The Mechanics of Change

The recordkeeping industry and plans it provides are always open to reinvention.

Retirement plan recordkeeper systems and services currently face many demands. Legislation and regulations have opened the door for creation of more pooled employer plans in both the 401(k) and 403(b) markets; employer matching of student loan repayments; creation of emergency savings accounts; certain catch-up contributions to Roth, rather than pre-tax, accounts; and the inclusion of private market investments and retirement income vehicles in retirement plans.

The Mechanics of Plan Design

According to Tim Rouse, executive director at the SPARK [Society of Professional Asset Managers and Recordkeepers] Institute, “The SECURE Act and SECURE 2.0 significantly expanded opportunities and are improving participant outcomes. Provisions calling for the creation of PEPs, promoting auto-enrollment/escalation, facilitating emergency savings accounts, streamlining plan administration, and offering new tax credits for small employers have driven innovation in plan design and are benefiting Americans saving for their retirement.”

However, Phil Senderowitz, managing director at Strategic Retirement Partners, says allowing for some of these provisions seemed like easy, no-brainer, check-a-box-and-move-forward solutions, but when you peel back the onion, that’s not how it turns out. For example, Jared Porter, chief market strategy officer and co-founder of 401Go, recently wrote in an article about private market investments in defined contribution plans that “Retirement plan infrastructure was built for a simpler world of mutual funds, daily pricing, standardized transactions and straightforward fees. Private assets challenge all of those assumptions.”

Recordkeepers have had to make many additional enhancements to their systems to allow for some of these provisions, Senderowitz notes. The new demands on recordkeepers incur costs and time, so the ability to offer many provisions have been rolled out in a piecemeal fashion.

Michael Ready, a partner and retirement plan specialist at Summit Financial Group, says integration is a critical point. For example, new rules require that catch-up contributions for employees who make more than a certain earnings amount must be contributed as Roth contributions. “Roth catch-up depends on prior year FICA wages, which means the payroll provider, not the recordkeeper, kind of owns that data,” Ready says. “So the breakdowns that we’re seeing across our clients is really payroll to recordkeeper, recordkeeper to payroll, and document to actual operation.”

Ready says this is where the value of the newer “fintech” recordkeepers shows, as they are more connected to payroll providers, which “is a huge part of the service model now.”

“I think there’s a huge opportunity for those players,” Ready says. “I bet you in the five years, there’s probably going to be a provider that shows up that we’re talking about that isn’t even in the fold now.”

Regarding other plan design features allowed by legislation, only 20.0% of recordkeepers responding to the 2026 PLANSPONSOR Recordkeeping Survey said plan sponsors could choose from multiple student loan repayment programs and partners that are integrated with their platform. Half only integrate with one student loan repayment program, and 30.0% do not integrate with any. This complicates recordkeeping for student loan repayment matching into retirement plans. How do recordkeepers track repayments?

Additionally, slightly more than half (58.8%) of recordkeepers have a proprietary emergency savings offering, and 47.1% have a partnership-based offering. However, 43.3% indicated they had no offering, but only worked with a plan’s chosen emergency savings provider.

Among a list of in-plan retirement income products, 44.1% of responding recordkeepers said they do not support recordkeeping for any of them.

On a positive note, Rouse says, “Recordkeepers are moving beyond simply helping Americans save in a 401(k) to assisting saving their first dollars in Trump Accounts, toward supporting smart savings innovations throughout their career, delivering reliable lifetime income solutions in retirement and facilitating thoughtful generational wealth transfers.”

He says recordkeepers have adapted effectively and have invested heavily in system updates, data integration with payroll providers, and new features. SPARK has provided tools and support to aid recordkeepers.

“For plan sponsors, this has meant more robust support for compliance, better participant tools and improved data flows, ultimately lowering administrative burdens over time,” Rouse says. “However, coordination challenges with payroll and varying readiness levels have required sponsors to engage more actively with service providers during transitions.”

The Mechanics of Growth

With respect to PEPs, Senderowitz notes that the initial thought was, “This is where all the startup plans are going to go.” But that has not turned out to be the case. He says smaller plans are being sold into a “group of plans” solution, similar to PEPs but without the additional costs. “So what we are seeing is sponsors of $20 million plans or $50 million plans deciding they want to get out of the 401(k) business,” he adds. “The PEPs are moving further and further up market.”

In the 2026 PLANSPONSOR Recordkeeping Survey, respondents reported 10,797 adopting employers in 401(k) or 403(b) PEPs, up from 7,454 last year—a 44.8% increase.

Rouse notes that state-mandated plans have also heightened movement by some employers to offer their own employer-sponsored plans. “SPARK’s analysis in our Marketplace Update notes that while state IRA programs help close coverage gaps, employer-sponsored plans—facilitated by tools like PEPs and MEPs—remain superior due to higher contribution potential, employer matching and fiduciary oversight,” he says.

Ready says recordkeepers that do state plan business can provide a natural off-ramp for those companies that are saying, “Hey, I don’t want to do the state plan anymore. I want to go set up my own.” He says, “It’s going to be a huge boon for all of the recordkeepers that have scale.”

Ready adds that recordkeepers that do not have the scale to serve PEPs and new plan designs at a lower cost are going to be left behind. “There’s research that says that 75% of the [retirement plan] market share will be with five or six recordkeepers in a few years,” he says. “The bigger are going to get bigger, and the others have to find little niches to fit into. So I wouldn’t be shocked if that pushes more down the path of consolidation.”

The Mechanics of Benchmarking

Rouse says important factors for plan sponsors to consider when selecting a new recordkeeper or benchmarking their own recordkeeper include:

• Technology and Integration: Robust Application Programming Interfaces—APIs—data security and seamless payroll coordination;
• Compliance Expertise: Proven track record with SECURE 2.0, Roth catch-up and evolving rules, plus strong participant disclosure and reporting capabilities;
• Participant Outcomes: Personalization, retirement income solutions, financial literacy tools and engagement analytics;
• Fee Transparency and Value: Total cost of services, alongside demonstrated return on investment;
• Scalability and Innovation: Support for PEPs, lifetime income and future-proofing against regulatory changes; and
• Service Quality: Dedicated support, cybersecurity standards and alignment with sponsor goals.

Ready warns that growth for recordkeepers no longer means just winning plans—it means winning participants and their wallets. PEPs deliver more participants to recordkeepers that may try to monetize them via managed accounts, rollovers and wealth management.

“Plan sponsors have to govern that relationship, not just price it,” Ready says. “It’s a governance issue, and none of it is inherently wrong, but it means the recordkeeping relationship now has this embedded conflict that just benchmarking your fees won’t catch. So committees have to ask, ‘What does our recordkeeper earn from our participants behind that fee that they’re charging us? Do we know about it? Did we knowingly approve that?’”

Whereas the standard has been for plan sponsors to benchmark every three to five years, Ready believes the new landscape calls for provider management to be a committee agenda item every year.

Overall, recordkeepers have shown they can evolve both by shifting to pooled plans and by embracing the reinvention of plans as more than just savings vehicles for retirement.—Rebecca Moore