Defined contribution plans suffer no shortage of critics—justask the plaintiffs’ bar.

The most strident would like to see them go away altogether, andreturn to the days when defined benefit pensions were the primaryplatform for readying workers for retirement.

That is unlikely to happen, of course. But a new survey of 20sponsors of mega 401(k) plans that hold billions, and in some cases tens ofbillions, in participant assets, suggests more fiduciaries areincorporating components of traditional defined benefit portfoliomanagement into their 401(k) platforms.

“Historical approaches to DC plans have generated decidedlymixed results, including an over-reliance on retail investmentsolutions, inability to integrate automation and education, andinefficiently priced products and services,” says a new paper fromBNY Mellon, The DC Plan of the Future: DBPrinciples for the DC Generation.

Read: 401(k)s beat pensions for higher incomereplacement rates

Credible studies crop up every year comparing 401(k) plans’ ability togenerate retirement income relative to traditional pensions.

A couple of years back, Towers Watson compared annual investmentreturns of 401(k)s to pensions over a 17-year period, beginning in1995.

Read: Top 5 industries for 401(k)plans

The investment strategies of DB plans routinely outperformedreturns in 401(k)s, which are not only self-directed bynon-investment professionals, but also have access to fewerinvestment options. For six of those years, returns on pensionportfolios were more than 2 percent better than 401k plansgenerated.

Those results go a long way to explaining why more of thelargest 401(k) sponsors are actively implementing tradition DBinvestment strategies into their DC plans.

Here is a look at exactly how the largest sponsors are borrowingfrom the past as they create the 401(k) plans of the future.

#1: Creating income for life by annuitizingdeferrals

Over half of the of the sponsors said providing retirementincome will drive the greatest changes in plan design by 2020, morethan investment product innovation, regulatory or litigationissues, or market volatility.

“In the same way that people know the monthly payments of theirpension (DB) and social security, the same thing can be done withDC plans,” the study says.

While forward-thinking sponsors are addressing lifetime incomeneeds, real obstacles are slowing the process. The financial crisiscalled into question the solvency of some major insurance carriers,such as AIG needing a government bailout. Some annuity productswere pulled from the market during the crisis, according to thereport.

Also, regulators have been slow to provide a clear safe harborfor sponsors in offering annuities, though effortsfrom the White House to clarify sponsors’ fiduciary obligations inselecting and monitoring an annuity provider suggest the regulatorywill exists to facilitate annuities in 401k plans.

#2: Institutionalizing investment options

Of all the controls at sponsors’ disposal, the study calls theuse of institutional investment vehicles the “low-hanging fruit” inthe effort to reduce plan costs and implement greater control overinvestment outcomes.

More than one-third of sponsors said they will reduce the numberof mutual funds from lineups, and 65 percent said they willincrease the use of institutional investment vehicles such ascollective trusts and separately managed accounts.

The average expense ratio of all CITs (including passive andactive strategies) is 32 basis points, compared to 45 basis points,the average for all mutual funds.

Beyond the lower fees, separate accounts allow sponsors tocustomize an investment strategy. In “white labeling” an investmentstrategy, sponsors can leverage investment managers with provensuccess overseeing participants’ DB plan assets.

Sponsors said they continue to limit the number of investmentoptions. In customizing institutional investment options, they canimprove underlying diversification issues in some traditionaloff-the-shelf funds, while minimizing participant confusion bynarrowing the range of investments to choose from.

#3: Adding a place for private equity, hedge funds andother alternatives in mega 401(k)s

Mega sponsors are warming to offering alternatives to 401(k)participants, even as some public pension funds and institutionalinvestors pare back some alternative vehicles, such as hedgefunds.

The paper suggests that by accessing the range of investmentsavailable with DB strategies, 401(k) participants could not onlyexperience higher long-term returns, but also build in protectionsfrom volatile equity markets.

In total, 30 percent of sponsors said they are increasingalternative options (5 percent are adding hedge funds, 25 percentare adding liquid alternative funds).

Alternative investment fund manufacturers are helping the causeby providing products that don’t include the carried interest orincentive fees seen in traditional alternative investments, whichhave garnered significant criticism over the past severalyears.

Sponsors also said they are looking to include alternative fundsin custom target-date funds, giving participants investmentdiversity while addressing liquidity issues that have harmed thecase for alternatives in 401(k)s in the past.

Some sponsors indicated concern over stand-alone alternatives ininvestment menus, as participants may get the impression thatalternatives can’t lose money.

Last year, fiduciaries of Intel’s 401(k) plan were sued for thevolume, cost, and quality of the alternative investments in itsplatform.

Notwithstanding that case, BNY Mellon says all indications arethat sponsors of mega plans see a place for alternatives inparticipants’ 401(k) strategies.

#4: Unbundling fees and improvingtransparency

Combining investment, recordkeeping, and administration fees cancreate inflated costs, limit transparency, and introduce potentialconflicts of interest, the papersuggests.

“The DC Plan of the future will have a more transparent feestructure, particularly on the investment side,” the papersaid.

The vast majority of mega-plan sponsors—95 percent—expect to seegreater unbundling and less reliance on revenue-sharingagreements.

“Whether driven by regulators, lawsuits, or voluntary changes,sponsors anticipate a decreased reliance on marketing anddistribution fees and related payments. Fees will become morecompetitive once sponsors can see what they are paying for.”

#5: Combining education and automation

The automatic-enrollment and automatic-escalation provisions ofthe Pension Protection Act have succeeded in expanding enrollmentbut have failed to ensure adequate savings rates, failed to addressparticipants’ specific savings needs, and failed to provide incomepredictability in retirement, the paper says.

Two-thirds of mega-plan sponsors said they plan to increase thetime invested in participant education to address the shortcomingsof auto-enrollment.

“Returns are important,” notes the paper. “But successfulcampaigns stress the need for disciplined approach, with savings asthe main engine of growth.”

Deeper analysis of the true cost of 401(k) loans is one toolsponsors are exploring to better educate their participants.

Sponsors in the BNY Mellon survey noted the need for targetededucation of retiring employees. Because mega plans have suchsignificant purchasing power, and given sponsors’ intent to reduceplan costs more with CITs and separate accounts, retirees will facepotentially expansive new investment costs when they roll out assets at retirement intoIRAs packed with more expensive retail mutualfunds.

That raises the question of leaving assets in plan atretirement, and how that might benefit not only participants, butalso mega-plan sponsors.

“Targeted communications to participants nearing retirement canhighlight the fact that staying in the plan is a compellingoption,” the paper said.

Moreover, “sponsors with plans where the majority of assetsconcentrated among a narrow group of participants nearingretirement have the added motivation of considering the potentialimpact that large rollovers would have on the plan.

“Defections by boomers with high account balances couldsignificantly decrease plan assets, leading to decreased economiesof scale and higher fees for remaining participants,” the papernoted.