A description of the circumstances under which assets in the individual account may be invested on behalf of the participant or beneficiary in a
qualified default investment alternative; and, if applicable, an explanation of the investment alternative; and if applicable, an explanation of the circumstances under which elective contributions will be made, the percentage of such contributions, and the right of the participant to elect not to have such contributions made on the participant's behalf (or to elect to have such contributions made at a different percentage);
It's most often target-date funds (TDFs) that are at the core of an asset-allocation re-enrollment, as these fund series are most often a plan's
qualified default investment alternative (QDIA).
The move comes as a surprise, as just five years ago low fees were voted the least important consideration for plan sponsors when selecting a
qualified default investment alternative (QDIA).
The Pension Protection Act allowed sponsors to designate CITs as the
qualified default investment alternative in their retirement plans.
The DOL notes that for an investment to serve as a
qualified default investment alternative (QDIA), any participant or beneficiary on whose behalf assets are invested must be able to transfer those "in whole or in part" to any other investment alternative available under the plan as frequently as participants and beneficiaries may elect to invest in the QDIA, and no less frequently than once within any three-month period.
Among the changes are an expanded nonproprietary investment universe, a range of
qualified default investment alternative (QDIA) options and a changed pricing structure.
Certainly, the passing of the Pension Protection Act (PPA) in 2006 was a momentous landmark for the industry, as it led to automatic features and the use of target-date funds (TDFs) as the
qualified default investment alternative (QDIA)-sidestepping participants' inertia and ensuring that their portfolios are properly diversified and rebalanced over time.
The Guardian Insurance & Annuity Company introduced a new managed account
qualified default investment alternative (QDIA) option for participants in small retirement plans through independent investment advisor Brinker Capital, Inc.
The Department of Labor (DOL)'s implementing regulation-known as the "
qualified default investment alternative," or "QDIA," regulation-made it clear that the department favored TDFs and similar investment vehicles over investments that protect principal.
The choice for
qualified default investment alternative (QDIA) presents a good example of this phenomenon.
* Implement automatic enrollment into a TDF as the plan's
qualified default investment alternativeAccording 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.
