A new study of target-date fund investments by the Employee Benefit Research Institute (EBRI) found that participants in 401(k) plans dominated by those with low income and short tenure at their workplace tend to contribute less than those in plans dominated by participants with high income and long tenure. EBRI says its study also finds that participants’ investments in target-date funds with different equity allocations differ by plan demographics based on participants’ income and/or tenure. In particular, target-date fund users with 90% or more of their account balances in target-date funds who are in 401(k) plans dominated by low-income and short-tenure participants tend to hold target-date funds with lower equity allocations compared with their counterparts in plans dominated by high-income and long-tenure participants. The EBRI analysis found that although target-date funds with different equity glide paths affect the retirement income replacement success rate, participant contribution rates have a stronger impact. The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) and the SEC held a joint public hearing on June 18, 2009, on the investment of 401(k) and other retirement plans in target-date-type plans.
EBSA has once again extended the applicability and effective dates of the final rule on investment advice under the Pension Protection Act to November 18, 2009. On March 20, the department extended the applicability and effective dates of the final regulation from March 23 to May 22, but the department has now determined that additional time is needed to consider the legal and policy issues raised by comments on the final rule.