Performance, investment fees and expenses.
Those, according to new guidelines from the Department of Labor, are three key areas that ERISA plan fiduciaries should spend plenty of time considering when they look at target date funds and try to decide the differences between providers.
The department's Employee Benefits Security Administration also recommended fiduciaries should establish a process for the periodic review of selected TDFs.
Take the time to understand the fund’s investments and how these will change over time, it said in a new tip sheet. It also is important to review the fund’s fees and investment expenses, according to the EBSA.
Fiduciaries also should:
- ask whether a custom or non-proprietary target date fund would be a better fit for their plan;
- develop effective employee communications;
- take advantage of available sources of information to evaluate the TDF and recommendations they receive regarding TDF selection;
- document the process.
Rocaton, an investment advisor registered with the Securities and Exchange Commission, noted that most plan sponsors take a very thoughtful approach when selecting and evaluating target date funds.
“Consideration is typically given to competing funds as well as industry best-practices, and further, most record-keepers allow our clients a sufficient range of choices of target date funds,” the company said.