Expense Ratios Fell on DC Plan Stock Mutual Funds in 2010: ICI

ICI noted that 401(k) participants who invest in mutual funds tend to choose lower cost funds with below-average turnover, as well as no-load funds. Furthermore, according to ICI, load funds typically waive sales charges for retirement plan participants, making expense ratios often the only cost associated with owning mutual funds for most 401(k) participants.

“401(k) plan sponsors are aware of the costs associated with fund ownership, regularly evaluate investment options in their plans, and are seeking and getting good value in mutual funds,” Sarah Holden, senior director of retirement and investor research, said in a press release. “The drop in the average expense ratio incurred by 401(k) investors in stock mutual funds reflects cost-conscious decision-making by plan sponsors and plan participants, as well as the impact of rising stock values in 2010, which helped to spread fixed fund expenses across a larger asset base.”

The report found that not only did stock fund expense ratios fall in 2010, 401(k) investors pay lower expense ratios overall. The average total expense ratio incurred by 401(k) investors in stock funds was half of the simple average for all stock funds, and lower than the industrywide asset weighted average of 0.84%.