You can find the DOL guidance here: http://www.ofr.gov/OFRUpload/OFRData/2010-29509_PI.pdf
Key guidance in the rule includes the following:
- Fiduciaries are relieved from certain fiduciary responsibilities in defined contribution plans if they follow the rules.
- Plan administrators must furnish participants and beneficiaries with certain information related to each available investment under the plan.
- That information must include:
- A narrative explanation of the glide path and a description of the point at which the TDF will reach its most conservative investment allocation. This is key in understanding whether the purpose of the particular TDF is to get participants to retirement or through retirement.
- A graphical illustration of the TDF's glide path.
- An explanation of the relevance of the TDF date; e.g., for a 2030 fund, what does the "2030" mean?
Again, this is probably a step in the right direction for TDFs in reaction to the precipitous fall in the value of TDFs in late 2008 and early 2009. But, the reasoning is wrong. Of course, TDFs can lose money. All investments can. The point is that retirement plan participants need to understand the decisions that they must make. This is good information, but if they don't understand that this is an investment that is designed to increase in value, but that could decrease in value, then we have gotten nowhere.
Americans need to be more financially educated. Savvy is a good goal, but educated is a necessity. It's nice that we learn about the explorers in school (Columbus, Magellan, etc.), but wouldn't it be nice if we educated our students in financial topics as well? It's never too early to start, but for many workers, it's far too late. For them, perhaps the best they can do is to follow the sage (or not so sage if you prefer) advice of Ron Popeil (he of infomercial fame): "Set it and forget it." Unfortunately, there is his follow-up line: "Wait, there's more."