yeah, happy to, and spoiler alert, we also think State Street's product is a great one too, because we implemented it, but we have a little bit more of a journey there, so maybe I'll start at the beginning. We started with retirement income on the non-guaranteed side about almost 5 years ago. We already had some systematic withdrawals, but we really expanded that and had a lot of flexibility within the managed cash withdrawal options and then added some accompany funds to help with almost like a reverse target date fund that was not guaranteed fully liquid, but would help employees create a balance that they could draw on from a non-guaranteed solution. That's been in place for a while with us, and pretty quickly after we launched that, we started evaluating the guaranteed solutions. And the reason why that was important to us ties back to multiple things that you and Darren mentioned is you have got to know your population. For Unum, we are an insurance company. We previously had a pension plan, but it's been frozen now since 2013. And so our population of employees and retirees that have access to meaningful guaranteed income through a pension plan continues to dwindle year over year, and there's been a growing need from employees, not necessarily saying put a guaranteed income option into the 401k plan, but saying things like I would love a guaranteed solution or bring back the pension plan. So, we knew there was a need for us to have something within the 401k plan, which was now our primary retirement vehicle for our employees so that they could have that peace of mind and that guaranteed income solution. So, we started evaluating the marketplace. We spent a lot of time looking at it, almost at the first approach that you mentioned Elise on where we evaluate in plan versus out of plan, what different solutions target date fund versus not target date fund, but ultimately got to a place where we decided that we needed multiple solutions, and it almost lines up nicely with the framework that you mentioned at the beginning of the call which had I had that a few years ago as we were starting this process may have made some of the conversations with my stakeholders easier, but we did get to that place. The first guaranteed solution we offered was that annuity purchase marketplace, Fidelity Guaranteed Income Direct. And at the same time, we also made the decision to move forward with the State Street IncomeWise Target Date Funds. And so there was a lot of work that went into that, particularly with target date funds because you're comparing target date funds compared to what we have now, thinking about it not only from the spending phase, but also the accumulation phase and making sure that it lines up with what our employees that may never take annuity in the future. And then thinking about the immediate versus the need for longevity protection with a deferred annuity. Considering all those different factors, we kind of came to the aha moment as we were getting towards the final list stages at these solutions of why can't we do both and let's do both. Which at the time was maybe a little bit more cutting edge, but as Darren mentioned, more plan sponsors are starting to think that way. I think it makes a lot of sense because populations are going to have different needs and just like Darren mentioned, you're building different options through the accumulation phase, and you really should be thinking about that as the spending phase too because there, spoiler alert, isn't one perfect solution that's going to meet the need of every single retiree that you have in your plan.

ELISE:
Yeah, I think that makes a lot of sense. You mentioned stakeholders and getting buy-in there. Was there anything that you wish you could tell your past self two years ago that would have been helpful to know and help your stakeholders get on board and the converse, the flip of that is, was there anything that you thought would get pushed back that actually seemed to go okay through the committee process?

BEN:
So maybe I'll start with the second question first. Because of how complicated it was, I thought that there was a high potential that our stakeholders and our fiduciary committee would say there's not a lot of people doing this, this is really complicated for us to understand and for potential retirees to understand, so I don't know that it makes sense for us to go forward with that. And I think a lot of plant sponsors have had conversations about this, and that's kind of the response they're getting from some of their stakeholders. I think the way that we approached it by taking a very methodical, slow, approach of doing a lot of education first about the need for the annuities, the different options in there, and then bringing forward the different options within the marketplace to the fiduciary committee helped a lot with that. So, I was pleasantly surprised that we got approval to do both. It was actually one of our fiduciary committee members that pushed for both. They're like, well, why don't we just do both, and we thought that was a good idea too and didn't think they were actually going to go for it. So, that was a pleasant surprise process.

ELISE:
Yeah, that makes a lot of sense. That's great to hear that the sometimes complicated nature, you do worry that it's a daunting thing, but just the fact that there is this need and I think focusing also on the optionality of solutions that it doesn't force someone to do it. It just provides an option for those who want it without impacting those who don't want it. And that's obviously true with the structure of adding something like GID because that's an opt-in type of solution and same thing with target date fund with the income options out there. I mean, it depends on the solution, but a lot of those are optional. But again, especially being attached to a QDIA, that type of analysis is probably a bit more scrutiny I would imagine.

