Senate Aging Committee Reaches Out to SEC

DOL Leaders Urging More 401(k) Target Date Fund Oversight

The chairman of the Senate Special Committee on Aging has expressed continuing concern over disclosure of asset allocations in popular target date mutual funds in correspondence with the new chair of the U.S. Securities and Exchange Commission (SEC) and the new Secretary of Labor. Both letters were dated February 24, 2009.

In the letter to SEC Chair Mary Schapiro, Sen. Herb Kohl (D-WI) said his committee found what he called “significant differences” in equity holdings among eight “2010” target date funds. The equity asset allocations ranged from eight to 68 percent of assets in a fund designed to match risk and return goals for a worker intending to retire in 2010. Kohl cited the Dow Jones Target Portfolio Index as determining that assets should be about 27 percent equities.

“Companies directing retirement funds have a unique responsibility to prudently manage their funds in order to ensure their participants sufficient retirement savings,” Kohl said in the letter. He urged Schapiro to focus on disclosure of underlying assets in target date funds. Kohl asked the SEC to work with the Dept. of Labor’s (DOL) Employee Benefits Security Administration to make it aware of any SEC findings.

Kohl told Labor Secretary Hilda Solis that Aging Committee hearings that focused on 401(k) fee disclosure also examined “ill-conceived” products such as 401(k) debit cards that he said would be outlawed in legislation that he has introduced. The legislation would also require increased fee disclosure. He also urged DOL to devise regulations regarding target date fund allocations.

The Senate Special Committee on Aging does not consider and prepare bills for the full Senate. However, its members do introduce bills that they have vetted during its committee hearings. ICMA-RC will continue to monitor these issues as they develop during this Congress.