Exploring the Value of Custom Models in DC Plans
Target date funds continue to soar in popularity for plan sponsors and participants alike in defined contribution (DC) plans. Plan sponsors like them because they are simple in theory, an easy concept to communicate to employees, offer participants potential for diversification and possibly can be designated as the qualified default investment alternative (QDIA). Participants favor them because they are a one-step investment option with professional management features.
What may not be as well known is that one of the fastest growing types of TDFs is the custom target date fund. In 2013, the DOL issued informal guidance directing plan fiduciaries evaluating TDFs to consider whether custom target date funds are appropriate for their plans. As plan sponsors review their investment plan lineup from a fiduciary perspective, they may want to consider using custom models for greater flexibility, control, and better alignment with plan and participant needs. As an advisor, you can help your plan sponsor clients understand the potential benefits of custom target date funds.
|Collateral Name||Audience/ Material Format|
|“Customizing Target Date Funds—It’s Easier Than You Think”
This guide provides practical steps on the implementation of semi-custom TDFs. It breaks down the roles and responsibilities of the Recordkeeper, Advisor and Plan Sponsor. Included is a discussion of how to determine a suitable glide path and investment committee considerations. A five-step process/checklist is included.
|“What Plan Sponsors Should Know About Custom Target Date Funds”
This roundtable discussion from a panel of Retirement Plan Advisors and Experts provides advisors and plan sponsors with practical advice on the use and implementation of semi-custom target date funds.
|Plan Sponsor/ Brochure|
|“Considering the Value of Custom Models”
Many plan sponsors offer target date funds in their plan menu, but for greater flexibility and control they may want to consider using custom target date funds (TDFs) instead. This brochure takes a look at the growing trends and how custom models may be a better fit for retirement plans.
|“Fiduciary Considerations Using Custom Models in DC Plans”
As adoption of target date funds increases, DC plan sponsors should be aware of the fiduciary concerns and best practices associated with implementing them in their plan. This white paper addresses the requirements for ERISA fiduciaries to evaluate and monitor TDFs and to consider whether custom TDFs might be a more appropriate choice to meet plan specific needs.
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OppenheimerFunds is not undertaking to provide investment advice or to provide advice in a fiduciary capacity.
This material is provided for general and educational purposes only, is not intended to provide legal or tax advice, and is not for use to avoid penalties that may be imposed under U.S. federal tax laws. OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.
Mutual funds are subject to market risk and volatility. Shares may gain or lose value. Diversification does not guarantee profit or protect against loss.
The date in a target date fund’s name refers to the approximate year when an investor in the portfolio is assumed to retire and likely would stop making new investments in the portfolio, and may plan to start withdrawing money. Using an asset allocation “glide path,” (how the asset allocation changes as the target date nears) the portfolios generally become progressively more conservative until and after the approximate date of an investor’s “transition” into retirement. An investment, including the principal value, in a target date fund is not guaranteed and a portfolio can suffer losses, including losses near, at, or after the transition date, and there is no guarantee that a portfolio will provide adequate income at and through the investor’s retirement.
Discussion of custom risk-based models is not intended to represent investment advice that is appropriate for all investors. Each investor’s portfolio must be constructed based on the individual’s financial resources, investment goals, risk tolerance, investing time frame, tax situation and other relevant factors.
OppenheimerFunds does not recommend any specific asset allocations. A financial advisor can suggest an asset allocation strategy designed to meet your financial goals, time horizon and risk tolerance. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns and does not assure a profit or protect against loss.