Average 401(k) Expense Ratio Declines

Jul 01, 2011 --- According to an annual report by the Investment Company Institute (ICI), 401(k) plan participants invested in stock mutual funds on average paid lower expense ratios in 2010. ---

The report,The Economics of Providing 401(k) Plans: Services, Fees and Expenses, 2010, shows at year-end 2010, $1.8 trillion, or more than half, of the $3.1 trillion in 401(k) assets was invested in mutual funds, primarily in stock funds. 

The asset-weighted average expense ratio paid by 401(k) investors on their stock funds dropped 3 basis points to 0.71% in 2010, slightly lower than the 2009 average. According to the ICI, the 401(k) average expense ratio is measured as a 401(k) asset-weighted average; the total expense ratio, which is reported as a percentage of fund assets, includes fund operating expenses and the 12b-1 fee. 

“The drop in the average expense ratio incurred by 401(k) investors in stock mutual funds reflects cost-conscious decisionmaking 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,” said Sarah Holden, Senior Director of Retirement and Investor Research.