401(k) plans keep dropping active domestic equity funds

Active domestic equity funds made up a large share of the fund changes 401(k) plans made in 2025, according to a Pensions & Investments review of hundreds of 11-K filings, with consultants tracing the churn to the ongoing challenges active managers face in a market that has punished fees and rewarded low-cost passive strategies.

The 11-K filings, the regulatory documents plans use to disclose lineup changes, offer a rare ground-level view of sponsor behavior. They don't show the exact replacement funds, but the direction is clear: when a plan makes a change, active domestic equity is increasingly the fund being dropped, a pattern that aligns with the broader shift toward collective investment trusts and passive vehicles that has reshaped the defined-contribution market.

Active domestic equity managers have spent a decade defending their fees against the reality that, after costs, most fail to beat their benchmarks, and plan sponsors face both a fiduciary duty and a litigation environment that pushes them toward cheaper options; the 11-K data suggests that pressure is now showing up in the mechanical decisions plans make every year.

The data doesn't capture every plan — 11-K filings are required only for publicly traded companies, so the universe skews toward larger employers — but within that universe, the pattern is consistent: active domestic equity is the fund most likely to be shown the door, a consistency that makes the filings useful even if they are not a complete census.

The consultants' diagnosis — that active managers face ongoing challenges — is accurate, but it undersells the structural nature of the problem: the DC marketplace has moved to a fee-first model, and active domestic equity is becoming a specialty allocation for plans with the resources and conviction to hold it, not a default building block. For the rest of the market, the category is increasingly a candidate for replacement.

The practical consequence for asset managers is straightforward: selling active domestic equity into 401(k) plans now requires a clear, defensible reason for a sponsor to pay up. The 11-K filings suggest that without one, the category will keep losing ground, one lineup change at a time; the same filings give plaintiffs' attorneys a fresh supply of evidence that cheaper alternatives exist, keeping pressure on plan fiduciaries to prune higher-cost funds before a lawsuit does it for them.