Securian Paper Offers Target Date Fund Guidance for Plan Sponsors

ST. PAUL, Minn., March 10 /PRNewswire/ -- When target date funds were introduced in the mid-2000s, they seemed to offer employers a good choice for employees looking to simplify their investment option selection. Target date funds quickly became popular and are expected to swell to $2.6 trillion by 2018.

When the market fell in 2008, employers and employees learned that the absolute level of risk within each target date fund is not always apparent. The declines in fund values drew the attention of the Department of Labor and subsequent hearings explored those concerns.

In a paper available at SecurianRetirementCenter.com, the company offers commentary on target date funds as investment options in retirement plans.

"At the very least, target date funds should be held to the same standards as other investment options in a plan's investment array," said Kent Peterson, CFA, FSA, AIF, Securian Retirement's director of investment services and author of the paper. "In fact, the case could be made that they should be held to a higher standard whenever the participant usage and the proportion of assets invested is high."

The paper highlights four aspects of target date funds that employers can consider when determining whether a fund is right for their plan. They are:

1. Risk across the target date time horizons so appropriate risk levels for participants can be identified.
2. Risk-adjusted returns and expenses to determine which target date funds, if any, achieved strong returns relative to a valid benchmark and a reasonable level of expense relative to other target date funds.
3. Holding the underlying funds to the same standards as other stand alone investment options offered in a plan's investment array.
4. The reliability and repeatability of investment results. Although past performance does not guarantee future results, historical data may assist plan sponsors with their reviews.

The paper also gives Securian's perspective on target date funds. When evaluating the four areas of analysis in the Securian paper "plan sponsors may find that target date funds are not a prudent choice for their plan participants."

Since 1880, Securian Financial Group and its affiliates have provided financial security for individuals and businesses in the form of insurance, investments and retirement plans. Now one of the nation's largest financial services providers, it is the holding company parent of a group of companies that include Minnesota Life Insurance Company.

Securian is a fiduciary with regard to the selection and monitoring of the investments that underlie the unregistered separate accounts of its variable group annuity products and takes this responsibility very seriously.

SOURCE Securian Financial Group