Vanguard Removes S&P 500 Fund From Its 401(k)

According to the firm, the Total Stock Market Index Fund, which remains in the investment menu, is the best proxy for the U.S. market.

Vanguard has removed 12 funds from its 401(k) plan, including the popular S&P 500 fund, which charges a fee of a mere 0.02%.

Alyssa Thornton, a Vanguard spokesperson, told PLANADVISER, “Like many companies, we conduct regular reviews of our employee 401(k) plan to ensure we are implementing leading plan design best practices. According to ‘How America Saves 2018,’ Vanguard’s annual DC [defined contribution] benchmarking report based on recordkeeping data for nearly 2,000 qualified plans, the average plan offers an investment menu of 18 funds, and, on average, participants use less than three funds in their portfolios. More than half of all participants in these plans are invested in a single target-date fund [TDF].”

The investment menu of 27 funds “will continue to offer a mix of low-cost, broadly diversified index and actively managed investment products, including the Total Stock Market Index Fund, which [Vanguard believes] is the best proxy for the U.S. market, offering exposure to large-, mid- and small-cap stocks.” Assets that were invested in the 12 funds being removed from the plan will be transferred to an age-appropriate target retirement fund, unless an employee decides on another option, Thornton added.