Compliance May 6, 2010

DoL, SEC Offer TDF "Primer"

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) and the U.S. Securities and Exchange Commission (SEC) have published what was termed “guidance to help investors and plan participants better understand the operations and risks of target date fund investments.”
Reported by

In announcing the release, EBSA noted that, “There can be significant differences among target date funds in how they invest and how they reallocate assets between equity and fixed income investments up to and after the target date of the fund. The guidance will assist investors and participants in assessing the benefits and risks associated with target date funds and the appropriateness of including such an investment as part of their retirement portfolios.” 

Elementary Outline

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

The “guidance” turns out to be a pretty elementary outline of some basic features of target-date funds, including the investment mix of such funds, an acknowledgement that there are risks associated with the investments, how target-date funds operate, and ways to evaluate a target-date retirement fund. 

However, the latter category keeps to the elementary theme, advising only that investors:

  • Consider your investment style  
  • Look at the fund’s prospectus to see where the fund will invest your money
  • Understand how the investments will change over time  
  • Take into account when you will access the money in the fund, and   
  • Examine the fund’s fees.  

“Investor Bulletin: Target Date Retirement Plans” is available athttp://www.dol.gov/ebsa/pdf/TDFInvestorBulletin.pdf

 

Compliance May 6, 2010

Schwab Settles State YieldPlus Fund Suit

Charles Schwab has agreed to pay $35 million to settle a California state court suit over the Schwab YieldPlus Fund.
Reported by

A Schwab announcement said the money is in addition to the $200-million settlement of federal court claims about the YieldPlus fund that the company announced in April (see “Schwab to Pay $200M in Bond Fund Suit Settlement“). While repeating that it has not admitted or denied guilt over allegations made about the fund, Schwab said the agreements allow it to avoid the distraction and uncertainty of a trial and the further possibility of a protracted appeals process.

Based on the newest settlement, Schwab said it increased the contingency reserve in connection with the litigation by $14 million pre-tax, which is net of expected insurance coverage. Together with previously reported reserves of $182 million pre-tax in connection with the federal and state claims, the combined reserve reduces first quarter 2010 net income by approximately $120 million, or $0.10 per share, the company said.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

According to Schwab, the fund was designed to invest in a variety of fixed income instruments, including corporate bonds, asset backed securities, mortgage-backed securities, and other fixed income investments. The credit crisis led to a decline in most fixed income investments, which Schwab claimed led to the investor losses that were the subject of the federal and state litigation.

«