Target date fund (TDF) assets have exploded since 2006. Cerulli Associates projects that target date assets will reach $2 trillion and nearly 90% of new 401(k) contributions by the end of 2019. With this type of growth and more than 30 different product alternatives currently in the marketplace, I believe the fiduciary burden for retirement plan committees to prudently select and monitor TDFs has never been higher. Typically, I have seen the selection of TDFs tied primarily to the choice of plan provider with little thought given to whether the solution was right for the plan and participants. That is probably why Vanguard, T. Rowe Price and Fidelity garner nearly 75% of TDF assets as of the end of 2013.
With the explosive growth of retirement assets invested in target date funds (TDFs), Greenspring created Target Date (k)larity® to assist defined contribution plan fiduciaries and committees engage in a prudent process to choose the most appropriate TDF strategy for their participants and to help fulfill their fiduciary duties.
Target Date (k)larity® is a comprehensive three-phase, seven-step target date evaluation process that aligns closely with Department of Labor guidance from 2013 and provides an excellent framework to help plan fiduciaries fulfill their duties by guiding them through a prudent and demonstrable decision-making process.
Phase one begins by identifying the goals and needs of the plan and assessing participant demographics such as age, salary, tenure, as well as participation and deferral rates. In phase two, Greenspring uses the information gathered in the first phase and then conducts extensive product due diligence on multiple TDF options by analyzing areas such as asset class exposure, glide path construction, performance, risk vs. return and fees. Finally, in phase three Greenspring makes a TDF recommendation and documents the entire process with a written executive summary and 25+ page recommendation report.