T. Rowe Price Research To Highlight The Impact Of Defined Benefit Changes On Defined Contribution Plans

Rhea-AI Summary

T. Rowe Price launched a research series on the impact of defined benefit (DB) plans on defined contribution (DC) plans, highlighting challenges faced by plan sponsors. Over 55% of Fortune 500 companies maintain both DB and DC plans. The inaugural paper, "Making the Benefit Connection," emphasizes the need for flexible glide paths aligned with unique sponsor objectives. Additional installments will further explore related topics such as glide path evaluation and the impact of closed DB plans. As of January 31, 2021, T. Rowe Price manages $1.46 trillion in assets.

Positive

• Launch of a research series addressing complex issues faced by plan sponsors.
• Focus on aligning DB and DC plans to improve retirement outcomes for participants.

Negative

• Research indicates that no single method exists to assess DB plan impacts on glide path suitability, suggesting potential complexity in implementation.

BALTIMORE, March 2, 2021 /PRNewswire/ -- T. Rowe Price (NASDAQ-GS: TROW) has launched the first installment of a research series examining the complex issues faced by plan sponsors as they navigate how changes in defined benefit (DB) plans can affect outcomes for defined contribution (DC) participants. According to industry research from Willis Towers Watson, 55% of Fortune 500 companies still manage assets and liabilities in DB plans in addition to the DC plans they offer to employees¹, underscoring the timeliness of T. Rowe Price's fresh exploration of how companies can make their plans work in sync.

The series will address the impact of DB plans on the design of glide paths used in qualified default investment alternatives (QDIA) and important considerations for plan sponsors in assessment and selection for their DC plans.  The inaugural paper, "Making the Benefit Connection," concludes that there is no single way to assess a DB plan's impact on glide path suitability. Instead, there is a need to advocate for flexibility and emphasize the importance of aligning the glide path to a sponsor's unique objectives.

This paper will be followed over the next several weeks by deeper dives into related topics, including:

• Installment 2: Glide Path Evaluation Is Not an Easy Task
• Installment 3: Closed or Frozen DB Plans Present Unique Challenges
• Installment 4: Evaluating Opportunity Costs
• Installment 5: Taking Specific DB Plan Features Into Account
• Installment 6: Employer DC Plan Contributions Impact Glide Path Design
• Installment 7: The Potential Impact of DB Plans on Early Retirement

Contributing authors include, Justin Harvey, ASA, CFA, Head of Analysis, Multi–Asset Solutions; Andrew Jacobs van Merlen, CFA, Portfolio Manager; Adam Langer, CFA, Quantitative Investment Analyst; Lorie Latham, CFA, Senior Defined Contribution Strategist; Joe Martel, CAIA, CFA, Portfolio Specialist; Aaron Stonacek, FSA, CFA, Multi–Asset Solutions Analyst; James Tzitzouris, Ph.D., Director of Research, Multi-Asset.

Following the release of the first seven papers in the series, an eighth installment is expected to address additional questions from plan sponsors and summarize conversations sparked by the first seven installments.

QUOTE

Lorie Latham, Senior Defined Contribution Specialist

"Changing benefit packages present specific challenges for plan sponsors while they also place an important focus on appropriate solutions for employees. It is our hope that this research will shed light on the importance of glide path design in a plan sponsor's full suite of retirement benefit plan offerings. Plan sponsors face complex issues in making sure their plans work well together. While the issues are not straightforward, we believe that determining an appropriate glide path for all participants in a plan can be achieved through thoughtful analysis."

ABOUT T. ROWE PRICE

Founded in 1937, Baltimore-based T. Rowe Price Group, Inc., is a global investment management organization with $1.46 trillion in assets under management as of January 31, 2021. The organization provides a broad array of mutual funds, subadvisory services, and separate account management for individual and institutional investors, retirement plans, and financial intermediaries. The company also offers sophisticated investment planning and guidance tools. T. Rowe Price's disciplined, risk-aware investment approach focuses on diversification, style consistency, and fundamental research. For more information, visit troweprice.com, Twitter, YouTube, LinkedIn, or Facebook.

T. Rowe Price Investment Services, Inc.

¹ McFarland, B. (2020) Retirement offerings in the Fortune 500: 1998 – 2019 (Volume 30, Number 06). https://www.willistowerswatson.com/en-US/Insights/2020/06/retirement-offerings-in-the-fortune-500-1998-2019

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SOURCE T. Rowe Price Group, Inc.

FAQ

What is T. Rowe Price's new research series about?

T. Rowe Price's research series examines how changes in defined benefit (DB) plans affect outcomes for defined contribution (DC) participants.

What percentage of Fortune 500 companies manage both DB and DC plans?

According to research, 55% of Fortune 500 companies still manage assets and liabilities in defined benefit plans in addition to defined contribution plans.

What was the first paper in T. Rowe Price's research series?

The first paper is titled "Making the Benefit Connection," which discusses the flexibility needed in glide paths for retirement plans.

When was T. Rowe Price founded?

T. Rowe Price was founded in 1937.

How much assets does T. Rowe Price manage as of January 31, 2021?

As of January 31, 2021, T. Rowe Price manages $1.46 trillion in assets.