I suspect that few plan sponsors would believe that a 401(k) plan with its choices reduced to just 5 model portfolios would result in an INCREASE in plan participation - but that is EXACTLY what happened.   

 

You can talk theory all day long, but what really matters is real live fresh data, from the field.   

One such example was reported to me Thursday by a satisfied plan sponsor in the greater San Diego area.

 

We are in the process of taking over the plan and held the open enrollment meeting on August 15th.   It was important to the plan sponsor to increase employee participation.
 

In our 401(k) plans - a large nationwide RIA (registered investment advisor) firm chooses the funds and designs the 5 model portfolios (that use those funds). They use the same philosophy and funds that we use for our high net worth individual/couple clients.   We provide investment advice to the participants and guide them into one of the model portfolios. 

 

In fact, this client opted to provide ONLY the 5 model portfolios, and not give their participants the "6th option" of allocating their assets among the funds.    

 

We applaud this move and it certainly didn't impact the participation rate in a negative way - if anything - it made the plan even more attractive as about 80% of the remaining employees not previously enrolled, decided to enroll.   Mission accomplished.   

 

(We also completely understand and support sponsors allowing employees "building their own" - we choose the funds for the plan sponsor and also offer advice to the participants. - so their results will likely be better than a traditional 401k plan.)

 

This is light-years ahead of the mainstream 401(k) world. 

 

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