As life expectancies climb, so do the years that people will need to support themselves financially in retirement. The defined contribution (DC) industry recognizes participants’ challenge in trying to obtain income security as average lifespans increase and markets remain uncertain. Meanwhile, innovation continues on lifetime income solutions within DC plans to help participants achieve that security.
Some plan sponsors have tapped these solutions as default options, bringing income benefits to target-date funds, where most participants already invest. But other plan sponsors are still hesitant. If a lifetime income default option seems like such a good thing, why aren’t all plans doing it?
We think it boils down to two concerns: fiduciary and flexibility.
Major Strides in Regulatory Support for Lifetime Income
DC plan sponsors’ caution on the fiduciary front is somewhat understandable, given a perceived lack of regulatory and legal guidance. But as we see it, there’s much more direction on lifetime income solutions’ standing as qualified default investment alternatives (QDIAs) and safe-harbor status.
The SECURE Act, with its safe-harbor provision, illuminated the regulatory landscape. Plan sponsors who adhere to specific guidelines and conduct thorough due diligence receive protection from liability in “the selection of an insurer for a guaranteed retirement income contract.” But some sponsors likely still wanted more certainty on the implications of selecting target-date solutions with embedded annuities, such as the guaranteed lifetime withdrawal benefit (GLWB), as default options.
Subsequent guidance from legal experts has provided more clarity, and the US Department of Labor’s September 2025 advisory letter 2025-04A stated that a lifetime income solution can be considered a QDIA under the Employee Retirement Income Security Act (ERISA), provided that participants have access to and control of their retirement savings without penalty or restriction. Collectively, we think this regulatory guidance should go a long way toward allaying concerns, enabling more plan sponsors to consider lifetime income.
As Principal and Retirement Services Chair of Groom Law Group Michael Kreps puts it, “It’s understandable that fiduciaries are concerned about litigation risk, but it’s important that we not let fear paralyze us. At the end of the day, fiduciaries have a duty to do what’s in the best interest of participants, and many participants would benefit from new solutions.”
The Flexibility Consideration: ‘Does It Work for My Plan?’
The other area we think may be causing some plan sponsors to wait and see on installing lifetime income solutions, including GLWBs, revolves around the “fit” for a specific plan. That seems to come down to lingering concerns related to implementation and personalization.
Some guaranteed income solutions integrate a provider’s target-date solution and guaranteed income component, intending to provide a streamlined experience for plans. But not all plans want the same provider for their target-date solution and secure income solution, because they don’t want to replace their existing target-date fund. It could be a bridge too far.
To address this hurdle, providers have refined their solutions to offer more flexibility, developing à la carte secure income components. With this approach, plans can keep their existing default target-date funds and add a separate income component as a complement. That means no need to uproot their current target-date solution and the ability to upgrade plan design by incorporating the guaranteed income benefit participants are asking for.
There may also be some lingering wariness of default lifetime income products as one-size-fits-all offerings that don’t account for participants’ diverse needs and situations. But advances have enabled a personalized approach—some solutions can be set based on the needs of the plan, individual participants or both. Available options include the ability to turn off the income feature entirely, adjust the age that participants start accruing income benefits and specify how much to allocate to the secure income component.
For plan sponsors considering a default lifetime income solution as a QDIA, we think the clear and descriptive regulations from the SECURE Act and subsequent guidance provides a clear foundation for fiduciaries. And the continued design innovations make it easier to find a solution that makes the most sense for a specific plan. As we see it, this puts the focus squarely on driving better retirement outcomes for participants.
Jennifer DeLong is a Senior Vice President, Managing Director and Head of Defined Contribution, responsible for leading AB’s defined contribution business in North America.
Andrew Stumacher is a Senior Vice President and Managing Director for AB’s Customized Defined Contribution Solutions.
The views expressed herein do not constitute research, investment advice or trade recommendations, do not necessarily represent the views of all AB portfolio-management teams and are subject to change over time.
"Target date" in a fund's name refers to the approximate year when a plan participant expects to retire and begin withdrawing from his or her account. Target-date funds gradually adjust their asset allocation, lowering risk as a participant nears retirement. Investments in target-date funds are not guaranteed against loss of principal at any time, and account values can be more or less than the original amount invested—including at the time of the fund's target date. Also, investing in target-date funds does not guarantee sufficient income in retirement.
The guaranteed lifetime withdrawal benefit (GLWB) is a type of annuity that sets a withdrawal amount that will last throughout a participant’s retirement, even if the market falls or the account’s assets run out. The insurers will continue the withdrawal payments, if needed. Guarantees are based on the financial strength and claims-paying ability of each insurance company.
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