What past-performance benchmarks do 404a-5 disclosures use for target-date funds?

For a retirement plan that provides participant-directed investment, an administrator provides information to meet ERISA’s disclosure requirements. This includes comparing a fund’s or other investment alternative’s past performance to “an appropriate broad-based securities market index[.]” For example, many fiduciaries compare a fund one finds to have the investment goals and strategies of a US small-capitalization value fund to the Russell 2000 Value Index or the CRSP US Small Cap Value Index.

In SECURE 2022 § 318, Congress directs the Labor department to publish a rule to let a plan’s administrator use for “a designated investment alternative that contains a mix of asset classes” a benchmark that is a blend of broad-based securities market indices, proportioned to follow the target-date, asset-allocation, or balanced fund’s investments in asset classes.

Considering the Office of Information and Regulatory Affairs’ most recent Unified Agenda of Regulatory and Deregulatory Actions, it seems unlikely the Labor department will complete, or even propose, a rulemaking by Congress’s December 2024 due date.

For plan administrators that rely on a recordkeeper or third-party administrator to assemble rule 404a-5 disclosures comparing an investment alternative’s past performance to an index’s past performance, what have the service providers been doing?

Have some followed what Congress permits, setting up a custom benchmark built from applying each underlying asset class’s index in the portions the target-date fund declares as its target allocations?

If not, what benchmark does a 404a-5 disclosure use for a target-date fund?

(I’m aware some investment funds use custom benchmarks for securities law disclosures; I’m seeking what retirement plans do in ERISA 404a-5 disclosures to participants.)

Am I right in guessing big recordkeepers show as the 404a-5 comparator for a target-date fund Morningstar’s or S&P Global Ratings’ index of target-date funds of the same or nearest target year?

Were it that straightforward.  I would say most big recordkeepers have a default set of benchmarks that they use for the the 404a-5 disclosure, and may allow a plan's financial advisor or the plan's investment committee an option to pick their own benchmarks.

Some mutual fund companies (Vanguard being one) built their own benchmarks for their funds which can vary from Morningstar or S&P benchmarks.

As illogical as it may seem, it also is worth noting that some 404a-5 disclosures use a single benchmark for all of the target date funds in the investment menu regardless of the target year.  Given the mix of categories of assets vary as the calendar approaches a target date, we would expect to see a difference in the benchmark.

Using one comparator for all the differing portfolios in a set of target-year funds!

And let me guess: Almost none of the customers questions that selection?