January 14, 2011 

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

Attn: Target Date Amendments 

Room N-5655 

U.S. Department of Labor 

200 Constitution Avenue, NW 

Washington, DC 20210 

Ladies and Gentlemen: 

The ERISA Industry Committee (“ERIC”) is pleased to submit these 

comments on the proposed disclosure requirements for qualified default investment 

alternatives (“QDIAs”) and target date funds (“TDFs”). The proposed requirements are 

set forth in a proposed regulation entitled “Target Date Disclosure,” published in the 

Federal Register on November 30, 2010. 

ERIC is a nonprofit association committed to the advancement of the 

employee retirement, health, incentive, and welfare benefit plans of America’s largest 

employers. All of ERIC’s members sponsor individual account plans, including many of 

the largest individual account plans in the country. In the great majority of these plans, 

participants are responsible for directing how their accounts are allocated among the 

plan’s investment options. ERIC’s members have a vital interest in making sure that 

participants have access to sufficient information to make informed choices. ERIC’s 

members are also dedicated to ensuring that myriad disclosure requirements work 

together efficiently and effectively, to advance the goal of keeping participants engaged 

and attending to their responsibilities—without overwhelming them.1

Summary 

ERIC supports the Department’s goal of making available to participants 

sufficient information to make informed investment decisions. However, the desire to 

provide more information must be balanced against the cost and effort required to 

prepare disclosures and the risk of information overload: many participants who are 

inundated with information respond by simply ignoring the materials. When this 

happens, participants end up neglecting their responsibilities to manage their accounts 

based on their individual needs. 

The comments below are intended to ensure not only that sufficient 

information is made available, but that participants remain engaged and focused on their 

responsibilities. 

 

1

 The references in this letter to participants are intended to include participants, beneficiaries, 

and alternate payees. 

1400 L Street, N.W. 

Suite 350 

Washington, DC 20005 

T (202) 789-1400 

F (202) 789-1120 

www.eric.org 

The 

ERISA 

Industry 

Committee 
The ERISA Industry Committee January 14, 2011 

Comments on the Proposed Disclosure Requirements for QDIA & TDFs Page 2 of 9

1. The final regulation should (i) treat QDIAs and TDFs more like other investment 

alternatives; (ii) allow incorporation by reference to the same extent as it is permitted by the 

final participant disclosure regulation (29 C.F.R. § 2550.404a-5); and (iii) clarify that QDIA 

notices may be combined with other disclosures. See Part 1, beginning on page 3, below. 

2. The final regulation should include model disclosures. See Part 2, beginning on page 5, 

below. 

3. The final regulation should clarify that the requirement to explain a TDF’s asset allocation 

can be satisfied by describing the design of the TDF, without minute details about the 

underlying funds. See Part 3, beginning on page 5, below. 

4. The TDF rule should not require an explanation of assumptions about a participant’s or 

beneficiary’s contribution or withdrawal intentions. A description of the underlying 

investments, the glidepath, the landing point, the risks, the age group for whom the TDF is 

designed, and the relevance of the target date should be sufficient to help participants 

understand the TDF alternative. See Part 4, beginning on page 6, below. 

5. The TDF disclosure rule should not require disclosure of any information that SEC 

regulations do not require to be disclosed. See Part 5, on page 7, below. 

6. The final regulation should include more detail on the requirement to disclose historical 

performance data. In particular, the QDIA rule should address managed accounts, and the 

regulation should include the same transition relief as was provided in the final participant 

disclosure regulation. See Part 6, on page 7, below. 

7. The Department should reexamine its estimated compliance burden for the new 

requirements. See Part 7, on page 8, below. 

