July 3, 2014

Filed electronically at http://www.regulations.gov

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 Disclosure (RIN 1210–AB38)

Dear Sir or Madam:

The American Benefits Council (Council) appreciates this opportunity to comment 

on the Department of Labor’s reopening of the comment period on its proposed 

regulatory amendments regarding target date funds. The Council is a public policy 

organization representing principally Fortune 500 companies and other organizations 

that assist employers of all sizes in providing benefits to employees. Collectively, the 

Council's members either sponsor directly or provide services to retirement and health 

plans that cover more than 100 million Americans. Target date funds are used by many 

of our plan sponsor members, including as their plan’s qualified default investment 

alternative (QDIA), and our members support efforts to help participants understand 

these important investments and make informed choices.

The Department has asked for comments on a recommendation by the Securities 

and Exchange Commission’s Investor Advisory Committee that the Securities and 

Exchange Commission (Commission) develop a glide path illustration for target date 

funds that is based on a standardized measure of fund risk as a replacement for, or 

supplement to, an asset allocation glide path illustration. The Council is pleased to 

provide our comments, and pledges to continue to work with the Department as it 

evaluates the disclosures that will best serve participants.
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IMPORTANCE OF EFFECTIVE DISCLOSURE

Many studies have documented the widespread adoption of target date funds in 

401(k) and similar defined contribution plans.1Target date funds are the most common 

QDIA and have proven an important complement to automatic enrollment, itself a 

successful innovation in retirement plan design.2Target date funds can provide asset 

allocation at low cost and are able to adjust that allocation over time as a participant 

ages.

Because target date funds play a crucial role in our defined contribution system, we 

believe it is important as a first principle that the Department’s and the Commission’s 

initiatives do no harm. We must keep in mind that many participants’ account balances 

are invested in target date funds because they were defaulted into the investment.

Given the limited engagement of defaulted participants – and other participants who 

may spend very little time analyzing the option before choosing the investment – we 

believe that disclosure should be easy to understand and neither confusing nor 

misleading.

For this reason we commend the Department for taking a careful approach to this 

project. This is the second time the Department has reopened comments. The 

Department has worked closely with the Commission and we urge the agencies to 

continue to work closely together.

NEED FOR RE-PROPOSAL BEFORE FINAL RULE

The Commission’s notice does not propose any particular standard. The Commission asked a series of questions about various aspects of a risk-based disclosure for 

target date mutual funds. In fact, the Commission’s reopening of its comment period is 

essentially a request for information, not a proposal.

Similarly, the Department’s notice proposes no regulatory language or standard. We 

cannot, of course, comment on a standard that we have not seen. The Department, 

therefore, would need to re-propose particular amendments to the QDIA and 

participant disclosure regulations. The Department could not move immediately to a 

 

1

See, e.g., Employee Benefit Research Institute, 401(k) Plan Asset Allocation, Account Balances, and Loan

Activity in 2012 (Dec. 2013) (“Seventy-two percent of 401(k) plans included target-date funds in their 

investment lineup at year-end 2012”); Fidelity, 7 Hot Retirement Trends in 2014 (“For Generation Y 

participants, 54% had all their assets in a target date fund, providing this population with a more agebased asset allocation over prior years.”).

2

See Vanguard, How America Saves 2014, p. 52 (91% of plans with a QDIA designated a target date 

fund).
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final rule that incorporates changes to the “glide path” illustration or additional riskbased disclosure. We are not recommending a re-proposal, but rather pointing out that 

one would be necessary if the Department is interested in a disclosure based on a 

standardized measure of risk.

POSSIBILITY OF CONFUSION

In our prior comment letter, the Council commented that the requirement to disclose

that participants can lose money by investing in target date funds and that such 

investments do not guarantee adequate retirement income could be misleading if 

applicable only to target date funds. We pointed out that the model participant 

disclosure chart already contains a sentence that says “Your investment in these options 

could lose money.”

We have a similar concern about requiring a risk-based measure only in the context 

of target date funds. It seems both incomplete and inconsistent to require this disclosure 

just for one investment, particularly one that, by definition, includes a mix of asset 

classes that adjust over time.

We are also concerned that participants might misunderstand the purpose of any 

such disclosure, unless this itself was a required part of the disclosure. The Commission 

stated in its recent release that the underlying concern behind the Investor Advisory 

Committee’s recommendation was to help investors understand differences among 

target date funds offered by mutual fund companies.3But participants typically are not 

comparing among multiple target date funds from different providers. There is 

generally only one target date fund “suite” among a plan’s designated investment 

alternatives. The key decision for a participant in a qualified retirement plan is whether 

or not to invest in the target date fund appropriate for his or her expected retirement 

date, or, alternatively invest in the plan’s other investment options. Thus, a comparative 

disclosure to other target date funds that are not available under the plan would be of 

little use to plan participants.

NON-MUTUAL FUND INVESTMENTS

Our plan sponsor members offer target date funds in a number of forms. In addition 

to a registered mutual fund, a plan’s target date fund might be a collective trust, a 

separately managed account, or an insurance company separate account. Unlike the 

Commission’s proposal, the Department’s rules will affect a variety of investment types 

not subject to the Investment Company Act of 1940. The Department should consider 

 

3

See 79 Fed. Reg. 19564, 19565 (April 9, 2014) (Investor Advisory Committee’s recommendation was to 

“promote comparability”). 
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whether a new requirement under the QDIA and participant disclosure regulations is 

workable with respect to unregistered investment structures. As stated earlier, the 

Department would need to provide notice and an opportunity to comment on this 

important aspect, which will not be considered by the Commission. It is possible that a 

rule applied to qualified plan investments could be different from (i.e., require less 

detailed disclosure than), but still not conflict with, any requirements set forth by the 

Commission. Such a subset might be able to address the needs of qualified plan 

participants without being identical to a Commission rule.

* * * *

Again, we appreciate the opportunity to offer our comments. We believe that the 

American Benefits Council offers an important and unique perspective of the employer 

sponsors of, and service providers to, retirement plans and we look forward to working 

with you.

Sincerely,

Jan Jacobson

Senior Counsel, Retirement Policy