In February the Department of Labor’s Employee Benefits Security Administration (EBSA) issued new guidance for plan fiduciaries regarding Target Date Funds (TDFs), a relatively new and increasingly popular destination for retirement plan contributions. Although the document’s title describes its content merely as “Tips,” we believe EBSA expects plan fiduciaries to take this guidance seriously.

Target Date Funds “101”
Focusing on a given year in which participants are likely to retire, a TDF gradually shifts its asset mix toward more conservative invest-ments as the date nears.

“Glide path” refers to the number of years until a TDF’s asset mix reaches its most conservative point.

In some TDFs the glide path ends in the fund’s target year, while in others the path may extend beyond the target year.

Maha Rasayan capsules improve your stamina, power and energy levels. cialis in usa cialis online uk Recommended Dosage and Usage Kamagra Oral Jelly the impact will be evident inside as short as 14 minutes;*strong adequacy profile – studies show noteworthy change in 85% of patients who were utilizing Kamagra Oral Jelly;*the impact is sturdy – Kamagra Oral Jelly misbehaves to 12 hours;*kamagra Oral Jelly has few symptoms and is accessible online at sensible cost. Treatments When getting the disease, women who are about 50 percent are able to be lowest priced viagra treated by medicines. The key to preventing erectile dysfunction is to blame the man must undergo a few tests. buy line viagra
No doubt the Department has noted the strong growth of assets in TDFs (they rose nearly 29%, to $96.5-billion, in the 12 months ended September 30, 2012, according to Pensions & Investments), as well as predictions that this growth will continue. As such, it’s no surprise that the Department is focusing their attention on the selection and use of these funds.

Major points of the new guidance on TDFs include:

  • Evaluate the TDF based on the characteristics of the participant population.
  • Review your plan’s TDFs at consistent intervals, paying close attention to investment strategy and management team changes.
  • Understand each TDF’s glide path and how the investments will change over time.
  • Monitor the fund’s fees and investment expenses as well as the underlying funds of the TDF.
  • See if a custom or non-proprietary TDF would benefit your participants.
  • Educate your participants about TDFs.
  • Document the process you use to select, monitor and manage your TDFs.

Reinforcing a point from the guidance: Fiduciaries must understand their TDF’s glide path (defined in the box above). Some TDFs with longer glide paths might retain substantial holdings in stocks or other relatively high-risk investments. In these cases it is usually assumed that most of the participants will not withdraw all of their contributions upon their retirements.

If the plan sponsor has clearly communicated this aspect of the TDF to its participants, there should be no problem with it. The key, of course, is ensuring that communication happens consistently.