Expenses paid by 401(k) participants in mutual funds continued to decline in 2012, ICI reports

The expenses that 401(k) plan participants incurred for investing in mutual funds—which include equity, bond, and hybrid funds—declined in 2012, continuing the downward trend of the past decade and a half, according to new report by the Investment Company Institute (ICI).

In 2012, the average expense ratio on equity funds offered for sale in the United States was 1.40%. 401(k) plan participants who invested in equity mutual funds paid less than half that amount, 0.63%, the ICI report found. Expenses paid by 401(k) investors were also lower than the asset-weighted average expenses for all equity fund investors (0.77%). Similarly, expense ratios that 401(k) plan participants paid for investing in hybrid funds fell from 0.61% in 2011 to 0.59% in 2012. The average expense ratio 401(k) plan participants incurred for investing in bond mutual funds dropped from 0.52% in 2011 to 0.50% in 2012.

The ICI report notes that for the last decade and a half, the costs 401(k) plan participants have incurred for investing in long-term mutual funds have trended down. In 1998, 401(k) plan participants incurred expenses of 0.74% of the 401(k) assets they held in equity funds. By 2012, that had fallen to 0.63%, a 15% decline. The expenses that 401(k) plan participants incurred for investing in hybrid and bond funds have fallen even further, by 19% and 23%, respectively, from 1998 to 2012.

Source: ICI press release, June 12, 2013.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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