Retirement Plan Investments Heavy on TDFs, Index Funds

Take a peek behind the scenes of other sponsors’ retirement plans and you may gain some useful insights into ways to improve your own retirement plan. Some key findings in a recent benchmarking report include:

• The most common investment vehicle was the mutual fund, which held 46% of 401(k) plan assets. In all but the largest plans, mutual funds held more than half of plan assets; the largest plans relied more on collective investment trusts, which held about 21% of assets overall for 401(k) plans.
• At the end of 2012, nearly 70% of 401(k) plans offered target date funds, up from about 29% in 2006.
• Index funds, which generally offer lower expense ratios than actively managed funds, held about 25% of plan assets in 2012. Plans with assets of $10 million or less had about 10% in index funds, compared to more than 20% in plans with more than $250 million in assets.
• BrightScope’s research shows plan costs are trending lower. The 2012 average total plan cost (which includes administrative, advice, and asset-based management fees, as well as other fees gleaned from 2012 Form 5500 filings) was 0.91% of assets, down from 1% in 2009.

This information was gathered from private sector 2012 Form 5500 filings and compiled in a report by BrightScope and the Investment Company Institute (ICI), published December 2014. See The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans.