In our previous blog post, we introduced The Product Stack, highlighting the various components necessary for building retirement income products, where each integration is unique, and tailored to specific product requirements and operational methodologies. In this installment of our Implementation Playbook series, we’ll explore how technology is the missing link for portability in retirement income solutions.

Portability is an often discussed topic regarding income products and can have different meanings depending on the context, so we thought it would be beneficial to share some perspective on the topic. Portability can be thought of as the transferability of a participant’s guaranteed lifetime income benefit if a plan moves between recordkeepers or the participant moves to an IRA product. In this article, we will focus more on portability between recordkeepers.

Historical Lens

Historically, limited portability has hindered the broader adoption of retirement income solutions.

Recordkeepers often face significant challenges in performing data exchanges, elections, and distribution requirements, as well as retaining participant information. Even if a plan sponsor desired to maintain a specific income offering for their participants, the technology and operational resource constraints could create barriers.

A common example of portability is when a plan sponsor may seek out a new recordkeeper or administrator while seeking to retain their current income offering for participants. While this change may be the right decision for a plan sponsor, the decision to move is substantial and having income product portability and the technological ability to facilitate retirement income product portability eliminates a plan sponsor’s difficult position of deciding between a better administration option vs. the optimal guaranteed income solution for their participants.

Middleware enabling product portability

Middleware supporting income from accumulation, projections, elections, and payout is an important leap forward in enabling portability across different recordkeeping platforms. Middleware plays an important role in portability, by acting as the facility/clearinghouse to facilitate data exchanges, elections, distributions, tracking and storage of participant data, among other processes.

Having the right middleware solution can bridge all gaps across product types, so a new recordkeeper could have continuity of the guaranteed income solution they selected years ago. By integrating these solutions, recordkeepers can streamline data exchanges, making it easier to retain retirement income products during transitions.

The Importance of Designing for Portability

For product manufacturers, it is important to design retirement income products with portability in mind. Leveraging common data standards, like the SPARK income data file standards, are now well known and utilized and can add efficiency to onboarding discussions.

As the ecosystem continues to evolve and become more established, leveraging standardized operational processes, and leveraging defined standards and lexicon can help product manufacturers to design products that can more easily be adopted by recordkeepers. Taking this approach not only enhances market adoption but also allows products to “travel” seamlessly across different platforms, encouraging plan sponsors to offer solutions that genuinely meet their participants’ needs while reducing the resource burdens on recordkeepers that come with implementing new products.