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Via	e‐mail:	e‐ORI@dol.gov	

July	3,	2014	

Office	of	Regulations	and	Interpretations	

Employee	Benefits	Security	Administration,	Room	N‐5655	

U.S.	Department	of	Labor	

200	Constitution	Avenue,	NW	

Washington,	DC	20210,	

Re:	RIN	1210‐AB38	–	Target	Date	Disclosure	

Ladies	and	Gentlemen:	

State	Street	Global	Advisors	(“SSgA”),	a	division	of	State	Street	Bank	and	Trust	

Company,	appreciates	the	opportunity	to	provide	additional	commentary	on	the	

Department	of	Labor’s	proposed	regulation	regarding	the	provision	of	enhanced	

disclosure	for	defined	contribution	(DC)	plan	participants	about	target	date	funds.	

SSgA	is	one	of	the	largest	asset	managers	working	with	US	defined	contribution	

plans	today.	With	more	than	30	years	of	experience	in	the	DC	market,	we	manage	

nearly	$320	billion	in	DC	assets	worldwide	(as	of	3/31/14),	including	$259	billion	in	

the	United	States.	Drawing	upon	our	research	into	the	needs	of	retirement	plan	

participants	and	deep	experience	working	with	retirement	plan	sponsors,	we	are	

pleased	to	bring	the	voices	of	participants	and	plan	sponsors	to	the	conversation.	

In	letters	dated	January	14,	2011	and	July	9,	2012,	SSgA	has	previously	commented	

on	the	original	target	date	fund	proposal	from	the	Department	of	Labor	(“the	

Department”).	We	support	the	Department’s	decision	to	re‐open	the	comment	

period	for	receiving	specific	input	on	the	more	recent	proposal	by	the	Securities	and	

Exchange	Commission	(“the	Commission”)	introduced	in	April	2013	by	the	

Commission’s	Investor	Advisory	Committee	to	require	the	inclusion	of	a	“risk‐

based”	glidepath	illustration	as	part	of	target	date	fund	disclosures.	

Since	we	have	already	commented	on	the	Department’s	original	2010	proposal,	we	

are	limiting	our	comments	here	to	the	Commission’s	2013	proposal	with	specific	

emphasis	on	the	suggested	requirement	for	a	risk‐based	glidepath	illustration.	As	

we	noted	in	our	comments	dated	June	9,	2014	to	the	Commission,	we	oppose	a	new	

requirement	for	a	risk‐based	glidepath	illustration,	for	the	reasons	we	describe	

below.	

State Street Global Advisors 

Fredrik Axsater 

Senior Managing Director 

Global Head of Defined Contribution 

One Market Street 

Steuart Tower, Suite 1700 

San Francisco, CA 94105 

Telephone: 415.836.9811

www.ssga.com
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For	clarity,	our	point	of	view	about	target	date	fund	disclosures	refers	exclusively	to	

the	needs	of	retirement	plan	participants	and	other	investors	saving	for	retirement.	

While	the	use	of	target	date	funds	could	potentially	grow	in	other	areas,	such	as	

college	savings	accounts,	our	comments	here	are	specifically	geared	toward	

retirement	investors.	

Coordinated efforts among policy makers improve communications for DC

plan participants

At	SSgA	we	strongly	encourage	coordinated	efforts	among	regulatory	agencies	and	

other	policy	makers	to	provide	unified	guidance	on	target	date	fund	disclosures.	We	

agree	that	a	single	set	of	coordinated	guidelines	supported	by	both	the	Department	

and	the	Commission	will	best	serve	the	needs	of	participants.	In	our	view,	if	the	

Department	and	the	Commission	were	to	issue	separate	and	different	guidelines,	

the	resulting	sets	of	differing	disclosures	would	be	confusing	to	participants	and	

costly	to	plan	sponsors.	

The	Commission	has	proposed	the	creation	of	risk‐based	glidepath	illustrations	for	

DC	plan	participants.	While	we	oppose	the	creation	and	use	of	risk‐based	glidepath	

illustrations,	we	welcome	the	conversation	about	how	to	more	effectively	

communicate	risks	to	DC	plan	participants.	In	our	view,	discussions	about	target	

date	fund	disclosures	offer	a	prime	opportunity	to	consider	the	bigger	picture	for	

retirement	investors	today.	Before	we	can	have	a	conversation	about	how	to	

communicate	risks,	we	believe	that	policy	makers,	plan	sponsors	and	plan	service	

providers	first	need	to	first	identify,	“Which	risks	are	we	talking	about?”	

