Certain trends have already impacted many employer-sponsored 401(k)s, and soon experts predict the majority of plans will be influenced by these things.
Most plans will follow these trends in upcoming years, according to new research from Fidelity’s 401(k) team:
The new standard
1. Self-directed brokerage windows. In recent years, self-directed brokerage windows (an investment option that allows employees to invest in things other than the company’s general fund lineup) have been growing in popularity.
Between 2012 and 2013, the number of participants using self-directed brokerage windows has increased by 18%.
2. Roth 401(k)s becoming the norm. According to Fidelity, 42% of 401(k) plans offered a Roth option in 2013. And with the feds making it easier than ever for employees to roll over 401(k) funds into a Roth plan, the popularity of this investment option is only likely to increase.
3. The domination of target-date funds (TDFs). Speaking of investment options that are only likely to grow, one-third of 401(k) participants had 100% of their assets invested in a TDF last year. To give you an idea of how far TDFs have come, consider this: 10 years ago, just 3% of 401(k) participants had 100% of their assets invested in a target-date fund.
Since TDFs aren’t going away any time soon, firms should focus on making sure employees understand how these investments work as well as some of the finer points of TDFs.
4. Apples-to-apples comparisons. These days, employers want to show how well their offerings – as well as their employees’ participation, contributions, savings, etc. – stack up against the competition.
To that end, there are plenty of vendors offering tools and services to help companies understand how they compare to other plans using an array of different metrics.