Plan Administrators and Recordkeepers Must Prioritize Modernization Before 2030

The U.S. Defined Contribution (DC) retirement plan industry stands at an inflection point. Demographic upheaval, compressing administration fee revenue, accelerating regulatory complexity under SECURE 2.0, rising participant expectations, cybersecurity risks, and the arrival of AI-native competitors are collectively forcing a reckoning that no recordkeeper or plan administrator can afford to defer.

According to the 2025 McKinsey report “The U.S. Retirement Industry at a Crossroads,” the defined contribution (DC) ecosystem is approaching a structural tipping point. Recordkeeping revenues are under pressure, costs continue to rise, and competition is intensifying as retirement providers expand into wealth management and participant engagement services.

Legacy infrastructure is no longer a manageable liability but an existential risk. By 2030, retirement firms that fail to modernize their technology infrastructure, participant servicing models, compliance operations, and data ecosystems may struggle to remain profitable or competitive.

This white paper examines the critical forces driving the modernization imperative, the measurable cost of inaction, and the strategic actions retirement plan administrators and recordkeepers must take before 2030 to survive.

The new era of the 401(k) retirement plan industry

The retirement industry is no longer simply a transaction-processing business. It is becoming a participant experience and a lifetime financial relationship business. The following trends are fundamentally changing how recordkeepers and administrators operate:

The peak 65 decumulation wave

Approximately 11,200 Americans turn 65 every day, totaling over 4.1 million annually through 2027. As McKinsey’s 2025 report documents, the DC system is projected to remain in net outflows until 2030, with asset growth during this window driven primarily by market performance rather than new contributions. For recordkeepers, this compresses per-account revenue precisely when operational complexity peaks.

Revenue model under compression

According to McKinsey, total revenues from the DC system grew by about 40% between 2013 and 2023. The underlying economics underwent a significant transformation, with administrative fees declining as competition among recordkeepers increased. Assets under administration in DC plans rose 74% over the same decade, while total revenues grew only 39%, exposing a widening efficiency gap. Doing more with legacy systems that cost more to maintain is not a strategy. It is a slow erosion.

Regulatory non-negotiables with hard system deadlines

SECURE 2.0 has moved from guidance to enforcement. For most 401(k) and 403(b) plans, formal plan amendments reflecting all SECURE 2.0 operational changes must be adopted by December 31, 2026.

Critically, operational compliance, including mandatory Roth catch-up contributions for high earners, effective January 1, 2026, required system updates that many legacy recordkeeping platforms are still struggling to deploy. Missing these deadlines is not a paperwork error. It is a compliance failure with direct fiduciary and financial consequences.

5 reasons why legacy systems are becoming a strategic liability for retirement plan administrators and recordkeepers

The retirement industry is changing faster than most legacy platforms can adapt. The economics and expectations shaping the industry today are fundamentally different. Recordkeepers and plan administrators are now being evaluated on agility, digital experience, compliance responsiveness, data accessibility, and operational resilience. For plan administrators and recordkeepers, the cost of delaying modernization is rising rapidly.

Here are the key reasons why legacy systems are becoming a strategic liability for retirement plan administrators and recordkeepers:

Legacy infrastructure cannot scale

The defining challenge for most mid-market recordkeepers and TPAs is that their core systems were not designed to keep pace with today’s regulatory velocity. SECURE 2.0 alone introduced over 90 provisions. The SPARK Institute’s API framework, introduced in June 2025, offers voluntary best practices to standardize data exchange across the 401(k) ecosystem, enabling real-time updates for contribution updates, eligibility checks, and loan tracking. Systems built on batch-processing architectures and manual file-exchange workflows cannot adapt at the cadence regulators and plan sponsors now require.

Rising technology and support costs

Rising expenses for support functions and technology, driven primarily by inflation, have prompted providers to restructure their spending to maximize profitability while exploring options to lower costs, including digitization, offshoring, and outsourcing. Maintaining aging platforms consumes budget that should be funding participant-facing innovation. Legacy compliance debt is a violation in waiting. Organizations maintaining end-of-life systems face regulatory examination risk that can dwarf the cost of modernization itself.

Participant expectations have reset

Today’s plan participants, spanning Boomers exiting the workforce, Gen X at peak savings, Millennials navigating financial complexity, and Gen Z entering their first plans, expect digital-first, self-service, personalized experiences. More than half of plan participants said they would be comfortable receiving financial advice from their retirement solutions provider, which becomes a significant untapped engagement opportunity that only modern platforms can convert. Recordkeepers unable to deliver hyper-personalized, real-time digital experiences are sacrificing participant satisfaction and plan sponsor retention.

Guaranteed income is now a competitive differentiator

SECURE 2.0 actively incentivizes plan sponsors to add in-plan guaranteed income options. BlackRock’s 2025 Read on Retirement research identifies guaranteed income as one of three critical calls to action for the retirement industry, noting that only 27% of retirees feel financially prepared, down from 43% in 2020. T. Rowe Price’s 2025 Retirement Market Outlook confirms that more plan sponsors are moving from gathering information to deciding which retirement income solutions to adopt. Recordkeepers without the technical infrastructure to administer these products will lose mandates to those that do.

