Skip to main content

Target Date Fund Basic Definitions - Part 2

The U.S. Department of Labor's Employee Benefits Security Administration issued tips intended to help plan sponsors select and monitor target date funds (TDFs) in their investment lineups. These target date fund basic definitions will help plan fiduciaries navigate the Department of Labor Tips for ERISA Plan Fiduciaries.


  1. Asset classes are groups of securities that exhibit similar characteristics. The three main asset classes are equities (stock), fixed-income (bonds), and cash. Additional asset classes that may be employed within a target date fund are: world bond, emerging markets, and/or real assets like commodities and real estate investment trusts (REITs).

  2. Risk is the probability or likelihood that an investment’s actual return will be different from the expected return. This includes the possibility of losing some or all of the original investment.

  3. Volatility refers to the relative rate at which the price of a security moves up or down. Certain investments are more volatile than others.

  4. Proprietary target date funds are pre-packaged investments comprised of the underlying mutual funds of a single investment firm.

  5. Custom target date funds are built by plan sponsors who can choose to customize the glide path, asset classes, and/or underlying mutual funds appropriate for their plan demographics.

  6. Regulatory disclosure requirements refers to the DOL requirements that participants in retirement accounts receive information about the fees and expenses associated with their plans, including target date funds. Proposed regulations are being considered that would improve the disclosures that must be made to participants, specifically about target date funds.


Read 4 Steps to Building an Optimal Retirement Plan Lineup for Participants and download the Fiduciary Checklist for Target Date Fund Decisions to learn more. If you have any questions, or would like to begin talking to a retirement plan advisor, please get in touch by calling (800) 388-1963 or e-mail us at hbs@hanys.org.

Popular posts from this blog

What is HR vendor management? Overview with scenarios

Vendor management can be a litigious environment where efficiency, transparency and risk mitigation are paramount. With the right advisor in your organization’s corner, you’ll feel more confident navigating vendors and managing their services, ensuring streamlined processes and strategic alignment.   In this blog post, we'll cover the basics: What vendor management in HR entails, why it's important, how it can transform businesses and some scenarios in a few business types. Level up your knowledge and find the right partners to thrive.  Understanding vendor management in HR  Vendor management in HR involves the systematic management of third-party suppliers who provide goods and services essential to HR operations. This includes managing contracts, ensuring compliance with service level agreements and optimizing vendor performance to align with a company's long-term business goals.  A robust vendor management strategy can provide organizations with a structured ...
Read more

Employee Benefits Offerings: What Perks Can You Add?

Employee benefits can play a crucial role in attracting and retaining top talent. Beyond compensation and bonuses, offering a variety of perks can significantly enhance employee satisfaction and productivity. But what should you include in your employee benefits offerings?   What are employee benefits?   Employee benefits encompass compensation, bonuses and various perks outside an employee's wage. By offering flexible employee benefits, you can improve employee productivity and loyalty while attracting and retaining talented candidates.   Personalized benefits examples   The type of benefits offered can vary by industry. We've compiled some of the most popular options to help you explore possible employee benefits strategies .  1. Social opportunities   Employee perks don't always have to be tied to a benefits package. Sometimes, the best way to engage your employees can be through social opportunities. Group activities can help im...
Read more

Section 125 – Cafeteria Plans Overview

A Section 125 plan, or cafeteria plan , allows employees to pay for certain benefits on a pre-tax basis. Employers use these plans to provide their employees with a choice between cash and certain qualified benefits without adverse tax consequences. Paying for benefits on a pre-tax basis reduces the employee’s taxable income and, therefore, reduces both the employee’s and the employer’s tax liability. To receive these tax advantages, a cafeteria plan must comply with the rules of Section 125 of the Internal Revenue Code and related IRS regulations. Under these rules, a Section 125 plan must have a written plan document and can only offer certain qualified benefits on a tax-favored basis. Once an employee makes a Section 125 plan election, they may not change that election until the next plan year, unless the employee experiences a permitted election change event. Also, for highly compensated employees to receive the tax advantages associated with a Section 125 plan, the plan must pass ...
Read more