Plan Sponsors, Are you on Target? A Guide to Understanding your Target Date Fund Program

Target-date funds are becoming more popular with company 401(k) retirement plans. And as they do so, it puts more burden of responsibility on the plan sponsor to know what they are offering their employees who chose to invest in Target-date funds (TDF).

According to the SEC’s document Recommendation of the Investor Advisory Committee Target Date Mutual Funds April 11, 2013, TDFs had approximately $485 billion at the end of 2012, up 29% over the previous year. Roughly 70 percent of U.S. employers report offering target-date funds as their default investment option for company sponsored defined contribution plans.

What’s your Target-Date Fund’s Glide path?

We will start with defining what the glide path is as it relates to target date funds. Investortopia states it as follows:

Definition of ‘Glide Path’

Refers to a formula that defines the asset allocation mix of a target date fund, based on the number of years to the target date. The glide path creates an asset allocation that becomes more conservative (i.e., includes more fixed-income assets and fewer equities) the closer a fund gets to the target date.

Is your Glide Path “To” or “Through”? 

“To” glide paths will have lower equity exposure at age 65 whereas “through” glide paths will have much more equity exposure at age 65 and continue that equity exposure, in a decreasing manner, out to life expectancy. The “To” glide path fund company is working from a philosophy that the participant wants minimum equity exposure (risk) at age 65 and will likely roll his/her 401k to an IRA at retirement to begin distributions. The “through” fund company views longevity, not market risk & volatility, as the greatest risk to an age 65 retiree and hence, philosophy to keep a higher proportion of equity assets in the glide path at age 65. Which philosophy is correct, which is incorrect? Neither, they are merely different. But as a plan sponsor, do you know your glide path, and how have you communicated your target-date fund glide path to your participants? Is your glide path reflective of your company’s employee culture?

Fiduciary Considerations of Selecting the Right Target-Date Fund for Your Plan

Here we will learn what key considerations are needed in selecting the right target-date fund program for your organization, or determine if the current program you have is a proper fit for your company, and learn how you communicate all this to your participants.

Tips for ERISA Plan Fiduciaries, Target-Date funds.

The U.S. Department of Labor has recently issued guidelines for plan sponsors with respect to their target-date fund program. We will discuss what those guidelines are and how to apply them.

Target Date Fund Analysis Toolbox

Lastly in this webinar, we will learn what industry tools are available to the plan sponsor, and how access them to research, evaluate, recommend and document target-date options and suitability requirements for participants who do not make investment elections.

The tools include these areas of analysis.

  • ●Glide path; “To” or “Through”
  • ●Diversification; Asset Class Summary, Investment Management Firm
  • ●Structure
  • ●Expenses
  • ●Volatility Comparisons; Up/Down Capture Ratios, Drawdown
  • ●Inflation Hedge
Who Should Participate
All executive decision makers responsible for the creation, management and monitoring of a company 401(k) retirement plan with emphasis on decision makers responsible for employee education/communication programs.

What You Will Learn

1. Learn what the Glide Path is, and understand the difference between “To” and “Through” glide paths. Learn which one is right for your organization.
2. Learn what requirements the U.S. Department of Labor has for plan sponsors in monitoring their Target Date Fund Program.
3. Discover how to research, evaluate, recommend and document target-date options and suitability requirements for your company and your participants.
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Speakers:
  • David Gratke

    David Gratke 

    Mr. Gratke is CEO of Gratke Wealth, LLC 'Life is complicated. Retirement doesn’t have to be' We understand that our clients are busy and don’t have the time to manage their company’s 401(k) plan. We help them put all the pieces in place so their company’s hard earned dollars are optimally at work.

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Sponsors:
  • HR.com

    HR.com 

    HR.com is in business to help build great companies by connecting them with the knowledge and resources they need to effectively manage the people side of business. As the global authority, HR.com delivers HR best practices to help organizations build great companies through community, collaboration, research, shared best practices, events and measurements. HR.com is the largest global social networking and resource site for HR professionals. 200,000+ members visit us daily to learn, earn credits, attend live webcasts and virtual conferences, network, blog, join a community, and get the ans

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  • Gratke Wealth, LLC is a registered investment adviser in the State of Oregon, California. The adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.