Fred Reish highlights a problem with most Investment Policy Statements: Most lack a robust set of criteria to be applied to TDFs. For example, an IPS might be completely silent on the issue or may simply say that TDFs “will be selected and monitored.”
Foreseeing a point in the not-so-distant future when more than half of the assets in 401(k) plans will be in TDFs, Reish notes that this means that half of the assets in most plans will be in a suite of investments that have not been subjected to close scrutiny, while the rest will be subject to a rigorous evaluation process.
Reish recommends reviewing the evaluation criteria in comments filed with the DOL by the Investment Company Institute and the American Benefits Council, here. They include:
• the performance of each of the mutual funds inside the TDF;
• appropriate benchmarks to evaluate TDF performance;
• participant demographics; and
• whether the plan sponsor also offers a pension plan.
