Capitalizing on QLACs: Qualified Longevity Annuity Contracts Create New Opportunity for Firms to Sell Annuities

by on Feb 26, 2015

Annuities-ExplainedThis past summer, the Treasury Department approved the inclusion of longevity annuities in both 401(k) plans and IRAs as part of its efforts, in partnership with the Department of Labor, to enhance Americans’ retirement security. By creating these new opportunities to buy and sell annuities, this regulation change opens up an entirely new avenue for the annuity business. Longevity annuities represent significant industry innovation as the first new annuity product type since the introduction of Deferred Income Annuities in 2004. Since the initiation of this regulation, Corporate Insight has conducted ongoing market research examining the industry for signs of new products and marketing changes that embrace this new annuity product type. However, both Annuity Monitor’s and Retirement Plan Monitor’s research indicates that these products are not being heavily marketed to prospects or advisors.

Generally, firms have not rushed to introduce new longevity annuities or to modify existing products to allow them to qualify. However, in February, The Principal Financial Group announced that it enhanced its Deferred Income Annuity product to provide a qualified longevity annuity contract. The firm also introduced an advisor brochure answering frequently asked questions and providing information on QLAC premium limits, rollover options, distributions, death benefits and other pertinent details.

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Principal Deferred Income Annuity Questions About The New QLAC Solution? Advisor Brochure (Truncated)

 

Aside from The Principal, firms offering longevity annuities currently include Northwestern Mutual, New York Life, MetLife, MassMutual and Guardian Life. Only 26% of firms covered by Annuity Monitor currently offer longevity annuities. Overall, advisor and consumer information related to QLACs is lacking – none of these Annuity Monitor firms offer public or advisor site resources directly addressing longevity annuities. Resources explaining the importance and usage of longevity annuities are vital and ought to be made more widely available for consumer and advisor education. While the development of this type of product has been mild, we do hope to see firms offering more QLACs and related educational information in order to capitalize on this new and largely unexplored business opportunity.