A July 2018 whitepaper from SageView Advisory Group offers insight on potential conflicts of interest that may arise across different types of target-date solutions and suggests a process that a prudent fiduciary might undertake to evaluate such conflicts to serve the best interests of plan participants.
Since enactment of the Pension Protection Act, target-date funds (TDFs) have become a popular option for defined contribution plans. They are designed to provide plan participants with a simple and convenient way to obtain a diversified portfolio of investments that automatically adjusts over time in a manner that is reasonably appropriate for individuals with a given target retirement date.
As simple as they are for plan participants to use, however, SageView warns that they are anything but simple for plan fiduciaries. Their complex structures can present multiple areas of potential conflict of interest, but with a prudent evaluation process in place, plan fiduciaries can realize the benefits of target-date solutions while addressing potential fiduciary concerns, the report explains.
