It Pays to Set the Menu Mutual Fund Investment Options in 401(k) Plans

Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are aliated with the plan trustee. We nd no evidence that plan participants undo this aliation bias through their investment choices. Finally, the subsequent performance of poorly-performing afliated funds indicates that these trustee decisions are not information driven and are costly to retirement savers.