Although the Department of Labor hasn’t issued guidance yet on what acceptable default options should be in 401(k) plans, many sponsors are embracing target-date and target-risk funds, Dow Jones reports.

Last month, the DOL submitted its suggested list to the Office of Management and Budget, but it hasn’t given any hint of what the list contains or when the guidance will be issued.

But many believe the DOL will include target-date and target-risk funds, and fund companies continue to roll these out, introducing 25 additional such funds this year.

Today, about 25% of 401(k)s include target-date funds, said David Wray, president of the Profit Sharing/401(k) Council of America. Eventually, Wray said, “nearly all 401(k) plans will have some way for the employee to delegate the asset-allocation decision.”

About 15% of Vanguard clients use auto-enrollment, and of them, 67% include target-date funds, said Stephen P. Utkus, principal at the Vanguard Center for Retirement Research. “A few years ago, virtually no one adopted them as default options, so there’s a gradual shift underway,” he said. “I expect the shift to really solidify once the Department of Labor publishes its final regulations.”

The DOL has said it expects auto enroll will increase 401(k) accounts by $45 billion to $90 billion a year.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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