Compliance January 14, 2011

ASPPA Comments on Target-Date Fund Disclosures

The American Society of Pension Professionals and Actuaries (ASPPA) and the National Association of Independent Retirement Plan Advisors (NAIRPA) suggested a few additions and modifications to target-date fund disclosure rules.
Reported by

Addressing the Department of Labor’s Employee Benefits Security Administration, the groups recommended the disclosures for participants include: 

  • The impact on 401(k) participants who take a lump sum cash distribution at retirement. In the groups’ experience, most participants take their distributions in cash lump sums at retirement. Even if they roll their distributions over to an IRA, they may not reinvest (or be able to reinvest) in the same target date funds. Thus, any fund in which the landing point is 20 years after retirement may be wholly inappropriate for that participant. “Our point is not to engage in a debate of the “to” versus “through” glidepaths, but to emphasize that disclosure of asset allocation at the target date and/or the landing point, while helpful, may not be sufficient.” 
  • A statement as to the potential impact of disparate ages between spouses. A target date fund for a participant who intends to retire at age 70 (with a life expectancy of 16 years) and a spouse that is age 68 (with a life expectancy of 22 years) may not be appropriate for a 70 year-old with a 55 year-old spouse (whose life expectancy may be 35 years). 

In addition, as did the SPARK Institute in its comment letter to the Employee Benefits Security Administration (see “SPARK Calls for Clarification of Proposed TDF Disclosure Rules“), ASPPA and NAIRPA  asked for more clarification on the requirement in the Proposed Regulations that a chart, table or other graphical representation not “obscure or impede” a participant’s or beneficiary’s understanding of information required to be explained.  

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“Given the ambiguity in the language in the Proposed Regulation, plan fiduciaries will have difficulty determining whether they have satisfied this requirement,” the letter said. “As a result, ASPPA and NAIRPA suggest that the Department adopt the standard for target date fund disclosures that is used in the context of summary plan descriptions, i.e., where information must be provided “in a manner calculated to be understood by the average plan participant.”  

The comment letter is here.
The Markets January 14, 2011

ETF Securities Unveils Gold Offering

ETFS Physical Asian Gold Shares began listing on the NYSE Arca on Friday, trading under the ticker AGOL, ETF Securities announced.

 

Reported by

A news release said AGOL is the first U.S. precious metals product to be vaulted in Asia and will be held in Singapore.

According to the announcement, the highlights of the new offering are: 

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  • ETFS Physical Asian Gold Shares (AGOL) will custody all of its physical gold bars in secure LBMA approved vaults in Singapore.
  • ETFS Physical Asian Gold Shares (AGOL) are backed by London Bullion Market Association (LBMA) gold bars that meet “good delivery” standards.
  • Investors can diversify their gold holdings either into Asia using AGOL or Switzerland using the existing SGOL.  Both ETPs are offered at 0.39% per annum. 
  • Gold bars underlying AGOL will be audited bi-annually by an independent third party auditor.  All gold bar numbers will be published daily at www.etfsecurities.com.

ETF Securities now offers seven precious metal ETPs with a variety of single and basket precious metal ETPs. 

The objective of the ETFS Physical Asian Gold Shares (AGOL) is to reflect the price performance of physical gold, less trust expenses. The trust is open-ended and is designed for investors who want a cost-effective and convenient way to invest in or diversify their existing gold holdings.

ETFS Physical Asian Gold Shares represent a direct interest in physical gold bullion held in vaults located in Singapore by the Custodian (JP Morgan Chase Bank). 

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