More Target Date Fund Disclosures for Participants


By Todd Lucas

In keeping with the recent theme of increased transparency and disclosure, the Department of Labor (DOL) proposed disclosure rules for target-date retirement funds (TDFs) used in participant-directed retirement plans.

While TDFs function in the same manner, allocating investments among different asset classes and changing to a more conservative allocation over time, they can have very different investment strategies and asset allocations. The DOL’s proposed guidance is directed at providing participants with more information on how TDFs operate.

Phyllis Borzi, Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA), stated, “based on our collaborative examination of this issue with the Securities and Exchange Commission, it is clear that all participants in participant-directed individual account plans can benefit from better information about how target-date investments are designed to meet their retirement savings needs.”

Specifically, the proposed guidance includes the following:

  • A narrative explanation of how the TDF’s asset allocation will change over time, and the point in time when it will reach its most conservative position;
  • A graphical illustration of how the TDF’s asset allocation will change over time; and
  • For a TDF that refers to a particular date (e.g., “Retirement 2050 Fund”), an explanation of the relevance of the date.

The comment period for this proposal ends on January 14, 2011.

For further information on how these proposed disclosure rules will affect you or your employees, please contact Todd Lucas at tlucas@schneiderdowns.com.

Schneider Downs provides accounting tax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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