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 this space, yet fewer than one in ten DC plans today offers an in-plan guaranteed income product (MetLife, 2026 Lifetime Income Poll, 242 plan sponsors, February 2026). The gap is not awareness. The obstacle is actuarial and structural: selecting an insurance carrier for an in-plan annuity requires due diligence most benefits committees cannot perform independently, and SECURE 2.0’s safe harbor resolves the legal process question without answering it.

What the MetLife Survey Reveals About Sponsor Confidence and Inaction

MetLife commissioned the 2026 Lifetime Income Poll from MMR Research Associates, fielding it February 3 through February 16, 2026, across 242 DC plan sponsors. This is not a cross-section of small-employer plans with limited administrative capacity: 66% of respondents reported DC plan assets of $250 million or more, and 12% exceeded $1 billion. These are mid-to-large plan sponsors with dedicated benefits committees, plan consultants on retainer, and the organizational bandwidth to implement complex plan design changes. Their near-universal inaction on in-plan annuities is deliberate, not incidental.

The cross-tabs sharpen the picture. Among sponsors who would support requiring plans to offer lifetime income (59% of the survey sample), and the 54% who support defaulting a portion of savings into guaranteed income at retirement, support is materially stronger among sponsors who have already implemented: 81% of existing lifetime income providers back mandates, versus 59% overall, and 72% favor defaults versus 54% overall (MetLife, 2026). The experience of implementation produces confidence. First implementation is the barrier, not philosophical uncertainty about whether guaranteed income belongs in a 401(k).

The Plan Sponsor Council of America’s Annual Survey independently confirms the stagnation. The share of DC plans offering an in-plan annuity has shown no meaningful movement since 2016, with any changes running directionally downward (PSCA). Against 90% endorsement of lifetime income as the core plan purpose, this is an implementation failure concentrated between the committee room and the participant’s account.

SECURE 2.0’s Annuity Safe Harbor: Legal Coverage and Its Gaps

SECURE Act section 204 added a statutory annuity selection safe harbor to ERISA section 404(e). The mechanism: a plan fiduciary satisfies the safe harbor by obtaining written representation from the annuity provider confirming compliance with applicable state insurance laws regarding financial capability. The fiduciary need not select the lowest-cost contract, may weigh other provider attributes, and is deemed to satisfy periodic review by obtaining annual written representations and acting on material concerns they identify. That is a meaningful liability reduction versus a bare fiduciary standard where every aspect of carrier selection is subject to hindsight review.

The statutory safe harbor did not replace the regulatory safe harbor at 29 CFR §2550.404a-4, which dates to 2008. The DOL issued a direct final rule in July 2025 attempting to rescind the regulatory safe harbor as redundant, then withdrew it following significant adverse reaction from the Insured Retirement Institute and other industry groups, with EBSA reversing course by August 2025. Both safe harbors remain in force. The regulatory safe harbor requires an objective, thorough, and analytical search to identify and select providers from which to purchase annuities, an evaluation of each candidate’s claims-paying ability and creditworthiness, and a documented conclusion that the provider is financially capable of satisfying its obligations and that cost is reasonable in relation to benefits.

Most benefits committees are applying the statutory safe harbor’s streamlined written representation as their primary carrier diligence tool without fully accounting for the regulatory safe harbor’s analytical requirements. A carrier’s written representation confirms compliance with state insurance regulation. It does not certify that the carrier is optimally positioned to fulfill a guarantee running 20 to 40 years forward from participant election, that its RBC ratio is adequate relative to the plan’s specific liability exposure, or that its investment portfolio is positioned appropriately for the interest rate and credit cycles the plan will operate through over the next three decades. The safe harbor resolves the legal framework. It does not answer the actuarial question.

Carrier Review Beyond the Written Representation: RBC, Portfolio Quality, and Stress Scenarios

Advising benefits committees on in-plan annuity carrier selection, the actuarial documentation required to satisfy ERISA’s prudent expert standard is substantially more demanding than the safe harbor language implies. An AM Best financial strength rating of A or A+ is the starting screen, not the endpoint. A qualifying enrolled actuary review of a prospective in-plan annuity carrier covers four areas the written representation leaves untouched.

RBC ratio adequacy. NAIC’s company action level RBC is 200% for life insurers, the regulatory floor at which management action is required. That floor is not a prudence standard for a guarantee obligation running 30 to 40 years forward. Carriers actively competing for in-plan annuity business typically operate above 350% company action level RBC, with stronger carriers at 400% to 500% or higher. A carrier at 220% RBC is technically solvent under NAIC standards; it is operating closer to the regulatory boundary than is appropriate for the duration and irrevocability of an in-plan guarantee.

