Senate Hearing Asks, Are Target-Date Funds Missing the
Mark?
October 26, 2009 (PLANSPONSOR.com) - This week a
Senate committee will once again take up the topic of
target-date funds.
U.S. Senator Herb Kohl (D-Wisconsin), chairman of the
Senate Special Committee on Aging, today released a report
by the U.S. Government Accountability Office (GAO)
examining the effect automatic enrollment has on 401(k)
participation and retirement savings (see
GAO Finds Issues with Retirement Savings Proposals
), and also announced panelists for a hearing titled,
"Default Nation: Are 401(k) Target Date Funds Missing
the Mark?"
In announcing the report, Kohl noted that the GAO found
that automatic enrollment policies, which were instituted
as part of the Pension Protection Act of 2006, appear to
increase participation in 401(k) plans significantly,
though they may not be suitable for all plan sponsors, such
as those with a high rate of workforce turnover.
He said that the report also considered the benefits and
limitations of proposals to institute automatic IRAs and
other state-sponsored retirement savings accounts for
Americans who lack access to an employer-sponsored plan,
and that GAO raised questions about how such a proposal
could be implemented to effectively help low-income
workers, who are most likely to need assistance in saving
for a secure retirement.
"Just like target date funds, the auto-IRA is a
very promising concept that could help millions of
Americans save for retirement. But with both of these
products, the devil is in the details, and we need to make
sure that they are implemented correctly," said Kohl,
in a press release.
Target "Rates"
The GAO report also made mention of the widespread
adoption of target date funds as the default investment for
plans with automatic enrollment.
On October 28 Senator Kohl plans to hold an Aging
Committee hearing on strengthening the 401(k) system,
"with a particular focus on the proliferation,
composition, and regulation of target date funds."
According to the announcement, the hearing expands the
probe into target date funds first undertaken by the Aging
Committee as part of its February hearing (see
Senate Committee Takes Aim at Target-Dates
). Following that meeting, the Securities and
Exchange Commission (SEC) and Department of Labor (DoL)
also took up the issue in a special hearing (see
EBSA/SEC to Hold Target-Date Fund Hearing
).
Scheduled to testify at this week's hearing
are:
-
Barbara Bovbjerg, Director of Education, Workforce
and Income Security, U.S. Government Accountability
Office
-
Andrew Donahue, Director of Investment Management,
United States Securities and Exchange Commission
-
Phyllis C. Borzi, Assistant Secretary of Labor,
Employee Benefits Security Administration, U.S.
Department of Labor
-
John Rekenthaler, CFA, Vice President of Research,
Morningstar
-
Ralph Derbyshire, General Counsel, Personal and
Workplace Investing, Fidelity
-
Michael Case Smith, Senior Vice President,
Institutional Strategies, Avatar Associates
Nevin E. Adams
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