BEN:
For sure, and that one, to your point earlier, gets as close to the [inaudible] as you can get, I think with the annuity solutions, there's no automatic annuitization feature yet, the person has to make the opt in to the annuity, but it's all about making that a really easy experience for them and getting them the right education and tools and resources to be able to model and do that. There was a lot of work that we spent, particularly on the target date solutions, because like I said earlier, we were impacting not only the folks that needed retirement income, but all those employees that are defaulted into these as their accumulation phase, so it's really important for us to make sure both of those pieces lined up.

ELISE:
Yeah, absolutely, that's huge, especially from a fiduciary standpoint. I mean your point about like the “do it for me” and giving people an option, there's a question we got submitted to the panelists asking is there really a true “do it for me” option? Because it does require some kind of engagement. I think it's a really interesting question and it's something that a member of the State Street team is actually writing a paper about. This idea that we've done a lot as an industry, auto-escalation, auto-enrollment, target date funds to really create these participants that don't need to engage. And so, the question is, will that hurt us? Will there be a participant who doesn't want to engage so much that they want something automatic. And I think there are solutions out there and that could be something that's right for certain plans. I think when we think about it, I'd be curious, Ben, about your perspective too and Darren, if you guys are thinking about this in terms of engagement as well. But the way we think about it is if the income election that's attached to a “do it for me”, the optionality is important so that those who are full zombie participants and move through their life, they're no worse off than any other State Street target date fund investor. They have the exact same glide paths, same fees, everything. But for those who do want it, it almost is something where we want to wake them up a little bit, have them make a couple of decisions. Because this is a big decision. You've got a pot of money and you need to figure out how to turn that into income. So, what we want to do is create enough engagement and enough flexibility, we call it structured choice, so that people feel empowered to make a decision and they feel it's easy. They can do it in five to ten minutes and all online, and then they can go back to sleep, and the income will be automatic. And there's a guaranteed backstop, so they can’t outlive it. There's obviously different approaches to this in the marketplace, but it is kind of an interesting point of the industry has really aided and abetted this unengaged participant. How do we wake them up? Should we wake them up? What does that look like? I'd be curious about both of your perspectives because I think it's such an interesting question that we're going to have to wrestle with as we get closer to that retirement point.

DARREN:
Yeah, maybe I could jump in first then. I think this comes back to the earlier part of the conversation actually, around [inaudible] of a participant prior to just being at the point of retirement when a participant needs to make that decision. So, communicating with them and educating them maybe in their 40s to say, you're going to have these life decisions coming up over the next decade, here's the things that you should start thinking about and really getting them more engaged because you're right, target date fund investors, they were probably defaulted into the plan, into a target date fund, at 22 and don't know anything about it. It's surprising when I talked to friends and family that are in the finance industry and you ask them, what are you invested in your 401k? And they name the recordkeeper and it's like, okay let's take a step back, that's not what you're invested in. So, I think it's important from an education and communication standpoint to really just re-engage them prior to that point.

BEN:
Yeah, I think that's spot on and I agree with that. Philosophically we're not at the place where we're going to make that decision point an automatic feature right now of like we're defaulting you into this choice of guaranteed income, but we're trying to remove the friction and do a lot of education around the process and add flexibility to the process too so that when somebody gets educated on it and they kind of understand what it is, they can make the right choice for them versus defaulting them into automatically and eliminating that. It is definitely a balancing act, and it's one that I think will be really interesting as we go forward and how these products evolve, and automatic features obviously work great in a lot of other places on the 401k plan. But right now, philosophically, we're happy with the approach that the solution has where somebody has to proactively make that choice versus it being made for them.

ELISE:
Yeah, I agree with that. So I have a question for you, Ben, on take-up, and I'm sure you get asked this all the time, but before I ask it, I do just want to say we're getting some questions in the chat. Please keep submitting questions. They’re great and make for a really lively discussion. So please submit questions if you have any. Ben, can you walk us through take-up, elections, engagements, I think one thing that we have seen is that take-up is obviously usually with a new solution, it's determined by the amount of communication that's been delivered and I think for campaigns and for take-up to be successful, it's a campaign and it takes some input from plan sponsor, from the recordkeeper, from the solution provider, and the more that the plan sponsor can be involved and really put their name on things, I think that really engenders a lot of communication because there's still a lot of employer employee trust. But we've seen that with our custom retirement income solution that's been live for 5 years, we've seen take-up increase year over year, but not only with the income, but also just generally engagement with the plan. So, they have, again, that custom target date fund client that has the income solution. They have more engagement with the recordkeeper call center. They have more folks calling the planners, they have more visits to the site. So, I think it's not just an income engagement, it also tends to spread out and maybe it jogs someone's mind of, oh yeah, what am I going to do in retirement and what do I need to do to start that process. Ben, if you could just talk about take-up and however you want to define that, it would be helpful for us to hear.

BEN:
Yeah, absolutely. For the State Street solution, the annuity feature isn’t actually live yet, so we're live with the funds, but the annuitization, the actual ability to purchase the annuity goes live in January of next year. However, we do have the modeling tool available for our employees to go in, which is relatively recent launch, and a lot of the reason for that ties back to the recordkeeper integration and some of these things, especially when you're newer to the space, taking a little bit longer to launch than plan sponsors that are going to be following, so they will probably have a little bit of a quicker turnaround time on turning some of these features on than we did. But for the State Street solution, we have people going in and modeling it, which is great, and learning about the solution, and we're going to plan a heavy communication campaign going into the live launch of annuities, but also ongoing, and we're really framing the whole mindset around retirement income to be a holistic one and packaging everything together to get people in their 40s, 50s, like you mentioned there and thinking about this and aware of these solutions so that when it does come time for them to retire and they're thinking about how they're going to get a paycheck in retirement now that the standard paycheck is going away, they feel prepared to do it. So some good engagement of people engaging with the State Street tool for the Fidelity Guaranteed Income Direct solution that we have live and it's been live for a little bit over a year. We've had a handful of people actually annuitize, which is really exciting. Probably less than we were initially thinking, but again, a lot of engagement with the tools, which is great, and then to your other point Elise, when we launched that, we did another push of holistic retirement income webinars that were super well received by our population. We had hundreds of people attend them, we have about 10,000 total employees in the US and if you think about those that are closer to retirement age, we have a couple 100 a year that retire that are around the age for that. For getting that level of engagement, we were thrilled, and it just showed that people were going to the site and looking at it and learning more about what they have. And even if they don't end up annuitizing, we still see value of offering these type of solutions because it's just not a data point for somebody to go into retirement with something that they compare if they're going to work with an independent financial advisor, which we are more focused on doing what's best for you in your personal situation, but here is a resource that you now have access to through the plan that's managed just the same way that it was when you were a participant and an employee. And now you can compare that to quotes that you might be getting from your independent financial advisor. So, a lot of engagement around the tools and the resources and a push from us to wrap all of our resources around that, so participants understand it, not a ton of actual annuitization yet, but not zero, so that's great news.

ELISE:
Yeah, I think it's great to see any engagement and again, with our custom target date fund client that has the income feature, they've seen the annuitizations grow year over year. So, I think continuing to see that familiarity, building campaigns and with open enrollment every year as a reminder, there are things that as people get more familiar with the solution it can continue to grow. There's a question in the chat that I think ties to this utilization question, which is kind of the other side of it always, is it enough to make it worth it? And is that level of take-up, is the juice worth the squeeze, is what the question boils down to. Darren, I'd be interested in your perspective on this too, and Ben it sounds like from your perspective, just the overall level of engagement is something you're happy with and it seems like it's a longer term play. I think the optionality, of course, comes into this, this is an option for folks and they're no worse off if they don't use it. I think that frames up the utilization piece but one thing, I used to be on the consulting and target date fund research side and I had a former client who always said that the reason that he wanted retirement income and the plan is to solve the, or at least help mitigate the brother-in-law Dave problem, which is my brother-in-law Dave is a financial advisor and he told me just to roll my assets out and give it to him, right? I think the idea of like why you're trying to solve for that as a plan sponsor is if those retirees, if they don't know what to do with their money and their brother-in-law Dave calls them and they roll those assets out, they're probably paying 5, 6 X what they could in a retail IRA. And, you lose the scale. Those are your biggest assets as the plan. Those are your biggest plan balances. And so, giving folks an option where they feel like they can keep their assets in the plan through retirement, it keeps that scale, it allows the plan to continue to negotiate for fees. I think there's a lot of benefits beyond take-up rate that flow down from that. I guess I'll just put it to both of you. Any other thoughts on how you guys think about utilization and take-up rate and juice worth the squeeze, Ben, if there's anything you want to add and then Darren, if Aon thinks about it differently, it'd be great to hear from you guys.

