Legislators ask GAO to review target-date funds

Trying to find out whether increasingly popular target-date funds work as intended, the chair of the Senate’s Health Education Labor and Pensions Committee, and her House counterpart have asked the Government Accountability Office to conduct a review.

In their letter to the GAO, Sen. Patty Murray, D-Wa., and Rep. Bobby Scott, D-Va., chair of the House Education and Labor Committee, noted that more than $1.5 trillion are invested in target-date funds, often as the default investment option for employer-based retirement plans.

“The employer-provided retirement system must effectively serve its participants and retirees, and we are concerned certain aspects of TDFs may be placing them at risk,” the letter said. “TDFs are often billed as ‘set it and forget it’ investments, yet expenses and risk allocations vary considerably among funds. The millions of families who trust their financial futures to target-date funds, need to know these programs are working as advertised and providing the retirement security promised.”

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Among the specific questions Murray and Scott asked the GAO to address were those involving the percentage of total defined-contribution plan assets invested in TDFs, the percentage of plan participants who default into TDFs, the degree of performance variation in same-date TDFs, the differences in glide paths, awareness of cost and the extent to which TDFs include alternative assets, such as hedge funds or private equity.

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