Exchange traded funds provide liquid and low-cost exposure to the broader markets. However, defined contribution, 401(k) plans are not taking the bait.

Executives at 401(k)s larger than $100 million show little interest in ETFs partly because current investment options in defined contribution plans, such as institutional shares of index funds, collective trusts and separate accounts, are as cheap or cheaper than ETFs, writes Robert Steyer for Pensions & Investments. [iShares: The 401(k) State of the Union]

“I don’t see ETFs as a core investment in the foreseeable future,” Robert Benish, executive director and interim president of the Plan Sponsor Council of America, said in the article.

Nevertheless, ETFs have made some inroads into  self-directed brokerage accounts. According to Callan Associates, 2.3% of defined contribution plans, with less than $200 million in assets, offered ETFs in 2012 compared to 2.5% in 2011 and zero in 2010. A Cerulli survey found that 401(k) assets made up only 0.2%, or $6 billion, of the $1.05 trillion in ETF assets as of the end of 2011.

“There’s a long road ahead for ETFs in 401(k) plans,” Alec Papazian, associate director at Cerulli Associates, said in the article, adding “there are a lot of administrative complications” that represent “significant hurdles” for ETFs in 401(k) plans.

For instance, 401(k)s are designed for end-of-the-day mutual fund trades, mutual funds can hold fractional shares, and ETF trading fees can diminish cost advantages. Consequently, Papazian believes that the administrative hurdles outweigh the benefits of using ETFs.