Continued Growth and Lower Fees Push Evolution of DC Structures

Over the past two decades, from 2004 to 2024, the assets of defined contribution plans have seen substantial growth, expanding by a significant margin of 27 times. In conjunction with the increase in assets, the number of participants has also experienced remarkable growth, increasing eightfold. Compounded with these impressive figures, there has been a notable decline in investment management fees, which have decreased by an impressive 67%. Moreover, recordkeeping fees have also followed suit, falling by 26% between 2014 and 2024.

Emma O’Brien, a partner at NEPC, commented that these trends over the 20-year period do not merely reflect cyclical market fluctuations but rather indicate structural changes within the defined contribution model. O’Brien noted that the incredible growth of plans and the reduction in fees are a direct result of intentional decisions made by plan sponsors as they continuously refine and enhance the defined contribution model.

Regarding the investment structure and implementation aspect, NEPC has pointed out four key trends observed in the industry. Firstly, there has been a shift from actively managed target-date funds to more passive or blended options. This move has been influenced by the decrease in passive fund implementation costs and the increased availability of glide paths. O’Brien emphasized that previously, to have a higher-risk glide path, it had to be actively implemented or in a custom target-date funds format. However, now, these alternative glide paths are becoming available through passive providers.

In a study conducted by T. Rowe Price, it was discovered that a significant portion of plan sponsors are opting for a blend of active and passive investment strategies. This blend is seen as valuable, with many plan sponsors believing that active management adds value while also protecting against benchmark deviation, as indicated by 78% of respondents to T. Rowe Price’s 2025 Global Retirement Savers Study.

Another noteworthy trend shed light on by NEPC is the transformation in the U.S. large-cap equity options within plans. Between 2020 and 2025, around one-third of plan sponsors underwent structural changes to their U.S. large-cap equity offerings, which hold a substantial portion of participant assets outside of target-date funds. 12% of plans even chose to remove this option entirely. O’Brien explained the challenges faced by active managers in adding value through large-cap assets, leading plan sponsors to reconsider offering active management and embracing traditional style-box offerings like value and growth.

In addition to these shifts, there has been a close examination of managed accounts within the industry. NEPC’s data indicated that 14% of defined contribution plans have opted to terminate their managed account services since the end of 2023. While 48% of plans currently offer managed accounts, only 10% of participants are utilizing this option, with 9% of plan assets invested in managed accounts.

Furthermore, plan sponsors have been assessing the value proposition of managed accounts, especially considering the relatively higher fees associated with them. A substantial 43.6% of plan sponsors noted offering managed account services for participants in a survey conducted by PLANSPONSOR in 2025. The interest in managed accounts is significant, with 70% of plan sponsors expressing interest in offering a managed account as an opt-in if the fee is lowered to 10 basis points or less.

These trends in structuring and implementing investment options within defined contribution plans reflect the evolving landscape of retirement savings plans, driven by sustained growth and a desire to optimize cost efficiencies for participants.