Joint DOL and SEC hearing on target‐date funds

Abstract

Purpose

The purpose of this paper is to explain the results of a June 18, 2009 Joint US Department of Labor‐Securities and Exchange Commission hearing regarding Target Funds as investment options for individual and company‐sponsored retirement plans.

Design/methodology/approach

The paper explains the background of Target Funds, the meaning of “target” dates and “glide paths,” the popularity of Target Funds with investors, recent losses suffered by Target Funds, areas of confusion among investors and plan sponsors such as fund naming conventions and differing target date strategies, asset allocation strategies, and glide paths; improvements in disclosure that are needed; possible problems with proprietary funds; and the prospects for new SEC and DOL regulations.

Findings

Given the extensive use of Target Funds as an investment option in retirement plans, particularly as a safe harbor “default” option, the SEC and DOL are expected to promulgate regulations governing some aspects of Target Funds, in order to protect investors by providing greater disclosure, especially regarding the glide path.

Originality/value

The paper provides practical guidance by experienced employee benefits, executive compensation, financial services and private funds lawyers.

Citation

Camillo, S.M., Robertson, R.A., Ziga, K., Paulson Egbert, K.J. and Patel, A. (2009), "Joint DOL and SEC hearing on target‐date funds", Journal of Investment Compliance, Vol. 10 No. 4, pp. 34-38. https://doi.org/10.1108/15285810911007390