Key Takeaways
- Alternative assets are no longer optional: Regulatory changes and sponsor demand are pushing private equity, real estate, and other alternatives into 401(k) plans, fundamentally changing how plans must be administered and recorded.
- Legacy operating models will not scale: Daily-priced, liquid-asset recordkeeping systems cannot support irregular valuations, complex fee structures, and liquidity constraints without significant risk and manual work.
- Operational risk rises without modernization: Valuation complexity, reconciliation challenges, liquidity mismatches, and expanded fiduciary obligations increase sponsor and administrator exposure if not addressed with purpose-built processes.
- Technology and expertise are the differentiators: Cloud-based platforms, automation, APIs, and specialized operational knowledge turn alternative assets from an operational burden into a competitive advantage.
- Early movers gain strategic relevance: Retirement plan administrators and recordkeepers that invest now can position themselves as trusted partners to sponsors, unlocking new revenue opportunities while improving transparency and participant outcomes.
The retirement plan industry is undergoing significant changes as a new executive order allows 401(k) plans to include alternative assets like private equity, real estate, and cryptocurrency. For retirement plan administrators and recordkeepers, this marks a significant shift in how plans are managed.
Alternative assets offer diversification and long-term growth potential, but they also come with challenges such as valuation, reporting, liquidity, compliance, and technology. They require specialized oversight, clear communication, and strong operations.
Retirement plan administrators and recordkeepers face a choice to change alternative assets into a competitive edge or a burden. Success depends on how well they adapt their systems and expertise to meet the needs of their customers. By investing in the proper infrastructure now, retirement plan administrators and recordkeepers can tackle current challenges and become key partners in the future of retirement investing.
Why alternative assets matter for retirement plan administrators and recordkeepers?
Alternative assets like private equity, real estate, and crypto are transforming 401(k) plans, requiring retirement plan administrators and recordkeepers to overhaul processes like valuation, liquidity, and fee models. While this shift increases operational risks, it also opens new opportunities. Retirement plan administrators and recordkeepers can gain a competitive edge by building reliable systems and addressing key business impacts.
Here are the key impacts of alternative assets on retirement plan administrators and recordkeepers:
- Sponsor demand: Many plan sponsors want more choices to improve participant outcomes and differentiate their benefits. Retirement plan administrators and recordkeepers that can operationalize alternatives become the logical partners for sponsors looking to modernize their plan lineups.
- Better diversification and return opportunities: Private equity, real estate, and private credit offer different ways to generate returns and are less tied to public market fluctuations. This makes them useful for long-term retirement goals, which is why they are attracting interest from sponsors.
- Participant outcomes and plan competitiveness: Retirement plans with relevant, well-managed options can lead to better outcomes, making them more appealing to employers as they compete for retaining and attracting talent. It also increases their expectations for transparent reporting and participant education.
- New revenue and fee structures: Alternatives often carry higher fees and bespoke administrative charges. Retirement plan administrators and recordkeepers can generate revenue from specialized services like valuation support, liquidity management, and custom reporting, but they must clearly define and price these offerings.
Core operational challenges retirement plan administrators and recordkeepers must solve
The highest-impact challenge areas for retirement plan administrators and recordkeepers are:
- Technology infrastructure overhaul: Legacy recordkeeping systems expect daily-priced and liquid assets. Alternative assets need systems that support irregular valuation cycles, complex fee waterfalls, subscription or redemption lifecycles, and multi-tier reporting.
- Valuation and reporting complexity: Alternative assets lack daily market prices and often use manager estimates or mark-to-model approaches. It complicates reporting and audits.
- Liquidity management and participant flows: Lack of liquidity can cause a gap between participant actions, like withdrawals, transfers, or QDROs, and the ability to settle these transactions. Without proper controls in place, retirement plan administrators and recordkeepers risk transaction failures and potential sponsor liability.
- Recordkeeping and reconciliation: New position types like side-pockets, vintage funds, and carried interest, along with irregular cash flows, add to reconciliation workloads and increase the risk of errors.
- Enhanced fiduciary and compliance burden: Alternative assets increase documentation, analysis, and disclosure requirements, with sponsors relying on retirement plan administrators and recordkeepers to support diligence and regulatory readiness.
Simplifying alternative asset operations for retirement plan administrators and recordkeepers with Congruent Solutions
Managing alternative assets in 401(k) plans requires a very different operating model than traditional mutual funds. From irregular valuation cycles and complex fee structures to liquidity restrictions and regulatory disclosures, retirement plan administrators and recordkeepers must re-engineer their processes to keep pace with sponsor and participant expectations. Upgrading the technology infrastructure and outsourcing retirement plan administration can turn challenges into opportunities.
Congruent Solutions helps retirement plan administrators and recordkeepers simplify these complexities through its cloud-based CORE platform, Retirement Edge, API-driven integrations, and outsourced plan administration services. With Congruent Solutions, retirement plan administrators and recordkeepers can:
- Automate complex workflows such as valuation updates, reconciliation, and exception handling to reduce manual errors and audit risks.
- Handle non-standard asset types with data models designed for private equity, real estate, private credit, and other alternatives.
- Enhance compliance and reporting with built-in audit trails, participant communications, and support for regulatory filings.
- Scale operations with outsourcing by leveraging Congruent Solutions’ specialized teams for recordkeeping, contribution processing, participant transactions, and reporting. We allow retirement plan administrators and recordkeepers to focus on client relationships and strategic growth while reducing operational overhead.
- Industry-standard APIs enable seamless integration with partners such as custodians, asset managers, and recordkeepers, ensuring accurate, secure, and timely data flow across the ecosystem.
By investing in technology modernization with specialized outsourcing with Congruent Solutions, retirement plan administrators and recordkeepers can deliver consistent, transparent, and efficient support for alternative asset investments. Instead of struggling with operational bottlenecks, retirement plan administrators and recordkeepers can position themselves as trusted partners to sponsors and recordkeepers navigating this new landscape.
Partner with Congruent Solutions to turn alternative asset challenges into opportunities.