8. The regulation should not be effective before the later of (i) 180 days after the regulation is 

published in the Federal Register or (ii) the applicability date of the final participant 

disclosure regulation. See Part 8, on page 8, below. 
The ERISA Industry Committee January 14, 2011 

Comments on the Proposed Disclosure Requirements for QDIA & TDFs Page 3 of 9

Discussion 

1. Avoiding Information Overload and Keeping Participants Engaged 

ERIC’s members invest considerable time and treasure to improve communications 

and to encourage participants to attend to their investment strategies. As a result of these efforts, 

most of the information required by the proposed regulation is already made available to 

participants. Our members do so because they are concerned about their employees’ future and 

because employers have a considerable stake in managing their workforces. 

A barrage of detailed notices can turn participants away from attending to their 

investment responsibilities. Many participants who receive excessive notices and other disclosures 

will simply ignore what they receive and end up investing in a default fund without considering 

whether it is suitable for their needs. The average investor’s reaction to a prospectus exemplifies 

this concern. Although prospectuses are designed to provide investors with sufficient information 

to make informed investment decisions, they have become so long and detailed that they are 

routinely ignored.2

Inundating participants with too much detail can have serious consequences. In a 

defined contribution plan, participants are exposed to a range of risks, including: 

 investment risk (the risk of adverse investment experience); 

 inflation risk (the risk that inflation will erode the value of an account); 

 longevity risk (the risk of exhausting savings before the participant dies); 

 early termination risk (the risk of employment terminating prematurely and 

unexpectedly); and 

 inattention risk (the risk of failing to adjust investments in response to changed 

circumstances). 

In a participant-directed plan, the responsibility for balancing these risks, and making 

adjustments as circumstances change, falls on the participant. No investment alternative (target date 

fund or otherwise) is designed to relieve a participant of this responsibility. Accordingly, it is 

critical that the disclosure requirements be calibrated to keep participants engaged.

 

2

 The Department acknowledged the shortfalls of the prospectus in its preamble to the proposed participant 

disclosure regulation. See 73 Fed. Reg. 43,014, 43,020 (July 23, 2008) (citing Report of the Working Group 

on Prudent Investment Process, 2006, available at http://www.dol.gov/ebsa/publications/ 

AC_1106A_report.html). 
The ERISA Industry Committee January 14, 2011 

Comments on the Proposed Disclosure Requirements for QDIA & TDFs Page 4 of 9

The following recommendations are intended to strike an appropriate balance 

between making adequate information available and keeping participants engaged: 

 The final regulation should not single out QDIAs and TDFs for disclosure of 

information that is also relevant for other investment alternatives. For example, 

the risk of losing money, including near and following retirement, and the lack of 

a guarantee that an investment will provide adequate retirement income are not 

unique to TDFs. Those concerns apply with respect to almost all investment 

alternatives. At a minimum, the required statements should recognize that the 

risks associated with TDFs are comparable to the risks inherent in most other 

investments. For example: 

“As with most other investment alternatives, you may lose 

money by investing in the TDF, including near and following 

retirement, and there is no guarantee that investment in the 

TDF will provide adequate retirement income.” 

 The final regulation should allow required disclosures for QDIAs and TDFs to be 

incorporated by reference to the same extent permitted by the final participant 

disclosure regulation. For example, the final QDIA regulation should allow the 

description of the QDIA’s objectives, goals, and principal strategies to be 

provided on a Web site rather than in the notice itself. Indeed, the Department 

recently acknowledged that the “Web site approach to disclosure strikes an 

appropriate balance . . . accommodating different levels of participant interest in 

more detailed investment-related disclosures.” 75 Fed. Reg. 64,910, 64,918 

(Oct. 20, 2010). 

 The final regulation should clarify that plans may combine QDIA notices with 

other required disclosures. In particular, the final regulation should state that the 

QDIA notices may be combined with automatic enrollment notices (as permitted 

by Field Assistance Bulletin 2008-03) and/or the disclosures required by the 

Department’s regulations under ERISA § 404(a) and (c). Combining notices 

saves paper and avoids duplicative disclosure. 

