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Member, Beacon International Group, Ltd.
WASHINGTON—Employers that offer target-date and similar retirement funds as an investment option in their 401(k) and other defined contribution plans would have to disclose more information to participants, the Labor Department has proposed.
Among other things, the Labor Department wants plan sponsors to disclose how the asset allocations of target-date funds will change over time and when the funds will reach their most conservative investment position.
In addition, a graphical illustration would have to be provided to participants on how the funds’ asset allocation will change over time.
Many target date funds include a retirement date in their names. Those that do would have to explain the relevance of that date.
The proposed rules, which will be published Tuesday’s Federal Register, come at a time of “exponential” growth of the funds, said Mark Kastory, an investment analyst at Aon Hewitt Inc. in Chicago.
At the end of the first quarter of 2009, $145 billion was invested in such funds, up from $23 billion six years earlier according to the most recent Labor Department estimates.
Target-date funds are so named because the mix of equities and fixed-income investments are adjusted to reflect an employee’s age.