401(k) Specialist Issue 2 - 2016 - 8

401(k) NEWS YOU CAN USE
" When It Comes
to 401(k)s,
Confusion Reigns "
- NBC News
401(k) Investment Fees in Decade-Old Free Fall
THE REASONS ARE MANY and the results are good; 401(k) fees
continue to fall.
Additionally, a new report finds that those who invest through 401(k)s
pay less in mutual fund expenses then their taxable counterparts.
401(k) plan participants' cost of investing in long-term mutual
funds was less in 2014 than in 2013, consistent with the pronounced
downward trend since 2000, according to an annual research report
from the Investment Company Institute (ICI).
According to the report, " The Economics of Providing 401(k)
Plans: Services, Fees, and Expenses, 2014, " 401(k) participants
paid an average expense ratio of 0.54 percent of assets for equity
mutual funds-the most common type of mutual funds in 401(k)
plans-down from 0.58 percent in 2013. That's less than half of the
average expense ratio of 1.33 percent for all equity funds offered
in the United States in 2014. The difference reflects the fact that
401(k) participants tend to concentrate their assets into lower-cost
mutual funds.
" The data underscore the significant trend of declining mutual
fund fees in 401(k) plans since 2000, " Sean Collins, ICI's senior
director of industry and financial analysis, said in a statement. " In
this competitive market, funds are striving to provide not only better
services, but also lower prices, to the benefit of mutual fund investors
saving for retirement in 401(k) plans. "
LONG-TERM DOWNWARD TREND OF FUND FEES PAID BY 401(K)
PARTICIPANTS CONTINUES
Since 2000, the average expense ratio paid by 401(k) participants
for equity mutual funds has fallen by 30 percent, from 0.77 percent
of assets in 2000 to 0.54 percent in 2014. The fees that 401(k) plan
participants paid for hybrid and bond mutual fund investments also
fell from 2000 to 2014, by 24 percent and 28 percent, respectively.
8 ISSUE 2 2015 | 401kSpecialistmag.com
From 2013 to 2014, hybrid fund expenses fell from 0.57 percent to
0.55 percent, while the expense ratio for bond mutual funds in 401(k)
plans dropped from 0.48 percent to 0.43 percent.
At year-end 2014, 88 percent of 401(k) plan equity fund assets
were invested in mutual funds with expense ratios of less than 1.00
percent, and 45 percent of such assets were invested in equity funds
with expense ratios of less than 0.50 percent.
REGULATORY REQUIREMENTS IMPOSE COSTS ON 401(k) PLANS
The report explains that regulatory and other requirements of offering
a 401(k) plan impose costs on participants in addition to the costs
of investing in mutual funds and other products offered in the plan.
Employers are fiduciaries to the participants in their plan and thus
are obligated to ensure the reasonableness of costs that participants
pay for plan services. Employers and plan participants
generally share the costs of operating 401(k) plans.
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401(k) Specialist Issue 2 - 2016

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