BEN:
That’s going to be an individual case by case basis for the company and how you think about your employees and your retirees and what your population makeup is. Here at Unum, we tend to have very long tenured employees. The culture is to create holistic benefit packages that support them through all pieces of life. Naturally this fits in with that. It does obviously benefit us to have more assets in the plan, but it also benefits them too. And tying back to what I said originally, if they want to roll their money out of the plan and go to brother-in-law Steve or I can't remember what the brother-in-law's name was, but if that's the best decision for them, great, go for it, but we want them to make an educated decision on that and providing these tools and resources help a lot with that. So, for us, the juice was worth it, even though we're not seeing hundreds of annuitizations within the first couple of months of launching a solution like this. It's not really a realistic expectation based off of how many people we have retiring, and how many people that are retiring now may have access to that guaranteed income, but in four or five years, the retirees are not going to have as much, so getting it in the plan now and getting them familiar with it as they prepare for retirement will, I think, be a long term benefit.

DARREN:
Yeah, I completely agree, Ben. The only thing I would maybe just add on to it is think of it the same way as the accumulation side. The benefits that participants are getting. They're getting the institutional buying power, they're getting better annuitization rates, as you mentioned, they're not getting that 5-6% fee, and they're getting the fiduciary oversight. You have professionals overseeing this and selecting it and offering it for your participants. All are beneficial to the end participant. And then the last point, as it relates to utilization, it's not always just about who purchased and how many people purchased it. I think Ben, you make a good point, offering these tools in a comparison for participants to see what could I get in the institutional context versus what could I get from brother-in-law, Steve is very valuable. So, having that optionality and that full picture is beneficial in our view.

ELISE:
Yeah, and to your point it's the institutional pricing, you're able to get in the retirement income solutions as well. So, thinking about, just from our perspective, we've seen on average 15 to 30% higher annuity payout rates than through IncomeWise than what a participant could get on their own. It’s that mirror of that institutional price that you're able to give your participants. Darren, there's a really interesting question in the chat that I want to pose to you, which is, thinking about the average workforce and maybe thinking that Unum is an insurance company, so there is the potential that folks are a bit more familiar with annuity products and things like that. I still think that a lot of these, just because of the way they're designed, IncomeWise is designed to be simple and easy to use for anyone, but I do think it's an interesting question of are you seeing take-up and interest in retirement income solutions for plans that have workforces that aren't necessarily in the white collar, the financial world. And are you seeing differences and solutions that are of interest to those plans or is it varied?

DARREN:
It really varies. I think it goes back to the point earlier that it's a case by case and organization by organization. Maybe to put the other lens on, if you went a lower income earning organization and to think about it more holistically, big picture about retirement income. You know, those participants, Social Security is going to make up a lot of their income post-employment. So maybe it doesn't make sense to look at things like annuities because Social Security is already covering, call it 70% of their earnings. So again, it's case by case by organization. You really have to understand your demographics and what their needs are. Typically, there isn't just one demographic within your overall organization, so the need for multiple types of solutions tends to be where organizations land.

ELISE:
Yeah, I totally agree with that. I think the other question that we've gotten today and that you hear a lot is if the average DC balance is $200,000-300,000 dollars depending on what survey you look at. And so maybe this is a question for Darren, just thinking about on average, is it worth it? Another version of is the juice worth the squeeze. From our perspective, I think it depends on the solution. Obviously, that is one piece of a larger, hopefully a larger puzzle from a financial perspective for a participant. This is really where I think that nitty gritty of comparing and contrasting these solutions against each other becomes really important because for a $300,000, $200,000 balance participant, an immediate annuity probably isn't going to get you that much guaranteed income. So, does a deferred annuity make more sense because that deferral period, you get 2, 3x that income because you have that deferral period and then you can use a managed payout feature to do the immediate piece and pair those together. For me the efficacy for different balances, I think again, it's where you start to really need to get into the nitty gritty of comparing and contrasting the solutions and seeing what makes sense for individual plans, but I don't know, Darren, if you have any thoughts or disagree with anything I said.

DARREN:
No, I agree with you there. Yeah, I mean, the industry historically has thought about your ending balance as a multiple of your last year's earnings, and you need a sufficient amount, call it 15x or whatever it is, and that should last you in retirement. And so, if you're in a situation where your last year’s earnings were $100,000 but you only have $200,000 in savings, annuitizing that is not going to get you anywhere close to what you were making in your working years. Looking at other solutions, looking at things that could help facilitate monthly payments, but also have the opportunity to grow more. So, you're probably going to want more growth assets associated with it. I think in that type of example, the focus is more so how do we get our population and participant base to save more, to earn more, it's more of the accumulation focus in that type of situation in our view.

