Key Takeaways
- BlackRock’s $30B milestone (mid-2026) signals that in-plan annuities have moved from pilot programs to large-scale adoption across America’s biggest 401(k) plans.
- SECURE Act 2.0 pension-linked annuity provisions allow plan sponsors to include annuity options as default investments (QDIA-safe), removing the fiduciary barrier that previously kept employers from offering them.
- “Auto Income” features are emerging as the next default revolution — automatically directing a portion of a participant’s balance into an annuity at retirement, similar to how auto-enrollment and auto-escalation transformed participation rates.
- In-plan annuity payout rates currently range from 4.5% to 6.2% annually for 65-year-olds, depending on the insurer and product structure, which is competitive with retail SPIAs.
- Participants should compare the in-plan option’s payout rate, surrender terms, death benefit options, and insurer ratings against purchasing an annuity on the individual market.
- Tax treatment of in-plan annuity payments follows ordinary income tax rules, and the SECURE Act 2.0 tax changes introduced new reporting requirements and a pilot program for annuity tax credits.
The $30 Billion Milestone: How In-Plan Annuities Went Mainstream
In June 2026, BlackRock announced that its in-plan annuity program — built on partnerships with major insurers including Brighthouse Financial, Lincoln Financial, and Pacific Life — had surpassed $30 billion in aggregated annuity contract assets across more than 200 employer-sponsored retirement plans. This represents a staggering growth trajectory: just three years ago, in-plan annuity assets sat below $5 billion nationwide.
What’s Driving the Surge?
Several forces have converged to push in-plan annuities from niche product to mainstream 401(k) feature:
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SECURE Act 2.0 fiduciary safe harbor expansion — The 2022 legislation (with provisions phasing in through 2025–2027) expanded the Qualified Default Investment Alternative (QDIA) safe harbor to include annuity options that provide lifetime income. This means plan sponsors can now default participants into annuity options without taking on additional fiduciary risk, provided they meet the Act’s insurer selection requirements.
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Retirement income anxiety — With traditional pensions nearly extinct and Social Security’s trust fund depletion projected for 2033, workers are increasingly concerned about outliving their savings. A 2026 Employee Benefit Research Institute (EBRI) survey found that 64% of 401(k) participants rank “running out of money in retirement” as their #1 financial fear, up from 51% in 2022.
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Employer demand for decumulation solutions — Plan sponsors are under growing pressure to help participants not just accumulate wealth but also draw down their savings sustainably. The Department of Labor’s 2025 guidance on lifetime income disclosure statements accelerated employer interest in decumulation tools.
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Insurer capacity and product innovation — Major insurers have invested heavily in the in-plan annuity infrastructure, creating streamlined, low-cost products specifically designed for the 401(k) market. Group-level pricing often results in payout rates 10–30 basis points higher than comparable retail products.
BlackRock’s Specific Program Structure
BlackRock’s in-plan annuity solution, marketed under the “LifePath Paycheck” brand, integrates directly with target-date fund strategies. Participants accumulate in a BlackRock LifePath target-date fund during their working years, and at a predetermined transition point (typically the fund’s target retirement year), a portion of assets is automatically allocated to an annuity contract issued by a partner insurer.
Key features of the program:
| Feature | BlackRock LifePath Paycheck | Typical Retail SPIA |
|---|---|---|
| Minimum investment | $5,000 (within plan) | $10,000–$25,000 |
| Payout rate (age 65) | 5.4%–5.8% | 5.2%–6.0% |
| Surrender period | None (in-plan) | 3–10 years |
| Death benefit | Return of premium option | Varies by contract |
| Inflation adjustment | Optional (1–3% annual) | Available at higher cost |
| Fees (expense ratio) | 0.30%–0.45% | 0.00%–0.50% embedded |
The absence of surrender charges in the in-plan structure is a meaningful advantage — participants who change their mind after the annuity is purchased can typically reallocate back to investments, subject to the insurer’s recalculation terms.
SECURE Act 2.0 Pension-Linked Annuity Provisions: The Policy Architecture
The SECURE Act 2.0 (officially the “Consolidated Appropriations Act of 2023”) contained several provisions specifically designed to encourage the adoption of in-plan annuities. Here’s where things stand in 2026:
Section 107: Pension-Linked Emergency Savings Accounts
While primarily focused on emergency savings, Section 107’s implementation created an unexpected boost for in-plan annuities. Plans that adopted pension-linked emergency savings features reported 22% higher participant engagement with their overall retirement plan, including the lifetime income options. The behavioral insight: participants who feel financially secure about emergencies are more willing to lock up a portion of their retirement savings into an irrevocable annuity.
