The recent Securities and Exchange Commission and Department of Labor jointly sponsored hearing on target-date funds (“More target-date scrutiny in future,” June 29) actually produced a few substantive agreements on target-date funds.
•Plan sponsors are responsible for selecting and monitoring target-date funds.
•The distinction between “to” and “through” funds needs to be recognized, and fund companies need to clearly label their products accordingly. “To” funds are designed to end at the target date, and might be called “accumulation-only” funds. “Through” funds are designed to continue beyond the target date, potentially to death, and might be called “target death” or “lifetime” funds.
•There is a crying need for a standard, or standards if need be, so plan sponsors can make informed decisions.
Although some might not agree, it was pointed out that target-date funds are not all that complicated. For example, there is currently only one standard for “to” funds, so either it should be embraced or alternatives should be brought forward. Somewhat more complicated, there are three index series vying for acceptance as “through” standards, and the key distinction among them is active vs. passive. Hopefully, the DOL will select appropriate standards because it really doesn't have to be all that complicated.
Target Date Analytics LLC
San Clemente, Calif.