Many working Americans are counting on their 401(k) to help get them through retirement. Because they’re living longer, retirement lasts longer than ever before. So the risk of outliving—or outspending—savings is very real.

Some advocates for annuities contend that they have a solution. Annuities, they point out, are the only savings vehicle that carry a guaranteed, contracted, lifetime income stream, outside of Social Security and pension benefits. So why not use them in 401(k) plans?

"Ensuring that Americans can save sufficient assets for retirement and be able to convert those assets into an income that is guaranteed to last throughout their retirement is among the most critical issues facing our economy over the next generation," said Tim Walsh, senior managing director of institutional and endowment distribution at TIAA, a leading annuity provider, based in Waltham, Mass.

Others insist that annuities don't belong in 401(k)s for a variety of reasons. "My opinion as an attorney, not an investment expert, is that annuities are expensive and do not operate efficiently in a 401(k) plan," said Joshua Sutin, employee benefits attorney and shareholder at Chamberlain Hrdlicka, in San Antonio.

They "may help individuals with a stream of income they can plan out with their investment advisor," he acknowledged, and they "can be a good creditor-protection vehicle," Sutin said, but it's best not to dive in without "a trusted professional investment advisor [to] help decide."

There are legal reasons why annuities don't figure more prominently in 401(k) plans. The annual non-discrimination test and/or "safe harbor" requirements with which 401(k)s must comply can be onerous and unclear about how to evaluate the relative financial strength of different annuities providers. "It is hard to find a good [annuity] product with reasonable fees that also fits the investment policy statement guiding the fiduciaries" who administer the 401(k)s, said Sutin.

Another concern is that annuities are designed to accomplish specific things for particular clients, making them far from a one-size-fits-all solution and posing difficulties for 401(k) administrators.

"Each plan participant may be better served by different annuity offerings, [and] this represents an impractical barrier for plan fiduciaries," said Joe Heider, a chartered financial consultant and president of Cirrus Wealth Management, in Cleveland, Ohio.

Annuities "are complicated instruments," said Heider, citing their surrender periods and liquidation penalties, among other complications. Due to these facts, they are not easily reviewed by plan sponsors and fiduciaries to determine if they are in the best interest of the participant.

Heider didn’t feel that annuities make a good fit for 401(k)s. "Although annuities can play an important role in providing financial security during retirement," he said, "they are better suited in an IRA or owned directly by an individual."

But Walsh at TIAA disagreed.

"Providing access to annuities inside retirement savings plans offers meaningful benefits to participants," he said. Among other advantages, he listed competitive pricing, since "institutionally-priced products leverage economies of scale. The oversight and due diligence that employers exercises over their plan help ensure that participants have access to competitive and beneficial offerings."

The problem lies not so much with the annuities themselves as with the barriers and ambiguities inherent in some legal guidelines. "Central to addressing this challenge is adopting policies that will increase in-plan access to annuities," Walsh said.

The current rules create uncertainty about how to assess what's appropriate to offer in a 401(k). "Evaluating the financial strength of any given annuity provider can be a complex process," he said. For instance, the Department of Labor's safe harbor guidelines, though intended to simplify the process, need clarification. "For that reason, many [employers] are reluctant to adopt in-plan annuities, even if they and their plan consultants recognize the value that annuity products can deliver.”

Walsh suggested adjusting the rules to allow fiduciaries to "rely on the true experts in evaluating an insurer’s financial strength—the state regulatory bodies.”

Accordingly, he supports bipartisan legislation recently introduced in Congress that "lays out the specific framework for this safe harbor." One such proposal is an amendment to ERISA called the Retirement Enhancement and Savings Act (RESA).

"Any part of RESA that helps cover more Americans in workplace savings plans and also spurs higher savings rates is welcome," said Jim Kais, a senior vice president and head of retirement plans at Ameritas Life Insurance Corp., in Lincoln, Neb.

Kais pointed specifically to a provision that provides a "fiduciary safe harbor" for selecting insurance carriers for in-plan annuities, thus eliminating "a key roadblock in offering lifetime income options," he says.

Given the slow pace of Congress, where this will lead is anyone's guess.

"The concept of in-plan annuities is still a fairly embryonic idea," said Kais. Plan sponsors, he conceded, "struggle with portability, cost containment, insurer risk, employee communication [and] benchmarking," as well as with whether annuities are appropriate for younger workers in the accumulation stage of retirement planning.

Yet he was optimistic. "At Ameritas, we believe in helping participants achieve lifetime income so they can live as comfortably as possible knowing they will not exhaust all of their retirement funds," said Kais. "Whether in-plan or outside of the plan, most participants may benefit by placing a portion or the entirety of their assets in an annuity."

To TIAA's Walsh and others like him, the benefits of in-plan annuities shouldn't be missed.

"While retail products have and continue to play an important role in retirement security, having these products also available through an employer-sponsored plan is key to addressing concerns about retirement income," he said.