More than three-quarters of small businesses employees who participate in their firm's 401(k) plan have well-constructed, appropriately diversified investment portfolios, in many cases because their employer placed them in a professionally managed investment option, Vanguard researchers said on
According to a release from the company, Vanguard Retirement Plan Access 2014, the small business version of Vanguard's How America Saves 2014 report on retirement planning trends and behaviors within 401(k) and other defined contribution (DC) plans that Vanguard administers, showed that 76 percent of participants in small company plans held broadly diversified investments in 2013. More than half of those participants did so through a professionally managed investment option of a target-date fund, another type of balanced fund, or a model portfolio.
Vanguard noted that many of those participants are in a professionally managed option because of action their employer took when it moved their plan to Vanguard Retirement Plan Access (VRPA), a service launched in 2011 to provide 401(k) and other plans to small businesses. During the switch to Vanguard, two-thirds of the plan sponsors chose to reenroll their participants' assets into the plan's qualified default investment alternative (QDIA). The QDIA consisted of a professionally managed balanced investment option, namely, a target-date fund (46 percent of participants held a single target-date fund), another type of balanced fund (4 percent), or a model portfolio (2 percent).
"Because these plan sponsors took such proactive steps, the portfolio construction of their participants tends to be strong," said
Vanguard is an investment management company.
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