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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After the passage of the Pension Protection Act of 2006 (PPA), there were often comments about how automatic enrollment, automatic escalation and qualified default investment alternatives (QDIAs) would eliminate the need to engage participants.
Alison Cooke MintzerAfter the passage of the Pension Protection Act of 2006 (PPA), there were often comments about how automatic enrollment, automatic escalation and qualified default investment alternatives (QDIAs) would eliminate the need to engage participants.
"In addition, these products also allow new asset managers to participate in the market, outside of the few that have dominated the space since the Pension Protection Act of 2006 blessed these funds as Qualified Default Investment Alternatives," he adds.
Among plans with qualified default investment alternatives, over half of participants under 30, and 52% of participants with account balances less than $5,000 have well-diversified accounts.
Department of Labor permitted the use of target-date funds among the qualified default investment alternatives used when a participant fails to make an investment election.
The federal Office of Management and Budget is trying to resolve the dispute, which involves the wording of a proposed rule that would implement a default investments provision of the Pension Protection Act of 2006 dealing with qualified default investment alternatives.
The next wave of innovation within the target-date industry may bring it closer to a managed account service, one of the three possible qualified default investment alternatives named by the Department of Labor in 2007, according to Cerulli.
This is especially true in the area of managed accounts and made-to-order asset-allocation solutions that serve as qualified default investment alternatives (QDIAs).
Balanced funds, including target-risk funds, were granted status as qualified default investment alternatives (QDIAs).
If the final rule "materially follows" the proposed regulation with respect to qualified default investment alternatives, OMB should "return the default investment regulation to EBSA for further consideration of the matters discussed below."
Beaumont Capital Management introduced a series of ETF-based, risk-managed funds that resemble target date funds and are intended as qualified default investment alternatives in retirement plans.
First, determine whether the managed accounts will be used as qualified default investment alternatives (QDIAs) for participants who do not direct their investments.
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