Target Date Funds: Fiduciary Concerns for Plan Sponsors
Target-date funds (TDFs) have become the standard default investment choice for 401(k) plans since the 2006 Pension Protection Act approved them for this use. However, TDFs from different providers should not be considered perfect substitutes. They differ in several key areas: investment philosophy, glide paths, and costs. Understanding these differences is a requirement of plan sponsors under ERISA’s “prudent expert” rule when choosing the investment line up for their 401(k) plan. This paper seeks to explain the distinctive characteristics of TDFs in an effort to help investment committees...
Read MoreMessage to Plan Sponsors: Your Traditional 401ks are broken
401k plans were developed in the late 70s/early 80s – about the same time as PacMan and the Commodore 64 computer. While we’ve seen huge leaps in computer technology most 401k plans have not evolved. So, it shouldn’t be a surprise that Ted Benna, the father of the 401k, feels his creation has become a “monster”, and economist and professor Teresa Ghilarducci believes that 401ks have “failed” the people they are supposed to help the most. You decided to offer a 401k plan because you wanted to offer competitive benefits and help your employees save effectively for retirement. As an employer,...
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