Adding Target-Date Funds as QDIA- Committee Procedures

[kshawbenefits]

Should an investment committee have a special process for adding a target-date fund to a 401k lineup, and possibly using it as the QDIA? A client is being told that it should take the extra step of having its investment committee interview the managers of the target-date funds under consideration. I haven't heard this before. Any thoughts appreciated. Thanks. 

[QDROphile]

Extra step on top of what?  If the "what" is prudent, then the interview by the committee is not compelling.  For example, if the committee is advised by an investment adviser and the adviser, as part of the adviser's practices, interviews the fund managers before recommending a fund (QDIA or not), then the committee need not interview if it is reasonable to rely on the investment adviser.  Also, reliance on the investment adviser might be reasonable even if the investment adviser does not interview the fund manager -- under many circumstances an interview is not not necessary.  But the committee needs to know what the due diligence is under the investment adviser's practices and recommendations.

[ERISAAPPLE]

Why would the committee, who is responsible for millions of dollars of other people's money, want to interview the people who will actually manage that money?  

That's a rhetorical question.  Please don't answer.

Whoever is telling this to your client is one of the few who actually cares.   The reason you have never heard it is because so few care.

 

[Larry Starr]

14 minutes ago, ERISAAPPLE said:

Why would the committee, who is responsible for millions of dollars of other people's money, want to interview the people who will actually manage that money?  

 

 

Maybe because they are the least competent to actually interview the managers!  As QdroPhile noted, if they have an investment advisor that they are working with and on whom they depend for expertise, then having the committee actually interview the manager may be a useless action.  The individual situation will determine what is best.

[jpod]

I think the investment committee of a plan of any size can safely rely on its 3(21) advisor.  (If it were a 3(38) investment manager we wouldn't be having this conversation in the first place, would we?)  On a practical note, unless you are a plan of a certain size or larger, why would anyone think that a target date sponsor/advisor is going to agree to an interview? 

[kshawbenefits]

Thanks everyone for your thoughts!