Mutual Fund Exception Applies to Fund of Funds

In an Advisory Opinion, the DOL concludes that the fact that a target date or life cycle fund includes interest in other underlying funds does not eliminate the application of the mutual fund exception for plan assets.

Document Excerpt

You requested an advisory opinion on behalf of Avatar Associates, LLC regarding the application of certain provisions of Title I of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) to “target-date” or “lifecycle” mutual funds. The underlying assets of these funds, according to your request, typically consist of shares of other, affiliated mutual funds. Specifically, you ask whether the assets of target-date or lifecycle mutual funds constitute “plan assets” of investing employee benefit plans, and whether investment advisers to such mutual funds would be considered fiduciaries to the investing plans under ERISA. We assume that your request relates to mutual funds that are investment companies registered under the Investment Company Act of 1940, 15 U.S.C. section 80a-1 et. seq.


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