Digital Transformation for the Retirement Plan Industry

The United States is the world’s largest retirement market as the total assets held under retirement-related accounts reach $37.5 Trillion. It comprises both public and private –

Defined Contributions (DC), Defined Benefits (DB) plans, IRAs, and annuities.

However, the market is strained for all participants, recordkeepers, and plan sponsors. From an aging population to fee pressures on retirement plan providers, there are many challenges curtailing industry growth.

There is a need for rethinking processes, optimizing resources, and enhancing operational efficiency to survive in the market. Digital transformation has become imperative for addressing the growing needs of consumers.

The Changing Landscape of Retirement Planning

Thin margins are raising pressure on US retirement firms and placing constraints on the profitability of recordkeeping and plan administration services providers. PwC reports the average 401(k) expense ratios have fallen by a third over the last ten years, while recordkeeping fees are also rapidly declining. Giving in to the fee pressures, smaller retirement firms are left with only two options – consolidating with larger ones or exiting the market. It has brought the number of players from 400 to 150.

The retirement plan providers, recordkeepers, and even the plan participants are facing a tough time. With an average of 11,700 people crossing the age of 65 each day, the retiree population in the US is constantly growing. But half the population is unprepared, as depicted by the National Retirement Risk Index (NRRI). The study says that 50% of US households lack sufficient funds to maintain their living standards upon retirement. The financial stress amplifies with rising life expectancies and increasing healthcare costs.

Firms must create a more engaging experience for participants by using technology to streamline operations. Lowering costs will help them improve margins and make retirement programs more accessible. They can use consumer data to create new benefit offerings. AI-enabled Robo Advisors and well-informed human advisors can come together to offer holistic advice. We believe a robust digital transformation strategy could increase participation and help unlock the additional $5 trillion worth of assets, as estimated by PwC.

The Essentials for Retirement Planning

Plan sponsors and recordkeeping firms aim to provide quality services as efficiently and effectively as possible. Unfortunately, legacy systems are incapable of the desired standards of service delivery. In the changing landscape of the retirement industry, businesses must strive to meet the following needs:

  • Speed: Adapting to changing participant needs is essential for staying competitive in the retirement industry.
  • Flexibility: Thinking beyond the DC plan to offer multi-product cradle-to-grave benefits will help diversify revenue sources.
  • Scalability: Re-evaluating business processes to automate tasks and adopting new technologies will increase efficiency and reduce expenses.

The Need for Digital Transformation

Despite the severe challenges of the retirement industry, agile and tech-based companies are surviving. Several new entrants in the market are filling the gaps left unaddressed by incumbent firms. It makes digital transformation imperative for players of all scales in the retirement industry. Companies can no longer thrive on legacy systems or outdated software. They must focus on improving customer experience to stay competitive and simplify processes for better efficiency.

It offers the following benefits:

  • Lower costs: Cloud-based retirement payroll solutions use advanced cyber-security mechanisms to maximize security. These systems use AI and are highly affordable compared to traditional databases.
  • Enhanced efficiency: RPA-led retirement operations processing tools allow automation of daily operations like contributions and distribution processing. Manual intervention can be reduced by workflow automation. For instance, using chatbots helps speed up customer service.
  • Improved productivity: Leveraging low code / no code retirement plan administration software helps reduce turnaround time for staff while enhancing customer experiences. Similarly, 401k plan compliance testing can be automated to conduct annual nondiscrimination tests and reporting regularly.
  • Future-proofing: Digital transformation is not just one step. Instead, it is an ongoing process. The shift from legacy systems to retirement plan administration software must be supported by modernization. In times of crushing fee pressures, technology is used for process automation and developing self-service tools. It is helping businesses accelerate towards sustainable profitability.

The Roadmap to Digital Transformation

Digital transformation in the retirement industry is not just switching processes from paper to software systems. It will need resources and expertise, whether an end-to-end transformation or a digital technology upgrade. Before you choose the right technology, you must develop a culture that embraces change.

