After the passage of the SECURE Act at the end of 2019, defined contribution plan consultants indicate they are highly anticipating increased coverage and even higher savings rates, with limited anticipation of existing plan sponsors moving to Multiple Employer Plans (MEPs).
This according to T. Rowe Price’s first annual Defined Contribution Consultant Study, released Sept. 9. In partnership with Schaus Group, T. Rowe Price surveyed 20 of the largest defined contribution (DC) industry’s leading consultants, representing more than 5,500 plan sponsors and nearly $4 trillion in assets under advisement, to look at marketplace trends and factors driving plan sponsor decisions.
“Our study shows consulting firms are rising to the challenge, shifting their business models, pursuing efficiency and scale, and expanding services,” said Lorie Latham, a senior defined contribution strategist at T. Rowe Price.
The retirement landscape has recently experienced seismic shifts in quick succession; the recent passage of the CARES Act and SECURE Act combined with market volatility related to the coronavirus pandemic have accelerated changes in marketplace dynamics. The study found that 80% of the consultant respondents rank longevity risk as either the No. 1 or No. 2 source of concern for participants in retirement planning.
The new Defined Contribution Plan Study also found retirement outcomes for current and retired plan participants to be the most important aspect of plan design, according to consultants surveyed. Additionally, consultants broadly support Environmental, Social, Governance (ESG) pursuits of plan sponsors, but many want best practices to evolve even before the recently released DOL guidance. The study also found that stable value is the most recommended capital preservation offering by consultants, with increasing focus on its use as a retirement income planning tool.
“Along with our long-standing plan sponsor and participant research, it is clear that DC is now central and well positioned for traction beyond a conventional savings plan,” Lorie added. Outcomes matter. A successful path forward relies on designing DC plans to help participants meet future retirement income needs.”
The study’s survey population includes 20 defined contribution consulting firms responding to a total of 41 questions from Jan. 7-Feb. 13, 2020 and April 8-April 21, 2020. Participating firms received a custom report comparing their firm’s responses to the aggregate responses. For more DC insights, visit troweprice.com/dcio.