SSgA Analysis

Risk is multi‐dimensional for retirement investors.

We	believe	it	is	useful	to	view	retirement	readiness	and	the	overall	financial	health	

of	retirement	savers	through	a	multi‐dimensional	lens.	Just	as	an	investor	saving	for	

the	down	payment	on	a	new	house	or	other	near‐term	goal	may	be	concerned	

primarily	with	market	volatility	risk—the	risk	that	their	account	could	lose	value	in	

the	near	term—there	are	other	risks	that	homeownership	entails.

Similarly,	an	investor	saving	for	retirement	has	to	consider	volatility	risk,	as	well	as	

other	key	risks.	These	additional	risks	include:	

1. Accumulation	risk:	The	risk	of	not	generating	sufficient	portfolio	growth	to	

fund	retirement;		

2. Longevity	risk:	The	risk	of	outliving	one’s	savings;		

3. Volatility	risk:	The	risk	of	substantial	wealth	degradation	due	to	a	negative	

market	event;	and,		

4. Inflation	risk:	The	risk	of	significant	erosion	in	purchasing	power	due	to	

elevated	inflation	levels.	

	 	
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Target	date	funds	are	designed	to	help	participants	manage	these	key	risks.	While	

the	glidepath	itself	is	the	primary	tool	that	the	manager	of	a	target	date	fund	uses	to	

address	the	four	risks	above	on	behalf	of	participants,	we	believe	it	is	impractical	to	

measure	and	communicate	these	risks	to	participants	through	a	glidepath	

illustration.	Rather	than	using	glidepath	illustrations	as	a	proxy	“risk	meter”	for	

investors,	we	believe	that	a	glidepath	illustration	should	only	be	used	for	its	original	

purpose—to	show	the	basic	asset	allocation	and	illustrate	that	the	portfolio	will	

automatically	change	over	time	based	on	an	investor’s	time	horizon.	This	simplicity	

enables	the	investor	to	focus	on	other	aspects	that	help	drive	retirement	readiness,	

notably	establishing	a	sufficient	savings	rate.	

Participants are generally unaware of the subtle, but important retirement

risks they face.

SSgA’s	research	indicates	that	accumulation,	longevity	and	inflation	risks	will	likely	

seem	abstract	at	best	to	many	participants.	Many	participants	we	surveyed	have	not	

considered	how	much	money	they	may	need	to	save	or	how	long	they	may	live	or	

how	inflation	may	impact	their	purchasing	power.	Our	2012	Biannual	DC	Investor	

Survey	shows	the	following	responses.	

Which of the steps have you performed in the last 2 years?

	 Yes	 No	

Determining	how	much	to	save	 64%	 36%	

Determining	how	much	monthly	income	I	

will	need	in	retirement	

47%	 53%	

Determining	how	many	years	I	have	until	I	

retire	

70%	 30%	

Determining	how	many	years	I	will	live	in	

retirement	

43%	 58%	

Determining	what	investments	to	invest	in	 61%	 39%	

Determining	how	to	monitor	my	progress	 53%	 39%	

Total	exceeds	100%	due	to	rounding	

Have you considered inflation when making investment decisions?

	 Responses	

I	haven’t	even	considered	the	effects	of	

inflation	

15%	

I	did	consider	it:	I	just	didn’t	know	how	to	

address	inflation	

43%	

I	have	considered	inflation	and	I	invest	in	

inflation	protection	investments	

25%	

I	don’t	think	inflation	is	going	to	be	a	

problem	for	me	in	retirement	

16%	

I	don’t	understand	how	inflation	may	

affect	me	in	retirement	

1%	
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Because	many	retirement	plan	investors	may	have	only	a	cursory	awareness	of	the	

risks	they	face,	we	suggest	focusing	educational	efforts	on	defining—rather	than	

measuring—key	retirement	risks	in	participant	communications.	Target	date	fund	

investors,	in	our	view,	should	simply	focus	on	things	they	can	control.	Target	date	

fund	investors	can	control	their	individual	savings	rate,	attempt	to	realistically	

forecast	when	they	may	retire,	choose	an	appropriate	target	date	fund	accordingly,	

and	look	for	opportunities	to	save	more	if	they	need	to.	

