Vanguard, which popularized the S&P 500 index funds,
workers will no longer be able to choose that option in
their 401(k) retirement plan.
S&P 500 index fund, one of the low-cost examples of
passive investing that put the firm on the investing
map, will be dropped this month from the mutual fund
giant’s menu of options for its employees’ 401(k)
Boyer, who previously worked in Vanguard’s
defined-contribution retirement plan division, said the
overall menu of funds available are still "great,
but why would the firm risk a potential lawsuit by
getting away from the S&P 500 index fund in its own
said colleagues were upset over the removal of the
S&P 500 index fund — an institutional class of
shares in the fund that charged just 0.02 percent
annually, making it one of the cheapest options.
Vanguard pioneered the use of such low-cost funds.
is one of the most important funds that put Vanguard on
the map and the one most investors associate with the
firm," added Boyer, who was based in the
Scottsdale, Ariz. office.
painted the slimming down of its fund choices as a
better option for employees. Money now in the funds that
are being dropped will be transferred into Target Date
Retirement mutual funds based on the employee’s age,
starting June 25.
early May, we streamlined the investment lineup for our
retirement plan, eliminating 12 funds," Vanguard
spokesman John Woerth said in an email. The number
dropped from 28 funds to 16 funds as choices, if all the
Target Date Retirement funds are counted as one option.
plan will continue to offer a broad choice of index and
active funds, including our popular Target Retirement
Fund series; our building-block index funds (Vanguard
Total Stock, Vanguard Total Bond, Vanguard Total
International Stock, Vanguard Total International Bond),
which are among our largest funds; and supplemental
choices, such as our oldest active funds (Wellington
Fund and PRIMECAP Fund)," Woerth wrote.
average plan offers 18 funds, Woerth noted, citing How
America Saves, the annual report on defined-contribution
on average, participants use 2.5 percent of the funds
offered. A total of 51 percent of all participants
invest in a single target date fund. "These stats
are for the DC [defined contribution] plans we manage;
not Vanguard’s retirement plan offered to crew,"
as the firm calls its employees, he added.
Vanguard Retirement and Savings Plan is a
defined-contribution plan with a profit-sharing
component and 401(k), according to BrightScope. Vanguard’s
retirement plan is ranked in the top 15 percent of all
plans in its peer group, according to 2016 data for
Account Balances, Company Generosity, Participation
Rate, Salary Deferral, and Total Plan Cost.
Vanguard Retirement and Savings Plan currently has over
17,800 active participants and over $4.6 billion in plan
assets, according to BrightScope.
who worked at Vanguard for 14 years handling retirement
plans for large corporate clients, acknowledged from a
fiduciary perspective, it may make sense to simplify and
reduce more expensive funds, and "since Vanguard
handles over $1 trillion in defined-contribution assets,
then the [company’s] plan is held up as a standard for
the other plans. However, most of us longtime crew
Vanguardians love the small-cap and high-yield funds. In
the industry now, low fees are more important than
performance and filling an investment style or
diversification, the S&P 500 actually is now
extremely tech-heavy, the former employee explained.
current problem with the Index 500 fund is over 25
percent of the fund is in technology stocks," while
Vanguard Total Stock market fund is better diversified,
funds sailing away
June 25, the following investments will be removed from
Vanguard’s 401(k) retirement plan:
High Yield Corporate Fund
Short-Term Inflation Protected Securities Index Fund
Balanced Index Fund
Institutional Index Fund (S&P 500)
Small-Cap Index Fund
Selected Value Fund
U.S. Growth Fund
Morgan Growth Fund
Windsor II Fund
Extended Market Index Fund
International Value Fund