Smaller plans were more likely than larger plans to add target date funds to their investment lineups between 2006 and 2013, though the former had something of a head start.
For example, 25.4% of plans with $1 million to $10 million in plan assets offered TDFs in 2006, while 72% did in 2013, according to The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2013. However, among plans with more than $1 billion in plan assets, while 77.9% offered TDFs in 2013, in 2006 43.6% had already embraced the option.
Smaller plans also experienced the largest increase in the share of plan assets invested in target date funds. In 2006, just 3.5% of plan assets for plans with $1 million to $10 million in plan assets was invested in TDFs, but that had risen to 19.4% by 2013. For plans with more than $1 billion in plan assets, the percentage of plan assets invested in TDFs rose from 2.2% to 12.5% over the same time period.
Target-Date Trends
In 2006, a third (32%) of 401(k) plans offered TDFs, but by 2013, this had risen to nearly three quarters (73%). Similarly, the percentage of participants who were offered TDFs increased from 42% of participants to 75% between 2006 and 2013, and the percentage of assets invested in TDFs increased from 3% to 15%.
Between 2006 and 2013, of the 401(k) plans in the BrightScope database in every year (or consistent plans), 29 added an average of five investment options, on net, to their plan lineups, going from 21 investment options on average in 2006 to 26 in 2013. Generally, the trend across plans was to increase the number of investment options between 2006 and 2010/2011, before leveling out for the most part.
However, running contrary to that general pattern, the largest plans, those with more than $1 billion in plan assets, had a distinct pattern of their own, expanding the number of investment options from 27, on average, in 2006 to 32 options in 2009, before paring back to 28 options in 2011 through 2013.
The largest net change was in TDF offerings, which increased from 2.7 funds per plan on average in 2006 to 7.2 funds per plan in 2013. This corresponded to a net increase from 0.4 target date fund suites on average in 2006 to 0.8 suites in 2013. If a TDF suite is counted as a single investment option, then the number of investment options offered in these consistent plans only increased, on average, from 18 options in 2006 to 20 options in 2009 through 2013.
On average, 401(k) plans offer 21 options according to this TDF-adjusted number, ranging from 19 investment options for plans with more than $100 million to $500 million in plan assets to 23 investment options for plans with more than $1 billion in plan assets.
