DOL Issues Advisory Opinion Regarding "Target-Date" or "Lifecycle" Mutual Funds

On Decemmber 4, 2009, the United States Department of Labor ("DOL") issued Advisory Opinion 2009-04A, addressing the issue of whether the assets of "target-date" or "lifecycle" mutual funds constitute "plan assets" of employee benefit plans which invest in the funds. The DOL also addressed the issue of whether the funds' investment advisers would be considered fiduciaries of the investing employee benefit plans under ERISA. In answering these questions, the DOL assumed that the Funds are investment companies registered under the Investment Company Act of 1940. The DOL noted that, under Section 3(21)(B) of ERISA, the investment of an employee benefit plan in a registered investment company does not, by itself, cause the company or its investment adviser to be a fiduciary (or a party in interest) of the investing plan for purposes of Title I of ERISA. In the DOL's view, nothing in ERISA Section 3(21)(B) or Section 401(b)(1) suggests that a registered investment company's investment in the shares of affiliated mutual funds would, by itself, affect the application of those sections of ERISA. According to the DOL, the fact that a fund's assets consist of shares of affiliated mutual funds does not, by itself, make the assets of the fund "plan assets" of an employee benefit plan which invests in the fund, or make the fund's investment advisers fiduciaries of the investing employee benefit plan under ERISA.

Here is the link to the Advisory Opinion Letter http://www.dol.gov/ebsa/regs/aos/ao2009-04a.html.