COLLECTED WISDOM™ on Qualified Default Investment Alternative

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Should Managed Accounts Be Used as a Plan's Default?

The use of professionally managed accounts in employer-sponsored retirement plans has been steadily increasing over the past decade, with improvements in technology and customization making these accounts more personal. While engaged participants can benefit from actively choosing this service, automatically enrolling unengaged participants raises fiduciary concerns. It's essential to critically evaluate defaulting unengaged participants into managed accounts.

Source: Multnomahgroup.com, March 2025

Reform QDIAs, ERISA Advisory Council Urges DOL

The ERISA Advisory Council has made significant recommendations to the DOL concerning qualified default investment alternatives. These recommendations include the creation of a "tips document" to assist fiduciaries in selecting QDIAs that incorporate lifetime income options, enhancements in QDIA disclosure, and the inclusion of QDIAs in individual retirement accounts. QDIAs serve as the default investment choice in defined contribution plans, which is increasingly relevant due to the rise of automatic enrollment practices that place participants into QDIAs without their active involvement.

Source: Asppa-net.org, December 2024

ERISA Advisory Council Homes in on Four QDIA Recommendations

The ERISA Advisory Council has made recommendations to enhance qualified default investment alternatives for retirement plans. Key suggestions include improving communication with participants about QDIAs, considering environmental, social, and governance factors, and ensuring that QDIAs align with participants' needs and preferences.

Source: Planadviser.com, October 2024

ERISA Council Signals More Work Needed for Retirement Income Products in QDIA

The DOL's Advisory Council on Employee Welfare and Pension Benefit Plans, also known as the ERISA Advisory Council, held the final discussion this week on retirement income products and their place within qualified default investment alternatives. Members debated the complexities of integrating lifetime income options into retirement plans and the broader implications for plan sponsors and participants amid the changing retirement landscape.

Source: Planadviser.com, September 2024

What Should Plan Sponsors Consider When Selecting a Dynamic QDIA?

As dynamic qualified default investment alternatives are gaining interest with plan sponsors, panelists on a Morningstar webinar discussed the benefits of more personalized investment advice, as well as how a plan sponsor can go about selecting the right QDIA for their population. Understanding the average age of participants and how employees are allocated in their investments are some factors plan sponsors should consider when evaluating a QDIA that moves participants from a TDF to a managed account.

Source: Plansponsor.com, August 2024

ERISA Advisory Council Makes Case for Annuities as Part of QDIA

An ERISA Advisory Council hearing explored expanding the use of annuities in default investment offerings. Experts at the hearing recommended that annuities should be part of a defined contribution plan's default investments as a hedge against longevity risk.

Source: Planadviser.com, July 2024

Vetting of QDIAs Is Crucial as Options Proliferate

The qualified default investment alternative that a plan fiduciary chooses can shape participant outcomes for decades. As if that is not important enough, all the relatively new, compelling QDIA options for employees are making the evaluation and selection process even harder. Fiduciaries must have a strong process to determine the best-qualified default investment alternative for their plan's participants, said a panel at the PLANSPONSOR National Conference.

Source: Planadviser.com, June 2024

QDIAs To Receive ERISA Advisory Council Review

The ERISA Advisory Council voted during a recent meeting to focus its attention on issues related to welfare plan claims and appeals and qualified default investment alternatives. The council will study these issues and make recommendations to the Employee Benefit Security Administration later this year as per its mandate from the Department of Labor.

Source: Planadviser.com, May 2024

QDIA Update: Essential Insights and Emerging Trends

Target-date offerings continued to garner the lion's share of defined contribution assets and are now estimated to make up over 40% of the assets in 401ks. Personalized target-dates and dual-default solutions blending target-dates and managed accounts have evolved. Managed account solutions continue to see increased adoption by Plan Sponsors, but participant utilization remains low.

Source: Fiducientadvisors.com, April 2024

Dynamic QDIA Is Taking Off. Here's How to Do It

There is certainly no doubt for a plan sponsor and a retirement advisor that one of the most impactful investment decisions being made today is determining the optimal QDIA for plan participants. As a result of the fiduciary duty to consider and evaluate all QDIA options, and a growing focus on delivering more personalization and opportunities for holistic advice, managed accounts are poised to finally have their moment.

