DOL proposes rule to amend target-date fund disclosures

The Department of Labor’s Employee Benefits Security Administration issued a proposed rule aimed at providing participants in retirement plans with more information on how target-date funds operate.

If finalized, the proposed rule would amend regulations on qualified default investment alternative and the participant-level disclosure. Under the proposal, plan administrators are required to issue to participants and beneficiaries in a participant-directed plan the following:

• A narrative explanation of how the TDF's asset allocation will change over time, and the point in time when it will reach its most conservative position;
• A graphical illustration of how the TDF's asset allocation will change over time; and
• For a TDF that refers to a particular date (e.g., "Retirement 2050 Fund"), an explanation of the relevance of the date.

In the proposed rule, the investment-related information on TDFs must also be provided to investors who are not defaulted into a TDF. Officials hope the amendment will help plan participants to understand investment strategies and asset allocation of TDFs.

"Based on our collaborative examination of this issue with the Securities and Exchange Commission, it is clear that all participants in participant-directed individual account plans can benefit from better information about how target-date investments are designed to meet their retirement savings needs," says Phyllis C. Borzi, assistant secretary of labor for EBSA.

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