SAN FRANCISCO — 401(k) plan sponsors are offering fewer investment options, a new Callan Associates Inc. survey shows.
At the same time, more plans are offering lifecycle funds, according to the survey of 95 defined contribution plans with a total of more than $100 billion in assets.
The plans surveyed by San Francisco-based Callan offered 16 investment options in 2004, down from 20 in 2001, the last time Callan conducted its survey. In 1998, plans offered an average of 11 investment choices.
"During the late '90s and early 2000s, plan sponsors wanted to meet participant demand for more fund choices. It was a vocal minority, but plan sponsors were very willing to accommodate those participants and offer more choice," said Anna Oakley, vice president and defined contribution practice leader at Callan.
"Now, plan sponsors see that more choice is not the best thing for participants," she said.
Callan does not believe the average number of investment options will decline further. "It won't continue much more," Ms. Oakley said. With lifecycle funds separately based on risk and retirement age, the number of funds will balance out. "Risk-based series can offer three to five options, and time-based series could offer six to 10," she said.