Sen. Murray, Rep. Scott Ask Government Watchdog to Review Funds Responsible for the Retirement Security of Millions | #retirement | #elderly | #seniors
“As chairs of the
Full text of the letter below and PDF HERE: https://www.help.senate.gov/download/050621-gao-target-date-fund-request-final
To: The Honorable
Dear Mr. Dodaro:
As chairs of the
TDFs, which are default investment options offered in employer-provided retirement plans, are intended to balance risk and provide an age-appropriate asset allocation for plan participants over time. TDFs do so by gradually shifting participants’ asset allocations from higher risk investments (equities) to more conservative ones (fixed income) as participants approach retirement. TDFs are incredibly popular among plan participants. In fact, since the GAO last reported on TDFs in 2011, these funds have steadily grown with over
Further, while TDFs have traditionally included a mix of equities and fixed-income investments, the
Given these concerns regarding TDFs, we respectfully ask GAO to address the following questions:
1. What percentage of total defined contribution (DC) plan assets are invested in TDFs? What percentage of plan participants are offered, and participate in, TDFs? What percentage of plan participants defaulted into TDFs?
2. To what extent have participants approaching retirement age who are invested in TDFs been affected by market fluctuations as a result of the COVID-19 pandemic? How much variation is there in the performance of TDFs of the same vintage (i.e., target retirement year), particularly for TDFs at or near the target retirement date? To what extent have TDF providers taken steps to mitigate the volatility of TDF assets?
3. How often do investors with default investment TDFs in their DC plans reassess their investments, and what, if any, is the cost of a passive investment stance in a tumultuous market? Are TDFs properly structured to withstand major stock turbulence?
4. How does the asset allocation and fee structure vary across those TDFs used as default options in 401(k) plans? How do TDF fee structures compare with other investment products? In the years approaching retirement (i.e., age 55 and older), to what extent do TDFs shift the allocation of equities to more conservative investments like fixed income in order to protect these participants from losses near retirement?
5. How are TDFs marketed and advertised? Are participants sufficiently aware of the cost and asset allocation variation among TDFs?
6. What percentage of plan sponsors select off-the-shelf TDFs? What percentage of plan sponsors select custom TDFs? Is there a material difference in the performance of off-the-shelf versus custom TDFs?
7. To what extent do TDFs include alternative assets, such as hedge funds or private equity? What information is typically available to participants and plan sponsors about the risks and benefits of asset allocations in TDFs? How do plan sponsors select and oversee TDFs to ensure these funds have a suitable risk level for participants?
8. What steps has the
9. When provided the option to invest in TDFs alongside an array of other investment fund options, how often and to what extent do plan participants rely primarily–or exclusively–on TDFs? In these scenarios, how many investment alternatives are provided? How many TDFs do plan sponsors generally offer in their investment options?
10. What are possible legislative or regulatory options that would not only bolster the protection of plan participants, who are nearing retirement or are retired, but also achieve the intended goals of TDFs?
If you have any questions concerning this request, please contact
Thank you for your attention to this matter.