401(k) Target-Date Fund Administration in Louisville, Kentucky: Are Plan Fiduciaries Acting in the Sole Interest of Plan Participants?

Abstract

This article is a condensed version of the study that addresses whether plan fiduciaries make decisions regarding which target-date funds to include on their respective plan investment menus based upon a due diligence process or due to an established relationships (i.e, party-in-interest) with the target-date provider. Target-date funds are becoming the most popular default option chosen by plan fiduciaries since the passage of the Qualified Default Investment Alternative (QDIA) Regulation (29 CFR Section 2550.404c-5), which was passed a part of the Pension Protection Act of 2006. The 401(k) plans reviewed in this study were administered in the Louisville, Kentucky metropolitan statistical area, had at least 1,000 participants and had at least $5,000,000 in total assets as of December 31, 2011. Twenty seven 401(k) plans in Louisville, Kentucky metropolitan statistical area (excluding any 401(k) plans from Indiana) met the criteria. The study examines these local defined contribution 401(k) plans specifically with regard to administration fees and overall performance based upon independent analysis from BrightScope, Inc., Morningstar, Inc. and Target Date Analytics, LLC.