Introduction
The US retirement landscape is undergoing a seismic transformation. In the defined contribution (DC) recordkeeping space, consolidation has accelerated—driven by increasing margin pressures, falling administration fees, and an urgent need for digital transformation. Mergers and acquisitions (M&A) have become strategic levers that enable recordkeepers to achieve scale and boost profitability in a competitive and highly regulated market.
While the challenges of post-merger integration (PMI) in technology, culture, and operations are real, the financial upside for recordkeepers that execute it effectively is substantial. This blog explores the pathways to enhance profitability through consolidation, drawing on the growing trend of M&A with focus on notable examples, multiple avenues for recordkeepers to grow business as well as challenges they face post-merger. It also illustrates how Evalueserve can support recordkeepers in navigating this complex and evolving landscape.
The Consolidation Wave: A Recap
The US DC recordkeeping market has undergone significant consolidation in recent years, resulting in a sharp reduction in the number of major recordkeepers operating in this space. According to a 2024 Pensions & Investments survey, the number of major DC recordkeepers in the US decreased from 80 in 2004 to 27 in 2023. Currently, the market is dominated by just five major players in terms of assets and participants. Furthermore, a 2024 Accenture study based on the Cerulli Report reveals that these top five recordkeepers now control nearly 70% of DC assets and 56% of participants. Over the past decade, these top players have gained 13% market share by assets under administration (AUA) and 12% by participants. This underscores the growing importance of scale for achieving operational efficiency and competitive advantage.
Recent M&A Shaping the Recordkeeping Industry
In recent years, consolidation activity among recordkeepers and related service providers has surged. The table below highlights notable examples of M&A that occurred between 2019 and 2025:
*Reflects AUA when each transaction was announced (versus closed)
Beyond the major M&A in the DC recordkeeping space from 2019 to 2025, a closer analysis reveals strategic maneuvers by specific players. Rather than merely participating in M&A activity, these firms leveraged opportunities to expand market share, deepen capabilities, or streamline their strategic focus.
Empower’s Strategic Acquisitions
Empower has expanded through multiple acquisitions, including the retirement businesses of MassMutual, Prudential, Fifth Third Bank, and SunTrust. According to the CEO of Empower, over the past four years, these acquisitions have led to a 6% reduction in the company’s recordkeeping cost per participant. Overall, these deals have significantly increased Empower's participant base, AUA, and operational leverage, solidifying its position as a top-tier recordkeeper.
Voya’s Strategic Divestment
In 2021, Voya streamlined its operations by divesting its life insurance and annuities businesses, which enabled the firm to concentrate on its core strengths – namely serving workplace and institutional clients. This strategic realignment was further reinforced by its 2025 acquisition of OneAmerica’s retirement business, which expanded Voya’s retirement recordkeeping capabilities.
Ascensus’ Rapid Expansion
Ascensus has significantly expanded its assets and participant base through the aggressive acquisition of numerous recordkeeping firms. Its consistent M&A strategy targets the small and mid-sized retirement plan market, IRA administration, and emerging plan types such as Pooled Employer Plans (PEPs) and Multiple Employer Plans (MEPs). This approach has positioned Ascensus as a top-tier recordkeeper, allowing it to dominate the smaller plan segment and develop scalable, tech-driven retirement solutions, rather than competing with the largest players in the mega-plan market.
The Profitability Playbook: Where the Financial Upside Lies
Consolidation unlocks multiple avenues for recordkeepers to enhance profitability. It provides clear profitability levers including cost savings through scale, technology-driven efficiencies, product synergies, and strategic focus enabled by divestments.
Economies of Scale Drive Efficiency and Margin Expansion
The main financial benefit of consolidation is economies of scale. By spreading fixed costs related to compliance, IT infrastructure, cybersecurity, and customer support across a larger client base, merged firms can reduce their cost per participant. In an industry where per-participant fees are relatively low (typically $30-80 per annum), this can be crucial for expanding margins. It enables firms to offer competitive fees while sustaining or increasing profitability, which can be a key advantage amid growing fee pressure.
Technology-driven Cost Optimization
The integration of technological platforms post-merger offers significant opportunities for cost reduction. Digitization of participant services, migration to cloud-based systems, implementation of robo-advisory solutions, and automation of plan administration processes can greatly reduce reliance on manual processes and decrease headcount requirements. A 2024 Accenture study found that a fully digitized operating model not only mitigates business and data risks but also reduces operating expenses by up to 40%.
