The financial research firm BrightScope on Tuesday released its annual list of the 30 top 401(k) plans and found that target-date funds are making inroads in highly rated plans.

The average plan on this year’s list had 4.9 percent of its assets in target-date funds, up from 3.6 percent in 2010. (This year’s list reflects plan data as of the end of 2011.) There has been a large flow of money into target-date funds because they are often the default enrollment option for employees, said Dan Weeks, BrightScope’s co-founder. The funds automatically reallocate investments, reducing exposure to stocks as retirement nears.

Index funds, meanwhile, represent 29.5 percent of assets in the top 30 plans, up from 25.4 percent in 2010.

Brokerage windows — a self-directed option, in which employees can choose their own mutual fund investments — are also becoming somewhat more popular: they represent 3.8 percent of 401(k) assets in this year’s list, up from 2.8 percent in 2010.

The list represents the top 30 of more than 400 retirement plans with $1 billion in assets, as rated by BrightScope. (Some companies offer more than one plan.) BrightScope bases its ratings on about 200 different factors, and boils down the information to a single rating number.

Criteria include the amount of money flowing into the plan from the employer, the participation rate of employees, the total cost of the plan and the investment choices it offers. In a nutshell, the sooner a plan allows employees to retire, the more highly it ranks. The company uses information gleaned from public filings with the Department of Labor and the Securities and Exchange Commission, combined with information from the plans themselves. [Read more…]

Article source: http://bucks.blogs.nytimes.com/2012/12/12/brightscope-lists-its-top-401k-plans/?partner=rss&emc=rss