Among 401(k) plan sponsors, 54% prefer to keep their retiree participants’ assets in-plan, instead of letting them roll over into an IRA or another employer-sponsored plan, according to Cerulli Associates.

This represents a big increase since 2019, when only 26% of those surveyed felt that way, and it's an opportunity for asset managers, according to a new report from the Boston-based financial research firm.

“As more plan sponsors strive to keep participants’ assets in-plan, asset managers should focus their retirement income product distribution on the mega plan market,” said Shawn O’Brien, Cerulli's associate director of retirement research.

Retirement income is the number-one topic of concern among defined-contribution, investment-only asset managers, as measured by Cerulli research. Fully 88% of these asset managers said that conversations with plan sponsors, advisors, and consultants related to in-plan retirement income have increased in the past 12 months. They want to make their plans “decumulation friendly,” the report found.

But interest in keeping retiree assets in-plan even during decumulation is greater among “plan sponsors in the large and mega plan market,” the report said, “than those in smaller plan asset segments.”

“Many larger plan sponsors are considering or implementing plan design and investment lineup changes to make their plans decumulation-friendly,” said O’Brien.

Cerulli’s survey of retirees’ desired features from their retirement plans found that 63% of those with investable assets of $1 million or less put “the ability to withdraw additional funds from my account if I need them” at the top of their list. The same was cited by 62% of those with investable assets of between $1 million and $2 million. In this wealthier group, 68% said that the possibility of having assets “grow with the market even after I begin taking money out of my accounts” was another desired feature.

The Cerulli report noted that the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 included provisions to encourage offering annuities and other retirement-income-generating options in defined-contribution plans. As a result, perhaps, “a handful of top DC asset managers,” the report said, referring to managers of defined-contribution retirement plans, “including American Century, BlackRock, Capital Group, and J.P. Morgan, recently launched target-date series with embedded annuities.”

The SECURE 2.0 Act, which took effect this January, further incentivized employers to offer retirement plans, promoted participation in those plans, and encouraged stronger contributions to such plans.

When considering in-plan retirement income products, 68% of defined-contribution consultants recommended a target-date fund with a guaranteed income component, the research found. Cerulli data, however, also showed that most retirees would prefer flexibility and access to an advisor, instead of this kind of highly structured income guarantee.

Cerulli recommended periodic check-ins with plan sponsors to assess their progress toward addressing clients’ decumulation needs and desires.

“Overall, growing interest from plan sponsors in making their plans more retiree-friendly creates an opportunity for asset managers and retirement plan providers to satisfy a nascent, albeit largely unmet, need for more effective, comprehensive in-plan decumulation solutions,” said O’Brien. “Innovations in in-plan decumulation will benefit mass market, middle market, and certain mass affluent retirement investors who are often ignored by the traditional wealth management industry.”