Although the average number of fund choices in a 401(k) plan is 15, many employers offer dozens and dozens of selections. But a number of leading companies are now beginning to trim those offerings back, which should be very beneficial to investors, as it helps boost participation, The Wall Street Journal reports.
Plans that offer only two investment choices experience participation rates of 75%, a recent study by Columbia University found. For every additional 10 choices, participation drops 2%
Employers are also beginning to offer more diverse offerings, including REITs and fixed-income funds, while they are also limiting sector or other types of specialized funds.
Three leading retirement plan administrators Vanguard, Merrill Lynchs retirement group and Manulife Financial told The Journal they are seeing many employers cut back on their offerings. Indeed, Ford Motor Co. recently trimmed the 60 choices it had in its 401(k) plan to 36. Sierra Pacific Resources cut back its 43 offerings to 19.