Surplus adequacy relative to plan exposure. The plan’s incremental contribution to the carrier’s in-plan annuity block deserves contextual evaluation, not just absolute assessment. A carrier absorbing a $200 million in-plan annuity obligation from a single plan sponsor while carrying $500 million in total surplus is in a materially different risk position than the same carrier with $5 billion in surplus and a diversified block across many plan sponsors. This relative exposure analysis is plan-specific and cannot be delegated to the carrier.

Investment portfolio quality, including alternative asset concentration. Life insurer general accounts have shifted meaningfully toward private credit, CLOs, and real assets since 2012 as carriers pursue spread in a compressed yield environment. AM Best has documented a two-notch average decline in the credit quality of assets backing annuity reserves since 2007 across the sector, concentrated in PE-backed carriers. For an in-plan annuity guarantee that is irrevocable once elected and runs for the participant’s lifetime, the credit and liquidity profile of the backing assets matters across multiple economic cycles. A carrier whose general account is 30% or more in alternatives faces different liquidity and credit stress dynamics than one at 5% to 10%.

Stress scenario results. A carrier that appears adequate under base-case assumptions may behave differently under a scenario involving 10 to 15% credit impairment in the private credit book, a prolonged low-rate environment compressing spread income, or a rapid-rising-rate period creating duration losses on the existing fixed-income portfolio. Stress scenario review does not require the fiduciary to predict economic conditions; it requires the fiduciary to understand the carrier’s sensitivity to adverse scenarios and to document that the carrier holds adequate capital buffers to absorb them across the range of conditions the plan might experience over the guarantee’s lifetime.

Most benefits committees cannot perform this analysis without retaining specialist actuarial counsel. That retention is a cost, a procurement cycle, and a vendor relationship that competes for committee bandwidth already allocated to investment lineup review, compliance deadlines, and plan design decisions. The result is that the safe harbor’s written representation becomes the practical ceiling for carrier diligence rather than the legal floor it was designed to establish.

The Monitoring Obligation That Never Terminates

For a traditional pension risk transfer buyout, the plan sponsor’s carrier monitoring obligation ends at closing. The group annuity contract transfers the benefit obligation permanently, the defined benefit plan terminates or reduces its covered population, and the fiduciary relationship with the insurer ends. An in-plan annuity works differently, and that difference is the behavioral mechanism behind the adoption gap.

The plan continues operating. The in-plan annuity option is a permanent feature of the plan menu. Participants accumulate in it year after year, growing the plan’s total exposure to the selected carrier over time rather than extinguishing it at a defined close date. ERISA’s prudent expert standard requires the fiduciary to periodically reassess whether the carrier remains a prudent selection, and to act on material concerns. That obligation is open-ended in duration and unpredictable in what it may require.

The scenario most benefits committees cannot pre-answer: what happens if the selected carrier’s AM Best rating drops from A+ to A- five years after initial selection? The options are accepting elevated counterparty risk and documenting that decision with actuarial support, removing the option from the plan menu and managing the resulting participant transition, or transferring accumulated participant balances to a replacement carrier at pricing determined by market conditions at the time of transfer. None of these options is costless or administratively clean, and the committee’s liability for whichever path it takes is evaluated under the prudent expert standard in hindsight, not the safe harbor standard that governed initial selection.

A plan sponsor who adds an in-plan annuity in 2026 assumes a carrier monitoring obligation that may run to 2060 or beyond for participants who are currently in their 30s and early accumulation years. Most plan committees are not structured for that kind of long-horizon actuarial relationship. They are structured for annual fund manager review cycles, where underperforming options are replaced with modest procedural friction. An in-plan annuity downgrade scenario is a categorically different decision, with participant assets at risk and participant notification obligations attached. That liability profile deters adoption even when the initial carrier selection would be defensible under ERISA.

IRA Rollover Annuities: What Plan Sponsors Trade Away

Some plan sponsors resolve the monitoring problem by directing retiring participants toward IRA rollover annuities rather than offering an in-plan product. Once the participant rolls over, the plan’s carrier exposure ends and the monitoring obligation transfers to the individual. The administrative appeal is real: a clean plan record, no ongoing carrier relationship, and no fiduciary liability for the annuity the participant chooses in the retail market.

The participant’s economic position after rollover differs from what an in-plan product would deliver on four dimensions:

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 unisex pricing differential is actuarially significant for a large share of DC plan participants. Women represent a majority of the workforce in many health, education, and public-sector plans, and their life expectancies exceed men’s by four to six years across most actuarial tables in current use. An in-plan annuity using ERISA-mandated unisex rates provides women the same per-dollar monthly income as men for identical contributions and ages at election. An IRA annuity in a state that permits sex-distinct pricing delivers women a lower monthly income for the same premium, reflecting their longer expected payout period. The per-dollar income gap between unisex and sex-distinct pricing is approximately 5 to 10 percentage points depending on carrier and election age. Plan sponsors directing female participants toward IRA rollover annuities without surfacing this differential are making a consequential choice about participant economics without recognizing it as a fiduciary decision.

