Qualified Default Investment Alternative


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Qualified Default Investment Alternative

An investment vehicle a fund manager may use for retirement plan contributions in the absence of direction from the plan participant. A qualified default investment alternative must be diversified, may not directly consist of securities in the company for which the plan participant works, and may not penalize the participant for early withdrawal. Qualified default investment alternatives were defined in the Pension Protection Act of 2006 as part of a broader effort to ease automatic enrollment in retirement plans.
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Like other investment alternatives made available under a plan, a plan fiduciary would be required to carefully consider investment fees and expenses in choosing a qualified default investment alternative for purposes of the regulation.
Auto Enrollment -- Automatically enrolling new hires into a qualified default investment alternative within the DC plan, at a fixed contribution rate.
According to Cerulli, managed accounts have some hurdles to overcome to effectively replace target-date funds (TDFs) as the go-to choice for Employee Retirement Income Security Act (ERISA) retirement plans' qualified default investment alternative (QDIA) designation.
But, Castellani adds, MassMutual "strongly believes" that DOL's exclusion of guaranteed general investment account and other stable value guaranteed products from the list of qualified default investment alternative, or QDIAs, "is an unacceptable shortcoming in the proposed regulation that must be addressed.
More plan sponsors may want to consider making plan design changes, such as automatic enrollment that automatically places participants in target-date funds, or reenrollment, which resets participants' current investments into a qualified default investment alternative such as a target-date fund.
The Pension Protection Act allowed sponsors to designate CITs as the qualified default investment alternative in their retirement plans.
The qualified default investment alternative (QDIA) regulation provides for a balanced fund, a target-date fund (TDF) or a professionally managed account.
The survey, which has been conducted annually for four years and focuses on DC plan sponsors' qualified default investment alternative (QDIA) fund selection, construction, monitoring and satisfaction, revealed a broad gap between plans' utilization and understanding of target date funds.
Among the changes are an expanded nonproprietary investment universe, a range of qualified default investment alternative (QDIA) options and a changed pricing structure.
Summary paragraph: Of the three qualified default investment alternative (QDIA) options, only managed accounts depend upon participant engagement.
New products and changes introduced over the last week include annuity modeling capabilities from RetireUp, a managed account qualified default investment alternative from the Guardian Insurance & Annuity Company and the addition of Orion Advisor Services to the Schwab OpenView Gateway.
The appealing idea of a "set it and forget it" strategy was made only more attractive by the endorsement of these funds as a qualified default investment alternative (QDIA) by the Department of Labor (DOL) after the passage of the Pension Protection Act of 2006 (PPA).
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