Compliance May 6, 2010

DoL, SEC Offer TDF Primer

May 6, 2010 (PLANSPONSOR.com) - The U.S. Department of Labor’s Employee Benefits Security Administration and the U.S. Securities and Exchange Commission have published what was termed “guidance to help investors and plan participants better understand the operations and risks of target date fund investments”.
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In announcing the release, EBSA noted that, “There can be significant differences among target date funds in how they invest and how they reallocate assets between equity and fixed income investments up to and after the target date of the fund.  The guidance will assist investors and participants in assessing the benefits and risks associated with target date funds and the appropriateness of including such an investment as part of their retirement portfolios”.

Elementary Outline

The “guidance” turns out to be a pretty elementary outline of some basic features of target date funds, including the investment mix of such funds, an acknowledgement that there are risks associated with the investments, how target date funds operate, and ways to evaluate a target date retirement fund. 

However, the latter category keeps to the elementary theme, counseling only that investors:

  • Consider your investment style
  • Look at the fund’s prospectus to see where the fund will invest your money
  • Understand how the investments will change over time
  • Take into account when you will access the money in the fund, and
  • Examine the fund’s fees.

“Investor Bulletin:  Target Date Retirement Plans” is available at http://www.dol.gov/ebsa/pdf/TDFInvestorBulletin.pdf

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