Section 319: QDIA Safe Harbor for Annuities
The most consequential provision for in-plan annuity growth is Section 319, which took full effect in 2025. This provision clarified that a lifetime income investment option can qualify as a QDIA, meaning plan sponsors can default participants into it without breaching fiduciary duty — provided:
- The annuity is offered as part of a diversified portfolio
- The insurer meets strict financial soundness requirements (NAIC accreditation, minimum capital requirements)
- Participants receive annual disclosures about the annuity option
- Participants retain the ability to opt out and redirect future contributions
By mid-2026, an estimated 15% of large 401(k) plans (those with 5,000+ participants) have configured their plan defaults to include an annuity component, up from fewer than 2% in 2023.
Section 332: Simplified Disclosure Rules for Annuity Options
The SECURE Act 2.0 also simplified the disclosure requirements for in-plan annuity options. Previously, the “annuity disclosure safe harbor” required providing participants with a complex set of information, including the annuity’s features, contract limitations, and a detailed cost comparison. Section 332 streamlined these requirements, making it easier for plan sponsors to present annuity options without overwhelming participants.
Section 201: Saver’s Match and In-Plan Annuities
The new “Saver’s Match” federal matching contribution (which replaced the Saver’s Credit starting in 2027) can flow into a participant’s in-plan annuity allocation. This means lower-income workers can build guaranteed income from federal matching funds — a powerful combination for retirement security.
The “Auto Income” Revolution: Beyond Auto-Enrollment
If auto-enrollment transformed participation rates in the 2010s, and auto-escalation boosted contribution rates in the 2020s, Auto Income is poised to be the next default revolution of the late 2020s.
What Is Auto Income?
Auto Income is a plan design feature that automatically directs a portion of a participant’s 401(k) balance into an in-plan annuity at or near retirement age. Unlike voluntary annuity selection, Auto Income operates as a default — participants can opt out, but if they take no action, a percentage of their savings converts to guaranteed lifetime income.
The concept gained significant traction in 2026 after three major record-keepers (Fidelity, Vanguard, and Empower) announced Auto Income features for their platform clients. The Department of Labor issued favorable guidance in early 2026, confirming that Auto Income defaults can qualify for the QDIA safe harbor when structured appropriately.
How Auto Income Works in Practice
A typical Auto Income design looks like this:
- At age 59½: Participant receives their first annual lifetime income illustration, showing what their current balance could generate as monthly income for life.
- At retirement (or the target-date fund’s maturity): A default percentage (commonly 25%–50%) of the participant’s balance is allocated to an in-plan annuity contract.
- Annuity payments begin: Based on the participant’s chosen retirement date — can be immediate or deferred.
- Remaining balance stays invested: The non-annuitized portion continues in target-date or balanced funds, providing growth potential and liquidity.
Current Adoption Rates
As of July 2026:
| Metric | Percentage |
|---|---|
| Plans offering any in-plan annuity option | 28% of large plans |
| Plans with active Auto Income defaults | 4% of large plans (growing rapidly) |
| Average default annuity allocation | 30% of account balance |
| Participants who opt out of Auto Income | ~18% |
| Participant satisfaction (among those enrolled) | 82% “satisfied” or “very satisfied” |
The 82% satisfaction rate among Auto Income participants is particularly notable — it suggests that once people experience the peace of mind of guaranteed income, they value it. The 18% opt-out rate is substantially lower than the opt-out rate for auto-enrollment (typically 25%–35%).
Evaluating Your 401(k) Annuity Option: A Worker’s Decision Framework
If your employer offers an in-plan annuity, should you participate? Here’s a structured framework to help you decide.
Step 1: Understand What’s Being Offered
In-plan annuity products come in several varieties. Understanding the annuity payout options available is essential before committing:
- Immediate annuity (within the plan): Your lump sum converts to monthly payments starting now.
- Deferred annuity (within the plan): You purchase the annuity now, but payments begin at a future date (e.g., age 70 or 75). This can be combined with a QLAC strategy to delay RMDs.
- Guaranteed Lifetime Withdrawal Benefit (GLWB): You maintain access to your account balance but have a guaranteed minimum annual withdrawal rate (typically 4%–5%), even if investments decline.
- Pension-linked annuity: A group annuity purchased by the plan on behalf of participants, often with institutional pricing.
Step 2: Compare the Payout Rate to Market Rates
The single most important metric is the payout rate — the annual income you’ll receive as a percentage of your premium payment. As of July 2026, here are benchmark SPIA payout rates:
| Age at Purchase | Average Retail SPIA Rate | Typical In-Plan Rate | Difference |
|---|---|---|---|
| 60 | 5.1% | 4.8%–5.0% | -0.1% to -0.3% |
| 65 | 5.7% | 5.4%–5.8% | -0.3% to +0.1% |
| 70 | 6.9% | 6.5%–7.0% | -0.4% to +0.1% |
| 75 | 8.3% | 7.8%–8.5% | -0.5% to +0.2% |
In-plan annuities are competitive with — and sometimes slightly better than — retail SPIAs, particularly for older ages where the group pricing advantage compounds. However, the exact rate depends on the specific insurer and product your plan has selected.
