Walter Welsh 

Executive Vice President, Taxes & Retirement Security 

(202) 624-2157 t (866) 953-4149 f 

walterwelsh@acli.com 

 

James Szostek 

Vice President, Taxes & Retirement Security 

(202) 624-2378 t (866) 953-4149 f 

jimszostek@acli.com 

Shannon Salinas 

Counsel, Taxes and Retirement Security 

(202) 624-2028 t (866) 953-4149 f 

shannonsalinas@acli.com 

Mailed Electronically

January 14, 2011 

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

Room N-5655 

U.S. Department of Labor 

200 Constitution Avenue, NW 

Washington, DC 20210 

Attention: Target Date Amendments (RIN 1210-AB38) 

Dear Sir or Madam: 

On behalf of the American Council of Life Insurers (“ACLI”), we are writing to 

comment on the proposed rule regarding disclosures required for target date funds and 

qualified default investment alternatives (“QDIAs”), which was published at 75 Fed. Reg. 

73987 (November 30, 2010) (“Proposed Rule” or “Rule”). The Proposed Rule contains 

amendments to the QDIA regulation to provide more specificity as to the information that 

must be disclosed. The Proposed Rule also contains a proposed amendment to the 

participant-level fee disclosure regulation that would require the disclosure of the same 

information concerning target date or similar investments to all participants and 

beneficiaries in participant-directed individual account plans. 
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The American Council of Life Insurers represents more than 300 legal reserve life 

insurer and fraternal benefit society member companies operating in the United States. 

These member companies represent over 90% of the assets and premiums of the U.S life 

insurance and annuity industry. ACLI member companies offer insurance contracts and 

other investment products and services to qualified retirement plans, including both defined 

benefit pension, 401(k) and 403(b) arrangements, and to individuals through individual 

retirement arrangements (IRAs) or on a non-qualified basis. ACLI member companies also 

are employer sponsors of retirement plans for their own employees. 

ACLI appreciates the Department’s work on this Proposed Rule and agrees that 

improvements can be made in the information that is disclosed to participants and 

beneficiaries concerning their plan investment in target date funds. In our comments below, 

we suggest a number of specific changes and clarifications to the Proposed Rule. We would 

welcome the opportunity to speak with the Department and supplement our comments as 

the Department considers these issues. 

1. The Proposed Rule creates difficulties for asset allocation models that are offered 

under the "investment management service" category of QDIA. 

The Department added investment management services as a QDIA category 

(section 2550.404c-5(e)(4)(iii)) in response to plan sponsors’ desire to offer managed 

accounts, and we respectfully request that this Proposed Rule be modified so as not to 

frustrate the use of this type of QDIA. Under the proposed amendment to the QDIA 

regulation, disclosure of various new items (including the issuer, objectives, strategies and 

historical performance) must be made with respect to each QDIA, not just the target date 

fund category of QDIAs. These disclosures work for single investment fund QDIAs, but won't 

work for QDIAs that are investment management services that allocate assets among more 

than one investment option offered under the plan (i.e., are not a single investment fund). 

While these disclosures could be made at the level of an individual investment option, it 

would be costly and difficult to prepare them at the asset allocation or managed account 

level. In addition, provision of some of this information could risk duplicating or conflicting 

with disclosure prepared under requirements of the federal securities laws and advertising 

standards of self-regulatory organizations, such as FINRA. 

2. Disclosure that there is no adequate retirement income guarantee. 

In general, proposed section 2550.404c-5 requires a statement to advise a plan 

participant that the QDIA is not guaranteed and that it is possible to lose money, etc. ACLI 

agrees that this information would be helpful to plan participants. We note that the same 

requirement applies under proposed section 2550.404a-5, but only for target date QDIAs. It 

would be helpful to align these requirements. So that participants are not led into thinking 

that this risk is unique to QDIAs or target date funds, it may also be helpful to also include a 

general statement that this risk generally applies to investment funds with respect to which 

the return is not fixed. 

Furthermore, many target date funds are described as “retirement” funds to be used 

throughout “retirement.” Plan participants typically cease purchasing shares of target date 
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funds at retirement. At that time, plan participants typically shift to orderly withdrawals to 

support their retirement income needs. In order to develop or evaluate a retirement income 

plan, a plan participant needs to understand longevity, market, and other risks that can 

affect the retirement income potential of their investment in the target date fund. 

In light of these risks, ACLI recommends that the proposed sections 2550.404a-5 

and 2550.404c-5 should require a statement that advises plan participants that, in the 

absence of an insurance guarantee, the fund does not guarantee that the plan participant 

could support a particular rate of redemptions from the fund over the participant’s life or for 

any other period (i.e., the fund does not guarantee income in retirement). 

