Still, there are many similarities between the GLIOs and traditional annuities. They both provide protection in the event of market downturn, and they both provide a guaranteed minimum amount of income for life. However, GLIOs tend to be more flexible than traditional annuities, and provide more protection during the accumulation phase.

Who it's right for

Sebastian Banchs, a financial representative for John Hancock Financial Network, said these new plan designs can be ideal for older participants who are five or 10 years from retirement.

"[Pre-retirees] may have lost a significant portion of their retirement savings in the market crash of 2008," he said, "and as a result they're hesitant to get back into the market. Knowing they have a feature in their 401(k) plans that would provide a guarantee would make them more willing."

David Alemian, an individual retirement advisor, knows how badly clients can be hurt by fluctuating markets, and agrees with Banchs that a guaranteed product could help the right individual.

"So many people get hurt because the market takes a dip right before they're ready to retire and they lose too much money," he said. "You really have to look at the long term, because now we have to plan retirement that lasts 30, 40 years."

But thanks to high fees, Banchs doesn't typically recommend the plans to younger participants.

"They have time on their side," he added, noting that the fees can range anywhere from 50 to 100 basis points.

Yahr said it's more about the source of retirement income than it is about the participant's age.

"There are a lot of high-level considerations," he said. "If a participant already has guaranteed income from another source, it doesn't really make sense to add one of these guaranteed lifetime income options. … But it works well for folks who are making enough money that Social Security is going to replace 40 percent or less of their income, and they really have no other guaranteed sources."

Plan sponsor and participant reaction

Don't get too excited about the idea of GLIOs yet. Robyn Credico, defined contribution purchase leader for North America at Towers Watson, said that while the idea of these types of plans is good in theory, in practice the adoption hasn't been very popular. 

"On the employee side, there's almost no demand, and in fact if you look at those employers who actually offer these there's very little uptake by the participant with them," she said.

Banchs agreed, saying he recently did an enrollment and not one participant selected the plan. He believes this is in large part due to lack of education.

"When we explain it to a large group of participants, they don't seem to understand, but when we sit down with them one-on-one, they get it," he said.

But what about employers? There is no financial cost to add such an option, so why not?

Credico said there are several factors to consider. The first is fiduciary risk. These plans aren't explicitly protected under the fiduciary safe harbor, so plans are wary of getting involved with them. Another issue is that employees aren't asking for them, which Credico cites as a chicken and egg problem.

"The third issue is that there's a lot of challenges in putting an annuity in a defined contribution fund because it's not liquid," she said. "What if an employee leaves, but they've been putting money in the annuity? What do you do? Or if the employer decides this insurer isn't a good insurer? What do you do?" 

Yahr agreed that the fiduciary issue and liquidity challenges were major problems for the adoption of the GLIOs, but he said a distinction needed to be made between large plans and small plans. The large plans tend to be worried about the fiduciary and liquidity concerns, as well as the simple fact that no one has moved forward to blaze the trail.

But with smaller plans, he said, they're driven by their financial advisors. 

"There are still a number of advisors who, this is not the area that they're most comfortable with," he said. "So the advisors are still educating themselves and becoming 100 percent comfortable with what these plans are, and then once they're completely comfortable they can turn around and educate the plans." 

Looking to the future

Alemian thinks GLIOs could change the market.

"The rules of retirement have changed," he said. "Having an income stream that you cannot outlive is the only way that you're going to protect yourself in the future."

But the bigger question is, whether the rules of retirement have changed or not, does the obligation to provide that guaranteed income option fall on the employer?

Credico doesn't think so. She thinks it's more about a paternalistic desire to help employees than an actual requirement to provide guaranteed options.

"The employee actually has all the obligation in making sure they have enough to retire on," she said. "So whether they do it in the plan or outside the plan, it all falls on every individual to prepare for retirement and make sure you have enough to live on."