MODERATOR:Lee Stevens, Vice President, National Sales Manager – Institutional Market, Empower Retirement

PANELISTS:

• Daniel Beard, Director of Administration, Office of Defined Contribution Programs, State Board of Administration of Florida

• Renée Wilder Guerin, Acting Director, Office of Participant Operations and Policy, Federal Retirement Thrift Investment Board

• Raymond Jimenez III, Associate Administrator/CFO, Adventist Retirement

• Steve Shepherd, Partner, Head of Institutional Annuities and Life Insurance Solutions, Aon Hewitt

Moving the Needle on Retirement Income

As a plan sponsor, do you currently offer a lifetime income solution to your employees?

1. Yes

2. No, but we are considering adding it

3. No, we do not plan to add it at this time

4. I don’t know what a lifetime income solution is

Thank you to our Diamond Sponsor

For those considering adding a lifetime income solution, what’s your time frame?

1. Within the next 12 months

2. 1 to 2 years

Thank you to our Diamond Sponsor

What’s your main concern with introducing an in-plan lifetime income solution?

1. Fiduciary concerns

2. Operational and administrative complexity

3. Plan-level portability

4. Participant appreciation, understanding and engagement

Thank you to our Diamond Sponsor

Older workers approaching retirement face significant challenges managing their retirement savings and run the risk of exhausting their savings. Contributing factors include:

• Longer Life Expectancy• Market Volatility• Erosion of purchasing power through inflation• Rising medical costs• Unrealistic expectations about post-retirement employment• Ill-advised financial decisions

The consequences of failing for U.S. retirees are severe –exhausting savings during retirement, relying solely on Social Security and living in poverty or near poverty.

Help participants generate lifetime income streams

Annuity options are rarely found in 401(k) or other DC plans. Of the 366 Fortune 1000 companies responding to a recent Plan Sponsor survey:

• Fewer than 5% offer annuities• More than 77% offer no income-oriented products or services

Even when annuities are available, participants’ utilization rate has historically been very low. Only about 1% of DC plan participants convert their balances to annuities, says a recent EBRI report.

Daniel Beard, Director of Administration, Office of Defined Contribution ProgramsState Board of Administration of Florida

Florida Retirement System Investment Plan Payment Options

• Rollover

• Lump-sum

• On demand or scheduled

• Annuity payments

• Combination

Florida Retirement System Investment Plan Annuities

• MetLife• Immediate Fixed Income Annuities• Deferred Income Annuities (QLAC)

• Introduced December 2015• EY financial planners run quotes

Newsletter Quarterly Annuity Quote

• Quarterly Newsletter • Includes latest annuity quote• $100,000 balance• Single/joint & survivor

• Included with quarterly statement

[Quarterly Annuity Quote]

Monthly/Yearly Annuity Letters• Monthly Letters

• To:• Terminated IP members > $50,000• Deferred Retirement Option Program rollovers

> $50,000• Annuity quote on 100%/50% of balance

• Yearly Letters• Terminated IP > Age 69½ > $50,000 - RMD

[Monthly Letter Sample]

Letters to Members

• Began in April 2010

• Annuities from July 2002 to April 2010 – 8 purchased ($1.2 mil.)

• Annuities from April 2010 to present – 60 purchased ($8.4 mil.)

• Increase in number of annuities purchased

• Increase in member’s awareness of annuities

Renée Wilder GuerinActing Director, Office of Participant Operations and PolicyFederal Retirement Thrift Investment Board

Thrift Savings Plan

• CSRS – Civil Service Retirement Plan• FERS – Federal Employee Retirement Plan

• TSP – Thrift Savings Plan• Uniformed Services

• $450 billion • 4.8 million participants• Periodic payments• No in-plan annuity• Immediate annuity available as a distribution

option

Thrift Savings Plan

Annuity Purchase History

0

500

1,000

1,500

2,000

2,500

88 90 92 94 96 98 00 02 04 06 08 10 12 14

Num

ber D

isbu

rsed

Dol

lars

Dis

burs

ed(0

00’s

)1,372

Contracts

2015

Dollars

$237,351

2015 Retirement Withdrawals

69%

19%

8%4%

100% AnnuityPaymentAnnuity and SinglePaymentAnnuity and MonthlyPaymentsAnnuity, Monthly &Single

Participant Education

Now• Retirement letter and brochure• Tweets• Videos

Later• Greater withdrawal flexibility• Outreach prior to retirement• Zone of Confidence• Re-engineer withdrawal election forms