Educating retirement investors requires a multi‐faceted approach.

Target	date	funds	are	increasingly	being	used	as	default	options	for	retirement	plan	

participants	because	they	automatically	manage	a	broad	range	of	key	risks	on	behalf	

of	participants	as	they	progress	toward	and	beyond	retirement.	These	risks	will	be	

different	for	different	groups	of	participants	and	will	change	over	time.	For	example,	

accumulation	risk	is	particularly	important	for	participants	who	are	20	or	more	

years	away	from	retirement.	Inflation	and	longevity	risks	are	particularly	important	

for	participants	near	or	in	retirement,	to	make	sure	these	older	participants	

maintain	the	purchasing	power	of	their	savings	over	time	and	do	not	outlive	their	

nest‐eggs.	

We	believe	the	most	practical	way	to	convey	these	risks	to	investors	is	through	

multi‐touch,	segmented	communication	strategies	that	are	tailored	to	specific	age	

groups	and	offer	participants	actionable	next	steps	to	help	them	improve	their	

individual	retirement	readiness.	Sustaining	and	improving	this	education	will	

require	a	coordinated	effort	among	the	Department,	the	Commission	and	plan	

sponsors	to	continue	improving	retirement	plan	participant	communication	during	

points	of	personal	change	(such	as	starting	a	new	job	or	approaching	retirement)	as	

well	as	during	enrollment	or	auto‐enrollment	periods.	

Participants want help choosing investments and managing risks.

Our	research	shows	that	many	participants	feel	they	lack	adequate	knowledge	to	

make	investment	decisions	on	their	own	and	appreciate	default	options	specifically	

designed	around	their	target	retirement	dates.	Our	2012	Biannual	DC	Investor	

Survey	shows	the	following	responses.	

Which 401k plan features does your company offer? Which features do you use?

	 Company	

offers,	and	

I	use	it	

Company	

offers,	but	I	

don’t	use	it	

Automatic	enrollment	in	the	plan	 55%	 8%	

Automatic	annual	increase	in	the	your	pay	

deferral	rate	

17%	 19%	

Professionally	managed,	diversified	fund	(e.g.	

target	date	funds)	

44%	 25%	

Computer	advice	programs	 44%	 25%	

Includes	respondents	who	identified	that	their	company	offers	some	form	

of	advice	
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What sources of information do you use to make investment decisions?

	 Company	

offers,	and	

I	use	it	

Company	

offers,	but	I	

don’t	use	it	

Retirement	goal	calculators	 44%	 29%	

One‐on‐one	professional	advice	 24%	 36%	

Call	center	advice	 19%	 44%	

Educational	workshops	 24%	 35%	

Because	many	retirement	plan	participants	may	have	only	limited	financial	

knowledge,	we	believe	plan	sponsors	should	help	participants	save	and	invest	for	

retirement	through	using	the	following	features:	

 Plan	design	(streamlined	investment	menus	and	automaticity,	e.g.	automatic	

enrollment	and	automatic	escalation);		

 Qualified	default	investment	alternatives	(QDIA)	selection;	and

 Participant	education.	

In	our	view,	these	three	pillars—plan	design,	QDIA	selection	and	participant	

education—are	effective	levers	for	managing	risks	on	behalf	of	participants.	

Making Retirement Work

We	appreciate	the	efforts	of	this	initiative	and	the	focus	being	placed	on	risk	factors	

that	impact	retirement	readiness	and	positively	influence	retirement	security.	At	

SSgA,	we	are	committed	to	making	retirement	work	for	all	Americans.	Thank	you	

again	for	the	opportunity	to	comment	on	the	Department’s	proposed	amendment	

and	the	Department’s	ongoing	exploration	of	how	to	best	communicate	the	risks	of	

target	date	funds	to	DC	plan	participants.	If	you	have	questions	regarding	SSgA’s	

comments,	viewpoints	or	research,	I	invite	you	to	contact	me	directly	and	welcome	

the	opportunity	to	continue	this	important	discussion.	

Sincerely,	

Fredrik	Axsater	

Senior	Managing	Director	

Global	Head	of	Defined	Contribution