ETF's

[Guest JCarroll]

I would be interested in knowing if any plan sponsors have added Exchange Traded Funds (ETFs) to their 401(k) family of funds. Ours is the typical 401(k) Plan with an array of equity and bond funds available for participant choosing. However, in this volatile investment time period a number of participants have expressed a desire to see ETFs as an investment option under our plan. Any thoughts (good or bad) on these types of funds and how they may or may not be suited for a 401(k) Plan would be appreciated. I am particularly interested in learing from other's experience from a fiduciary perspective. Thanks

[JanetM]

I was asked about these not long ago. The only points I made to employee were the following.

ETFs trade like funds during the day, not mutual funds at end of day.

Only couple of providers offer this sort of platform (Invest N Retire is one) for 401K plans and they have related costs. Alternative is brokerage windows with participants incurring fees on each trade (as opposed to bundled trade for entire plan).

[masteff]

I'd echo Janet's comments (which are critical stopping points, in and of themselves). The participants may not understand that ETF's are materially different from mutual funds. I'd also add that certain tax advantages of an ETF do not apply inside a 401(k) which is already tax advantaged.