 

3. Clarification that some new disclosures are provided upon request. 

One condition for obtaining fiduciary relief under the QDIA regulation is that the 

fiduciary must provide participants the material described in: 

• 29 CFR 2550.404c-1(b)(2)(i)(B)(1)(viii) (a copy of the most recent prospectus), 

• 29 CFR 2550.404c-1(b)(2)(i)(B)(1) (ix) (information related to the exercise of 

voting, tender or other similar rights) and 

• 29 CFR404c-1(b)(2)(i)(B)(2) (additional investment information upon 

participant request). 

The Proposed Rule amends this condition to require fiduciaries to provide the comparable 

materials that are described in 2550.404a-5(d)(3) and (d)(4) of the participant-level 

disclosure regulation instead of referring to the other sections of 2550.404c-1. However, 

because all participants in participant-directed individual account plans must receive the 

participant fee disclosure notice and have access to the materials to be provided upon 

request as required under ERISA §2550.404a-5, the reference in ERISA §2550.404c-5(c)(4) 

is duplicative and the section should be removed. 

4. Avoid duplication between the QDIA notice and the participant-level fee disclosure. 

All participant-directed individual account plans subject to ERISA will have to comply 

with the final participant fee disclosure regulations. The same plans can choose to comply 

with the QDIA rules. The proposed amendment to the QDIA rule adds more specific 

information to these disclosures. Much of the information described in the proposed 

amendment already must be either automatically provided or made accessible on a website 

under the final participant fee disclosure regulation. From a practical perspective, we would 

anticipate that the plan fiduciary would want to distribute the QDIA notice with the fee 

disclosure notice, since they have similar content requirements and similar (though not the 

same) distribution frequencies. 

The QDIA rules should not require that information that is already required to be 

disclosed under the fee disclosure rule be disclosed again on the QDIA notice. Requiring 

inclusion of the same information in two places is duplicative and will inundate the plan 

participant. The QDIA notice should also not be required to include information that the 

participant level fee disclosure regulation simply allows to be accessible on a website. 
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Instead, we suggest that the QDIA notice requirements conform to the participant fee 

disclosure requirements, and the QDIA notice simply refer to the most recent fee disclosure 

notice. The QDIA regulation should be modified to include a provision that, to the extent 

information is already required to be disclosed in the participant fee disclosure notice, that 

information is not required to be included in the QDIA notice, provided that the QDIA notice 

suggests that participants also refers to the most recent participant fee disclosure notice. 

The QDIA regulation could also be modified to allow reference to the same website that is 

required under the participant level fee disclosure regulation to satisfy certain requirements 

(e.g., the information in ERISA §2550.404c-5(d)(3)(i) through(iii), which the participant fee 

disclosure regulation only require to be made available by website). This would greatly 

simplify the QDIA notice, making it more readable, without sacrificing participant disclosure 

and would remove some of the burden to plan sponsors. 

5. Compliance with SEC Requirements. 

In the preamble to the Proposed Rule, the Department specifically requested 

comments as to whether, and to what extent, the final rule should include the disclosure 

elements and concepts included in the SEC’s Commission Release Nos. 33-9126, 34-

62300, IC-29301. If the Department does elect to incorporate those items into the QDIA 

regulation, then we would urge the Department to avoid duplication by making clear that 

satisfaction of the SEC rules will be deemed to satisfy the Department’s requirements. In 

addition, we would suggest avoiding duplication of any items that are already required under 

the participant level fee disclosure regulation. In addition, if the Department does 

incorporate these items into the regulation, it would be helpful if they provided a sample 

chart or model disclosure for use by nonregistered investment options which would be 

deemed to meet these additional requirements. 

6. Effective Date. 

 The proposed effective date of the Rule is 90 days after the final rule is published in 

the Federal Register. The Rule will require all QDIA notices to be modified. Ninety days is 

not sufficient time to make all of the system changes that will be necessary for compliance. 

We request that the effective date be no sooner than six months after publication. Ideally, 

the final rule would be released no later than May 1, 2011, and the effective date could be 

the same as the applicability date for the final participant fee disclosure regulation (i.e., plan 

years beginning on or after November 1, 2011). 
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* * * * * 

On behalf of the ACLI member companies, thank you for consideration of these 

comments. We welcome the opportunity to discuss these comments and engage in a 

productive dialogue with the Department on these important issues. 

Sincerely yours, 

Walter C. Welsh James H. Szostek 

Executive Vice President, Vice President, 

Taxes & Retirement Security Taxes & Retirement Security 

 

Shannon Salinas 

Counsel, Taxes & Retirement Security