Target Fund Dates: Surprising Facts

In 2006 the Pension Protection Act added Qualified Default Investment Alternative regulations, QDIA, to ERISA.  One of the 3 QDIA alternatives a Plan Fiduciary could choose as a safe harbor investment is a Target Date Fund.  As a result, the amount of 401(k) assets being deposited into Target Date Funds has increased substantially over the years.  The attached white paper points out some very interesting statistics and surprising facts on how Target Date Funds are being utilized by Plan Participants.  This provides an opportunity for retirement plan professionals to assist Plan Sponsors in answering the following questions based on the statistics outlined in the white paper.

What are some questions for plan sponsors to consider?

  • People may not understand how TDFs are intended to be used. How can employers better educate their workers?
  • Target date users may need to be reminded of the importance of saving for retirement.

How can employers nudge them in this direction?

  • Are there better investment options than the current suite of TDFs?
  • Most people increase equity exposure when changing their investment from a TDF.

How can sponsors help workers determine the right amount of risk for their situation?

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