A report released June 29 by the Investment Company Institutefound that 401(k) participants paid lower expense ratios on stockmutual funds in 2010 than in 2009.

The report, The Economics of Providing 401(k) Plans:Services, Fees and Expenses, 2010, found theasset-weighted average expense ratio for stock funds dropped 3basis points to 0.71% in 20­10, following a drop in three of theprevious five years. Of the $3.1 trillion in 401(k) assets as ofyear-end 2010, more than half was invested in mutual funds,especially stock funds.

While expense ratios for bond funds were unchanged between 2009and 2010, the asset-weighted average expense ratio on money marketfunds fell 9 basis points to 0.28%. This decline, according to ICI,is largely due to the low interest rate environment and fee waiversfrom many money market fund providers.

ICI noted that 401(k) participants who invest in mutual fundstend to choose lower cost funds with below-average turnover, aswell as no-load funds. Furthermore, according to ICI, load fundstypically waive sales charges for retirement plan participants,making expense ratios often the only cost associated with owningmutual funds for most 401(k) participants.

“401(k) plan sponsors are aware of the costs associated withfund ownership, regularly evaluate investment options in theirplans, and are seeking and getting good value in mutual funds,”Sarah Holden, senior director of retirement and investor research,said in a press release. “The drop in the average expense ratioincurred by 401(k) investors in stock mutual funds reflectscost-conscious decision-making by plan sponsors and planparticipants, as well as the impact of rising stock values in 2010,which helped to spread fixed fund expenses across a larger assetbase.”

The report found that not only did stock fund expense ratiosfall in 2010, 401(k) investors pay lower expense ratios overall.The average total expense ratio incurred by 401(k) investors instock funds was half of the simple average for all stock funds, andlower than the industrywide asset weighted average of 0.84%.