Source: Napa-net.org, April 2024

TDFs Continue as Leading Investment Vehicle in DC Retirement Plans

New findings today from the NEPC show that target-date funds remain the dominant investment option among DC plans. The organization's latest Defined Contribution Plan Trends and Fee Survey, which surveyed 128 clients representing $259 billion in aggregate assets and 2.6 million plan participants, reports that 86% of respondents currently offer a TDF paired with systematic distributions to their participants. Ninety-seven percent of clients offer target-date fund options, and 96% use the vehicle as the qualified default investment alternative.

Source: 401kspecialistmag.com, March 2024

How Plan Sponsors Make Sure Their QDIA Is Still the Best Option

Plan sponsors Dawn Foods and the Southwest Airlines Pilots Association use different qualified default investment alternatives for their 401k plans, but they share several of the same practices to make sure they are looking out for their participants. They review the defined contribution plan default regularly, performing quarterly examinations to fulfill their fiduciary duty under ERISA.

Source: Plansponsor.com, August 2023

Lifetime Income for Employees Act Would Make It Easier to Use Annuities as QDIAs

Representatives Donald Norcross and Tim Walberg, re-introduced the Lifetime Income for Employees Act, a bill that would make it easier for annuities to be used as the default investment in 401k plans.

Source: Planadviser.com, June 2023

Reintroduced Bill Provides Relief for Annuities in QDIAs

The latest version of a bipartisan bill would permit annuities to be the default 401k investment option for workers enrolled in an employer-sponsored 401k plan.

Source: 401kspecialistmag.com, June 2023

Coming Soon to a 401k Plan Near You: Personalized Target-Date Accounts

Managed accounts are the second most popular choice of QDIA. But before you switch to a managed account you should consider an emerging disruptive innovation that combines managed accounts with TDFs, providing the better characteristics of both. We call this innovation Personalized Target Date Accounts.

Source: 401kspecialistmag.com, November 2022

Evolution of the QDIA. Is Your Plan Due for a Review?

A QDIA review can be looked at as a gateway for your plan committee to clarify plan objectives. This article encourages plan sponsors to lift their heads and consider (or reconsider as the case may be) if your committee is due for a deeper look at your QDIA given marketplace evolution and changing plan needs.

Source: Planpilot.com, October 2022

New Wave of ERISA Class Actions Accuse Fiduciaries Of 'Imprudently' Using Low-Fee, High-Rated Funds, Like Blackrock TDFs

Retirement plan sponsors are fake fiduciaries if they offer cheap, highly rated funds from premium brands in 401k plans without factoring in fund performance, according to a fresh wave of ERISA class action cases. Most of the 11 outstanding class actions allege that plan sponsors chose BlackRock LifePath target-date funds as their default 401k option simply because they had the superficial markings of a fiduciary process rather than engaging in an authentic one.

Source: Riabiz.com, September 2022

What's Next for QDIA?

More than 15 years after the passage of the Pension Protection Act of 2006, Qualified Default Investment Alternatives and target-date funds are now a core offering for many plan sponsors. While target-date innovation may have slowed down in recent years, interesting things are happening elsewhere in the world of QDIAs.

Source: Captrust.com, June 2022

Bipartisan Bill Would Allow Annuities as Default Option

Key members of the House of Representatives have reintroduced legislation to allow retirement plan sponsors to provide annuities as a default option in their DC plans.

Source: Asppa.org, February 2022

Understanding Default Investments: A Focus on Target-Date Funds

The DOL doesn't mandate which types of plans should use which types of QDIA solutions. However, there are some best practice considerations to make when determining which QDIA structure may work best for your plan. Target-date funds have become the default of defaults, meaning the most frequently used solution for plan sponsors. It falls in a sweet spot of complexity/customization/cost. This article walks plan sponsors through all QDIA solutions with a special focus on target-date funds.

Source: Multnomahgroup.com, February 2022

Seeing the Bigger QDIA Picture

A close look at selecting and evaluating qualified default investment alternatives forces some questions about the value an adviser can add to the process. For instance, though advisers may be good at helping to craft custom funds, this might not always be appropriate. Simply put, there are so many different low-cost, off-the-shelf solutions that most plan sponsors can typically find one that meets their needs.

