401(k) recordkeepers need a major transformation. As regulations shift, technology evolves, and participant expectations rise, 2025 is set to redefine the industry. This year’s not going to be just about ticking compliance boxes. It will include seizing opportunities, staying ahead of the curve, and driving growth amidst the change.
This article explores the key trends shaping 401(k) recordkeeping and provides practical tips to help recordkeepers prepare for these changes. We will also look at how technology can help recordkeepers succeed in 2025.
What’s changing in 2025?
2025 is bringing significant changes for 401(k) recordkeepers. Economic uncertainty and the new reforms of the SECURE 2.0 Act will improve plan access, boost retirement savings, and ensure compliance. These changes will benefit participants and also reshape how recordkeepers deliver their services.
Here are the key trends you need to watch in 2025:
1. Automatic enrollment and contribution escalation
The SECURE 2.0 Act has introduced mandatory automatic enrollment and contribution escalation for new retirement plans starting in 2025. The default contribution rate will be set between 3% and 10%, with an annual automatic increase of 1% until it reaches at least 10%, but not exceeding 15%. Automatically enrolling employees helps them save more for retirement by increasing their contributions. However, it is challenging for recordkeepers to track increased enrollments and adjust contributions.
2. Enhanced contribution limits
The SECURE 2.0 Act introduces increased contribution limits for 401(k) plans, particularly benefiting older workers. Employees in the 60 to 63 age group can make catch-up contributions much higher than the limit for those under 60. However, 401(k) recordkeepers must accommodate these updates and communicate changes clearly to sponsors and participants.
3. Regulatory compliance and adaptation
Retirement plan regulations and fiduciary roles continue to tighten. Recordkeepers must monitor mandatory automatic enrollment, update existing plans, and accommodate the increased catch-up contribution. Recordkeepers must also maintain thorough documentation and records as required under ERISA guidelines. Staying compliant in 2025 will require innovative recordkeeping and monitoring tools.
How will these trends impact recordkeepers in 2025?
For 401(k) recordkeepers, the above trends come with the following challenges:
- Increased complexity in administration: Automatic enrollment and escalating contribution rates add a new layer of administrative detail for recordkeepers. Tracking participant status, ensuring accurate payroll deductions, and handling opt-outs will increase workloads.
- The demand for enhanced technology: Recordkeepers must use tools for timeliness, accuracy, and scalability. From automating processes to using AI for engagement, recordkeepers will rely on advanced technology for compliance and improving participant experience.
- Focus on data analytics: Behavioral data analytics will be needed to guide participants toward better retirement planning. Insights into saving habits will help recordkeepers deliver personalized communication for participants.
- Emphasis on cybersecurity: Recordkeepers must prioritize cybersecurity measures with increasing cyber threats and larger volumes of sensitive participant information. Implementing strong security protocols and regularly testing vulnerabilities is now necessary.
Elevate your 401(k) recordkeeping with Congruent
Upgrading software and modernizing legacy systems is key to keeping operations running smoothly. But what will really set you apart as a recordkeeper is clear, proactive communication. Take the opportunity to stand out by breaking down new features, contribution limits, or plan requirements in ways that participants can easily understand. Stay informed about regulatory compliance changes and partner with regulatory experts if needed.
At Congruent Solutions, we understand recordkeepers’ challenges when navigating regulatory and operational changes in 401(k) plans. Our CORE platform transforms recordkeeping by eliminating inefficiencies and streamlining the process with powerful end-to-end automation.
The platform’s compliance tools keep pace with the evolving provisions of SECURE Act 2.0. Self-service portals allow seamless communication and easy access to plan information for participants, sponsors, and TPA. Our experts offer support and guidance at every step, ensuring recordkeepers enter 2025 with confidence.
Please meet with our team today to build the foundation for 2025 success.