The document discusses a model being developed to project DC plan cash flows based on evolving generational demographics. It analyzes how contributions and distributions may be impacted out to 2045. Several scenarios are explored to test how incremental savings increases from Millennials and Gen Xers could offset expected distributions from retiring Baby Boomers. Key insights include that contributions may not outweigh distributions until the late 2020s or early 2030s without changes to savings rates among younger cohorts. Plan design features and targeted campaigns may be needed to increase savings 1-2% from Millennials and Gen Xers to accelerate the timeline.

1. MODEL DEVELOPMENT
June 29th, 2015 – RPS Team Meeting
USIS Client Market Insights
Macro Trends Impacting DC Contributions & Distributions

2. 2
Project Overview
 Hypothesis
– While the RPS Segment and the markets it participates in will remain
under pressure due to growth in distributions taken by Boomers entering
retirement there are distinct strategies that can offset this macro trend if
executed effectively.
 Objective of this project
– Develop a model that will help RPS leadership better understand the
evolving generational demographic effect on DC Plan cash flows by
projecting into the future and testing when, if ever, contributions might
outpace distributions from an industry perspective.
 Complex and interdependent set of variables
– Industry experts such as EBRI, Cerulli, the Federal Reserve, the
Department of Labor and academic sources we researched have not
generated research on this issue beyond a five to seven year window.

3. 3
Inputs & Challenges
Model Inputs Modeling Challenges
 Minor variations in employment
populations, savings rates, and market
performance can paint completely
different outcomes relative to
contributions and distributions
 Product innovation, particularly the
impact of income solutions, along with
regulatory and/or legislative actions
would have significant impact on our
analysis
 Our current model utilizes population
trends and employment participation
rates as primary variables
 Broadly, the number of variables and
their interrelations increase model
complexity driving our decision to focus
on a narrower set of variables
 EBRI - Employment-Based Retirement Plan
Participation: Geographic Differences and Trends,
2010
 DOL – Bureau of Labor Statistics
 Cerulli – Retirements Guide 2013
 2010 U.S. Census Population
Projections
 JP Morgan Sell Side Analyst Report on
Asset Managers 3/29/2015

4. 4
Catalogue of Macro-environment
Attributes
Impacting Contributions
 Retirement Decumulation Rates
 Cash-out Rates
 Transition to IRA
 Job Change
 Retire
 Leave Job Market
 RMD’s
 Hardship Withdrawals
 Employee Demographics/#’s
 Employer/Sponsor Participation
 Employee Participation
 Auto Enroll
 Auto Escalation
 Catch-up Contributions
 U.S. GDP
 Consumer Confidence
 Legislative/Regulatory Change
Impacting Distributions
 Contribution Rates
 Wages
 Stay in Plan Rates
 Market/Investment Performance
 Company Match
 Roll-ins
 Income Solutions

5. 5
Agenda
1. Demographic Affects on DC Net Flows (Recap)
2. Sensitivity Analysis of incremental contributions by
Millennial Cohort to offset Boomer Distributions
3. Demographics of the RPS Book & Comparison to
Record Keeping industry
4. Demographic Analysis of Top 10 RPS Clients
5. Distribution Behavior of Generational cohorts
6. Demographics of TDF Industry & at TRP
7. Plan Design Features & Age Segmentation Programs
to increase savings from Millennial Cohort

6. 6
Demographic Affect on DC Net Flows
 Flows pressured net negative by boomer exit for next 20 years (2014-2035)
 If Millennials exhibit similar behavior as Boomers, DC Flows will turn positive
Implications:
 As Boomers exit there is a shrinking pool of DC Cash Flow & Greater
Competition to capture flows
Sources: Cerulli/JPM ( 2003-2036), TRP CMI (2036-2045)
 DC Flows have been positive for last 10-20 years

