The average large 401(k) plan offered 27 investment options — including a mix of equity funds, bond funds, and target date funds, according to a recent study by BrightScope and the Investment Company Institute (ICI).
“Employers recognize the importance of being able to customize the design of their 401(k) plans to suit their workforces, which is one of the strengths of the 401(k) system,” Sarah Holden, ICI’s senior director of retirement and investor research, said. “Employers use the flexibility of the 401(k) system—including a wide variety of investment options and the structure of employer contributions—to build plans that encourage employee participation and make it easier for participants to plan and save.”
It also found that plan fees continue to decline.
“The 401(k) marketplace is constantly evolving, and with that, the overall costs of 401(k) plans for participants have declined,” Brooks Herman, vice president of data and research at BrightScope, said. “There are a variety of factors contributing to the decrease of fees and expenses in plans, including increased competition and the growing size of the 401(k) marketplace, as well as public disclosure of plan costs. All of these factors benefit participants and help them continue to grow their retirement nest eggs.”
The study also revealed that 85 percent of large 401(k) plans offered employer contributions. Employer contributions most commonly are structured as a simple matching contribution. Additionally, nearly 60 percent of larger 401(k) plans automatically enrolled their participants.
Finally, all large 401(k) plans included domestic equity funds, international equity funds, and domestic bond funds. Also, 80 percent of large 401(k) plans offered target-date funds while 69 percent offered guaranteed investment contracts (GICs) and 65 percent offered other types of balanced funds. In addition, 44 percent offered money funds, and 30 percent offered international bond funds.
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