It really doesn't matter which type of target date fund the plan sponsor chooses. From a fiduciary liability standpoint, the only real concern deals with whether the TDFs contain hidden conflict-of-interest fees. (Photo: Fotolia)
Target date funds came as a godsend courtesy of the 2006 Pension Protection Act. They have redefined the 401(k) for both the employee and the sponsoring company (see “How QDIOs Have Changed the Fiduciary Role of 401k Plan Sponsors).
At first, they seemed so simple. Then the 2008/2009 market crash occurred. Target date funds tanked with everything else. And people—including Congress—were itching to take names. That's when the bloom came off the rose.
But a funny thing happened. For all the bluster, the angry villagers with their pitchforks and torches never amounted to much. The dollars kept flowing TDFs. Financial professionals dove deep into the underlying assets to parse target date funds. Meanwhile, the dollars kept flowing into TDFs. Worried plan sponsors tried to take actions to reduce the potential fiduciary liability presented by target date funds. Yet, the dollars kept flowing into TDFs.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
