Employers Make One-Third of Contributions to Large 401(k) Plans

Employer contributions to all large 401(k) plans represented 32% of contributions in 2016, roughly $107 billion, while employee contributions in plans with employer contributions totaled $219 billion.

A study from BrightScope and the Investment Company Institute examined defined-contribution, private-sector 401(k) plans in 2016, revealing trends and insights into how these plans are allocated and how many investment options are available to contributors. The study examined more than 50,000 401(k) plans that have between four and 100 investment options and more than 100 participants.

The study also looked at how many and what kind of investment options were offered in these plans. The average number of investment options was 27 in 2016, an increase of seven options from the 20 that most plans offered in 2006. Equity and bond funds were the most common investment options, with index funds representing 91.3% of the assets in larger 401(k) plans. Equity funds alone represented the largest share of plan assets among the options available at 42.9%, with the majority concentrated in domestic equity funds.

Reviewing the average expense associated with investments in 401(k) plans, the Investment Company Institute found that the asset-weighted expense ratio for all 401(k) plans averaged 0.45% in 2017, while the asset-weighted industry average expense ratio was at 0.59%. Similarly, fees for all plan size asset and mutual fund investment categories decreased between 2009 and 2016, falling anywhere from 0.07% to 0.23% depending on the kind of mutual fund.

Source: “The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2016,” by BrightScope and Investment Company Institute; June 2019.