7. 7
What’s driving Flows: ‘Retirement Sprint’ Years
2010 Boomers
2014 Population Facts:
Millennial Population: 91M (1980 – 2000) are 14-34 years old
Baby Boomer: 75M (1946-1964) are 50-68 years old
Gen X – 61M: (1965-1979) are 35-49 years old (20% less than Boomers)
Gen Z – 57M: (2001-2020?) are 0-13 years old ---> From projections this cohort will be on par with Millennials if not exceed
There are 50% more Millennials than Gen Xer’s & 21% more Millennials than Baby Boomers
2045 Millennials
2025-2030 Gen X

8. 8
What’s driving Flows: Work Force Demographics
Sources: BLS ( 1992-2014), TRP CMI (2014-2060)

9. 9
What’s driving Flows: ‘Age Wave Gap’ - Gap in DC Saving
2014 Population Facts:
There are 50% more Millennials than Gen Xer’s & 21% more Millennials than Baby Boomers
Millennial Population Count – 91M
Baby Boomer – 75M
Gen X – 61M ( 20% less than Boomers)
Gen Z – 57M but expected to rise
As the large Boomer population ages we observe
work force dips from Boomers leaving and not
enough Gen Xer’s replacing them. This begins to
change in 2028+ as the Millennials age.

10. 10
Key Assumptions for Sensitivity Model
Employment Population Projections
 Held 2014 US Employment Participation Rates by age constant and applied census projections to get future workforce totals & share
Plan Population Projections:
 Held 2014 U.S. DC Plan Participation & Employment Participation rates by age cohort as a constant rolling forward (JPM & BLS Data)
 Applied 2010 U.S. Census population projections to the rates above to get future DC plan participation total & share by age cohort
Contribution Projections:
 Held 2014 Avg Income of Full Time employed by age cohort as a constant and applied a 2% annual income growth rate for
projections (BLS)
 Applied 2014 Avg Deferral Rate by Age Cohort as a constant (Vanguard)
Net Flow Projections:
 Used JPM’s Reported Net Flows for 2008-2036; For 2036-2045 assumed Millennial’s, as they age, will exhibit similar retirement
savings behaviors as Boomers and that historic net flows would repeat as Millennials reach ‘Retirement Savings Sprint’ in 2045
Distribution Projections:
 Distributions are the difference between Contributions & Net Flows
 Held the share of Distributions by each Age Cohort in 2014 as a constant and applied it to projected Distributions

11. 11
Sensitivity Analysis To Offset Boomer Distributions
Scenario 1
In 13 to 15 years - 2028
Increase net savings (employee + match) of:
• 18-24 year olds: by 0.5% from 7.5% to 8% (mill)
• 24-34 year olds: by 0.5% from 8.6% to 9.1% (mill)
• 35-44 year olds: by 0.5% from 9.4% to 10.1% (gen x)
By 2028 start to see net positive flows. 3 years earlier than 2031 projections
2014 Deferral Rates & Income Stats:
Sources: JPM (2008-2013), TRP CMI (2014-2045)
Sources: Vanguard, JPM, BLS

12. 12
Sensitivity Analysis To Offset Boomer Distributions
Scenario 2
In 10 years - 2025
Increase net savings (employee + match) of:
• 18-24 year olds: by 1% from 7.5% to 8.5% (mill)
• 24-34 year olds: by 1% from 8.6% to 9.6% (mill)
• 35-44 year olds: by 1% from 9.4% to 10.4% (gen x)
By 2025 start to see net positive flows. 6 years earlier than 2031 projections
Sources: JPM (2008-2013), TRP CMI (2014-2045)

13. 13
Sensitivity Analysis To Offset Boomer Distributions
Scenario 3
In 5-6 years – 2021
Increase net savings (employee + match) of:
• 18-24 year olds: by 1% from 7.5% to 8.5% (mill)
• 24-34 year olds: by 2% from 8.6% to 10.6% (mill)
• 35-44 year olds: by 2% from 9.4% to 11.4% (gen x)
By 2021 start to see net positive flows. 10 years earlier than 2031 projections
Sources: JPM (2008-2013), TRP CMI (2014-2045)