Step 3: Evaluate the Insurer’s Financial Strength
Your annuity is only as secure as the insurer backing it. Check the financial strength ratings of the insurer offering your in-plan annuity:
- A.M. Best: Look for A+ (Superior) or A (Excellent)
- Moody’s: Aaa or Aa1/Aa2
- Standard & Poor’s: AA or AAA
- Fitch: AA or AAA
If your plan’s annuity is backed by a highly rated insurer (most in-plan annuities use top-rated carriers), the risk of default is extremely low. However, you should still understand your state’s guaranty association coverage limits, which typically protect annuity owners up to $250,000–$500,000 in present value.
Step 4: Consider Your Overall Retirement Income Portfolio
An in-plan annuity should be one component of a diversified retirement income strategy. Consider how it fits with:
- Social Security — Will you delay to age 70 for maximum benefits? If so, an annuity can bridge income from 62 to 70.
- Pension income — If you have a spouse with a pension, you may need less annuity income.
- Investment portfolio — A dividend portfolio combined with an annuity income floor can provide both stability and growth.
- Other retirement accounts — Your IRA, Roth IRA, and brokerage accounts provide liquidity and tax diversification.
- Healthcare costs — Keep sufficient liquid assets for healthcare expenses not covered by Medicare.
Step 5: Assess Liquidity and Flexibility
One of the biggest concerns with annuitization is irrevocability — once you annuitize, you typically can’t get your lump sum back. In-plan annuities often offer more flexibility than retail products:
- Return of premium death benefits: If you die before receiving total payments equal to your premium, the remainder goes to your beneficiaries.
- Period-certain options: Guarantee payments for 10, 15, or 20 years even if you die during that period.
- Cash refund options: A lump-sum refund of any unused premium at death.
- In-plan portability: Some plans allow you to transfer the annuity contract to an IRA if you leave the employer, preserving the terms.
Step 6: Run the Numbers
Use a present-value calculator to determine whether the annuity’s payout rate represents a fair deal. As a rule of thumb, if the annuity’s internal rate of return (IRR) — assuming you live to your life expectancy — exceeds the yield on comparable safe investments (like Treasury bonds), the annuity offers good value due to the mortality credits (the “insurance” aspect of pooling longevity risk).
For a 65-year-old purchasing a $100,000 immediate annuity at a 5.7% payout rate ($5,700/year), the IRR at various life expectancies is:
| Lifespan | Total Payments | IRR |
|---|---|---|
| Age 80 (15 years) | $85,500 | 1.2% |
| Age 85 (20 years) | $114,000 | 4.0% |
| Age 90 (25 years) | $142,500 | 5.5% |
| Age 95 (30 years) | $171,000 | 6.7% |
The annuity “breaks even” with a risk-free Treasury portfolio at around age 84–85 for a 65-year-old. Beyond that age, the annuity’s IRR exceeds what you could achieve with bonds alone — that’s the value of mortality credits.
Potential Drawbacks and Risks of In-Plan Annuities
While in-plan annuities offer compelling benefits, they’re not the right choice for everyone. Consider these potential downsides:
Inflation Risk
Fixed annuity payments lose purchasing power over time. A $2,000/month payment in 2026 will have the buying power of roughly $1,480/month in 2036 (assuming 3% average inflation). To mitigate this, consider:
- Purchasing a Cost of Living Adjustment (COLA) rider (typically adds 8–15% to the cost)
- Allocating only a portion of your savings to the annuity (e.g., 25–40%) and keeping the rest in growth investments
- Combining the annuity with Social Security, which has built-in inflation adjustments
Irrevocability and Liquidity Loss
Once you annuitize, you generally cannot access the lump sum. This means:
- You can’t tap the annuitized funds for emergencies, home purchases, or medical expenses
- You lose flexibility to respond to changing life circumstances
- Your heirs won’t inherit the annuitized portion (unless you select a period-certain or refund option, which reduces the payout rate)
Provider Risk
Although rare, insurer insolvencies do happen. The state guaranty association provides a safety net, but coverage is typically capped at $250,000–$500,000 in present value (varies by state). If your in-plan annuity balance exceeds this limit, consider splitting across multiple insurers.
Fee Transparency
In-plan annuities may carry embedded fees that are less transparent than the expense ratios on mutual funds. Ask your plan administrator for:
- The annuity’s total expense ratio
- Whether there are revenue-sharing arrangements between the insurer and plan record-keeper
- How the payout rate compares to an identical retail annuity
How to Access Your In-Plan Annuity Option
If you’re interested in exploring your 401(k)‘s annuity option, follow these steps:
- Check your plan’s investment menu — Look for a “lifetime income” or “annuity” option in your plan’s fund lineup or investment options document.
