DC Assets Reach New Highs as Structural Hurdles Remain

While the “main measures of scale”—the number of employers, participants and plans—in the defined contribution market continue to grow, structural challenges are bubbling up, according to Morningstar’s “2026 Retirement Landscape Report,” released on March 24.

Fueled by strong market returns in 2023 and 2024, assets in DC plans surpassed $10 trillion at the end of 2024, according to Morningstar’s analysis. Returns on money already inside plans were the largest driver of plan assets, over and above money flowing into plans from contributions and out of plans through distributions and rollovers into individual retirement accounts. Meanwhile, accelerated plan closures, persistent asset leakage and growing disparities between small and large plans in both cost and coverage have sent warning signals to the industry for more than the past decade.

Industry’s Continued Growth

More than $650 billion in assets flowed out of DC plans each year between 2020 and 2024, generally through rollovers to individual retirement accounts, the report stated. From 2015 to 2024, the amount that left DC plans in rollovers and cashouts totaled $6.3 trillion. While some of the rollovers may have stemmed from employees moving money from an old employer’s plan to a new one when changing jobs, Morningstar estimated that less than $600 million of the outflows—only 9.3%—were retained in the DC system.

Morningstar’s analysis found that had half the outflows from 2015 to 2024 been retained in the DC system, plans would have had roughly $2.8 trillion more (27%) in assets than the roughly $10 trillion mark they hit at the end of 2024. In the period from 2011 through 2023, as members of the Baby Boom generation began reaching age 65, roughly 3.6 million per year turned 65. Starting in 2024, in the period known as ‘Peak 65’ an estimated 4.1 million people in the U.S. are expected to turn 65 annually until 2027, according to data from AARP.

“The constant flow of money out of defined-contribution plans limits the growth of overall assets and removes a potential buffer in times of down markets,” Morningstar’s report stated. “During down markets, such as 2018 and 2022, keeping this [retirement plan] money in the system would soften the impact, potentially reducing the decline in total plan assets to 1.6% from 4.6% in 2018 and to 12.2% from 14.3% in 2022.”

Small Employers’ Challenges

In addition, Morningstar’s analysis showed that between 2015 and 2024, more than 392,000 plans—an average of 5.7%—closed. Most closures came in the small end of the plan size spectrum: 93% of those that closed between 2015 and 2024 covered fewer than 100 participants.

Meanwhile, retirement security has become increasingly concentrated in the hands of very few employers. In 2023, only 0.3% of DC plans—2,342—covered 50% of all plan participants. Fewer than 14% of plans covered 90% of participants. The report cautioned that economic shocks could result in “dramatic decreases” in access to retirement savings plans.

On the cost front, participants in smaller plans continued to pay materially higher fees than larger-plan participants, despite broader adoption of lower-cost investment vehicles, Morningstar found. The median cost among small plans declined 4% in 2023, to 75 basis points, yet was still nearly three times as high as the 27 bps paid by participants of larger plans. Medium-sized (between $25 million and $100 million in assets), large (more than $100 million and less than $500 million) and mega (more than $500 million) plans saw marginal changes in their total participant costs, with the median cost dropping by less than 1 bps in all three categories.

“Policy solutions have often focused on bringing together smaller employers to try to replicate the large plan environment, but narrowing the distribution to reduce the number of overly expensive plans could provide a fruitful alternative,” the report suggested.

On a positive note, Morningstar’s report stated that while small plans are disadvantaged compared to larger plans due to economies of scale, there is evidence that small plans can overcome pricing hurdles. As an example, more than 24% of small plans—defined as those with $25 million or less in assets—had total participant costs less than those for the median medium-sized plan in 2023.

CITs’ Influence

According to the report, collective investment trusts—pooled investment vehicles sold by banks, which are less regulated and generally lower-cost than their mutual fund counterparts—nearly doubled their market share, to 42% from 23%, between 2015 and 2024. Morningstar recently reported that the level of assets invested via CITs grew by 20% in 2025 from 2024, while remaining concentrated among a few major providers.

The greatest uptake in CITs has been among the largest plans: in 2024, 55% of them invested through CITs, comprising 89% of the market share of assets in CITs. By comparison, CITs represented slightly more than 20% of assets for large plans and less than 10% of assets for small and medium plans through 2024.

But any growth in total assets in CITs is significant for small employers, considering the barriers that limit their adoption, according to the report. CIT asset minimums are often higher than those for mutual funds, making it more difficult for participants in smaller plans investing across a large lineup of options to concentrate sufficient assets to meet the thresholds.

The “Retirement Landscape Report” leveraged data filed from U.S. retirement plans via Form 5500 and collected by the Department of Labor’s Employee Benefits Security Administration. While the most complete Form 5500 dataset only goes through 2023, Morningstar reported having at least 95% of plan filings in hand for the 2024 plan year, as of January 16. The firm based its projections for 2024 on the number of plans it believed to be outstanding based on filings from 2023, and it scaled the 2024 numbers based on the portion of the corresponding 2023 data they represented.