Ronald J. Surz 

President

Ron@TargetDateSolutions.com

_________________________________________________________________________

 78 Marbella

 San Clemente, CA 92673

 (949)488-8339

 www.targetdatesolutions.com

Tuesday, May 29, 2012

Submitted Electronically

Office of Regulations and Interpretations

Employee Benefits Security Administration

Room N-5665

U.S. Department of Labor

200 Constitution Avenue, NW.

Washington, DC 20210

Attention: RIN 1210-AB38; Target Date Disclosure.

Dear Department of Labor,

I applaud your proposed disclosures and fully support your efforts. The

recommended disclosures will serve to remedy the agency problems that 

currently plague this good idea. Fiduciaries, not participants, select TDFs, so they 

are employer-directed rather than participant-directed, requiring a higher 

fiduciary duty of care. Do not be misled by provider protests about participant 

misunderstandings. TDFs are chosen by fiduciaries, who have a responsibility to 

know and understand, and who are presumed to be educated and professional.

The January 31, 2012 issue of Advisor Persepectives magazine has an article at 

http://www.advisorperspectives.com/newsletters12/Why_Target-
Date_Funds_Fail.php by the editor, Robert Huebscher, that concurs with the 

findings of “A 2010 paper, Agency Problems in Target-Date Funds, by 

Vallapuzha Sandhya, written as part of her doctoral dissertation at Georgia 

State University, comprehensively identified the problems. In economics, an 

“agency problem” is a mismatch of incentives in a transaction between the 

principal (in this case, the investor) and the agent (in this case, the fund 

company) – the agent is able to profit at the principal’s expense.” 

I agree with this explanation and would add the following observations:

1. Until and if TDFs are vetted, agency problems will persist, and 

participants will be exposed to excessive risk at the target date. Plan 

sponsors and their advisors are enabling failure. The safe harbor of a 

QDIA is not enough in this case, nor is safety in numbers (choosing one of 

the “Big 3”).

2. To package product, fund companies are selling “objectives” that are 

actually hopes – hopes that can be served by any glide path they choose, 

since any glide path will do. Replacing pay and managing longevity risk 

are hopes. An objective with a nonsensical course of action is a hope. 

Saving more is the right course of action. This packaging is plain for all to 

see in 2 ways: (1) The equity allocations of equity managers is generally 

higher than those of bond managers, and (2) Prospectuses and factsheets 

NEVER state objectives that are used in sales. Instead the “official” 

objectives are the likes of “Earn a return commensurate with the risk.”

3. If and when fiduciaries wake up, which could take a lawsuit, they will 

demand a real objective, like bring the participant safely to the target date 

with appreciated savings intact – a real “to” fund rather than the phony 

baloney versions currently being served up.

The proposed disclosures strip away reasonable deniability. Fiduciaries cannot 

claim that they did not know. Perhaps then they will actually vet their selections 

and require solution rather than product, solution that has a reasonable 

objective.