Products October 29, 2014

Hartford Funds Expands DCIO Market Capabilities

Hartford Funds appointed Bill Dougherty as channel leader for its defined contribution investment only (DCIO) business, while introducing retirement-specific share classes for 12 mutual funds.
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Dougherty joins the Hartford Funds DCIO group as a senior vice president. He now oversees the firm’s DCIO distribution team, made up of 10 professionals. In addition, he will continue to oversee distribution within the registered investment adviser (RIA), bank trust and consultant channels.

Two other senior executives also recently joined the DCIO team: John Boyd, vice president and senior national accounts manager, and Dana Hartwell, defined contribution (DC) investment national accounts manager. Boyd and Hartwell will be responsible for cultivating and establishing key relationships in the DCIO segment, the firm says.

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“Bill’s leadership of the RIA, bank trust, consultant and plan sponsor teams provides an opportunity to offer a more holistic view of the DCIO opportunity across all channels,” explains Jac McLean, head of distribution for Hartford Funds. “These enhancements to our distribution model further our commitment to effectively serving these audiences.”

Hartford Funds also announced the addition of R6 share classes for a dozen funds. This structure is designed to better serve the retirement planning market, and enables consultants and plan sponsors to choose the share class that best meets their clients’ needs, according to Hartford Funds. The R6 share class will be available beginning November 7.

Among the 12 funds offering the R6 share class is the Total Return Bond Fund, which also recently added a fee waiver following management fee evaluation. Additional funds offering the R6 share class include:

  • Hartford World Bond Fund;
  • Hartford Balanced Income Fund;
  • Hartford Dividend and Growth Fund;
  • Hartford Equity Income Fund;
  • Hartford Growth Opportunities Fund;
  • Hartford International Opportunities Fund;
  • Hartford Capital Appreciation Fund;
  • Hartford MidCap Fund;
  • Hartford Small Cap Growth Fund;
  • Hartford Small Company Fund; and
  • Hartford Strategic Income Fund.

Hartford Funds is a provider of mutual funds and 529 college savings plans. The company also offers a broad range of actively managed strategies designed to provide solutions for a variety of investment needs. Visit www.hartfordfunds.com for more information.

Compliance October 29, 2014

Attorney Explains TDF Annuity Rule

What does the new guidance about annuity investments in target-date funds (TDFs) mean for retirement plan sponsors and participants?
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While at the 2014 America Society of Pension Professionals and Actuaries (ASPPA) Annual Conference, S. Derrin Watson, an attorney with SunGard, spoke with PLANADVISER about what exactly the guidance allows and how annuities in TDFs will work for participants. Watson notes the IRS is trying to find ways to provide for at least part of participants’ retirement savings to be invested in annuities that will provide them with lifetime income.

In a TDF series, funds start at a certain participant age—say 55—to move underlying investments from equities to fixed income. The guidance allows the funds that are making this shift to invest in an annuity as part of the underlying investments, Watson explains. The annuity can either be an annuity that starts payments to participants shortly after retirement age or at some age in the future, say 85, to protect a participant against outliving his assets. Watson says at a participant’s retirement date, the fund manager will issue the annuity or a certificate for a group annuity to the participant, and the other assets of the TDF will be retained in the fund and reallocated.

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According to Watson, insurance companies will not issue annuities without knowing the age of the annuity recipient, so the TDF series that uses annuities will have to restrict how participants invest in the series. For example, if a 30-year-old participant wanted to invest in a more conservative TDF than the one corresponding to her age, she could not invest in the 2020 fund in the series because if offers annuities. However, if the series did not include annuity investments, the 30-year-old participant could invest in the 2020 fund.

Watson says the IRS provided in its guidance that the age restriction on TDFs in a series that offers annuities will not violate antidiscrimination rules as long as younger participants will have the same investment opportunities at the same as age as older participants do.

The IRS then asked the Department of Labor (DOL) if such funds could be used as a plan’s qualified default investment alternative (QDIA), Watson notes. The DOL said yes, as long as the TDF series that offers annuities meets all other QDIA requirements. “The DOL also said the TDFs would qualify for the safe harbor from liability against a participant claim provided by the QDIA requirements as long as there is nothing inherent in the annuity chosen that would disqualify it,” he adds.

The DOL also said plan sponsors could limit their fiduciary liability for offering annuities to participants by offering them through TDFs. The plan sponsor has a fiduciary liability to prudently select the TDF manager; the TDF manager selects the underlying investments in the TDF. According to Watson, the DOL mentioned that TDF managers could use the Employee Retirement Income Security Act’s (ERISA) safe harbor rules when selecting the annuity in which to invest participants’ money.

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