DRS highlights lifetime-income option but reports low annuity uptake among LEHI 2 retirees

DRS staff told the LEHI 2 board that lifetime-income options can help retirees change their mental accounting and use savings for durable monthly income, but staff also flagged very low utilization of the Department's in-plan annuity option.

"In 2025, only 11 annuities were purchased for an average of just over $200,000," Bonham said, and she noted that only a small share of eligible retirees are using the feature even though broader surveys show interest in guaranteed monthly income. She described how a partial purchase can generate a predictable monthly payment while leaving some savings liquid for unexpected needs.

Bonham illustrated the trade-offs with a hypothetical: a member with a $500,000 deferred-comp balance who converts $200,000 into the DRS annuity would add about $915 per month (roughly $11,000 per year) to their pension payment while preserving the remainder in liquid investments. She argued that education and earlier engagement with members are needed so people know the in-plan option exists and understand the liquidity, tax and survivorship rules.

DRS staff also cautioned that the annuity purchase must generally be paid with pre-tax deferred-comp funds; Roth balances cannot be used, meaning some members expecting to use Roth money to buy an annuity will be surprised unless counselled earlier. Trustees asked DRS to provide more granular utilization data and examples for counseling outreach.