TDFs have become an increasingly popular option for investors who are attracted to what SEC Chairwoman Mary Schapiro described as the “set it and forget it” nature of the funds.
She questioned whether additional SEC regulations should be implemented to address deficiencies regarding TDF’s, predominantly with regards to disclosure rules and asset allocation mandates.
“Recent concerns have been raised about variation in the glide paths of same-date target funds offered by different providers, and how this variation may result in plan participants and investors unknowingly placing their retirement assets at risk,” said Seth Harris, deputy secretary for the DOL.
Commentators generally agreed that additional disclosure and participant education would help to clear up confusion and remedy gaps in the public understanding of TDF’s.
They pointed out, however, that a TDF is most attractive to an investor who does not want to be actively engaged in the management of the retirement fund, which makes additional disclosure and education questionable.
Many of those who testified also expressed their belief that there is no need for the government to enact asset-allocation mandates. The varied opinions at the hearing on optimal asset allocation at the target date and glide path projections indicated there is no “one-size-fits-all” approach to TDF.
Allison Klausner, who represented the American Benefits Council, emphasized the need for “plan fiduciaries to have the flexibility to determine the appropriate offering for its plan participants based on the information obtained from its due diligence.”
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