Labor Dept., SEC to Probe Target-Date Funds

By Staff Report

Apr. 6, 2009

The Department of Labor is set to begin an “immediate review” of target date funds—one that could lead to new regulations placed on the all-in-one investment strategies.

In a March 26 letter sent to the Senate Special Committee on Aging, Labor Secretary Hilda Solis said that the department will begin examining target-date funds to determine whether the popular 401(k) options are potentially exposing investors to too much unknown equity risk.

She added that the Labor Department will coordinate its review with the staff of the Securities and Exchange Commission.

Her letter was in response to a request from Sen. Herb Kohl, D-Wisconsin, chairman of the Senate Special Committee on Aging, who in February held a hearing to discuss target-date funds and the broader impact that the current economic crisis is having on older Americans.

“Target-date funds in 401(k) plans are designed to simplify long-term investing by automatically adjusting to more conservative investments as the targeted retirement date approaches,” Solis wrote in her letter to Kohl.

“However, given the variation in equity holdings among funds with the same targeted retirement date, participants may be unknowingly exposing their retirement savings to financial risks.”

The Labor Department investigation “will determine what regulatory or other guidance is necessary to address the identified problems,” Solis wrote.

A spokeswoman for the Labor Department confirmed that Solis sent the letter to Kohl, but was not immediately able to offer further details on the review.

A spokesman for the SEC declined to comment.

Filed by Mark Bruno of Investment News, a sister publication of Workforce Management. To comment, e-mail

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