Participant Education

Raymond Jimenez IIIAssociate Administrator/CFOAdventist Retirement

Adventist Retirement• DC Plan Profile

• Over $1 billion in assets• Over 25,000 participants with a balance

• Participant Profile• Retirement plan is primary retirement asset for many participants

• Plan Features• Managed Accounts• Online Advice• Target Date Funds• Asset Allocation Models

• In Plan Retirement Income – Guaranteed Lifetime Withdrawal Benefit (GLWB)

Adventist Retirement

The Case for Guaranteed Retirement Income

• Retirees are living longer

• Timing retirement can be a risky proposition for participants

• Participants and plan sponsors value certainty and predictability

• Average participants tend to invest based on emotion, damaging their retirement income potential

Adventist RetirementWhy an in-plan retirement income solution

• Majority of Americans do not have access to professional financial advice• In-plan solutions provide the best opportunity for participants/investors to gain access to

retirement income solutions• Many participants do not have enough assets outside their retirement plan to fund a retirement

income solution• Does not require a distributable event to fund a retirement income solution. Many

employers are making it a priority to help their employees – particularly the Baby Boomer generation – become retirement ready by helping employees account for their retirement income needs

• Retirement income solutions help plans balance their investment lineup by helping participants account for both the accumulation phase of retirement as well as the income phase

Guaranteed Lifetime Withdrawal Benefit

Adventist Retirement – GLWB Roll Out• Fund Addition Letter – Direct Mail• Email Campaign – Link to microsite• Banner Website Messaging• Plan Highlights with SecureFoundation II Information – Direct Mail• Plan Sponsor Flyers - Email• Participant Flyers – Direct Mail• Participant Education Presentations• Pre-Retirement Presentations – Directed at those 55 and older,

presented at Employer locations

Steve ShepherdPartner, Head of Institutional Annuities and Life Insurance SolutionsAon Hewitt

Employees Not on Track for Adequate Income

Source: Aon Hewitt’s The Real Deal, 2015 Retirement Income Adequacy at Large Companies; based on results for full-career contributing employees who only have a defined contribution plan available for retirement income accumulation.

Mul

tiple

of e

ndin

g sa

lary

Need Reality

7.0x pay

4.1x pay

11.1x pay

Income Gap

Less than 1 out of 5 DC-only participants is on-track for a reasonably

adequate retirement

Average participant needs 11.1x pay at age 65 for retirement income, yet

DC-only participants fall short

10

8

6

4

2

0 Reasonably adequate retirement defined as being within 2x pay of projected retirement needs

67%Feel supporting the process to have participants convert

balances to lifetime income is very or moderately important

48%Are very likely or moderately likely to address ways to

encourage lifetime income in 2016

In-plan annuity or insurance product

Prevalence of Tools and Products to Convert Savings to Lifetime Income

7%

12%

Facilitation to purchase annuities outside plan

In-plan managed account with drawdown

30%

45%

Distribution option to receive monthly payments

Online tools or apps to help see how much to spend

66%

Converting Savings to Retirement Income

Percentages shown are those who answered “Already Offer”Source: Aon Hewitt’s 2016 Hot Topics in Retirement and Financial Well-being Survey

Barriers to Adding In-Plan Income Solutions

Percentages shown are those who answered “Major Barrier”Source: Aon Hewitt’s 2016 Hot Topics in Retirement and Financial Well-Being Survey

Waiting to See Market Develop53%

Fiduciary Concerns43%

Operational or Administrative Concerns

Participant Utilization Concerns

40%

34%

How Sponsors Think about the Market

2008 Safe Harbor

CounterpartyRisk

1. Early Adopters

2. Wait & See

Due Diligence

Future Regulatory

Actions

3. Follow the Crowd

4. Legally Required

Retirement Income Solution Categories

Type of OptionManaged Payout – Existing Funds

Managed Payout – New Fund

Deferred Guaranteed Withdrawal Benefit

Deferred Guaranteed Income Benefit

Deferred Fixed Annuity

Traditional annuity – End of plan

Annuity Platform

Longevity Insurance

Scheduled Payout

Ongoing GuaranteedIncome Purchase

Lump Sum Annuity Purchase

Longevity Insurance

Income Category

Aon Hewitt’s Views on Retirement Income

Prepare for Evolving

Environment

Retirement income options are evolving DC plans - critical retirement income source Firms starting to implement The Government supporting and encouraging

Evaluate Market as it Matures

The market is addressing initial sponsor concerns Greater fee transparency Lower counterparty risk Better portability through middleware

Continue to Assess Options

Plan Sponsor action steps: Examine non-insurer and insurer solutions Assess the right time to add retirement income Consider short-term and long-term fiduciary implications