Submitted electronically to 

e-ORI@dol.gov 

January 14, 2011 

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

Room N-5655 

U.S. Department of Labor 

200 Constitution Avenue, N.W. 

Washington, DC 20210 

Attention: Target Date Amendments 

The Pension Rights Center submits the following comments on the Department’s 

proposed amendments to the qualified default investment alternative regulation and the 

participant-level disclosure regulation concerning disclosure of information by target date 

or similar funds. The Pension Rights Center is a nonprofit consumer organization that 

has been working since 1976 to promote and protect the retirement security of American 

workers and their families. 

Target date or lifecycle funds are increasingly included as an investment option in 

participant-directed individual account plans and are specifically mentioned as a 

permissible qualified default investment alternative. These types of funds provide for 

changing asset allocations over the life of the fund as participants age. The recent 

collapse of the stock market revealed that, while the target date for funds might be the 

same, the asset allocations were materially different. This was because the “glide paths” 

(rate of change of asset allocation) depended on how conservative the fund assumed a 

participant needed to be at retirement (the target date). Unfortunately, many participants 

were not aware of the assumptions on which the funds’ strategies were based. The 

Department has addressed this by designing rules that will ensure disclosure of target 

date fund assumptions. 

The Department’s proposed disclosure amendments for target date funds will enable 

sophisticated participants to better determine whether a particular fund will meet their 

needs. The rules focus on the changing asset allocations as participants approach 

retirement and beyond retirement. A chart or other graphic illustration of the changes in 

assets over time will be particularly useful to participants trying to plan for a secure 

retirement. 

Sophisticated participants will also benefit from the expansion of disclosure requirements 

for qualified default investment alternatives. We are concerned, however, about the 

change in the notice requirement to participants who are defaulted into a qualified default 
investment alternative. Instead of a description of any fees, restrictions, or expenses that 

apply to a transfer from the fund, the proposal would merely require a statement that 

certain fees or restrictions may apply. We recommend that the notice specify the pages 

or section of the investment materials where transfer fees or restrictions can be found. 

Target date funds are most appealing to unsophisticated investors who desire a singlestop investment appropriate for saving for retirement, including participants in automaticenrollment 401(k) plans who are defaulted into a target date fund. Such participants, as a 

group, are probably the least likely to use or understand the types of disclosure that the 

regulations contemplate. Thus, ultimately, the value of target date funds to such investors 

will depend on the plan fiduciary’s prudent selection of appropriate target date funds with 

low management and investment fees, appropriate glide paths, and prudently selected and 

managed underlying assets. We thus commend the Department’s plan to publish “a 

series of tips to assist plan fiduciaries in obtaining and evaluating relevant information 

when selecting and monitoring TDFs as investment options for participant-directed 

retirement plans.” We recommend that the Department include in such a publication 

characteristics that would make a target date fund an inappropriate default investment, 

such as excessive fee levels or inappropriate underlying investments. 

 

Further, to adequately protect the unsophisticated investors who are most likely to use 

target date funds it will be important for the Department to monitor fiduciary behavior in 

selecting target date funds and to have an effective audit and enforcement program 

The Department also requested comments on incorporating participant-level disclosure 

requirements into the qualified default investment alternative regulation. We recommend 

that this be done. Defaulted participants have the same needs for detailed information 

about their investments as other participants, since they must make the same decisions as 

other participants, including whether to remain with the defaulted investment alternative, 

switch to another investment vehicle, or to remain in the plan at all. In addition, fees for 

target date funds may be harder to discern since they may change over time as the mix of 

funds changes, and may include fees both for each underlying fund and additional fees 

for managing the underlying funds. Detailed disclosure can help participants make more 

informed decisions about target date funds. 

The Pension Rights Center appreciates this opportunity to present comments on the 

proposed enhanced disclosures to participants in individual account plans. 

Respectfully submitted, 

 

 

Jane T. Smith Norman P. Stein 

Policy Associate Senior Policy Advisor