The cost of investing in mutual funds through 401(k) plans fell again in 2017, according to a new research paper from the Investment Company Institute.
The report — “The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2017” — also shows that participants who invest in mutual funds in their 401(k) plans tend to hold lower-cost funds.
Virtually all participant-directed 401(k) plans offer a variety of pooled investment options, such as a selection of mutual funds, collective trusts, and/or separately managed accounts. Some also include guaranteed investment contracts, company stock, or a brokerage window that gives participants access to direct investment in stocks, bonds and other securities.
A majority of the 401(k) plan assets, though, are held in mutual funds. According to the report, at year-end 2017, 67% of the $5.3 trillion in 401(k) plan assets were invested in mutual funds.
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Mutual funds are required by law to disclose their fees and expenses, and ICI studies trends in those fees and expenses. ICI also separately tracks 401(k) plan account holdings of mutual funds. ICI’s report combines the results of these analyses in order to examine the fees and expenses that investors incur on mutual funds held in 401(k) accounts.
According to the report, the average expense ratios that 401(k) plan participants incurred for investing in equity, hybrid, and bond mutual funds each fell in 2017, continuing a long downward trend since 2000.