A press release entitled, "ICI Reports Continued Downward Trend in Mutual Fund Fees in 401(K) Plans in 2015," says, "The study, "The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2015," also affirmed prior ICI research that shows that participants who invest in mutual funds in their 401(k) plans tend to hold lower-cost funds." On Money Market Funds, it says, "Only 3 percent of 401(k) mutual fund assets were invested in money market funds at year-end 2015. 401(k) participants holding money market funds had an asset-weighted average expense ratio of 0.16 percent in 2015, the same as in 2014 and lower than in 2013. The decline in money market fund fees over the recent years has been largely because of investment advisers waiving advisory fees in the current low interest rate environment.” `Given that total 401k plan assets in mutual fund are about $2.8 trillion, this means that money funds represent a mere $84 billion. In other news, Employee Benefit News posted the article, "How plan sponsors can prepare for new money market fund rules." It says, "New money market rules from the Securities and Exchange Commission -- effective in October -- will change how retail funds need to operate, creating a major impact on retirement rules. Plan sponsors need to be prepared. The new fund rules establish new definitions and rules for government and retail funds.... Investors that are not natural persons, including institutional and other non-retail investors, will not be permitted to invest in retail funds. Instead, they will be required to use institutional funds. Since a defined benefit plan does not qualify as a “natural person” under the new rules, plan sponsors who maintain both a DB and a DC plan should thoroughly examine their fund options going forward.... Government funds will not be subject to the floating NAV rule, creating a very important exception for this special category of fund. For investors that are not natural persons (including institutional and DB plans in particular), this is the only category of fund that will be exempt from the floating NAV requirement (as noted above, all institutional prime and municipal funds will float).” It continues, "During this period of transition to the new rules, fund companies have been busy merging funds, re-naming funds, etc. Many fund providers have been proactively migrating their DC plan clients to a retail-designated government fund. Plan sponsors should take note and archive any correspondence received in this regard. Any new or updated fund prospectuses and statements of additional information should be reviewed by plan sponsors or their service providers, along with the fund's competitive position, and the fund's retention/replacement should be affirmatively acknowledged by a vote of the plan fiduciaries charged with investment discretion, documented through minutes and archived accordingly. Every plan sponsor should work expeditiously to determine what sort of fund is appropriate for its plan(s). Each plan sponsor also should be engaging its service providers -- if it has not done so already -- to examine any fund held by its plan(s) to make sure the plan sponsor understands that fund in light of the new rules, and to affirm that it is a reasonable choice given plan requirements. If a plan sponsor elects to use a government fund, the plan sponsor should make a special effort to determine if the selected government fund will have the ability to impose fees and gates.... Proper monitoring of the fund's shareholder communications also is required, since only 60 days' advance notice is required to impose fees and gates."
