Complexity of Design: Targeting Target Date Funds
Los Angeles partner Fred Reish’s March 2012 “Just Out of Reish” column discusses target-date funds (TDF), which have become increasingly popular with plan sponsors.
Fred notes, however, that they may have become popular “before plan sponsors and their advisers were fully equipped to rigorously evaluate them.”
Because of the complexity of TDFs, it is more difficult for plan sponsors to apply the same processes they apply to traditional investments.
Fred discusses the “tool” the Department of Labor was provided with by the American Benefits Council and Investment Company Institute -- a list of potential items for fiduciaries of defined contribution plans to consider when selecting and monitoring of target-date funds.
He highlights several of the issues the list raises for plan committees to consider.
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