Streamlining the 401(k) Investment Menu

Beginning this month, the MIT Benefits Office will invite faculty and staff to a series of focus groups designed to gather feedback on possible changes to the investment options available in MIT’s Supplemental 401(k) Plan. More than 20 focus groups are planned on campus and at the MIT Lincoln Laboratory, with special sessions for retirees. The Benefits Office expects approximately 400 plan participants to attend. Focus group participants will be selected to ensure representation from all segments of the community.

For more than a year, the 401(k) Plan Investment Oversight Committee has been evaluating the plan's core menu of investment options. The Committee has developed a preliminary proposal to streamline the number of options available in the core menu from 300 to 30 funds or fewer. The brokerage window, which enables participants to access investments outside the core options, would be maintained for those who desire greater choice.

MIT’s proposal is designed to:

• Respond to feedback from employees that the current menu is confusing and gets in the way of making sound investment choices
• Create opportunities for lower investment costs and higher overall value to participants by consolidating assets in fewer funds
• Enable MIT to better monitor the performance of funds to ensure plan participants are well-served and to satisfy increasingly stringent regulatory standards

Although it was common practice a decade ago for 401(k) plan sponsors to offer a large number of fund options, most plan sponsors have adopted a more streamlined approach in recent years. Many of MIT’s peer institutions, including Harvard University, Stanford University, Tufts University and Boston University, have already streamlined their investment menus.

The proposed investment redesign makes no changes to benefits from MIT's basic pension plan, 401(k) plan or retiree medical plan. The only change under consideration is a simplification of the core investment menu for plan participants.

The focus groups are expected to continue through March. After that, feedback will be reviewed and analyzed, and the Committee will finalize its proposal. The results, and any future plans, will be communicated in late 2014. No changes in the investment menu are expected to occur before 2015. If you have any questions or comments, please send an email to 401kfeedback@mit.edu.