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By Christine Benz | 03-08-2010 10:16 AM

Where Washington's Leaning on Retirement Issues

Retirement policy specialist Jamie Delaplane on the future of target-date regulations, annuities in defined contribution plans, and auto IRA initiatives coming out Washington.

Christine Benz: Hi, I'm Christine Benz for Morningstar. I'm here at the Morningstar Ibbotson Conference. I'm here with Jamie Delaplane. Jamie is a partner at Davis & Harman, a law firm, and he is also a retirement policy specialist.

So Jamie, you gave an interesting presentation this morning in which you talked about some hot button issues in Washington that affect the retirement landscape. You noted that the target date area, which has grown by leaps and bounds over the past couple of years, is getting a lot of scrutiny in Washington following some terrible performance from some of these funds in 2008. Can you talk about what's going on there and what might be the implications for target fund investors?

Jamie Delaplane: Sure. I mean it's a natural implication of the growth I think that we have seen and the fact that we had the market downturn, people were asking tough questions and that's understandable. I think what we are going to see in the near term is more regulatory issuances from Washington about target date funds.

So at the individual level, we are about to get a checklist from the SEC and the Department of Labor of what as an individual investor should I be thinking about, what factors should I review, how do I understand the glidepath, so probably some helpful information for individual investors.

Likewise, the Department of Labor will give a checklist for planned fiduciaries, employers, that have these target date funds in their 401(k) lineup. What should they be thinking about and reviewing as they select a target date fund, as they oversee it and monitor it. So most of that I think will be constructive.

In the backdrop is, are there any threats to the position of target date funds in the marketplace? And the answer is really "no." Most policymakers believe these are very sound structures; they help participants and investors, they improve diversification, their glide path concept is the right concept.

So I think you will see some regulatory attention to sort of deal with the outliers at the margins who have been way out of the norm with asset allocation, or glide path strategies, and not through direct prohibition, but just nudging them towards the norm through these disclosure kinds of approaches.

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