14. 14
Demographics of RPS Book of Business

15. 15
Demographics Comparison:
TRP RPS & the Competitive DC RK Landscape
EBRI Data: DC Universe vs TRP RPS - Share of Assets by Age group
EBRI Data: DC Universe vs TRP RPS - Share of Participants by Age group
 TRP has a higher
share of participants in
the 20 year old cohort
 TRP has a lower share
in the 30-50 year old
buckets than industry
 Assets by age group
are similar to the
industry except RPS
skews a little younger

16. 16
Demographic Analysis of RPS Top 10 Clients
 As of 2014 Top 10 Clients represent 30% of Total Assets & 20% of Total Participants
 OMNI Total Assets: $140B
 OMNI Total Ptc (Term + Active): 1.8M
 Top 10 Clients Demographic Resemble overall book of business
 Boomers hold 60% Assets & 30% of Participants of Top 10
 But variations exist by client – Costco Youngest & Kodak Oldest
 Top 5 ‘Younger’ Clients by Participant (Millennial & Gen X’ers) of Top 10:
 Top 5 ‘Older’ Clients by Participant (Boomer & Silent) of Top 10:

17. 17
Distribution Behavior Termed Participant Assets
1 Year of Termination After 3 Years After 5 Years
 60% of Termed Assets
& 30% of Termed Ptc
are Boomers
 50% of Plan Assets
leave within 1st year of
termination across all
cohorts
 After 5 years Boomers
preserve 86% of their
assets, Xer’s 80%,
Millennials 64% for
retirement
 Cash out rates 2-3x
that of boomers for
younger generations

18. 18
Demographics of TRP Target Date Funds
Take Away:
1) 62% of TDF Assets Held with Boomers ($88.1B)
2) 27% with Gen X ($38B)
3) 5% with Millennial ($7B)
4) About 1/3 of TDF Assets ($46B) will be winding down over the next 5 years (2000-2020 Funds)
As of 2014 TRP at $141B has a 18% market share

19. 19
Plan & Product Design: Improve Millennial Savings
 Our book resembles Industry so the 1-2% increase in Millennials & Gen X savings rates
should be an appropriate target
 Influence increases in Auto Enroll default deferral
 43% of RPS Plans elect a 3% Deferral Rate
 23% of RPS Plans elect a 6% Deferral Rate
 Influence Auto Increase Opt Out Plan Design
 38% of Plans use Opt-Out Method  has an 66% participant adoption rate
 62% of Plans use Opt-In Method  has an 11% participant adoption rate
 Implement Specific Age Relevant Campaigns or Plan Design features to modify savings
behavior by age or salary
 Influence Plan Sponsors to increase match incentives (stretch match)
 Educate Plan Sponsors & Participants of the immediate importance of increased savings
behavior less focus on outcomes
 Increase efforts to get Boomers & X’ers to save 1-2% more
 Incentivize Sales Staff to influence Plan Design Changes
 Solutions to keep money in plan

20. 20
Key Insights & Facts
 U.S. workforce is currently at an inflection point across generational
cohorts impacting DC Cash Flows
 “Retirement Sprint”; age 45 - 64 years are peak for savings and account
balances
 Next 15 - 20 years (2015 – 2035) shows a dip in the “Retirement
Sprint ” employment rate as the smaller Gen X population enters the
sprint
 T Rowe Price
 60% of assets & 40% of participants are held with Boomer generation
 Need to increase savings of younger generations by 1-2% to offset
Boomer outflows
 Need to influence better plan & product design adoption to increase
overall savings & keep more money in plan
 Decreasing Plan Size has implications for Fees & Pricing

21. APPENDIX

22. 22
Detail: Demographic Analysis of TRP Top 10 Clients

23. The Wealth Business impacted by Boomer Redemptions
As our investor base ages, net new flows will be pressured by increased redemptions among retiring
baby boomers
2
Source: Retail Metrics+
*among customers who were age 55-69 from 2014 to 2022
$16
$44
$62
$104
$140
$189
$210
$274
2015 2016 2017 2018 2019 2020 2021 2022
Estimated Increase in Annual Redemptions Attributable to Aging
Investor Base* (millions)