The QLAC ceiling adds a coverage gap for participants with large balances. An IRA rollover can direct up to $220,000 into a Qualifying Longevity Annuity Contract in 2026 (IRS), deferring required minimum distributions and securing longevity protection at an advanced age. For participants whose DC balance well exceeds $220,000, that ceiling limits longevity coverage to a fraction of their accumulation. In-plan annuities carry no analogous statutory restriction on the amount that can be converted to guaranteed income.

SECURE 3.0 and the Compliance Shift It Would Trigger

Sixty-six percent of plan sponsors in the MetLife survey would support a SECURE 3.0 package with retirement income provisions, and 54% support defaulting a portion of savings into guaranteed income at retirement (MetLife, 2026). Bipartisan policy discussion is active: proposed SECURE 3.0 provisions would allow workers 50 and older to allocate up to $200,000 to a lifetime income product while still employed, integrating guaranteed income into the accumulation phase rather than restricting it to the distribution window. A May 2026 analysis cited research suggesting that legislative action on retirement income could increase total U.S. retirement wealth by up to 77% (CNBC, May 2026).

If Congress moves toward mandates or defaults, the actuarial due diligence burden shifts from optional best practice to compliance-required. Plan sponsors who are currently relying on the statutory safe harbor’s written representation as their primary carrier diligence tool would need to upgrade to a fuller actuarial review. The monitoring frameworks that most plans have not established would become required governance documentation. The carrier relationships that most benefits committees have not developed would need to be built quickly.

That preparation gap is concentrated among the roughly nine in ten DC plans that have not yet implemented an in-plan annuity. Plans that build a carrier selection framework, establish an actuarial counsel relationship, and complete an initial carrier review now have a platform to respond to a mandate on a manageable timeline. Plans that wait face that work on a compressed schedule while competing for actuarial resources at the moment industrywide demand is highest.

Building a Decision-Ready In-Plan Annuity Program

A qualifying in-plan annuity program requires four components that the safe harbor does not specify but that ERISA’s prudent expert standard demands.

A carrier review framework conducted by an enrolled actuary or life solvency specialist, covering RBC adequacy against a bar meaningfully above the 200% NAIC minimum, surplus adequacy relative to the expected plan exposure at full rollout, investment portfolio quality with specific attention to alternative asset concentration and credit rating distribution, and stress scenario results across a defined set of adverse economic paths. The written carrier representation satisfies the statutory safe harbor; the actuarial review satisfies the standard to which a prudent expert would actually be held.

A request for proposal structure that standardizes comparison terms across responding carriers: guaranteed payout rates at defined ages and contribution levels, expense loads and credited rate floors, portability provisions for participants who separate before retirement and want to preserve their accumulated guarantee, and explicit downgrade protocols specifying what the carrier commits to do and what the plan sponsor may do if the carrier’s financial strength rating falls below an agreed threshold. A non-standardized RFP produces proposals that cannot be compared on a consistent basis, and an apples-to-apples comparison is the documentary foundation of a defensible prudent process.

A monitoring cadence with defined trigger criteria. A biennial carrier reassessment on a scheduled calendar, with accelerated review triggered by AM Best rating downgrade below A-, RBC ratio falling below a defined threshold higher than the 200% regulatory floor, material change in investment portfolio composition beyond a documented tolerance, or senior management change at the carrier. This structure converts the monitoring obligation from an indefinitely open liability into a scheduled, bounded process with documented decision criteria. The committee does not need to wonder when to act; the trigger criteria tell them.

A participant communication and default design framework. Research on in-plan annuity utilization consistently shows that voluntary active-election models produce participation rates in the low single digits; default enrollment into a partial guaranteed income allocation, with a straightforward opt-out, produces materially higher uptake. The 54% of plan sponsors who support defaulting into guaranteed income have identified the correct mechanism. The actuarial support for default design covers the appropriate default allocation percentage relative to expected income replacement at retirement, the income replacement ratio across accumulation scenarios, and the carrier exposure that the default creates for the plan over the accumulation period before retirement. A program that satisfies ERISA’s process requirements but produces 3% participant election rates has not solved the retirement income problem the committee endorsed in principle.

The sponsor support is not in question: 90% endorsement across a well-resourced, policy-literate sample of mid-to-large DC plans is not a market waiting to be convinced. It is a market waiting for a clear, bounded implementation path. The actuarial components of that path, carrier review, process documentation, monitoring framework, and default design, are the work product that converts a committee resolution into a plan feature participants can elect.