Some Interesting New Data on 401(k) Plans

by Mark Hebner and IFA Contributors - Thursday, 18 December, 2014

BrightScope and the Investment Company Institute recently collaborated to produce this report on the current state of 401(k) plans based on an analysis of over 35,000 plans in BrightScope’s database as of 2012 (the latest year available). As of 6/30/2014, of the $24 trillion of U.S. retirement plan assets, 401(k) plans comprised 18.3% or $4.4 trillion, as shown in the pie chart below.

The average 401(k) plan offered 25 investment options, of which about thirteen were equity funds, three were bond funds, and six were target date funds. Two of the remaining three could probably be a stable value fund and stock in the sponsoring company.

Mutual funds were the most common investment vehicle in 401(k) plans, accounting for 46% of 401(k) plan assets, as shown in the pie chart below.

Within the mutual fund category, index funds were offered by 84% of plans in 2012, up from 77% in 2006, as shown in the bar chart below.

Assets invested in index funds rose from 17% of plan assets to 23% over the same period. Almost all (97%) of plans with more than $100 million of assets now offer index fund options to plan participants. Naturally, we at Index Fund Advisors are pleased with this trend, and we expect it to continue.

Another important trend is the ascent of target-date funds which were offered by 70% of plans in 2012 compared to 29% in 2006. Total plan assets invested in target-date funds rose from 3% to 13%.

One unsurprising finding is that larger plans tend to have lower costs than smaller plans. The average asset-weighted expense ratio for domestic equity mutual funds was 0.95% for plans with less than $1 million in assets and 0.48% for plans with more than $1 billion. Overall plan costs have been on a downward trajectory, going from 1.00% of plan assets in 2009 to 0.91% in 2012. If plans are weighted by number of participants, the numbers look better, declining from 0.65% in 2009 to 0.53% in 2012. Larger plans are more likely to have automatic enrollment of plan participants as well as provide a match or other type of employer contribution.

At Index Fund Advisors, we view all of these as positive developments, and we look forward to playing a greater role in the retirement plan market. If you would like to learn more about how IFA can assist you or your employer in developing a sensible retirement plan with fiduciary protection, please visit or rate your existing plan with IFA’s Retirement Plan Scorecard.