TD Ameritrade Trust Co. recently launched a program enabling plan sponsors and independent RIAs to offer exchange-traded funds to 401(k) participants.

The Jersey City, N.J.-based provider of trust and custodial services to retirement plans said the use of ETFs among TD Ameritrade clients has jumped more than 30% annually for the past two years. But ETFs have been slow to penetrate the 401(k) space due to technical challenges.

A big issue is that legacy 401(k) recordkeeping and accounting systems are based on mutual funds that trade in fractional shares and entail next-day settlement. ETFs, on the other hand, trade throughout the day and only in whole shares.

To counter that, TD Ameritrade Trust developed a trading process that includes the ability to trade fractional shares of ETFs and to facilitate next-day settlement, says John Newman, chief operating officer at TD Ameritrade Trust, a subsidiary of of TD Ameritrade Holding Corp.

Furthermore, per-share fees and transaction fees are eliminated for 401(k) plans on the TD Ameritrade Trust platform, which the company says creates potential cost savings to plan participants and eliminates the reconciling component for recordkeepers. Additionally, the TD Ameritrade Trust platform is an open architecture system that allows advisors and plans sponsors to select ETFs from multiple providers.

With this platform, the company says, ETFs can join mutual funds, collective investment funds and employer stock in 401(k) plan portfolios.

Newman says TD Ameritrade Trust works with roughly 4,000 qualified business retirement plans, with the vast majority served by fee-based RIAs acting as fiduciary advisors to the plan.