On July 2, 2014, the NAPA Government Affairs Committee submitted a comment letter to the DOL in response to its request for comments regarding a proposed rulemaking on target date fund disclosures. The comment letter recommends that the DOL require that five disclosures be made to retirement plan participants regarding TDFs:
• TDFs are not guaranteed investment options.
• A stated target retirement year is not a guarantee that a TDF investor will achieve a successful retirement by that date.
• TDFs are intended to be utilized as the sole investment option for its investors.
• TDF manufacturers and managers make a number of informed assumptions when constructing their TDF portfolios, and their assumptions for the “average” TDF investor may or may not reflect a specific investor’s own circumstances.
• TDF allocations/glidepaths should be disclosed to investors in a matrix format to best standardize the delivery and should be a part of the fund series’ prospectus.
The recommendations are similar to those in NAPA GAC’s June 9 comment letter to the SEC on TDFs.
NAPA is hopeful that the DOL and SEC will follow our recommendations to improve the disclosures that are currently provided for TDFs. We will continue to monitor the progress the agencies make on this important issue.
Ronald J. Triche is NAPA’s Associate General Counsel and Director of Government Affairs.
