Compliance May 22, 2009

More Details Released about Target-Date Hearing

The U.S. Department of Labor (DoL) and the Securities and Exchange Commission (SEC) plan to look into how target-date fund managers determine the asset allocation of target-date funds, among other things.
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In a news release, the DoL’s Employee Benefits Security Administration (EBSA) and the SEC provided more information regarding a one-day hearing on June 18, which will explore issues relating to target-date funds and other similar investment options.

The release said the “purpose of the hearing is to examine the need for additional guidance given the importance of these investments to the retirement savings of investors.”

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The agencies said witnesses will address topics relating to:

  • how target-date fund managers determine asset allocations and changes to asset allocations;
  • how managers select and monitor underlying investments;
  • the extent to which the foregoing, and related risks, are disclosed to investors and the adequacy of that disclosure;
  • the approaches or factors to compare and evaluate the funds.

After a similar hearing in February, the U.S. Senate Special Committee on Aging noted that the DoL has issued regulations allowing target-date funds to be used as a qualified default investment alternative (QDIA) in employer-sponsored retirement plans, but there are no requirements regarding the composition of target-date funds and the appropriate ratio of stocks and bonds as the fund nears its target (see “Senate Committee Takes Aim at Target-Date Funds’).

The EBSA/SEC hearing, first announced last week (see “EBSA/SEC to Hold Target-Date Hearing’), will begin at 9 a.m. in the department’s auditorium, 200 Constitution Avenue, NW in Washington, D.C.. Written requests to testify at the hearing and topical outlines should be submitted by June 5.

The agencies said those wishing to testify at the hearing should submit a request to speak and an outline of topics to be discussed to e-ORI@dol.gov, or to Office of Regulations and Interpretations, Employee Benefits Security Administration, 200 Constitution Ave., N.W., Washington, D. C. 20210.

Comments also may be submitted directly to the SEC using instructions available on the agency’s Website, www.sec.gov.

The hearing agenda will be available by June 10.

The Markets May 22, 2009

529s Shed 12.4% of Assets in Q408

The combined assets of all Section 529 college savings plans fell 12.4% in the fourth quarter to $104.9 billion.
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At the end of December 2008, prepaid plans accounted for $15.6 billion, while savings plans held another $89.4 billion, according to data gathered by the Investment Company Institute (ICI).

The number of Section 529 plan accounts increased 1.3% to about 11.2 million in the fourth quarter of 2008. There were 2.3 million prepaid plan accounts and 8.9 million savings plan accounts. The average 529 savings plan account size was about $10,000 in December 2008.

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The largest such program nationally was the Virginia Savings Plan, which, as of December 2008, had 1.89 million accounts and $19.7 billion in assets, according to the data.

Meanwhile, the Florida Prepaid program had 1.3 million accounts and $7.2 billion in total assets.

More information and state-by-state data is available here.

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