The Impact of Artificial Intelligence on DC Plans: 3 Questions with Beth Hanig

The Impact of Artificial Intelligence on DC Plans: 3 Questions with Beth Hanig
December 23, 2025 8 mins

The Impact of Artificial Intelligence on DC Plans: 3 Questions with Beth Hanig

The Impact of Artificial Intelligence on DC Plans: 3 Questions with Beth Hanig

Artificial Intelligence (AI) is reshaping DC plans with personalized advice, operational efficiency, and new ethical and regulatory considerations.

As the defined contribution (“DC”) landscape continues to evolve, Artificial Intelligence (“AI”) is emerging as a transformative force with the potential to reshape retirement outcomes for millions of participants. The prospect of integrating AI into DC plans offers new opportunities to enhance participant experiences, optimize investment strategies, and streamline plan administration. As plan sponsors and fiduciaries seek to improve retirement readiness for their employees, understanding the multifaceted impacts of AI—including personalization, operational efficiency, and ethical considerations—will be critical to informed decision-making.

01
What Could be the Impact of AI on DC Plan Participants?

Perhaps one of the biggest opportunities for AI to impact individual participant experiences and outcomes is by using technology to drive more personalized communication and recommendations.

By leveraging complex algorithms, recordkeepers can analyze participants’ financial behaviors, preferences, and demographic profiles to deliver tailored communications and recommendations. This approach can improve participant engagement, may increase satisfaction, can foster a stronger sense of trust in the plan provider, and potentially drive better outcomes.

For example, AI can deliver individualized investment advice and retirement planning strategies that reflect each participant’s unique situation. These capabilities move beyond traditional segmentation, enabling plan sponsors to connect with participants in more meaningful ways.

Another aspect of these advancements that could be felt directly by participants has to do with recordkeeping efficiencies and costs (which are often borne by participants).

While recordkeepers have been using AI technology like chat-bots to answer participant questions for years, there is now the potential to drive much more efficiency in recordkeeping and administrative processes. Automation and advanced data analysis can reduce manual workloads and streamline operations, which may ultimately lead to lower plan administration costs. However, it is important to note that the upfront investment in AI technology can be substantial, and the immediate impact on fees may be limited. Over time, as AI systems mature and scale, the cost savings and operational efficiencies are expected to become more pronounced.

02
What Could be the Impact of AI on Investment Management?

Using AI can help investment managers see patterns not noticed before or scrub large amounts of data to improve their forecasts or sharpen their ideas. This technology is being used not only by quant managers, but also by fundamental managers. Recently, we have seen investment managers using AI for efficiency more than decision-making. Similar to what was discussed regarding recordkeeping costs, we believe there is a potential to drive down investment manager fees; however, given tech investment to capitalize on AI, do not expect those fee savings yet.

Traditional investment options, such as Target Date Funds (TDFs), have been a mainstay in DC plans. While TDFs account for a significant share of plan assets, their reliance on basic participant data to set asset allocation—typically a birth date—limits their ability to address individual circumstances and goals. Managed accounts offer the potential for a more customized experience, but often require active participant engagement, which can be a barrier to adoption and impact. 

The integration of AI is facilitating the development of the next generation of investment solutions that combine the automation of TDFs with more personalization than today’s managed accounts. For example, AI has become able to synthesize information from multiple sources—including financial records, demographics, public data, and behavioral analytics—eventually, it may inform more sophisticated investment products. As investment managers compete for a share of the substantial assets in US DC plans, the ability to deliver highly tailored solutions will become an important differentiator.

78%

of workers in the U.S. are using generative AI, with 73 percent of them using their own devices, highlighting the widespread and somewhat uncontrolled use of AI tools. 

Source: Microsoft

03
What are the Ethical and Regulatory Considerations?

While the opportunities to positively impact DC participant outcomes and experiences are tremendous, they do not come without some concerns, especially as it relates to ethical and legal implications.

The expanded use of AI in DC plans raises important questions about participant data privacy and security. As more detailed information is collected and analyzed, ensuring the protection and ethical use of personal data is essential to maintaining participant trust.

Plan sponsors must evaluate the safeguards in place to protect sensitive participant information and comply with applicable data privacy regulations. Further, we believe how a recordkeeper uses AI will become a key consideration when fiduciaries evaluate recordkeepers. 

The use of AI algorithms in investment decision-making introduces new ethical considerations related to transparency, fairness, and accountability. It is critical that AI systems are designed and implemented in a manner that aligns with the best interests of participants and avoids unintended biases or discriminatory outcomes.  It may be challenging for fiduciary decision-makers to evaluate offerings that rely on AI generated elements.

The regulatory environment surrounding AI in DC plans is evolving, but not as quickly as the technology is evolving. Fiduciaries must stay informed about existing and emerging regulations governing data protection. Compliance requirements specific to AI in retirement plans are likely to emerge and fiduciaries may be reluctant to capitalize on many of the opportunities that have already been discussed before guidance and regulatory oversight catch up.

75%

of organizations now have roles requiring AI skills, yet just 31 percent have effectively implemented company-wide AI strategies.

Source: Aon’s 2024 Artificial Intelligence Study

Conclusion

AI is poised to significantly enhance the DC plan landscape by enabling deeper personalization, improving operational efficiency, and supporting the creation of innovative investment products. While the potential benefits are substantial, the integration of AI also introduces new ethical, privacy, and regulatory challenges that require careful consideration. Plan sponsors and fiduciaries must commit to ongoing education and prudent evaluation to ensure that the adoption of AI aligns with the best interests of plan participants.

The transformative power of AI is already reshaping expectations for retirement savings. By embracing AI with a focus on ethical standards, data privacy, and regulatory compliance, plan sponsors can unlock new opportunities to improve participant outcomes and advance the future of defined contribution plans.

Aon’s Thought Leader
  • Beth Hanig
    Defined Contribution Solutions Leader, Aon Investments USA Inc.

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The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.

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