Representative Scott and Senator Murray call on government watchdog to examine funds responsible for keeping millions of people safe in retirement
Yesterday President Robert C. “Bobby”
“As presidents of
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Read the letter below:
To: The Honorable
Dear Mr. Dodaro,
As presidents of
TDFs, which are default investment options offered in employer-provided pension plans, aim to balance risk and provide an asset allocation appropriate to the age of plan members over time. . To do this, TDFs gradually shift the asset allocation of participants from higher risk investments (stocks) to more conservative investments (fixed income) as participants approach retirement. TDFs are extremely popular among plan members. In fact, since GAO’s last TDF report in 2011/1, these funds have
In addition, while TDFs have traditionally included a combination of equities and fixed income securities, the
In light of these concerns regarding TDFs, we respectfully request GAO to respond to the following questions:
1. What percentage of total defined contribution (DC) plan assets are invested in TDFs? What percentage of plan members are offered and participate in TDFs? What percentage of plan members are by default in FTDs?
2. To what extent have participants approaching retirement age who are invested in FTDs been affected by market fluctuations due to the COVID-19 pandemic? How much variation is there in the performance of FTDs of the same vintage (ie Target Retirement Year), particularly for FTDs on or near the target retirement date? To what extent have TDF providers taken steps to mitigate volatility in TDF’s assets?
3. How often do investors with default investment TDFs in their DC regimes re-evaluate their investments, and what, if any, is the cost of a passive investment position in a turbulent market? Are TDFs properly structured to withstand major stock turmoil?
4. How does the asset mix and fee structure vary between TDFs used as default options in 401 (k) plans? How do TDF’s fee structures compare to those of other investment products? As retirement approaches (i.e. at age 55 and over), to what extent do FTDs change the allocation of stocks to more conservative investments like fixed income in order to to protect these members against losses as they approach retirement?
5. How are TDFs marketed and advertised? Are participants sufficiently aware of the variation in costs and the allocation of assets among TDFs?
6. What percentage of plan sponsors choose ready-to-use RDFs? What percentage of plan sponsors choose personalized TDFs? Is there a significant difference between the performance of off-the-shelf TDFs and custom TDFs?
7. To what extent do TDFs include alternative assets, such as hedge funds or private equity? What information do plan members and plan sponsors typically have about the risks and rewards of asset allocation in TFFs? How do plan sponsors select and monitor FTDs to ensure these funds present an appropriate level of risk for participants?
8. What steps does the
9. When given the opportunity to invest in FTDs in addition to a range of other investment fund options, how often and to what extent are plan participants primarily – or exclusively – dependent on FTD? In these scenarios, how many investment alternatives are offered? How many TDFs do plan sponsors typically offer in their investment options?
10. What are the possible legislative or regulatory options that would not only strengthen the protection of plan members, who are nearing retirement or who are retired, but which would also achieve the intended objectives of the FDD?
If you have any questions regarding this request, please contact
Thank you for your attention to this question.
Check out the signatories and footnotes on click here: https://edlabor.house.gov/imo/media/doc/050621%20GAO%20Target%20Date%20Fund%20Request%20FINAL.pdf