Vanguard, a large turnkey 401(k) plan provider, recently documented trends among its millions of defined contribution (DC) plan participants in an informative report: The great recession and 401(k) plan participant behavior.

One interesting finding: 22 percent of Vanguard’s 2010 DC plan contributions went into target-date funds, up from just 4 percent in 2006.

Most of this growth is due to automatic enrollment arrangements with target-date funds as the default choice. Unless participants actively choose investments, the default choice is automatically assigned to receive contributions. In other words, inertia makes the decisions.

When you find that clients or prospects who have automatically defaulted into target-date funds, ask them if they are evaluating the cost of inertia, and offer to help. By monitoring target-date fund performance and comparing it to other plan investment choices, you can help participants increase personal control over plan investment strategies.

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