Product Innovation and Revenue Expansion
By unifying product offerings, merged recordkeepers can offer a wider array of services to their combined client base. They can cross-sell complementary solutions, including managed accounts, health savings accounts (HSAs), wellness programs, fee-based advisory models, and sophisticated institutional investment options for larger plans. In addition to cross-selling, recordkeepers can also grow either by serving specific plan sizes or by differentiating themselves in the niche plan types they serve. These strategic models are further described below:
- Large Plan Specialists: Recordkeepers in this category serve mega plans with complex needs and high switching costs. Their customized services create strong client loyalty, making them less attractive as acquisition targets for scaled players.
- Small Plan Specialists: Firms in this category efficiently manage high volumes of micro plans, often through exclusive channels like payroll providers. Even large recordkeepers sometimes outsource small plans to these nimble players.
- 403(b)/457 Market Specialists: Players in this category focus on non-401(k) segments such as government, healthcare, and education. Their tailored offerings meet unique plan sponsor and participant needs, giving them a distinct edge.
These expanded services create opportunities to increase revenue per participant, even in an environment where traditional fee structures face downward pressure.
Strategic Divestments
Some consolidations involve strategic divestments, as seen in the case of Voya. Divestments can also be used as a tool to shed low-margin business units and redeploy capital towards more profitable and strategically aligned areas. Selective consolidation allows companies to optimize their portfolios and enhance overall profitability.
Key Challenges in a Post-Merger Landscape
Despite the upside, post-merger challenges in systems, culture, data, and compliance can erode potential gains if not carefully managed. Some key M&A related risks include:
Technology Integration Complexity / Systems Misalignment
Merging legacy systems with new cloud-based platforms and databases can be costly, time-consuming, and prone to errors. Disparate recordkeeping systems often require custom integration or complete overhauls, delaying anticipated efficiency gains.
Participant and Plan Sponsor Disruption
Changes in service models, websites, or communication tools can cause confusion or dissatisfaction among plan sponsors and participants, increasing the risk of attrition during the critical transition phase.
Cultural Misalignment
Merging firms often have different corporate cultures, operating styles, and client engagement philosophies. If these elements are not aligned early, it can lead to internal friction, talent loss, and inconsistent service delivery.
Regulatory Scrutiny
Mergers expose firms to new regulatory requirements, particularly when the combination involves businesses with different operational histories, fiduciary roles, or cybersecurity protocols. Complying with stringent fiduciary and compliance standards can slow down the integration process.
Inefficient Data Migration
Merging systems and client data introduces cybersecurity vulnerabilities. Ensuring full compliance with data protection standards (such as ERISA and DOL guidelines) is non-negotiable but challenging.
Beyond these challenges, recordkeepers also encounter pressures related to client and talent retention and the need to establish a strong brand identity and market positioning.
Therefore, a clear and strategic post-merger integration plan is essential to harness the financial benefits of consolidation while mitigating these risks.
The Road Ahead: Turning Scale into Strategy
As the US retirement space continues to evolve, M&A will be more than just a growth strategy. It will emerge as a lever for profitability, a catalyst for transformation, and a means for long-term survival. Success will come to those who develop a merger playbook focused on operational excellence, technological advancement, and data intelligence, while recordkeepers who fail to consolidate effectively, or neglect technology integration and participant expectations, will risk becoming obsolete.
How Evalueserve Can Help
Evalueserve offers comprehensive market and competitive intelligence programs that provide timely and actionable insights tailored for firms in the retirement solutions space. Our support empowers firms to make informed business decisions – whether it's investing in new opportunities, pursuing M&A, or expanding product offerings. By keeping our clients informed about industry trends, regulatory developments, market opportunities, and competitor strategies, we help them stay ahead in an increasingly complex and competitive environment.
Here's how Evalueserve assists clients in these areas
- Industry Research: Evalueserve provides deep industry insights covering the latest trends, evolving regulatory and investment frameworks, market sizing, and potential industry opportunities.
- Competitor Strategy: Our competitive insights solutions help in the development of highly focused strategies to counter imminent threats. We also offer strategic business insights, competitor marketing positioning (participant engagement analysis), and earnings coverage of peers to help our clients understand management viewpoints and strategic plans.
- Product Intelligence: Evalueserve conducts product benchmarking, provides insights that enhance the value proposition of existing offerings, and helps launch innovative products to stay ahead in the marketplace.
