Nationwide introduces proposal to provide guaranteed income within 401(k) retirement plans

Proposal aims to improve retirement outlook for Americans

 

FOR IMMEDIATE RELEASE
May 3, 2010

Contacts:
Erica Lewis (704) 896-5652
lewise6@nationwide.com

Jeff Whetzel (614) 249-6354
whetzej@nationwide.com

Columbus, OH — Today, Nationwide Financial Services, Inc. introduced 401KIncome, a public policy solution that provides incentives for the funding of guaranteed retirement income while strengthening the current employer-sponsored defined contribution system. The new proposal is designed to help improve Americans’ retirement readiness.

“What we have learned from the recession is that investors need help managing risk and finding ways to generate guaranteed lifelong income,” said Anne Arvia, president Nationwide Retirement Plans.

Arvia feels recent market conditions have undoubtedly demonstrated the need for change, as well as the fact that 51 percent of Americans are not prepared to retire at age 65, according to the National Retirement Risk Index from the Center for Retirement Research at Boston College¹. Defined contribution plans were developed to provide supplemental retirement savings to defined benefit retirement plans. But now, they have become the primary retirement-savings vehicle for Americans and need enhancements to help provide the same level of retirement readiness as two plans.

“The defined contribution system plays a critical role in providing individual and national retirement preparedness,” said Arvia. “However, we need to improve the system by addressing two issues. First, we need to increase the overall access to employer-sponsored retirement plans, and second we need to promote features within the defined contribution system that afford income guarantees similar to what was once provided by traditional defined benefit pension plans.”

To help create a solution to today’s retirement income challenge, Nationwide has developed 401KIncome. Below is an overview of the proposal:

What it does – The proposal provides a strong incentive for employers with defined contribution plans to use the employer match to purchase a guaranteed stream of income. The proposal would also promote greater use of 401(k) retirement plans, thereby increasing the number of employees who have access to a retirement plan.

What it looks like - 401(k) plans would offer fixed income deferred annuities as the investment option for the employer match.

How it works- Plan Sponsors (employers) would receive a tax credit instead of a tax deduction for any employer match used to fund a guaranteed stream of income payments to participants.

Employees would still have control over and access to their own contributions, but the employer match would not be accessible for loans or early withdrawals. Employees could also choose to put their own deferrals in the defined benefit option.

“We believe the 401KIncome proposal can help improve the nation’s retirement outlook by strengthening the defined contribution system through the creation of lifetime income, improved investment diversification and increased plan access while providing greater incentives for use of the employer match and ensuring those contributions are put away for retirement,” said Arvia.

About Nationwide
Nationwide, based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S.and is rated A+ by A.M. Best. The company provides a full range of personalized insurance and financial services, including auto insurance, motorcycle, boat, homeowners, life insurance, farm, commercial insurance, administrative services, annuities, mortgages, mutual funds, pensions, long-term savings plans and health and productivity services. For more information, visit www.nationwide.com.

_{Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.}

_{Fixed annuities offer a fixed rate of return based on the claims paying ability of the issuer.}

_{Nationwide, Nationwide Financial, the Nationwide Framemark and On Your Side are service marks of Nationwide Mutual Insurance Company.}

¹_{Center for Retirement Research at Boston College, National Retirement Risk Index 2010}