If the market crisis of 2008 taught employees anything about their 401(k) accounts, it was just how quickly they could turn into 201(k) accounts (to quote those days painfully popular water-cooler joke).

It also gave the insurance industry new ammunition in trying to convince 401(k) plan managers of the need to introduce annuity products to their menus.

About a quarter of all companies these days offer their employees the option to purchase annuities with their 401(k) money, according to the Profit Sharing/ 401(k) Council of America, an industry group for plan sponsors. But these are lump-sum purchases that typically happen at the brink of retirement and aren t too popular with employees, says David Wray, president of the PSCA.

What insurers have been working on during the past several years are specially-designed guaranteed-income products that can be purchased in small chunks with each paycheck, just like shares of a mutual fund. Some of the country s largest insurance companies, including Genworth Financial, the Hartford Financial Services Group, MetLife and Prudential Financial have introduced them over the past few years and at least a few hundred companies offer their products in their 401(k) plans.

So far, sales of the products have been slow, according to Robyn Credico, the national director of defined contribution consulting at Watson Wyatt, a benefits consulting firm. But the products are being refined and improved, so industry representatives are hopeful that the tide is starting to change. There is a lot of interest in the plan sponsor community and people are asking tougher and more insightful questions, says Jody Strakosch, national director of strategic alliances at MetLife.

MetLife s first such product, Personal Pension Builder, works like a deferred fixed-income annuity: Each contribution purchases a certain amount of guaranteed retirement income, determined by the employee s age and the current interest rates. A second product, the SponsorMatch program, was introduced in partnership with Barclays Global Investors (BGI) in March 2008. It consists of target-date funds with deferred fixed annuities instead of the typical bond and money-market funds. Prudential has something called IncomeFlex, which adds an income guarantee to Prudential s target-date-funds. (An earlier version of the product gave 401(k) participants the option to invest in a variable annuity-type account.)

Plan sponsors have been slow to sign up, though. There are no sponsors to date for Barclays SponsorMatch program, and only about 200 plan sponsors offer Prudential s IncomeFlex products, the company says. One problem is that employer systems have been unable to meet with record-keeping requirements, says Tom Idzorek, chief investment officer of Ibbotson Associates, a Morningstar company. But marrying mutual funds with an income guarantee may be the way to avoid such hassles. Many people consider it the holy grail of creating a better solution for investors, says Idzorek.

If your employer offers any of the three guaranteed-income solutions the option to annuitize at retirement, the ability to purchase annuity shares with each paycheck or invest in a mutual fund with an income guarantee you should make sure it's the right solution for you. The three most important questions to ask:

1. What is the investment risk?

The much-touted guarantee is only there as long as the insurance provider behind it is healthy. In fact, single-insurance-carrier risk is one reason why adoption of the products has been slow, says Credico. The sponsor has to make sure that they feel like the insurance company is going to be able to make the payments on these benefits. It s hard to do that for retirees, but it s even harder if you have people who are 25 and will expect to start receiving benefits at 65. One solution the industry is considering is pairing up two or more insurance companies to back a product. In the meantime, employees can do their own research into the insurance providers financial health. Click here to find out how.

2. What are the costs?

Adding an insurance aspect to any investment leads to higher costs but how much of a premium you pay depends on the annuity provider. Once the guarantee kicks in with Prudential s IncomeFlex Target funds, for example, investors get hit with a 1% guarantee fee in addition to their other costs, which run in the ballpark of 65 basis points. But Barclay s SponsorMatch funds have an expense ratio of 50 basis points. The quest right now for plan sponsors is to drive down costs as low as possible for their participants, Idzorek says.

3. What is my exit strategy?

Another important question to ask your employer or 401(k) plan administrator before you start contributing: What happens to your investment if you change jobs? The insurance company will likely allow you to leave the investment in the plan, let you roll it over in an IRA, or will issue a certificate for guaranteed income you have accumulated so far. Make sure there are no penalties and you ll keep the investment guarantee, Credico says.