KnowHow Archive

Plan Sponsor Guide Participant Guide

Sighting the Right Target

Helping participants understand target-date designs

Illustration by Maxfield Holyoke-Hirsch

Plan sponsors have long embraced the concept of asset allocation funds, most especially target-date funds that purport to deliver a diversified, professionally managed solution to participants about whom nothing is known except their projected date of retirement. The ardor for those offerings cooled a bit after the 2008 market turmoil, which highlighted differences in asset allocation and glide path assumptions that plan sponsors—and many plan participants—had not anticipated.

It also brought those differences to the attention of legislators and regulators, who initiated hearings and then began to undertake a series of education and information initiatives to help provide a better appreciation for the structure and potential risks attendant with those, and indeed any, investments.

This month’s Know How draws heavily from a communication developed jointly by the Securities and Exchange Commission (SEC) and Department of Labor (DoL) for those participant investors.

By providing them with a better understanding of what those investments are, and the factors that should be considered in making those investments, we hope that your participants will be more appreciative of these offerings and more comfortable with them as well. As always, we appreciate your suggestions and feedback.

Nevin E. Adams