Key Insights on the 2025 Defined Contribution Landscape

Monitoring ongoing regulatory changes and litigation is always an important responsibility for plan sponsors of defined contribution (DC) plans. The first half of 2025 saw several changes affecting regulatory agencies and governing bodies in Washington, DC.

Recently, a new tax bill was unveiled in the House of Representatives that could have a significant impact on the future of retirement savings. It includes an extension of savers’ credit allowed for Achieving a Better Life Experience (ABLE) account contributions and expanding college savings and health savings accounts among other reductions to federal revenue.^[1]

Two additional bills were introduced in the Senate in mid-May aimed at strengthening and increasing the use of Employee Stock Ownership plans (ESOPs). Though these pieces of legislation are expected to go through multiple iterations before potentially being passed and signed into law, they are examples of the topics congressional leaders are discussing that would have a direct impact on the future of saving for retirement.

Ongoing ERISA lawsuits continue to dominate headlines, with topics surrounding plan fees and the usage of forfeiture assets. We anticipate additional lawsuits over plan fees but also over investment proxy voting and the use of proprietary stable value funds as well. It is important for plan sponsors to clearly document all committee meetings and decision-making processes to mitigate risk. 

A Qualified Default Investment Alternative (QDIA) review and selection process is an increasingly important task for plan sponsors due to high usage by plan participants. In fact, according to the PSCA, 80.8% of all plans surveyed have a QDIA and 86.2% of those plans use a Target Date Fund (TDF) series as their QDIA.^[2] Plan sponsors should implement a process to regularly review their QDIA (most often TDF suite) for suitability for their participants.

Plan sponsors should also consider monitoring the usage of online managed account tools by participants and their associated fees. Most recordkeepers offer an online managed account tool that participants can choose to use for a fee. Plan sponsors can ask their recordkeeper for a report of usage of such tools to better understand participants and their decision-making behavior when it comes to their retirement savings.

Lastly, plan sponsors should be aware of early developments in alternative investments for TDFs and managed accounts. The topic of the suitability of alternative investments in DC plans has been widely discussed by industry leaders and is gaining traction due to the potential of higher returns. However, it is important to note the risk associated with these types of investments might not be suitable for every saver especially those utilizing a 401(k) retirement account. We recommend plan sponsors ask their advisor about their position and continue to monitor Department of Labor guidance. 

The wellbeing of employees is increasingly important to the success of the business and should be a focus of every plan sponsor. Plan sponsors need to consider the holistic financial and mental health of their employees at work if they want to improve productivity. In a 2024 PNC Financial Wellness in the Workplace survey, 68% of workers surveyed said financial stress negatively affects their overall mental health, and 3 in 4 employers say workers’ financial stress negatively impacts operations.^[3] These statistics are troubling but true.

Additionally, 2025 has seen increased financial stress due to the ongoing market volatility dominating headlines and causing many Americans to question their investing choices. Plan sponsors should urge participants to stay invested and stay the course. Consider utilizing additional resources available from your recordkeeper or advisor to educate participants through the volatility.

 Another resource plan sponsors can make use of to better understand their employees is a survey. What do your employees want from their retirement program? Ask them. The power of a survey or dialogue with employees is often underutilized because plan sponsors assume they know what their employees want.

Finally, it is a good idea to regularly remind employees of the resources they have available through their recordkeeper’s website and mobile app. The second half of the year is normally when employees are thinking about benefits as it coincides with open enrollment so why not use the time to remind them about the availability of online resources. If you need help with any of these initiatives with your employees, reach out to your advisor and they can help you construct a plan and they can be an extension of your committee. 

Consider discussing these trends in your next committee meeting:

• Consider your desire to offer plan level guaranteed retirement income products for participants. Is this a need of your participants?
• Understand how Artificial Intelligence (AI) can be used by plan sponsors and service providers to enhance the participant’s experience. Can you use AI to query plan documents or service agreements?
• Discuss the increase of financial fraud, especially for participants who may not be digitally fluent. How can you protect your employees?
• Consider adding a student loan matching option to your 401(k). Would this benefit influence recruiting and retaining talent?

Plan sponsors play a critical role in creating and managing a successful retirement program. We recommend adding these topics to the agenda for your next committee meeting with your advisor. For more information on these topics and the defined contribution landscape, please contact your PNC representative.