While not a specific ERISA requirement for plan fiduciaries, a properly developed Investment Policy Statement (IPS) can be valuable to support the process undertaken by plan sponsors to prudently select and monitor the investments in the plan, including TDFs. The DOL issued guidance on the selection and monitoring of TDFs1 and the IPS should contain provisions that comply with that guidance. The guidance described a number of TDF characteristics that should be evaluated and documented as part of a prudent process and addressed the following:

  • TDF objectives and risk tolerance
  • Asset allocation and the underlying investments in each asset class
  • Glide path (i.e., the change in the asset allocation over time)
  • Qualified Default Investment Alternative (QDIA) selection criteria
  • Custom vs. pre- packaged TDF

Navigating TDFs and the Investment Policy Statement

  1. ^Source: Target Date Retirement Funds—Tips for ERISA Plan Fiduciaries, U.S. Department of Labor Employee Benefits Security Administration, February 2013.