As the number of new 401(k) and 403(b) plans surges—driven by state mandates and rising demand from workers—questions are growing about who will serve this expanding market. While payroll companies and fintechs have stepped up, many lack adequate service. Traditional retirement plan providers, on the other hand, face rising costs and shrinking margins, making the small-plan market unattractive.
Banks seem well-positioned to fill the gap, but with few exceptions—most notably JPMorgan Chase—they’ve largely pulled back from defined contribution (DC) recordkeeping. JPMorgan has found success by focusing on small plans, outsourcing operations to partners like Vestwell, and leveraging its asset management arm to subsidize costs through proprietary products like target date funds.
Despite banks’ trusted relationships, deep data, and AI capabilities, most remain on the sidelines due to their conservative nature, past exits from the DC space, and concerns about litigation and low profitability. While some believe banks and credit unions could reenter the market—especially by offering private-labeled, outsourced solutions—the complexity and regulation of the DC space remain barriers. JPMorgan may be the exception, not the rule, as small businesses continue seeking affordable, trusted retirement plan solutions.
Read more insights in Fred Barstein’s latest Wealth Management article, “Will Banks Step Up to Serve the Explosion of New 401(k) Plans?“
