DC Plan Consultants Expect a Focus on Retirement Income
Consultants underscore the need to focus on outcomes, and a successful path forward relies on designing DC plans to help participants meet future retirement income needs.
A survey from T. Rowe Price, in partnership with Schaus Group, reveals that after passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, retirement plan consultants indicated highest anticipation for expansion of coverage for new sponsors to join pooled employer plans (PEPs) and lowest anticipation of participants to use in-plan annuities.
The “2020 Defined Contribution (DC) Consultant Study—Retirement Environment” report says that still, 79% of consultant respondents expect retirement income solution services to be the highest investment service growth in the coming year.
The majority of both plan sponsors and consultants ranked longevity risk as either the No. 1 or No. 2 source of concern for participants in retirement planning. In addition, nearly nine in 10 (86%) plan sponsors indicated they think they should consider a participant’s entire journey (up to and into retirement) to better target desired outcomes. Consultants suggested allowing for partial distributions or systematic withdrawals from the plan as the No. 1 tactic for plan sponsors to help participants through retirement.
Even as the SECURE Act provided for portability of in-plan guaranteed income solutions and offers plan sponsors a fiduciary safe harbor in the selection of guaranteed income solutions, the study says there continues to be hurdles in offering these features, including recordkeeping operations, costs and litigation risks.
Consultant respondents indicated that target-date fund (TDF) glide path evaluation has evolved to account for changing retirement needs, although 55% of plan sponsor respondents said they have consistently maintained their approach on glide path assessment or adapted their approach four or more years ago.
According to the report, 62% of participants rely on workplace retirement plans for advice to achieve retirement goals. Additionally, participants in multiple generations (81% of Millennials, 77% of Generation X and 70% of Baby Boomers), said they would remain in a plan if they were given offerings to generate income in retirement.