AI-native competition is accelerating

Digital-native competitors are entering the recordkeeping space without the burden of legacy systems. Everest Group’s August 2025 assessment highlights that modular recordkeeping components, AI‑enabled data automation, and open integration frameworks are becoming key differentiators for firms modernizing legacy platforms and delivering consistent plan experiences at scale. For incumbents, the window to modernize before these entrants reach scale is closing.

Modernization priorities for retirement plan administrators and recordkeepers before 2030

Modernization in the retirement industry is no longer limited to replacing outdated technology platforms. It requires rethinking how retirement operations are designed, integrated, automated, and scaled for a far more complex regulatory and participant environment.

The retirement plan administrators and recordkeepers who lead the next decade will be those who build flexible digital infrastructure, embed compliance into operational workflows, and create participant experiences that can evolve continuously. The following capabilities are becoming essential components of a future-ready retirement administration model:

1.   Cloud-native, API-first architecture

The foundation of any credible modernization program is the migration of core recordkeeping functions to cloud-native platforms built on API-first architectures. This enables real-time data sharing with payroll providers, HRIS platforms, custodians, and regulators. It replaces costly, error-prone manual file processing. Retirement plan administrators who adopt SPARK’s interoperability standards now will build a competitive moat as the ecosystem consolidates.

2.   Compliance automation

SECURE 2.0 is not the last legislative cycle. Continuous compliance automation, where regulatory changes propagate through system logic rather than requiring manual reconfiguration, must be non-negotiable. This includes automated eligibility computation, LTPT tracking, contribution limit enforcement, mandatory Roth catch-up routing, nondiscrimination testing, and Form 5500 preparation. Manual compliance workflows carry unacceptable fiduciary risk at today’s regulatory velocity.

3.   AI-powered data and participant intelligence

Advanced analytics can be deployed to make transactions more customer-friendly, and with data analytics, retirement providers can get closer to knowing which individual is open to what product at what time and through what combination of channels. AI-powered predictive analytics can also identify retirement income shortfalls before they become participant crises. It flags fraud and automates census data validation at scale.

4.   In-plan guaranteed income infrastructure

Administrators must build or acquire the operational infrastructure to support in-plan annuity and guaranteed income products, including participant education workflows, policy issuance, cashiering, and statement reporting. Plans that cannot offer these products by the time the market shifts will face sponsor attrition as advisors direct new business to platforms that can.

5.   Strategic outsourcing for operational scale

Not every function needs to be built internally. Strategic outsourcing of high-complexity back-office processes, contribution and distribution processing, year-end compliance testing, and Form 5500 preparation allows administrators to concentrate capital and talent on differentiated participant experiences. As inflation drives up legacy system support costs, the economics of outsourcing versus internal maintenance have shifted decisively.

The next decade belongs to modern retirement plan administration and recordkeeping platforms

The cost of delaying modernization is operational, financial, regulatory, and increasingly existential for retirement plan administrators and recordkeepers. Organizations that delay modernization face a rapidly compounding set of risks, such as:

• Regulatory exposure from SECURE 2.0 operational non-compliance.
• Rising maintenance and support costs of aging infrastructure.
• Increased dependence on manual workarounds and fragmented workflows.
• Poor digital experiences drive participant attrition.
• Competitive pressure from AI-native retirement platforms built for agility and scale.
• Inability to support in-plan guaranteed income solutions.
• Limited capability for advanced participant personalization.
• Lack of real-time data interoperability across the retirement ecosystem.
• Reduced plan sponsor retention and weakened new business acquisition potential.

The organizations that lead the next decade of retirement plan administration will be those that modernize. Congruent Solutions is a strategic modernization partner for the retirement industry. With more than two decades of retirement domain expertise, it offers technology platforms and retirement administration services that are designed specifically for the complexities of the U.S. retirement ecosystem.

Congruent’s modernization capabilities include:

• Cloud-native, API-first retirement recordkeeping infrastructure through the CORE platform, enabling real-time processing, workflow automation, self-service experiences, SECURE 2.0 readiness, and scalable integrations.
• In-plan guaranteed income enablement through Retirement Edge, supporting participant enrollment, education, policy issuance, cashiering, and retirement income administration.
• Retirement outsourcing and operational support services covering transaction processing, compliance testing, Form 5500 preparation, trust accounting, and census management.
• AI-powered analytics and participant intelligence capabilities that improve operational visibility, participant engagement, and plan performance optimization.

Congruent Solutions approaches modernization as a phased business transformation rather than a disruptive technology replacement exercise. This allows retirement organizations to modernize strategically without compromising operational stability or continuity of participant service.

The window to modernize before 2030 is narrowing, and the organizations acting now will shape the future of retirement administration. Connect with the experts at Congruent Solutions to develop your custom modernization roadmap before 2030.