In the first of a three-pronged initiative on target date funds, the Department of Labor’s Employee Benefits Security Administration (EBSA) and the Securities and Exchange Commission (SEC) released its long-awaited guidance on May 6 to help investors and plan participants better understand the operations and risks of target date funds.
Phyllis Borzi, Assistant Secretary of Labor for EBSA, said in remarks about the newly released guidance at the Investment Company Institute’s (ICI) general membership meeting in Washington, on May 7, that “most [plan participants], and even the plan sponsors, maybe didn’t fully understand how widely these [target date] funds vary in their structure. So it became quite clear to [DOL and SEC] that we needed to do something to help people better understand.”
EBSA says the guidance describes some basic features of target date funds, including the investment mix of such funds, the risks associated with the investments, how target date funds operate, and ways to evaluate a target date retirement fund that will help increase awareness of both the value and risks associated with these types of investments.
The guidance is called “Investor Bulletin: Target Date Retirement Plans.”