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Washington Labor & Employment Wire » EBSA Releases Proposed Rule on Target Date Investments

EBSA Releases Proposed Rule on Target Date Investments


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On November 30, 2010, the Employee Benefits Security Administration (”EBSA”) of the U.S. Department of Labor issued a proposed regulation in the Federal Register that would require that additional information be disclosed in target date investments. The proposed rule would amend the qualified default investment alternative regulation and the participant-level disclosure regulation.

Under the proposed rule, which follows recently-promulgated SEC target date disclosure rules, EBSA would require plan fiduciaries to issue additional disclosures about the design and operation of target date investments. These requirements include an explanation of the asset allocation of the investment, a graphical depiction of how the allocation would change over time, and the significance of the target date of the investment. The proposed rule would also require plan fiduciaries to disclose information concerning the plan’s issuer, objectives, investment strategies and risks, historical performance, and fees and expenses. 

Additionally, the proposed rule would require that the fiduciary issue a disclaimer that investors may lose money upon arrival of the target date, which could coincide with retirement. It also includes a safe-harbor for the use of electronic media to provide the required disclosures to plan beneficiaries and participants.

Parties may submit written comments through January 14, 2011.