Mutual fund fees paid through 401(k) plans fell again in 2016, according to a research study that the Investment Company Institute (ICI) released this week.
The study, “The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2016,” found that the average expense ratios that 401(k) plan participants incurred for investing in equity, hybrid, and bond mutual funds each fell in 2016. It was the seventh straight year that expense ratios have dropped.
For equity mutual funds, 401(k) plan participants incurred an average expense ratio of 0.48 percent, compared to 0.51 percent in 2015. The average expense ratio that 401(k) plan participants incurred for investing in hybrid mutual funds fell to 0.53 percent in 2016, from 0.54 percent in 2015. And the average expense ratio that 401(k) plan participants incurred for investing in bond mutual funds fell to 0.35 percent in 2016, from 0.38 percent in 2015.
The declines are a continuation of a long downward trend. Since 2000, expense ratios that 401(k) plan participants incurred for investing in equity, hybrid, and bond mutual funds have decreased by 38 percent, 26 percent, and 43 percent, respectively.
“This downward trajectory, which is a boon to retirement savers, is driven by competition among funds and investors’ keen awareness of fees, among other factors,” Sean Collins, ICI’s senior director of industry and financial analysis, said.
Mutual funds are a major component of the 401(k) investment landscape, comprising $3.0 trillion of the $4.8 trillion in 401(k) plan assets at year-end 2016.