Although providing concise communications that are comprehensive enough to tell 

participants everything they need to know is a laudable objective, the reality is that participants 

making investment decisions should consider a wide array of information—not only about the 

QDIA, but also about the other investment alternatives. It is not feasible to include all of this 

information in a single notice; and it is not realistic to expect participants who receive a notice with 

so much information to read it—let alone process it. Treating QDIAs and TDFs more like other 

investment alternatives and directing participants to a Web site for more information should 

demonstrate to participants the breadth of information that they should be considering, without 

overwhelming them. 
The ERISA Industry Committee January 14, 2011 

Comments on the Proposed Disclosure Requirements for QDIA & TDFs Page 5 of 9

2. Model Disclosures 

To improve consistency, quality, and efficiency, the final regulation should include 

model disclosures. 

 A model QDIA notice should expand on the existing model automatic enrollment 

notice (available at http://www.irs.gov/pub/irs-tege/ sample_notice.pdf) by 

illustrating the level of detail that is appropriate. Like the Model Comparative 

Chart included in the final participant disclosure regulation, the model QDIA 

notice should be drafted in a straightforward and replicable format. 

 Model TDF disclosures should be comparable to the Model Comparative Chart 

included in the final participant disclosure regulation. They should be adaptable 

for use in a QDIA notice or for satisfying the requirements of the final participant 

disclosure regulation. 

Good models would help to ensure compliance with the intended disclosure 

standard, and would improve the level of consistency and quality of disclosures, by providing a 

much-needed roadmap for disclosing the right information in a useful format. Models would be 

especially helpful for investment alternatives that are not subject to SEC disclosure requirements, 

such as unregistered investment alternatives. For these investment alternatives, illustrative 

examples will mitigate the potential for disputes between plans and fund managers over the 

appropriate level of detail. In addition, preparing model disclosures will help the Department to 

fine-tune its regulatory impact analysis (see Part 7, beginning on page 8, below). 

Of course, any model disclosure should be treated as exemplary rather than a 

required form. The final regulation should not prohibit custom disclosures that do not follow the 

model but otherwise satisfy the disclosure requirements. 

3. Level of Detail Required for TDF Disclosure 

Although TDFs generally have designs and strategies that can be described 

succinctly, most fund managers retain the flexibility to adjust the underlying investments and asset 

mix at any time. For example, although TDFs generally specify the asset classes in which they 

invest and follow a basic glidepath, the actual investments at any time are not set in stone. 

This flexibility is important because it enables fund managers to react efficiently to 

market events and changed circumstances, without the need for constant updates to the disclosure 

materials. In order to protect this flexibility, the final regulation should clarify that the requirement 

to explain a TDF’s asset allocation can be satisfied by describing the design of the TDF, without 

getting into minute details regarding the underlying funds. In particular, the final regulation should 

include the following principles: 

 It is sufficient to describe the asset classes in which the TDF invests (e.g., 80% 

equities and 20% fixed income) and how the underlying funds are selected, 

without naming specific underlying funds. If a TDF limits itself to investing in a 
The ERISA Industry Committee January 14, 2011 

Comments on the Proposed Disclosure Requirements for QDIA & TDFs Page 6 of 9

particular fund family (e.g., in-house mutual funds), it should be sufficient to 

disclose this fact without naming particular funds or the precise allocation among 

those funds. 

 The description of how the asset allocation will change over time may include 

windows of time during which the allocation will gradually change, without 

specifying a precise allocation as of any specific time. 

 The point in time when the TDF will reach its most conservative allocation may 

be expressed as a window—e.g., between five and ten years after the target year. 

These principles should also be illustrated in examples or model disclosures. 

This level of detail will not compromise the usefulness of the disclosure. 

Descriptions within the parameters described above will give participants a useful understanding of 

the fund design; and significant changes that affect the characteristics of the TDF (e.g., a change to 

the glidepath or investment philosophy) will have to be disclosed. 

4. Assumptions About Contribution and Withdrawal Intentions 

Under the proposed regulation, the disclosure for a TDF named or described by 

reference to a date must include an explanation of the age group for whom the TDF is designed, the 

relevance of the date, and any assumptions about a participant’s or beneficiary’s contribution or 

withdrawal intentions on or after the target date. 

