Employers may want to take note of the qualifying longevity annuity contract rules that were put in place last year under the required minimum distribution rules of the Internal Revenue Code.

Fixed annuity sales in 2014 reached their highest level since 2009, according to the Insured Retirement Institute, reflecting individuals’ desire for a lifetime income stream in retirement. And although the IRI does not track group sales of annuities, Frank O’Connor, vice president of research and outreach for the IRI, said that employers should make a point of understanding the recent QLAC rules.

The QLAC rule “sets the parameters under which that deferred income annuity product can be put into an employer-based plan,” O’Connor says. “It provides more certainty around what the individual can do with that product, how much is allocated to it and basically sets the stage for use of this product with a clear set of rules around it.”

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From an employer perspective, “looking at the demographics of the participants in the plan and determining what income options to put into the plan to afford people to create their own income stream is a good development and something employers should pay attention to,” he adds.

A high percentage of employees are interested in lifetime income options in retirement, especially since most people don’t have the luxury of a pension plan anymore. Most people are relying on their employer-sponsored retirement plan and Social Security to get them through retirement, and there isn’t a lot of information out there on how to turn accumulated wealth into an income stream in retirement.

“The double-digit growth in fixed annuities in 2014 supported the strongest industry-wide annuity sales in three years,” says Cathy Weatherford, IRI president and CEO. “Not only was 2014 a year of growth in terms of sales, but also a year of growth in terms of the lifetime income offerings available in the marketplace. The year witnessed the continued expansion of deferred income annuities, regulators greenlighting qualifying longevity annuity contracts, and further development of investment-only variable annuities. With demand on the rise, and a wider array of products available in 2015 to meet consumers’ varying needs, we anticipate robust market activity in 2015.”

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Fourth quarter 2014 annuity sales reached $56.6 billion, a slight decrease from $56.9 billion in the previous quarter and a 4.6% dip from $59.3 billion in the fourth quarter of 2013, the IRI said in its report, which was based on data reported by Beacon Research and Morningstar, Inc.

Despite the drop during the fourth quarter, industry-wide sales were up for the year. Industry-wide annuity sales reached $229.4 billion in 2014, a 3.8% increase from $220.9 billion in 2013.

Fixed annuity sales surpassed $91.5 billion, ringing in their best year since 2009, the IRI found. This was a 17.2% jump from sales of $78.1 billion in 2013.

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“This strong growth was supported by record sales years for fixed-indexed annuities and income annuities,” according to Beacon Research.

Variable annuity sales for 2014 were $137.9 billion, a 3.4% drop from $142.8 billion in 2013, according to Morningstar’s data.

There’s a “fairly robust market for group annuities and with the introduction of qualifying longevity annuity contracts last year, we will see continued growth and a lot of interest demographically with plans moving to guaranteed income options within their plans,” O’Connor says.

He added that one of the most significant drivers of annuity sales has been lifetime income offerings, whether deferred income annuities or fixed income annuities.

The marriage of the annuity product with a lifetime stream of income “is very appealing and has driven significant growth in those products,” O’Connor says.

Paula Aven Gladych is a freelance writer based in Denver, Colorado.

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