Very few plans offer ETFs because it's slightly more difficult to track a target asset allocation when dealing with shares (like an ETF) rather than partial shares (like a mutual fund). Also, intraday trading causes ETFs to be subject to greater order placing complexity than a fund that only trades at NAV.
But if you think about the potential benefits of an ETF, there's really no major reason to be disappointed in their absence from many plans. Here's why:
ETFs may offer a tax-efficient way to track an index, while not being required to distribute accumulated capital gains in the same way a mutual fund must. This can make a difference in taxable accounts as the ETF may be able to avoid incurring this tax on its owner. However, a 401(k) is tax deferred, so this isn't a benefit in this kind of account.
Also, ETFs trade at equity commission rates instead of mutual fund rates, which can save an investor in trading commissions. Since the trading costs in a 401(k) are embedded within the overall plan administrative expenses, this also is not much of a benefit.
Too few in my opinion. ETFs are a great low cost alternative to mutual funds.. 401k Plan Advisors have been slow to recognize this reality. I would have expected ETFs to have become a bigger part of 401k investing by now just as it has become big part of non 401k investing. High fees including fund fees are the biggest detriment to individual retire savings. The damage that high fees cost retirees over time is immense and often undetected until it is too late to correct.