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Reference Point

Reference Point

T. Rowe Price Defined Contribution Plan Annual Benchmarking Report

T. Rowe Price

Reference Point is an annual benchmarking report that provides trend analysis and expert commentary that you can use to take advantage of emerging best practices and to improve plan effectiveness. You can use the report on your own or in partnership with your T. Rowe Price representative or advisor.

After seeing significant gains in participant deferrals and participation rates in 2016, plan and participant outcomes improved again in 2017. Plan design continued to be one of the strongest drivers of outcomes, led by features such as auto-enrollment and auto-increases with opt-out as well as adoption of higher default deferral rates, Roth contributions, and target date products. 

Auto-Solutions

Plan design continues to drive positive outcomes for plans and participants.
 

  • The 6% default deferral rate for auto-enrollment plans surpassed the 3% industry standard for the first time by a small amount: 32.4% of plans had a 6% default deferral compared with 31.9% with a 3% default.
  • Participation in auto-enrollment plans is 42 percentage points higher than in non-auto-enrollment plans (87% compared with 45%).
  • Adoption of auto-increases is over five times higher in plans with opt-out versus opt-in (66% compared with 13%).
     
Nearly two-thirds of plans have set or increased the default rate to an amount greater than 3%.
Opening Quote 6% default deferral rate reaches all-time high Closing Quote

Contributions

The average employee pretax deferral rate reaches 8.3%—the highest in 10 years.
 

  • Over 67% of plans now offer Roth contributions, up from 60.3% in 2016.
  • Younger participants (age 20–40) use Roth contributions more often than their older peers.
  • Nearly half of all plans with a match set the match ceiling at 6%.
  • The most popular match formula—50% up to 6%—is used by 31.8% of plans with a match.
     
Adoption of Roth increased in 2017—by plans and by participants—which could demonstrate increased understanding of the feature.
Opening Quote 67% of plans offer Roth contributions Closing Quote

Investments

The average number of investments offered by plans continues to increase, despite growing popularity of target date products.
 

  • For the first time, target date products now account for the largest percentage of plan assets under management, surpassing all other investment types in nearly every category.
  • Investment in target date products is highest among participants age 20–40, who are more likely to have been auto-enrolled than their older peers.
 
Plans with a high number of participants who appear to be non-diversified might consider a “QDIA reset,” which moves participants’ existing balances and future contributions into a qualified default investment alternative (“QDIA”), with an appropriately communicated opt-out option. This should be considered in light of other alternatives, such as investment education regarding the importance of diversification.
Opening Quote 94% of plans offer target date products Closing Quote

Loan And Disbursement Behavior

Loan usage decreased to 23.4%, but a greater number of participants age 50+ have outstanding loans.
 

  • The percentage of participants with multiple loans decreased to 15.6% in 2017, a drop of four percentage points since 2013.
  • There was no change in direct rollovers, cash-outs, or hardship withdrawal usage overall, although cash-outs increased among younger participants.
     
Education and plan design can help participants avoid tapping into their retirement savings.
Opening Quote 16% of participants had multiple loans, down four percentage points from 2013 Closing Quote

This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice. This material does not provide fiduciary recommendations concerning investments or investment management; it is not individualized to the needs of any specific benefit plan or retirement investor, nor is it directed to any recipient in connection with a specific investment or investment management decision.

T. Rowe Price Retirement Plan Services, Inc.

201805-483236 

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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