Publications: Press Releases
July 12, 2010
Media Contact: Sara Redington (866) 933-IFLC admin@iflcouncil.org
IFLC and Securian Provide Joint Perspective on Target Date Funds for Plan Sponsors
WASHINGTON, D.C. - International fiduciary standards organization Investment Fiduciary Leadership Council ("IFLC"), in partnership with Securian Financial Group, published a white paper that highlights for retirement plan sponsors the importance of prudently evaluating target date funds.
When target date funds were introduced in the mid-2000s, employers were offered a seemingly straightforward approach to simplifying their investment option selection. The popularity of target date funds has continued to increase in recent years, and is expected to swell to $2.6 trillion by 2018.
When the market fell in 2008, however, employers and employees learned that the absolute level of risk within each target date fund is not always apparent. The declines in fund values drew the attention of the Department of Labor and subsequent hearings explored those concerns.
With almost one-third of 401(k) plan contributions currently going towards target date funds, the careful review of these funds by pension plan sponsors is of paramount importance.
"It is crucial that target date funds are evaluated, as are other plan investment options, on their ability to meet the individual needs of plan participants," said Ronald E. Hagan, chairman of the board of directors for IFLC. "In many cases, this analysis will reveal target date funds as a risky investment for plan participants and, potentially, an imprudent choice for retirement plan sponsors."
The IFLC and Securian co-branded paper addresses several aspects of target date funds that employers can consider when determining whether a fund is right for their plan. They are:
- Risk throughout the entire targeted date period so appropriate risk levels for participants can be identified.
- Risk-adjusted returns and expenses to determine which target date funds, if any, achieved strong returns relative to a valid benchmark and a reasonable level of expense relative to other target date funds.
- Holding the underlying funds to the same standards as other stand-alone investment options offered in a plan's investment array.
- The reliability and repeatability of investment results. Although past performance does not guarantee future results, historical data may assist plan sponsors with their reviews.
To read the paper in its entirety, visit www.iflcouncil.org/Documents/IFLC-TargetDateFunds.pdf.
About IFLC
IFLC's member firms include corporate retirement plan sponsors, foundations and endowments, public pensions, investment advisors, investment managers, and businesses that provide administration services to pension plans. IFLC's members believe that the retirement plan, charitable foundation, and service provider communities should quickly move to the adoption of defined standards that embrace every type of fiduciary and fiduciary support organization. To this end, IFLC serves as a watchdog on fiduciary standards and identifies publicly the organizations that conform to their practices.
About Securian Financial Group
Since 1880, Securian Financial Group and its affiliates have provided financial security for individuals and businesses in the form of insurance, investments, and retirement plans. Now one of the nation's largest financial services providers, it is the holding company parent of a group of companies that include Minnesota Life Insurance Company.
Securian is a fiduciary with regard to the selection and monitoring of the investments that underlie the unregistered separate accounts of its variable group annuity products and takes this responsibility very seriously.
##
|
