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Defined Contribution

Longevity risk key concern for DC plan execs – survey

Forty-two percent of defined contribution plan executives cited longevity risk as the topic of biggest concern, a T. Rowe Price Group survey found. That compares to 14% of plan executives who cited downside risk and 12% who listed volatility risk as the biggest concern, said a news release on the survey.

The survey, the results of which were released Monday, focused on how plan officials perceive and prioritize risks participants face when working toward their retirement objectives.

"Being an effective plan sponsor today requires an expansive view of the risks and influences on the growth of a participant's portfolio," said Lori Latham, senior defined contribution strategist at T. Rowe Price, in the release. "This survey reveals that plan sponsors clearly understand that longevity risk — the risk that participants will outlive their retirement income — is a critical factor in determining retirement readiness, and that their investment choices must be designed accordingly."

The survey also found that 65% of plan executives cited "achieving the highest retirement income opportunity" as the dominant consideration in their selection of qualified default investment alternatives, while 35% cited "reducing point-in-time downside return" as most influential.

Also, 69% of executives said they wanted to keep retired participants in their plans as opposed to moving their balances out of the plans.

Additionally, 64% of survey respondents disagreed with the statement that "there are no unintended consequences in attempting to mitigate sequence of return risk for participants," which shows many plan officials acknowledge "reducing near-term risk comes at a trade-off," T. Rowe Price officials said in the release.

More than 260 plan executives and 45 plan consultants were surveyed between Jan. 29 and Feb. 20.