Hancock launches guaranteed 401(k) rider

John Hancock Retirement Plan Services today launched a guaranteed income rider for its 401(k) plans.
“The boomers’ Number One priority is how to generate a stream of income now,” said Ed Eng, senior vice president of John Hancock RPS of Boston.
“Given that few people are covered by defined benefit plans, people are retiring younger and living longer.”
This new feature, which is called Guaranteed Income for Life, allows clients to put a portion of their 401(k) assets into at least one of John Hancock’s lifestyle funds, creating a guaranteed benefit base.
This base is used to calculate a 5% lifetime income at distribution.
There is also an annual step-up if the market value of the funds with the rider is higher than the benefit base, thereby locking in market gains.
Customers can still participate in step-ups even after the lifetime income has been set.
Along with participants, spouses can also take advantage of the plan. But in this case, the income would be calculated at 4.5% instead of 5%.
Participants who select the rider will pay a 0.35% annual fee based on the balance in the funds that carry the guarantee.
Also, workers who retire, leave their jobs or have their plans terminated can preserve their benefit base and roll it over to another one of the company’s funds with similar options and retain the guarantee.
If plan sponsors switch to a provider and participants can’t roll their funds over, they can receive the market value of the account and have their rider fees returned to them for a maximum of three years.
“You’re seeing some of our competitors offer withdrawal benefits in 401(k)s, but we differentiate ourselves on three fronts: It has to be cheaper, simpler and portable,” said Mr. Eng.