* Insurers want easier way to include annuities in 401(k)s
* Want to reduce liability of employer in choosing insurer
* Vanguard skeptical about need for annuities in plans
By Helen Kearney
NEW YORK, Sept 15 (Reuters) - Life insurers told a joint agency hearing on Wednesday that the U.S. government should make it easier for companies to offer annuities in their retirement-savings plans.
Fewer than one-in-five U.S. companies offer annuities as part of their 401(k) plans. Insurers and their lobbyists told the regulators the reason more companies did not offer their products was because the employers had to guarantee the payments.
The American Council of Life Insurers (ACLI) testified at the joint Labor and Treasury Departments hearing that employers should only be required to assess the current strength of an insurer, instead of having to determine its ability to make payments 10 or more years down the road.
“This is as an onerous task and the average plan sponsor is not equipped to fulfill it,” said Patricia Harris, an executive at Hartford Financial Services Group (HIG.N) who testified on behalf of the Insured Retirement Institute.
Earlier this year, the Labor Department said it would consider helping to increase the use of annuities in employer retirement plans, such as the 401(k), to help ensure that employees do not run out of money.
The number of participants in defined contribution plans has risen from 11 million in 1975 to 67 million in 2007, the latest Labor Department figures available.
But mutual fund companies, which currently provide and administer most of 401(k) options, argued that many of their clients did not want annuities.
Employees already can expect guaranteed income from Social Security and Medicare benefits, Stephen Utkus, principal of the Vanguard Center for Retirement Research, testified.
“Given a minimum safety net of guaranteed income, many individuals are interested in retaining a portfolio of savings and spending those assets flexibly over time,” said Utkus.
He also argued against including annuities as a default investment option, a change regulators are considering.
The ACLI also wants employees to be able to see their current 401(k) account balances expressed as a monthly income payment, rather than just a lump sum.
Reporting by Helen Kearney, editing by Leslie Gevirtz