Deferred comp committee adopts Retirement Income Builder to offer lifetime-income option

San Joaquin County's Deferred Compensation Advisory Committee on Feb. 27 approved adding Nationwide's Retirement Income Builder series to the county 457 plan, voting 5-0 to make the option available to participants after standard fund-change processing.

The vote follows a presentation from Nationwide product specialists who described Retirement Income Builder as a set of target-date funds that locks in a participant's quarterly "high watermark" between ages 47 and 65 and then offers a lifetime payout percentage of that captured amount once income is elected at age 65. Nationwide representatives said participants may keep full liquidity and beneficiary control of the remaining account balance even after income begins.

The committee's decision matters for employees approaching retirement who want a built-in option to generate a predictable income stream while keeping assets inside the employer plan, the presenters said. Nationwide told the committee the feature is portable to another record keeper only if the receiving record keeper supports the same product and that typical implementation requires paperwork in order followed by about a two-month fund-change schedule.

Nationwide product expert Eric Linsky outlined mechanics and costs for the option. "Every quarter, it captures what's called a high watermark," Linsky said. "Starting at 65, the participant then has the ability to start receiving income from the account. They will receive 6 percent of that captured high watermark every year for the rest of their life." Linsky added that if a participant's account is exhausted, the insurer guarantee steps in so the participant continues to receive 4.5 percent of the high watermark for life.

Linsky told the committee the investment series uses State Street-managed target-date vintages and is passively managed with low fees compared with typical retail annuities: younger vintages carry roughly 9 basis points (0.09 percent) and older vintages that are income-eligible carry about 20 basis points (0.20 percent). He said Nationwide serves as one of the insurers that helps fund the guarantee and that the record-keeping vendor retains a portion of the fee to cover contractual obligations.

Committee members asked about allocation control, portability, beneficiary treatment and the joint-life option. Linsky said participants are placed in a vintage based on year of birth and the funds are managed like other target-date funds; the 6 percent figure is a payout percentage, not a rate-of-return. He confirmed beneficiaries receive the account balance (not the high watermark) if a participant dies before income activation, and that joint-life income options are limited to spouses and are irrevocable once selected.

The committee motion reads: "Adopt the GTC Retirement Income Builder series in San Joaquin County." The committee recorded a 5-0 vote in favor; present voting members at roll call were Miss Goodman, Mr. Whelan, Mr. Guardia, Miss Regalo and Mr. Wilkam. Nationwide staff said they will coordinate with county staff to complete the paperwork; Nationwide estimated the option would be available about two months after paperwork is submitted in good order.

The committee requested the provider's education plan and a schedule of participant webinars; Nationwide noted a webinar on March 6 to review related retirement-income products.

Votes at a glance: - Adopt Retirement Income Builder (motion): approved 5-0; mover/second not specified in transcript; implementation to follow standard fund-change schedule (about two months after paperwork in good order).