Target Date Funds

12/10/2010 / Mary L. Komornicka

In recent years, Target Date Funds have become a dominate investment options in most retirement plans. Developed to provide employees with a simple fund that would adjust asset allocation as individuals neared retirement, these funds quickly became a common investment option in many 401(k) plans. However, the internal structure of these funds have created difficulty for the participant and plan sponsor to assess the investment performance of these funds. The DOL has issued proposed regulations that will require target date funds to disclose additional information in a consistent manner. Specifically, the funds will need to disclose the glide path (the change in asset allocation over time) and the date at which the asset allocation becomes static. These proposed regulations are similar to the proposed regulations issued by the Securities and Exchange Commission.
It is anticipated that under these regulations there will be more consistent information provided to plan sponsors regarding the performance of different target date funds as well as providing employees with better information regarding the investment structure of these funds.
If you have questions regarding Target Date Funds, please contact one of Larkin Hoffman’s experienced Benefit attorneys.