With the continued growth of target-date funds showing no signs of abating, retirement plan sponsors will want to review their plan offerings to ensure they are meeting the savings needs of their employees.

Two important factors have contributed to the surge in target date funds:

1. They are often the default investment option for many defined contribution plans
2. They are easy for most employees to understand.

The numbers below from research firm Cerulli Associates tell the story:

• 88% of new contributions, representing 35% of total 401(k) assets, will be invested in target-date funds by the end of this year
• Target-date fund investments will total $2 trillion by year-end

While target-date funds are among the most common offerings in defined contribution plans, when you dig a little deeper you soon learn they are also the most widely misunderstood:  by plan sponsors (many of whom believe they are all similar); by participants (whose understanding of how they work is all over the map); and even investment advisors (who may not have access to the research tools necessary to properly evaluate the funds for suitability for participants).