Defined contribution (DC) plans are the core of the U.S. retirement system. From the second quarter of 20251US DC plans budgeted $12.6 trillion, representing approximately 26% of all US pension assets2. That concentration of capital places a significant fiduciary burden on plan sponsors, who must balance participant outcomes, regulators’ expectations, cost pressures and a rapidly evolving investment and technology landscape.
Looking ahead to 2026 and beyond, it is unlikely that incremental adjustments will be sufficient. Technology changes the way participants interact with their plans. Education is shifting from generic communication to personalized, life stage-based support. Investment setups are being tested by higher volatility, new product structures and a renewed debate on alternatives. At the same time, the risk of litigation and regulatory changes continue to redefine what “prudence” looks like in practice.
Against this backdrop, plan sponsors are being asked to make more consistent decisions with less room for error. The following sections highlight priority areas that plan sponsors should consider as they evaluate and manage their retirement programs in the coming year.
Advanced technology
The expansion of personalized retirement solutions is increasingly driven by technological advances, particularly the rise of AI-powered participant engagement tools. These innovations promise guidance tailored to the unique financial behavior, goals and life circumstances of individual participants.
A comprehensive retirement plan involves more than just looking at a single retirement plan account. A holistic approach takes into account a participant’s entire financial life, including spending habits, debt and savings outside of retirement accounts. This creates inherent scalability challenges. While human advisors provide depth and nuance, they can be costly. Conversely, robo-advisors or automated solutions, while efficient, can run the risk of providing generic or inaccurate advice.
There is no one-size-fits-all answer to this trend. Plan sponsors should carefully evaluate available solutions to determine what is most appropriate for their participants, paying particular attention to investment results, quality of service and associated fees.
Evolving education
Effectively supporting employees in the different phases of their lives and careers is a challenge that many organizations face. A thoughtful yet flexible approach can make a meaningful difference by giving employees the tools they need to increase their financial confidence and expand their knowledge.
When employees feel empowered, they tend to be more engaged, collaborative and productive. Empowerment comes not only from access to resources, but also from personalization: support that reflects both their career stage and current life circumstances.
One-on-one education sessions give employees the opportunity to ask questions and explore retirement planning in a way that feels relevant and approachable. Continuity, such as meeting with the same teacher again and building on previous conversations, can improve the experience and strengthen progress.
Personalized education is no longer considered optional; it’s an expectation. Organizations that provide accessible, individualized support are better positioned to meet the changing needs of their workforce and promote longer-term financial well-being.
Resource assessment
When assessing the tools and resources offered by records managers, it is critical to evaluate how these platforms increase participant engagement, promote financial well-being, and promote retirement readiness. Managed accounts and professional advisory services represent a growing area of interest. These features provide customized investment strategies tailored to individual participants’ objectives, risk tolerance and financial situations. Many of these solutions combine algorithmic portfolio management with access to human advisors, allowing participants to make more informed and personalized decisions.
Plan sponsors must consider usability, benefit transparency, integration with plan data, and quality advice to meet both fiduciary standards and participant needs. While we do not recommend these solutions in our role as advisors as the qualified default investment alternative (QDIA) for a plan, a properly vetted solution can serve as a valuable resource for participants seeking personalized investment support.
Investment strategy
Alternative assets and target date funds
The August 7, 2025 Executive Order “Democratizing Access to Alternative Assets for 401(k) Investors” continues to generate ongoing public debate. Although the Executive Order does not require 401(k) plans to offer alternative investments, it directs the Department of Labor and the Securities and Exchange Commission to remove any regulatory barriers that may prevent fiduciaries from considering such options for their plan participants.
Some commentators focus on integrating alternative investments into target date and target risk funds. Since such funds are developed and considered by plan sponsors, fiduciaries must employ a prudent and well-documented process when evaluating these investment vehicles. Attention should be paid to how target date and target risk funds address the traditionally unique characteristics of alternative investments, such as limited liquidity, irregular valuation and higher fee structures.
Active versus passive fixed income strategies
Investors are increasingly switching from passive fixed income strategies to active management. This shift may be driven by increased bond market volatility over the past five years, as measured by the Merrill Lynch Option Volatility Estimate (MOVE) Index. Factors contributing to the increased volatility include economic uncertainty, increased geopolitical risk and interest rate changes. When volatility increases, the stage is clear for active bond managers to add value by dynamically adjusting portfolio duration, credit exposure and sector allocations, capturing sustainable returns and navigating tighter credit spreads.
Alternatively, passive fixed income managers attempt to track broad fixed income indexes, which represent the entirety of a bond market’s sector(s) and are most heavily weighted in the most highly indebted issuers. Passive funds, by their nature, are unable to quickly adjust to bond market volatility and interest rate changes, limiting their ability to adjust in real time.
Regulation and compliance
In 2025, the DC industry witnessed critical litigation and regulatory developments, reshaping compliance requirements for plan sponsors.
The Supreme Court’s 2025 decision in Cunningham v. Cornell University3 has placed the burden of proving relief in prohibited transaction cases on defendants. This decision is expected to increase the number of lawsuits involving DC plans by making it easier for plaintiffs to resist early dismissal requests.
The SECURE 2.0 regulations continue to significantly impact the retirement savings landscape for participants. In addition to the plan design changes resulting from SECURE 2.0, plan sponsors should be aware of two important initiatives: automatic transferability and the Lost and Found Retirement Savings Database. Both are intended to help participants maintain or regain their retirement savings as they change jobs throughout their careers.
Plan design and developments
When planning ahead, plan sponsors must dive deep into the design decisions to determine whether the desired outcome has been achieved. SECURE 2.0 has reignited the discussion around certain plan elements, including but not limited to automatic features, catch-up contributions, distribution options and the eligibility of part-time workers. Plan sponsors should regularly assess whether their plan is appropriately designed to meet industry standards and the needs of their workforce. It’s not enough to set it and forget it.
Important questions to revisit
We encourage plan sponsors to engage in meaningful dialogue with their advisor at their next committee meeting. Think about the following questions:
- When was the last time your committee reviewed your adoption agreement and/or master plan document?
- Have demographics, savings behavior or financial needs changed since your last assessment?
- Does your plan fully comply with all applicable SECURE 2.0 requirements?
References
1 Board of Governors of the Federal Reserve System (US), Defined Contribution Pension Funds; Total financial assets, level [BOGZ1FL594090055Q]collected from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/BOGZ1FL594090055Q, November 18, 2025.
2 Board of Governors of the Federal Reserve System (US), households and non-profit organizations; Pension assets, level [BOGZ1FL153050015Q]collected from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/BOGZ1FL153050015Q, November 18, 2025.
3 Cunningham v. Cornell University.604 US 693 (2025), available at https://www.supremecourt.gov/opinions/24pdf/23-1007_h3ci.pdf
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