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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Joel Shapiro, a senior vice president for Employee Retirement Income Security Act (ERISA) Compliance at NFP 401k Advisors in Aliso Viejo, California, agrees with the premise that the funds are quickly becoming the norm for qualified default investment alternatives (QDIAs) and "set it and forget it" products more generally.
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.
Department of Labor's desire for plan sponsors to provide well-diversified Qualified Default Investment Alternatives for defined contribution plans.
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.
For DC plans, it provided a statutory authority for plans to use automatic enrollment-as well as automatic enrollment and automatic deferral increase safe harbors, and safe harbor investments called qualified default investment alternatives (QDIAs).
The study reveals 94% of plan sponsors recognize the success of automatic features, including auto-enrollment, auto-escalation and qualified default investment alternatives (QDIAs), in addressing their plan-related goals, and say these features drive higher participation and deferral rates along with better investment performance.
The ACLI said in a statement that it is working with the DOL to include guaranteed products like stable value funds and annuity contracts as qualified default investment alternatives options, according to Whit Cornman, an ACLI spokesman.
2 On a positive note, however, the report showed that participants in plans with automatic enrollment and Qualified Default Investment Alternatives (QDIAs) are better off than those without.
Businesses are less likely to offer defined benefit plans, and the Pension Protection Act of 2006 paved the way for automatic features and "specifically fueled the growth of auto-enrollment and assets in qualified default investment alternatives, specifically target-date funds," Bearden said.
Three risks exist for defined contribution plans in the current retirement environment, say experts from BlackRock: "yesterday's risk," or the growing risk of low risk; "today's risk," or the need for a better understanding of qualified default investment alternatives (QDIAs); and "tomorrow's risk," or the issue of retirement income.
Morningstar's Target-Date Industry Survey report noted TDFs owe much of their growth to their designation since 2006 as qualified default investment alternatives, or QDIAs, in defined contribution plans.
Investments and guaranteed income--which deliver differentiation through qualified default investment alternatives, including Prudential's target date funds, as well as an option that delivers guaranteed income for life.
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