Milliman looking to partner on guaranteed income product for 401(k) plans

Milliman Inc. is in discussions with a number of mutual fund companies, insurers and 401(k) plan sponsors to launch a guaranteed income product that would be backed by a pool of insurers.
NOV 09, 2009
Milliman Inc. is in discussions with a number of mutual fund companies, insurers and 401(k) plan sponsors to launch a guaranteed income product that would be backed by a pool of insurers. By mid-2010, the company expects that at least one 401(k) plan sponsor will offer near-retirement target-date funds that provide participants with guaranteed income after retirement, said Ken Mungan, financial risk management practice leader. Milliman has been developing this product for the past few years, and it had a lot of interest before the market downturn, Mr. Mungan said. “We had two very large asset management firms with big 401(k) businesses commit to this approach before the financial crisis,” Mr. Mungan said. “But then the crisis hit, and they both pulled the plug.” But over the past few months, he said, many firms have reached out to him about the concept. With the baby boomers hitting retirement, a growing number of financial services firms are trying to develop ways to offer guaranteed income to investors after they have retired. One of the big challenges in this space, however, is that asset managers and plan sponsors are concerned about the implications of offering a guarantee backed by just one insurance company — particularly after the recent market crash highlighted the instability of several large insurance carriers. “Our approach would spread the risk across a few insurance companies,” Mr. Mungan said. Specifically, Milliman’s concept would require a lead insurer, which would then be backed by three other insurers. The backup insurers would take over the guarantees if the lead insurer failed. The program would also require the insurance companies to establish a collateral account to back the guarantees. The guaranteed minimum withdrawal would reset annually based on market growth, but it wouldn’t go down if the market drops, Mr. Mungan said. Milliman anticipates the guarantee would cost 80-100 basis points. Target-date fund providers have been very interested in the concept, since it would be simple to add it to a target-date fund for the 50 and older crowd, Mr. Mungan said.

Latest News

Barred advisor forged wife’s signature on life insurance contracts, according to FINRA
Barred advisor forged wife’s signature on life insurance contracts, according to FINRA

Thrivent Investment Management Inc. in May fired Nicholas Hale, according to his BrokerCheck profile.

Raymond James lands $18.7B Synovus team as LPL adds UBS breakaways
Raymond James lands $18.7B Synovus team as LPL adds UBS breakaways

About 70 bank and credit union advisors move to the Raymond James platform, while a $480M New Jersey team goes independent with LPL

Tax-aware investing should expand client choices, not constrain them 
Tax-aware investing should expand client choices, not constrain them 

The best tax plan asks not only how much a client could save, but what they would have to give up to save it. 

Merrill veteran Jonathan Stogsdill joins Trinity Wealth Advisors in St. Louis
Merrill veteran Jonathan Stogsdill joins Trinity Wealth Advisors in St. Louis

A 20-year financial services veteran brings values-driven planning expertise to the St. Louis-based RIA.

SEC enforcement against public companies hits record low under Atkins
SEC enforcement against public companies hits record low under Atkins

New research shows a 71% plunge in actions in fiscal year 2026, with total settlements the lowest since the database began.

SPONSORED Best Practices for Engaging Women Around Alternatives

Growing wealth, evolving priorities, and untapped opportunities are reshaping how women approach long-term investing.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.