Posts Tagged ‘DOL and SEC joint hearings’
2Q09 Fundamental Facts
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In the first half of 2009, every style of the U.S. stock market made gains, in stark contrast to the devastation in the second half of 2008.
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Alarmingly, the U.S. national debt stands at 370% of GDP, far higher than its previous high of 299% at the height of the Great Depression. More troubling is that the statistic of U.S. national debt as a % of GDP has been steadily increasing since the 1980s.
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While it is technically possible for the U.S. government to inflate us out of our debt predicament by printing money, creditors and the poor will be adversely affected. Furthermore, those on fixed income, particularly retirees, will be the hardest hit, with the economic pain being compounded by recent market losses.
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This is one of the reasons that the DOL and SEC held their first joint hearings ever, to review the situation with target date funds, a popular choice in defined contribution retirement plans. The hearing produced a few substantive agreements on target date funds. A) Plan sponsors are responsible for selecting and monitoring target date funds – no one else. B) The distinction between “To” and “Through” funds needs to be more clearly recognized. “To” funds are designed to end at the target date and may be referred to as “Accumulation-only” funds. “Through” funds are designed to continue beyond target date, potentially to death, and may be referred to as “Lifetime” funds
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However, there remains a need for standards, so that plan sponsors and their advisors can make informed decisions. The definition of quality is “meets or exceeds standards,” so we need standards that describe the way target date funds should be structured.