ERIC supports addressing the concern that target date funds with similar names often 

have materially different designs and investment philosophies.3

 However, an explanation of 

assumptions about what a participant or beneficiary intends to do after the target date is not 

necessary and incorrectly implies that knowledge or expectations about an individual’s future 

behavior are (or should be) considered in the design or selection of TDFs. 

TDFs are not designed to suit the needs of actual participants or beneficiaries. 

Rather, TDFs are designed to meet the assumed needs of hypothetical individuals, based solely on 

their target retirement years. TDFs do not (and cannot) take into account critical unpredictable and 

 

3

 This concern has been raised by Congress, regulators, and others over the last few years. See, e.g., SEC 

Proposed TDF Advertising Rule, 75 Fed. Reg. 35,920, 95,922 (June 23, 2010) (“[T]arget date funds sharing 

the same target date have significantly different degrees of exposure to more volatile asset classes, such as 

stocks.”); DOL-SEC Joint Investor Bulletin on Target Date Retirement Funds (May 6, 2010), available at 

http://www.dol.gov/ebsa/pdf/TDFInvestorBulletin.pdf (“[T]arget date funds, even if they share the same 

target date . . . may have very different investment strategies and risks.”); Default Nation: Are 401(k) Target 

Date Funds Missing the Mark?: Hearing Before the Joint Special Committee on Aging (Oct. 28, 2009) 

(opening statement of Sen. Kohl), available at http://aging.senate.gov/ hearing detail.cfm?id=319426; Public 

Hearing on Target Date Funds and Other Similar Investment Options before the SEC and Department of 

Labor, at 11, 14-15 (June 18, 2009) (opening remarks of Dep. Sec. Harris and Chairman Schapiro). 
The ERISA Industry Committee January 14, 2011 

Comments on the Proposed Disclosure Requirements for QDIA & TDFs Page 7 of 9

personal factors, such as when an individual actually retires, the individual’s accumulated savings 

and risk tolerance, how much the individual will save in the future, what the individual intends to do 

(and actually does) after retiring, and the individual’s health. 

Given the limitations of TDFs, it would be misleading to suggest in any way that a 

TDF has been designed or selected to meet the assumed needs of any individual. Describing 

assumptions about a participant’s or beneficiary’s contribution or withdrawal assumptions 

perpetuates a dangerous misconception that participants who are inclined to follow the herd do not 

have to put effort into investing for a secure retirement. 

Accordingly, ERIC recommends deleting the requirement to explain assumptions 

about a participant’s contribution or withdrawal intentions. The regulation would still require a 

description of the underlying asset classes; the glidepath; the landing point; the risks; the age group 

for whom the TDF is designed; and the relevance of the target date. This information should be 

sufficient to help participants understand the TDF alternative. 

5. Consistency With SEC Disclosure Requirements 

The final regulation should not require disclosure of any information that is not also 

subject to disclosure under SEC rules—including existing SEC regulations and the advertising rules 

currently being developed. See 75 Fed. Reg. 35,920 (June 23, 2010). In practice, it is very difficult, 

if not impossible, for plans to collect information that the SEC does not require to be disclosed. 

For example, the SEC rules do not expressly require disclosure of assumptions about 

an investor’s contribution or withdrawal intentions (discussed in Part 4, above). ERIC members are 

concerned that it would be very difficult to obtain this information; and plan fiduciaries are not in a 

position to speculate on what the underlying assumptions might be (or whether contribution or 

withdrawal intentions are even considered). This practical problem is another reason why the 

Department should delete the requirement to disclose assumptions about withdrawal and 

contribution assumptions. 

6. Disclosing Historical Performance Data 

Like the final participant disclosure regulation, the proposed QDIA regulation would 

require disclosure of historical performance data. The final regulation should include more detail 

on this requirement. 