ELISE:
Yeah, maybe the elephant or like a baby elephant in the room is there's a lot of evolution in the target date fund space, retirement income is one of them. I think the other thing that's really present in the industry right now is private markets. And that is more, at least right now, an accumulation evolution. So, Darren, how do you think about prioritizing that if a plan is trying to figure out what should I focus on, what's more important, what's more impactful, how do you advise plan sponsors with that? And how do you pick a lane basically, or do you have to pick a lane?

DARREN:
Yeah, I don't think you necessarily have to pick a lane. Let me take a step back as we think about private assets, our view, the most efficient way probably to implement that would also be in a target date fund type solution. So now you're having the competing argument of should we include privates in there or should we include the annuity and they don't have to be mutually exclusive. I think it's working with a partner that is able to evolve with you over time. There are asset managers out there that have solutions in both of those lanes. We've yet to see that convergence where they're offering both privates and annuities, but it's an evolving landscape, legislatively, there's definitely a push for private markets. So that's going to be the next wave and it's all about how are these plan sponsors and product solution providers going to integrate both of them. But I don't think they need to be mutually exclusive.

ELISE:
Yeah, I totally agree. know we only have a few minutes left. Darren, I asked you where you see the industry going over the next three years. Ben, how are you thinking about your plan over the next couple of years? You guys have clearly done a lot of work over the last few, so hopefully you get a little respite from that, but curious about where you guys see you going from here. Is it monitoring to see take-up? You have a couple of solutions in place, is it trying to see what's missing, if there's participants calling and asking for a certain thing? How are you thinking about where you guys go from here?

BEN:
Yeah, it's a great question. I don't know about a respite, especially with all the legislative stuff coming up and the changes and the things that we need to be paying attention to. So, we're always focused on that and what's next, and obviously privates is a big thing that everybody's talking about with the executive order. Tying it back to income piece, what we're really going to be focused on is once all of these solutions are now finally live and everybody has access to them in January, how can we best communicate those to the population that can benefit from them, and how can we refine that and evaluate that. Are they working? Do we need to do something differently? Is there, to your point, something missing? So, we're going to do a lot of data analysis and really hone in on the employee experience and make sure that for the population that can benefit from them, they understand that they have access to these and we can package it up in a way that they can engage with easily and make decisions that are going to benefit them the best.

ELISE:
Yeah, I think that's great. Communication is one too that, that can always be changing. That's an area where technology is really going to come into play. And just trying to engage with folks maybe in a different medium than what we've traditionally done. That's also a segmentation thing. Whether it's a postcard with a QR code or a TikTok video or some kind of video, right? I think that could be really interesting and everyone's 401k plan, their recordkeeper, it's on their phone now. You've got the app and so how do you engage with folks? An interesting thing, you brought up a balancing act before. There's research that shows that for pre-retirees, so younger folks, if folks look at their 401k account more than 12 times a year, they're more likely to excessively trade. But they look at it, so it's like once a month seems to be like kind of the rule of thumb. So, it's kind of an interesting thing where you want to engage and you want to really help people understand the benefits they have, but there's also a fine line because we don't want to have participants treat these accounts like they're day traders. So, it's definitely a fine line and I think again, technology will be interesting to see where that goes.

BEN:
Totally agree.

ELISE:
So, I think we're going to wrap up. I’ll just say thank you very much to Ben and Darren. Any final thoughts from either of you on retirement income, where you see this going, what you're excited about before we wrap up?

BEN:
I mean, I can just reiterate, I'm excited for all of our solutions to finally be live and see what we have for results and continue to find how our employees engage with it.

DARREN:
Yeah, I'm just excited to see the continued evolution here. I mean, there's clearly a retirement issue in America where people need to start addressing this. So, coming up with new solutions and implementing I think will be exciting over the next few years.

ELISE:
Yeah. Great. Well, thank you guys both so much for joining today. Just in closing , I'm super excited about retirement income and where we see the industry going. It's been in the DC orbit for 10-15 years and it touched down to earth a few months ago and I think now we're really starting to see a lot of excitement, movement, implementation, but also just search activity, that has really gone up. Hopefully the framework and thinking through the ability to segment a population and categorize the variety of options out there by who they're designed for and then start to dig into and really compare and contrast the features as would be most applicable and useful for your population or that particular segment of your population. Hopefully, that's a helpful place to start. But yeah, thank you everyone for your time and I hope everyone has a great rest of your day.