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Lincoln Trust Looks at Passive Investing in Open Architecture 401(k) Plans

June 8, 2011 - DENVER, CO

Lincoln Trust Company, a leading provider of open architecture 401(k), profit sharing, and self-directed IRA solutions, has released a white paper comparing the use of index mutual funds and ETFs in 401(k) plans. The white paper -- "401(k) Index Investing: Index Mutual Funds or ETFs - A Closer Look at Passive Investment Options for 401(k) Plans" -- evaluates which investment product and accompanying variables may produce a higher account balance over varying time frames.

According to the Lincoln Trust analysis, there are three main factors that a retirement plan advisor should consider when choosing between an ETF and index fund in 401(k) plans that track the same index:

1) Expense ratios of both products,
2) ETF share price, and
3) ETF commissions charged by the applicable plan provider.

Using hypothetical funds, the paper specifically examines how long an ETF with a lower expense ratio should be held to potentially achieve a higher account balance than an index mutual fund considering, among other factors, the ETF commission expenses. This exemplary analysis is repeated by increasing the difference in expense ratios of the two products, modifying the share price of the ETF, and changing the commission amount charged for ETF transactions.

"Lincoln Trust has always been a strong advocate for investors selecting low-cost investment options for their self-directed retirement accounts," said Tom Gonnella, senior vice president of Corporate Development for Lincoln Trust Company. "We think that both ETFs and index mutual funds are great options to include in a plan's lineup. This analysis attempts to educate 401(k) advisors on a few key factors they should consider when choosing between these two passive investment products."

With more than 2,000 qualified plan clients, Denver-based Lincoln Trust ranks among the nation's largest independent providers of retirement plan trust and custodial services. The company was recently awarded the Gartner Business Process Management Excellence Award.

To view the Lincoln Trust Company white paper, click here.

About Lincoln Trust Company
Lincoln Trust Company is among the country's leading independent providers of self-directed IRAs. Headquartered in Denver, CO, the firm provides recordkeeping, administration, and custodial services to open architecture 401(k) plans and other defined contribution plans. Lincoln Trust's extensive expertise with respect to administering accounts that hold alternative assets attracts a wide variety of individuals, businesses, and retirement plan sponsors who want the flexibility to invest beyond traditional assets, including purchasing real estate in an IRA or in another retirement plan. Lincoln Trust does not provide investment advice, and it does not sponsor or distribute retail investment products. For more information, visit or call 855-719-5796.

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Morrison Shafroth
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