First, the final regulation should include guidance on how to provide historical 

performance data if the QDIA is an investment management service permitted by 29 C.F.R. 

§ 2550.404c-5(e)(4)(iii). Historical performance data is particularly misleading for this kind of 

QDIA, because performance is generally affected by variables related to individual circumstances 

(e.g., age, service, and/or perceived risk tolerance). If the Department nevertheless concludes that 

historical performance data is required for investment management services, the final regulation 

should allow the performance data to be based on the aggregate performance of all plan accounts 

invested by the management service during the relevant period, or broken down by class of 

participant (e.g., performance by age band). 
The ERISA Industry Committee January 14, 2011 

Comments on the Proposed Disclosure Requirements for QDIA & TDFs Page 8 of 9

The final regulation should also clarify that the historical performance data required 

for a QDIA is the same as the historical performance data required for other investment alternatives 

under the final participant disclosure regulation—i.e., the average annual total return for 1-, 5-, and 

10-year periods (or, if shorter, since inception). For TDFs that are customized for individual plans, 

the final regulation should not require historical performance information for any period before the 

inception of the customized TDF.

In addition, the final regulation should include the same transition relief as was 

included in the final participant disclosure regulation. For example, for investment alternatives that 

are not subject to SEC regulation, the final regulation should include transition relief for the first 10 

years after the regulation becomes effective. See 29 C.F.R. § 2550.404a-5(j)(3)(ii). 

7. Compliance Burden 

The Department has estimated that it would take only 15 minutes to incorporate the 

new TDF disclosures into a QDIA notice, that the compliance burden for TDFs that are not QDIAs 

is de minimis, and that the new disclosure would be only two pages. ERIC believes that these 

estimates are unrealistically low. 

First, the time estimate does not appear to take into account the burden on plans with 

TDFs that are not subject to SEC disclosure requirements. For these funds, the exercise of 

compiling the required information and organizing it in the required format will take considerably 

more than 15 minutes. 

Second, although ERIC’s members certainly hope that the additional TDF 

disclosures can be made in only two pages, it is not clear that this is possible. As a point of 

reference, the recent DOL-SEC Joint Investor Bulletin on Target Date Retirement Funds (May 6, 

2010) did not include all of the information required by the proposed regulation and was still almost 

four pages. 

As noted above, allowing more incorporation by reference to a Web site and making 

model disclosures available would help to reduce the cost of compliance. In addition, preparing 

model disclosures would give the Department and stakeholders a better sense of the effort and 

number of pages that will likely be required. 

8. Effective Date 

The proposed regulation states that it will be effective 90 days after the final rule is 

published in the Federal Register. After the regulation is finalized, it will take time to develop 

systems for collecting information, producing the required disclosures, and bringing plans into 

compliance. Also, the new disclosure requirements build on the disclosures required by the final 

participant disclosure regulation, which will not apply until plan years starting on or after November 

1, 2011. 
The ERISA Industry Committee January 14, 2011 

Comments on the Proposed Disclosure Requirements for QDIA & TDFs Page 9 of 9

Accordingly, the QDIA and TDF regulation should not be effective before the later 

of (i) 180 days after the final rule is published in the Federal Register, or (ii) the first plan year that 

starts on or after November 1, 2011. 

In setting the effective date, the Department should also consider carefully the 

interrelationships of the Department’s series of recent guidance—e.g., the QDIA and TDF 

regulation; the final participant disclosure regulation; the fee disclosure regulation; the investment 

advice regulation; the new definition of fiduciary; and the new electronic disclosure rules that the 

Department is currently working on. The effective dates for all of the new guidance should be set in 

a way that enables stakeholders to establish compliance strategies without having to make repeated 

adjustments for multiple pieces of guidance that become effective over a short period.

* * * * * 

ERIC appreciates the opportunity to submit these comments. If we can be of further 

assistance, please let us know. 

Sincerely, 

Mark J. Ugoretz 

President & CEO