Smart Strategies for DC Plan Sponsors: Navigating Change, Technology, and Security

Defined contribution (DC) retirement plans are evolving rapidly as employers respond to new challenges and opportunities. Recent survey data from 225 U.S. DC plan sponsors reveals a landscape shaped by shifting priorities, technological innovation, and heightened regulatory scrutiny.

Key Priorities and Cost Management

Financial wellness programs top the list of sponsor priorities, with nearly 40% focusing on helping employees achieve financial and retirement goals. Regulatory compliance and cost management closely follow, reflecting the growing complexity of plan administration. Sponsors are taking proactive steps to address rising costs, including plan design changes, workforce reductions, and outsourcing fiduciary functions. Larger plans tend to emphasize compliance, while smaller ones focus on governance. The adoption of pooled employer plan structures is also gaining traction as a way to boost efficiency and reduce risk.

Technology and Innovation

Technology is transforming the DC plan landscape. Nearly half of sponsors believe artificial intelligence (AI) will have the greatest impact on plan success in the next three to five years. Many are already exploring or implementing AI and advanced analytics to personalize participant experiences, detect fraud, and streamline administrative processes. Governance remains a cornerstone, with most sponsors relying on committees and external consultants for oversight. Outsourcing fiduciary responsibilities is increasingly common, delivering cost benefits and improved plan management.

Legal, Regulatory, and Vendor Management

Legal and regulatory risks are expanding, with almost one in five sponsors having faced litigation in the past five years. Most cases settle out of court, but the impact is felt through rising fiduciary liability insurance premiums. Outsourcing fiduciary functions can help mitigate these costs. Recordkeeper satisfaction is generally high, yet sponsors seek greater cost transparency, better technology, and improved participant communication. Bundling services with recordkeepers is especially popular among mid-sized employers.

Optimizing Participant Experience

Enhancing the participant experience is a central concern. Most financial wellness programs meet or exceed expectations, and sponsors plan to expand offerings further. Recordkeepers play a key role in delivering these solutions, but sponsors are encouraged to consider a range of vendors to reach all employees. When selecting investment options, sponsors prioritize historical performance, diversification, and manager reputation, focusing on outcomes and performance over fees.

Cybersecurity and Best Practices

As technology adoption grows, so does the need for robust cybersecurity. Sponsors are advised to formalize cybersecurity programs, regularly review and update policies, and ensure compliance with privacy regulations. Effective vendor management is essential, including requiring vendors to adhere to recognized cybersecurity standards, conducting annual third-party audits, and maintaining clear contractual liability clauses. Continuous monitoring for threats, ongoing staff and participant training, and a well-documented incident response plan are critical components of a strong cybersecurity strategy.

Conclusion

DC plan sponsors face a multifaceted environment marked by rising costs, increasing legal and regulatory risks, and significant opportunities for innovation. Success depends on enhancing financial wellness, improving plan performance, and achieving positive participant outcomes. Embracing technology, leveraging external advisors, and maintaining robust governance and cybersecurity practices are essential for thriving in today’s retirement plan landscape.

Bridgebay Financial, Inc. provides comprehensive due diligence to protect plan fiduciaries, enhance transparency, and improve participant communication. The firm leverages technology to offer cost-effective investment solutions and adheres to the highest professional standards set by the CFA Institute and IMCA.

Bridgebay’s advisory services focus on

• Retirement Plan Services

• Institutional Investment Consulting

• Treasury Management Consulting

Specialty services include RFP search and evaluations for pension consultants, OCIOs, multi-asset class managers, co-fiduciary managers, investment managers, diversity-owned managers, ESG managers, custodians, and recordkeepers.

Bridgebay does not manage or custody client assets, nor participate in wrap-fee programs. Clients include corporations, defined contribution plans, foundations, and not-for-profit organizations.