Is the investment company that manages the target fund in your 401(k) tweaking its design to better serve plan participants? It’s an important question, especially if a target fund is the default option for automatic enrollment.

In the wake of losses in some target date or “lifestyle” funds that exceeded losses in most Standard & Poor’s stock funds, many fund companies are making efforts to adjust their offerings to achieve the right mix; their proactive stance reflects possible regulation of the composition and marketing of the funds.

Senator Herb Kohl (D., Wis.), chairman of the Senate Committee on Aging, prodded the Department of Labor and the Securities and Exchange Commission to turn up the heat to correct a few major concerns, including the wide spread in the percentage of equities in 2010 target-date funds, which range from 8 percent to 68 percent.

Because the funds are intended to reduce equities exposure when investors approach retirement, this wide spread sparks obvious concern — which is magnified by the increase of target funds as default options since passage of the Pension Protection Act of 2006 allowed for such a provision in plans. According to Sen. Kohl, the funds have since become the default option in 75 percent of plans that offer them as such.

The Senate Committee on Aging report on target funds contends that the labels fund companies bestow (e.g., 2010 fund) are misleading, don’t seem to pertain to the design of the fund, and must be required to be more transparent. But according to a Bloomberg column, the Investment Company Institute, a trade group representing mutual fund companies, said “we believe disclosure about and transparency of target-date funds is adequate” and that the government shouldn’t dictate a specific mix of investments or regulate investment risk.

401(k) participants in target date funds labeled “2010” who lost big chunks of money this year would probably disagree strongly. ###