Fifty-one percent of 401(k) plans expect to change their investment lineups in the next 12 months, according to a Cogent Research survey released Tuesday, a “considerable” increase from the 44% that forecast changing lineups a year ago, said Linda York, lead author of a report describing the survey results.
In an interview, Ms. York attributed the increase to a greater sensitivity to fee disclosure thanks to Department of Labor fee-disclosure regulations that took effect last year. Ms. York is vice president, syndicated division, of Market Strategies International, the parent of Cogent Research.
“It's the primary driver,” she said of the regulations. “It's waking a lot of people up. … More sponsors are trying to reduce plan costs. They are looking at ways to adjust the investment menus and still have a robust enough lineup.”
Cogent's Internet-based survey was conducted in March and April. Among the 606 respondents, 69, or 11.4%, represented “mega” plans, those with assets of $500 million or more; 111 were from “large” plans, those with assets of $100 million to $500 million, representing 18.3% of the sample.
Among the megaplans, 36% of DC executives said they expected to change their investment lineups in the next 12 months but keep the same number of investment options, Ms. York said. Thirteen percent said they planned to increase the number of options, 10% said they would cut options and 41% said their plans wouldn't change.
Among large plans, 43% said they would change the lineup but keep the same number of options; 8% said they would increase the number of options; 3% said they would reduce the number of options; and 46% said their plans wouldn't change.
The mega- and large plans are likely to use the fee-disclosure regulations to negotiate lower fees or lower-fee share classes, Ms. York said.