DC Plan In-Plan Annuities: Why 90% Sponsor Support Has Not Produced Adoption

Nine in ten DC plan sponsors say a 401(k) should function as a retirement income vehicle, 86% expect the importance of lifetime income options to grow, and 95% report being knowledgeable about policy developments in the space. Fewer than one in ten DC plans offers an in-plan guaranteed income product. The obstacle is not awareness. It is that selecting a carrier for a guarantee running decades forward requires diligence the safe harbor does not describe.

Key Takeaways

• 242 plan sponsors, 66% with $250 million or more in DC assets and 12% above $1 billion. This is not a small-plan capacity problem; these committees have consultants on retainer.
• 81% of sponsors who already offer lifetime income support requiring it, against 59% overall. Implementation produces conviction, which places the barrier at the first one.
• NAIC company action level RBC is 200%. Carriers competing for this business typically run above 350%, and a 220% carrier is solvent while sitting close to the regulatory boundary.
• AM Best has documented a two-notch average decline in the credit quality of assets backing annuity reserves since 2007, concentrated in private-equity-backed carriers.
• The QLAC ceiling is $220,000 in 2026. The in-plan route carries no equivalent statutory cap on how much can be converted to guaranteed income.

What the Survey Actually Shows

MetLife fielded its 2026 Lifetime Income Poll through MMR Research Associates from February 3 to February 16, 2026, across 242 DC plan sponsors. The sample skews large: 66% reported DC assets of $250 million or more and 12% exceeded $1 billion. These are sponsors with dedicated benefits committees and the bandwidth to implement complex design changes, which makes the near-universal inaction a decision rather than an oversight.

The cross-tabs locate the barrier precisely. Overall, 59% of sponsors would support requiring plans to offer lifetime income and 54% support defaulting a portion of savings into guaranteed income at retirement. Among sponsors who have already implemented, those figures are 81% and 72%.

The Plan Sponsor Council of America's annual survey confirms the stall independently: the share of DC plans offering an in-plan annuity has shown no meaningful movement since 2016, with any change running directionally downward. Set against 90% endorsement of lifetime income as the plan's core purpose, the failure sits between the committee room and the participant's account.

The Safe Harbor Answers a Different Question

SECURE Act section 204 added a statutory annuity selection safe harbor at ERISA section 404(e). A fiduciary satisfies it by obtaining written representation from the provider confirming compliance with applicable state insurance law on financial capability. The fiduciary need not select the lowest-cost contract and is deemed to satisfy periodic review by collecting annual representations and acting on material concerns.

That statutory route did not displace the older regulatory safe harbor at 29 CFR 2550.404a-4, which dates to 2008. The Department of Labor issued a direct final rule in July 2025 to rescind it as redundant, then withdrew it after industry objection, with EBSA reversing by August 2025. Both remain in force, and the regulatory version asks for an objective, thorough, and analytical search, an evaluation of claims-paying ability and creditworthiness, and a documented conclusion on financial capability and cost reasonableness.

The written representation confirms compliance with state insurance regulation. It does not establish that the carrier is positioned to fund a guarantee running 20 to 40 years forward, that its capital is adequate against this plan's specific exposure, or that its portfolio suits the credit and rate cycles the plan will pass through.

Each of those is a number, not a judgment call. NAIC company action level RBC is 200%, the point at which management action is required; carriers active in this market typically run above 350% and stronger ones at 400% to 500%. Surplus has to be read against the plan rather than in the absolute: a carrier absorbing a $200 million obligation on $500 million of surplus is differently placed from the same carrier with $5 billion and a diversified block.

Portfolio composition has moved too, with general accounts shifting toward private credit, CLOs, and real assets since 2012. A general account 30% or more in alternatives behaves differently under stress than one at 5% to 10%.

The obligation also never closes, which is what separates this from a pension buyout. A buyout ends the fiduciary relationship at closing. An in-plan option stays on the menu, participants accumulate into it, and exposure to the selected carrier grows year over year. A sponsor adding one in 2026 may be monitoring that carrier into 2060 for participants now in their 30s, and a downgrade from A+ to A- five years in offers only costly answers: accept the counterparty risk with documentation, pull the option and manage the transition, or move accumulated balances at whatever pricing the market gives that day.

What the Rollover Route Costs the Participant

The workaround is to direct retiring participants to IRA rollover annuities. Once the participant rolls over, plan exposure ends and monitoring transfers to the individual. The record is clean and the fiduciary liability for the retail product is gone.

Feature	In-Plan Annuity	IRA Rollover Annuity
Creditor protection	Unlimited (ERISA)	Up to $1,512,350 in bankruptcy (2025)
Mortality pricing basis	Unisex (ERISA-mandated)	Sex-distinct in most states
Pricing scale	Institutional group rates	Retail individual rates
QLAC/guaranteed income ceiling	No statutory ceiling	$220,000 QLAC limit (IRS, 2026)
ERISA fiduciary oversight of contract terms	Yes	No

The pricing difference is the part that does not show up as a plan cost. An in-plan annuity uses ERISA-mandated unisex rates, so women receive the same per-dollar monthly income as men at identical contributions and election ages. An IRA annuity in a state permitting sex-distinct pricing pays women less for the same premium, reflecting life expectancies that run four to six years longer across most tables in current use. The gap runs roughly 5 to 10 percentage points of per-dollar income depending on carrier and election age.

That matters disproportionately in health, education, and public-sector plans, where women are a majority of the workforce. Directing those participants toward the retail market without surfacing the differential is a decision about participant economics being made without being recognized as one.

The coverage ceiling compounds it at the other end of the balance distribution. An IRA rollover can direct up to $220,000 into a Qualifying Longevity Annuity Contract in 2026, deferring required minimum distributions and buying longevity protection at advanced age. For a participant whose balance well exceeds $220,000, that caps longevity coverage at a fraction of the accumulation, and the in-plan product the sponsor declined to offer carries no analogous restriction.