Compliance March 4, 2013

EBSA Offers Tips for Selecting TDFs

 

The Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) prepared general guidance to assist plan fiduciaries in selecting and monitoring target-date funds (TDFs).


 

 

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The document says the guidance can also be used for other investment options in participant-directed individual account plans. The guidance includes a review of TDF basics.  

In the guidance, the EBSA suggest fiduciaries: 

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  • Establish a process for comparing and selecting TDFs; 
  • Establish a process for the periodic review of selected TDFs; 
  • Understand the fund’s investments—the allocation in different asset classes (stocks, bonds, cash), individual investments and how these will change over time; 
  • Review the fund’s fees and investment expenses; 
  • Inquire about whether a custom or nonproprietary target-date fund would be a better fit for the plan; and 
  • Develop effective employee communications. 

The EBSA guidance is at http://www.dol.gov/ebsa/pdf/fsTDF.pdf.

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