Calls for More Disclosure on Target-Date Funds (via WSJ)

For about two years now, federal regulators have been reviewing the ways in which providers of target-date funds explain how their products work.

The Securities and Exchange Commission and the Labor Department have sought comments on proposed new rules, and both reopened their comment periods this spring. For now, though, it’s unclear how soon any rule changes may take effect or whether the election in November might affect the process.

The focus is mainly on the marketing materials that target-date-fund providers use. Both the SEC and the Labor Department have proposed requiring a prominent graphic illustration of target-date-fund glide paths, or how fund allocations change over time. Surveys have shown that people find such illustrations more helpful than a narrative description.

The Investment Company Institute, which collects mutual-fund data and represents fund firms in Washington, D.C., where it is based, has told regulators that it supports such a change.

However, another proposal has drawn industry opposition: requiring the marketing materials to list immediately adjacent to the first mention of the fund’s name the asset allocation at a fund’s target date. Some in the industry argue that such a requirement, a so-called tagline disclosure, would provide an incomplete, and possibly misleading, glimpse of allocations.

The Investment Company Institute urges instead that figures for expected asset allocations at the target date be given within a narrative description of how a fund’s asset allocation changes over time, as illustrated by its glide path, says Dorothy Donohue, deputy general counsel for securities regulation at the organization.

A broader explanation is important, she says, “to help investors understand that there is more to a target-date fund than its asset allocation at the target date.”

{From The Wall Street Journal, Mr. Pollock is a writer in Ridgewood, N.J. Email him at}

About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
This entry was posted in Executive Benefits, News & Updates, Qualified Retirement Plans, Retirement, Retirement Plans and tagged . Bookmark the permalink.