Products June 6, 2018

T. Rowe Price Launches Feature Based on Targeted Education

According to the company, advisers will be allowed to view engagement metrics on the tool for their plan sponsor clients. 

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Aimed at increasing participant engagement to drive retirement savings, T. Rowe Price launched an analytical tool obtainable to plans serviced by the company.

Named “Engagement to Action,” the tool provides participant engagement analytics for six features available to clients. The quantitative plan-level metrics will be accessible through the company’s PlanView Portal for plan sponsors within its Plan Health feature; are “visible on a monthly or quarterly basis”; and hold historical figures dating back to October 2017, according to T. Rowe Price. The company says industry averages will be available on the tool as well, for comparison purposes. Quantitative metrics for the features will also be accessible based on a participants’ Confidence Number, age, or salary, and advisers will be allowed to view engagement metrics for their plan sponsor clients as well.

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In the first quarter of 2018, T. Rowe Price found plan participants who watched a personalized video were nearly five times more likely to increase deferral rates, and those who fulfilled a Confidence Number evaluation were two times more likely to grow their rates. Additionally, those who visited a Savings Check-In page on a workplace retirement website were almost two times more likely to raise their deferrals, and those who clicked on a T. Rowe Price or plan sponsor email were roughly two times more likely to raise them.  

“Our new Engagement to Action metrics confirm our belief that targeted participant engagement leads to positive actions that propel stronger financial futures,” says Diana Awed, head of marketing and client experience for T. Rowe Price. “Sponsors can now access on-demand analytics to see which experiences resonate the most with participants by linking their specific actions with increased savings rates. The metrics provide quantitative data that plan sponsors can use to demonstrate internally that these initiatives are effective and help them make further plan enhancements to encourage retirement preparedness.”

Client Service June 6, 2018

Cerulli Foresees 401(k)s Embracing Retirement Income

With many Boomers retiring, the research firm says the industry is at “an inflection point.”

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The Pension Protection Act of 2006 (PPA) resulted in massive reform of the retirement planning industry, permitting a safe harbor for plan sponsors to automatically enroll participants into their defined contribution (DC) plan—specifically into a qualified default investment alternative (QDIA) such as a target-date fund (TDF), Cerulli maintains in June’s The Cerulli Edge – U.S. Asset and Wealth Management Edition.

With millions of Baby Boomers now retiring, Cerulli expects the next big development will be plans embracing retirement income. “We are seeing a DC industry in which plan sponsors and consultants are taking a degree of control away from the participant, with the intention of guiding plan participants to better decisions about retirement savings,” says Bing Waldert, a managing director with Cerulli. “As part of this continued innovation, converting the 401(k) plan to an income platform is a step in taking DB [defined benefit] market experience and applying it to the 401(k) market.”

Cerulli says the first step retirement plan stakeholders can take is to encourage plan sponsors to work to keep retired participants in their plan, to “embrace a more holistic view toward their participants.”

Then, the next step plan sponsors can take to embrace retirement income is to work with their recordkeepers to permit retired participants to take systematic withdrawals from their savings. Cerulli notes that 87% of Vanguard plans allow investors to take only one-time, lump-sum withdrawals. “Structurally, this is a simple fix,” Cerulli says. “Consultants, recordkeepers and asset managers can work with plan sponsors to redesign the plan to offer a broader set of distribution options, including partial withdrawals or regular, systematic payments.”

The third step sponsors can take, according to Cerulli, is to offer TDFs that include retirement income options. “More than one-quarter (27%) of asset managers classify a managed payout as an attribute highly likely to be included in the next generation of target-date products,” Cerulli says. In addition, sponsors might turn to “managed payout funds [that] aim to provide steady retirement income to plan participants by achieving specific annual payout targets.”

Offering annuities in 401(k) plans is another obvious option, Cerulli says, but before this is likely to happen, the Department of Labor (DOL) will need to offer plan sponsors a safe harbor for the selection of an annuity provider. There is also a bill, the Increasing Access to Retirement Security Act of 2017, which the House introduced, that would clarify rules that provide a fiduciary safe harbor when selecting an annuity provider.

“Retirement market service providers should educate plan sponsors on the role of secure income in their participants’ retirement planning,” Waldert says. “This means making the DC platform more suitable for income, both from a flexibility and product standpoint.”

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