- Review the Summary Plan Description (SPD) — This document describes your plan’s distribution options, including any annuity features.
- Contact your plan record-keeper — Fidelity, Vanguard, Empower, and other major record-keepers have dedicated annuity specialists.
- Request a personalized illustration — Ask for a quote showing the monthly income your current balance could generate.
- Compare with retail options — Use an independent annuity marketplace (like ImmediateAnnuities.com or blueprintincome.com) to compare rates.
- Consult a fee-only financial advisor — An advisor with no commission incentive can help you evaluate whether the in-plan annuity fits your overall strategy.
Frequently Asked Questions
Can I roll my 401(k) annuity into an IRA if I leave my employer?
In most cases, yes. Under SECURE Act 2.0’s portability provisions, if your plan’s in-plan annuity allows it, you can transfer the annuity contract directly to an IRA without triggering taxes or surrender charges. However, the specific terms depend on your plan and the insurer. Some plans require you to either continue the annuity payments or commute (cash out) the contract to a lump sum before rolling it over. Check with your plan administrator for the exact portability rules.
What happens to my in-plan annuity if my employer changes 401(k) providers?
When an employer switches record-keepers (e.g., from Fidelity to Vanguard), existing in-plan annuity contracts are typically preserved — the new record-keeper takes over administration, but the underlying annuity contract with the insurer remains in force. Your payout rate and contract terms should not change. However, new contributions may be directed to a different annuity provider selected by the new record-keeper.
Are in-plan annuity payments protected from creditors?
Yes. Under ERISA, assets in a 401(k) plan — including in-plan annuity contracts — are generally protected from creditors in bankruptcy proceedings. This federal protection applies regardless of your state’s laws. However, once you receive annuity payments as income, the protection depends on your state’s exemption laws for annuity income. Most states protect a portion or all of annuity income from creditors.
How does the in-plan annuity affect my Required Minimum Distributions (RMDs)?
If you annuitize your 401(k) balance, the annuity payments count toward your RMD requirement for the annuitized portion. This means you don’t need to take separate RMDs from the annuitized amount — the payments automatically satisfy the RMD rules. For the non-annuitized portion of your 401(k), you still need to take RMDs as usual. Note that under SECURE Act 2.0’s RMD changes, the RMD starting age is now 74 in 2026. If you use a QLAC (Qualified Longevity Annuity Contract), you can delay RMDs on up to $200,000 until age 85.
Is the in-plan annuity payout rate locked in forever, or can it change?
For immediate annuities (SPIAs), the payout rate is locked in at purchase and never changes — you receive the same monthly payment for life. For deferred annuities purchased within the plan, the eventual payout depends on the contract terms: some lock in the rate at purchase, while others base the eventual payout on interest rates and the insurer’s portfolio at the time payments begin. For Guaranteed Lifetime Withdrawal Benefit (GLWB) products, the guaranteed withdrawal rate is locked in, but the actual income can be higher if account performance is strong.
Can I use the in-plan annuity if I retire before age 59½?
Yes, but with important caveats. If you separate from service at age 55 or older (the “Rule of 55”), you can access your 401(k) — including annuitizing within the plan — without the 10% early withdrawal penalty. However, if you retire before 55, you’ll generally need to wait until 59½ to annuitize without penalty. Some plans allow you to purchase a deferred annuity within the plan at any age, with payments starting at a future date. This can be an effective early retirement strategy.
What’s the difference between an in-plan annuity and a target-date fund with lifetime income?
A traditional target-date fund invests in stocks and bonds, automatically shifting to a more conservative allocation as you approach retirement. It does not provide guaranteed lifetime income. A target-date fund with lifetime income (like BlackRock LifePath Paycheck) adds an annuity component that provides guaranteed payments. The key difference: with a regular TDF, you bear the investment risk and could deplete your savings; with a lifetime-income TDF, a portion of your income is insured against longevity and market risk.
Ready to Evaluate Your 401(k) Annuity Option?
If your employer offers an in-plan annuity, take the time to understand the terms, compare the payout rate to retail options, and consider how it fits into your overall retirement income strategy. The right annuity — at the right price — can provide peace of mind that you’ll never outlive your savings.
Next steps:
- 📊 Use our annuity payout simulator to compare income options
- 📖 Read our SECURE Act 2.0 tax changes guide
- 💰 Check current SPIA payout rates by age
- 🏗️ Learn about building an annuity income floor
- 📋 Understand your annuity payout options
- 🧮 Explore QLAC strategies to delay RMDs