T. Rowe Price Develops New Framework for Defined Contribution Plan Sponsors to Evaluate Retirement Income Solutions

BALTIMORE, June 1, 2021 /PRNewswire/ — T. Rowe Award (NASDAQ-GS: TROW) has developed a new framework to help sponsors of defined contribution (DC) plans evaluate retirement income solutions for members to meet the changing needs of retirees. The valuation framework is intended to allow plan sponsors to tailor their DC plans to take into account the full retirement life cycle, including members who are already retired.

T Rowe Award research shows retirement income is high on the list for plan sponsors when discussing recovery from the 2020 “pandemic pause”. Conversely, progress is relatively slow in providing solutions of retirement income to DC plans. In November 2020, nearly a year after the SECURE Act was passed, 61% of plan sponsors said the law had not motivated them to consider retirement income solutions. Yet plan sponsors recognize the need to help their members transition into retirement, which is the top motivating factor (59.4%).1 to develop retirement income solutions cited by sponsors in a recent study by T. Rowe.

“Searching for retirement income is a complex issue for plan sponsors and members, and our goal is to help them move forward.” said Lori Latham, Senior Defined Contribution Strategist. “Until now, the retirement industry has tended to lead in launching retirement income products and with the goal of ‘selling’ into plans. We hope to see a pivot towards a greater emphasis on the basic needs of retirees and the objectives of the plans. You must gain a clear understanding of what you hope to solve before looking at the final solution.”

Providing retirees with a suite of income solutions, or “retirement tier”, is widely recognized as the preferred solution to meet the range of retiree needs. T Rowe Award research shows that 94% of DC consultants agree that a series of income solutions is better than a single retirement income offering. However, DC Consultants also report that only 13% of their plan sponsor clients currently offer or plan to offer a retirement level2. T Rowe Price The new framework aims to close this gap by providing plan sponsors with a strategic and informed assessment process.

The framework is designed to facilitate the evaluation process and to limit itself to fit-for-purpose solutions. Sponsors that establish core principles to shape that framework and limit themselves to a subset of solutions that committees can further consider, and ultimately implement, will be in a better position to move forward, Latham believes. Without doing this work, the number and types of solutions on the market are overwhelming and have proven difficult for most sponsors to navigate.

“We believe plan sponsors will benefit from a review of the specific inputs that drive the search for retirement income,” says Latham. “We took a close look at retiree needs, spending habits and changing income needs over time. Studying this data is instructive and will also help plan sponsors evaluate and establish the various solutions that meet the unique needs of their plan.”

In addition, it is important to encourage sponsors to lead members on the path to retirement through timely, relevant and actionable member engagement. Helping participants understand how the plan can be operated is a key factor for successful implementation and adoption. Working with members in the pre-retirement phase could also encourage them to stay in the plan after retirement.

“By using the framework to focus committees on understanding the retirement income needs they seek to address, plan sponsors can pave the way for progress in the pursuit of retirement income and provide much-needed solutions.” to their retiring members. said Mrs. Latham.

Founded in 1937, BaltimoreT. Rowe Price Group, Inc., headquartered in T. Rowe Price Group, Inc., is a global investment management organization with $1.59 trillion of assets under management at April 30, 2021. The organization offers a wide range of mutual funds, sub-advisory services and segregated account management for individual and institutional investors, pension plans and financial intermediaries. The company also offers sophisticated tools for planning and guiding investments. T Rowe Price disciplined, risk-conscious investment approach focused on diversification, consistency of style and fundamental research. For more information, visit troweprice.com, Twitter, Youtube, LinkedInWhere Facebook.

1 Source: T. Rowe Price Retirement Income Plan Sponsor Survey, 2020.
2 T Rowe Award, 2020 Defined Contribution Consultant Study. Produced in partnership with the Schaus group. The survey population includes 20 defined contribution consulting firms responding to a total of 41 questions of 07/01/2020 -13/02/2020 and 08/04/2020 -21/04/2020.

SOURCE T. Rowe Price Group, Inc.

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