Focused Disclosure Key for Investor Understanding
ARLINGTON, VA, (September 1, 2010) – The following is a statement from Brian H. Graff executive director and CEO of the American Society of Pension Professionals & Actuaries (ASPPA) and its affiliated organization the National Association of Independent Retirement Plan Advisors (NAIRPA) in response to the U.S. Securities and Exchange Commission’s (SEC) request for information on Target Date Fund disclosure. Read NAIRPA’s comment letter filed with SEC here.
“The National Association of Independent Retirement Plan Advisors (NAIRPA) issued their comments today on how to improve disclosure for plan fiduciaries and participants who choose target date funds (TDF) as designated investment options in their qualified plans.
Since their approval as a designated investment or QDIA by the U.S. Department of Labor (DOL) in 1996, target date or lifecycle funds have become a popular retirement option for employer sponsored plans such as 401(k)s or 403(b)s. ASPPA members provide consulting and administrative services to millions of retirement plans and have witnessed firsthand an uptick in the use of target date funds.
We believe focused disclosure is integral to the process and that the summary disclosure of asset allocation at or near the name of the fund often may not go far enough in informing investors on the risks to these vehicles.
Essentially one size does not fit all when it comes to disclosure of the risk, volatility, age horizon, asset allocation or glide path of TDFs. Specifically this disclosure is relevant to three types of investors who constitute roughly two-thirds of the TDFs market—(1) the plan sponsor or fiduciary, (2) the active participant, and (3) the default participant. Each of these investors has different concerns and needs—which we address in our comments.
We applaud the SEC’s call for clarity on target date fund disclosure and urge the Commission to consider our recommendations as they finalize guidance on the issue.”
The National Association of Independent Retirement Plan Advisors (NAIRPA) is a national organization of firms which provide independent investment advice to retirement plans and participants. NAIRPA’s members are registered investment advisors whose fees for investment advisory services do not vary with the investment options selected by the plan or participants. In addition, NAIRPA members commit to disclosing expected fees in advance of an engagement, reporting fees annually thereafter and agreeing to serve as a plan fiduciary with respect to all plans for which it serves as a retirement plan advisor.