Roughly half of respondents don't have QDIAs
and one-fifth lack a default investment altogether.
138) Traditional "target-date funds," which decrease stock exposure as the target date nears, or so-called "balanced" funds, which contain relatively fixed proportions of stocks and bonds, are common and desirable QDIAs
These prescribed QDIAs
relieve fiduciaries of liability as long as certain requirements are met.
Target-date fund usage has increased through a number of avenues: participants actively choosing the funds; the funds' designation as one of three eligible 'qualified default investment alternatives,' or QDIAs
, under the Pension Protection Act of 2006; and the growth of automatic enrolment plans, which frequently designate target-date funds as the default investment for participants as they are put in the plan.
The list of QDIAs
includes balanced funds and managed accounts as well as target-date funds, but target-date funds have become by far the most popular employee default, experts say.
On November 15, 2007, the IRS issued a sample participant notice that 401(k) plans can use to satisfy the notice requirements for QACAs, EACAs, and QDIAs
DALBAR evaluations are intended to facilitate the duties of the responsible fiduciary and do not replace the requirements to prudently select and monitor plan investments, including QDIAs
Lacking safe harbor default: Of the 50% of sponsors offering a TDF, but not using it as the default, an alarming 83% have no default at all or are still using a stable value fund, an equity fund or a bond fund - none of which are QDIAs
- as the default.
An increasing number of sponsors indicated they believe balanced funds and target risk funds are the best QDIAs
for their employee populations.
Since target date funds are becoming the most popular option chosen for QDIAs
Titled "Participants Embrace Target Retirement Date Investments," the paper explores factors retirement plan advisors and sponsors should consider when selecting a qualified default investment alternative (QDIA
), and the potential benefits of offering target retirement date investments as QDIAs
The Standard also offers select target date funds as QDIAs
, in order to be flexible in meeting the needs of its distribution channel as well as plan sponsors.