Once your people are aligned with your vision, you can tactically move towards digital transformation. Having a strategy in place allows you to navigate through digital transformation successfully. The roadmap below outlines the major milestones to look out for on your digital transformation journey

  • Analyze legacy systems to detect issues: Retirement firms are looking at offsetting fee pressures, and the best way to initiate the journey is by analyzing legacy systems. You can lay out your current workflow and identify bottlenecks. A further breakdown of each issue will help you identify its impacted processes. For instance, if the high-touch plan sponsor onboarding involves a long turnaround time and even higher costs. These paper-based processes do not offer the much-needed transparency and hamper new business growth.
  • Ideate solutions: Once you know the primary concerns, you can brainstorm the best solutions for each problem. Involve your CXO and technical experts to seek advice on which concerns need immediate attention and can be resolved through technology. The focus should be on reducing or eliminating paper and automating as many processes as possible. List your business needs and prepare a blueprint for the future based on evolving customer expectations.
  • Reimagine processes: By involving other stakeholders, you can rethink your processes. Try to develop a system with minimal complexity that helps you improve the user experience. A digital-first approach will ensure the new processes are as effective and efficient as possible. For instance, deploying Robo advisors and chatbots for customer services or digitalizing the entire process from participant onboarding to withdrawal. Your aim should be to automate operations while maintaining compliance. The new model must increase your ROI and allow you to take advantage of data sources.
  • Evaluate technology solutions: Identify digital solutions that match your growing business needs and deploy apps that minimize human intervention. Analyze all tools for the risk of data loss and breaches to strengthen cybersecurity risks in their current state. Embrace products that fit your budget and improve your methodologies. For instance, cloud technologies set up your retirement recordkeeping business for auto-scale. Opt for a reliable retirement and pension management software partner with domain expertise to make the journey smoother.
  • Develop a framework: Besides procuring the right technology, you must also develop an organization-wide frameworkto integrate all digital systems into a single ecosystem. It includes setting the expectations right and providing necessary training to the workforce to ensure they support your vision. For instance, if you are adopting low code/ no-code solutions, you must set up an empowered team of citizen developers and other non-IT stakeholders.
  • Test and deploy: The process of digital transformation can be highly disruptive as it involves changes across different levels of departments and teams. It is advisable to initiate testing along with development. Based on the earlier steps’ decisions, collaborate with your retirement plan administration software provider to develop custom solutions and test them. A focused approach helps you deploy quickly and maximize digital transformation’s benefits.
  • Review and upgrade: The streamlined and automated processes will enhance operational efficiency and productivity. However, it is necessary to monitor progress. Continuous project monitoring will enable you to gain agility. Reviewing project execution and plan will help you identify discrepancies and take corrective measures in time.


The changing landscape of the US retirement market requires retirement plan providers to offer multi-product offerings to engage participants and address their evolving needs. Digital transformation is imperative to meet these goals and remain resilient in the dynamic industry.

Plan providers must accelerate their digital transformation efforts, but as discussed, not without a well-defined strategy. A customer-centric mindset while defining the digital transformation roadmap. Partnering with Congruent Solutions, a leading retirement plan management software provider, will ease navigation.

Being an ISO 9001:2015, ISO 27001:2013, and SOC1 Type II and SOC2 Type II certified specialist technology solutions provider, we offer the best-in-class software to meet the growing industry needs.

We use our deep understanding of the retirement plan industry and technical competence to establish strong partnerships with our customers. Our CORE suite of solutions addresses your business needs and delivers value for participants, sponsors, administrators, and advisors.

From cloud-based intelligent solutions to modular microservices-enabled frameworks, we deliver custom software for managing and administering retirement plans. As part of your digital transformation journey, we help you achieve each strategic milestone in a phased manner.

Each solution is designed using industry-leading technology to give you a competitive advantage while ensuring functionality that helps you deliver on your value commitment to stakeholders.

Date Published: July 18, 2022

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