Source: Planadviser.com, July 2021

Plan Sponsor Views on Adopting Dynamic QDIAs

The DCIIA Retirement Research Center completed a project in late 2020 focused on investments in DC plans, specifically the plan sponsor's use of the dynamic or hybrid qualified default investment alternative. The dynamic QDIA can be defined as an investment option that starts a participant off in one investment product or solution and, upon reaching a certain threshold, automatically transitions the participant into a second, more retirement-focused product or solution. This structure is the focus of this paper.

Source: Ymaws.com, May 2021

The All-Out Battle Over the 401k Default Option

The fight for the 401k default option, like the competition to be a plan's recordkeeper or adviser, could change the largely cooperative DCIO landscape.

Source: Investmentnews.com (registration may be required), May 2021

A Review of QDIA Regulations

Qualified Default Investment Alternatives are soluble options to create portfolio growth for DC plan participants while protecting plan fiduciaries. Introduced as part of the Pension Protection Act of 2006, plan sponsors must follow certain rules to get the fiduciary protection that comes from offering QDIAs.

Source: Plansponsor.com, February 2021

Choosing a QDIA Under the Final Rule Governing the Selection of Plan Investments

The DOL issued a final rule that amends the long-standing regulations that govern the selection of retirement plan investments by fiduciaries. One of the provisions is a prohibition on the use of an ESG fund as a QDIA. Plan fiduciaries that choose a fund that involves ESG screening strategies are taking a risk that the fund is not a permissible QDIA.

Source: Boutwellfay.com, December 2020

What to Consider When Selecting a QDIA

When selecting a QDIA, there are many variables to consider. This paper is the third in a series of papers and presents the perspectives of managed accounts providers and target-date fund providers as well as investment consultants and ERISA counsel where relevant. The paper poses several questions that a typical committee might ask when evaluating a QDIA, whether the QDIA is a professionally managed account program or one composed of target-date funds.

Source: Ymaws.com, November 2020

DOL Shifts Focus From ESG to Pecuniary Factors in Final Rule

The Final Rule requires that fiduciaries evaluate investment opportunities based upon pecuniary factors. However, if fiduciaries are unable to distinguish investments based on pecuniary factors, the Final Rule permits fiduciaries to consider non-pecuniary factors as a tie-breaker provided that they comply with the Final Rule's documentation requirement. Like the Proposed Rule, the Final Rule includes restrictive conditions for investments used as a plan's qualified default investment alternative. This article describes the Final Rule's key features, including notable differences from the Proposed Rule.

Source: Groom.com, November 2020

QDIAs the Best Place for Participant Assets During Downturns

QDIAs keep DC plan participants on a path for growth, but the current market volatility plants seeds of new ideas about their construction going forward.

Source: Plansponsor.com, May 2020

How to Evolve Default Options for Retirees in DC Plans

Current target-date structures tend to manage competing objectives through trade-offs. Sponsors are generally responsible for determining which target-date design makes sense for their participants, given demographics, behaviors, and fund objectives. This is a challenging task, and while the industry has developed most of the elements of a more-complete retirement solution, they have yet to broadly create more versatile and complete forms of QDIAs. On its own, change occurs slowly, so as an industry, we need to encourage progress by combining these existing components into more useful solutions.

Source: Georgetown.edu, December 2019

Room for More Innovation in the QDIA Sphere

The domination of TDFs poses the question of whether participants and plan sponsors can feel confident in other types of funds approved as QDIAs and whether the retirement industry can innovate TDF properties to deliver customized retirement solutions that participants need. According to Daniel Uquillas, senior analyst at Cerulli Associates, QDIAs are seeing growth in the market, with several trends sprouting in product innovation. Uquillas notes the recent movement towards dynamic target-date solutions, or hybrid QDIAs.

Source: Plansponsor.com, November 2019

Innovation Is Key to Long-Term Success in the QDIA Space

Target-date products continue to dominate the Qualified Defined Investment Alternatives (QDIA) landscape; however, providers must innovate beyond current norms to deliver the guidance and custom retirement solutions that participants need, according to the latest research from Cerulli Associates. Providers should look for ways to improve upon engagement strategies, customization abilities, and retirement income options, all in the context of promoting broader financial wellness.

Source: Cerulli.com, October 2019

How Sticky is Your Plan's Default Investment?

There's been a significant increase in the use of "intelligent," or diversified, investment defaults in 401k plans over the past 10 years. Given the many positive effects that these default investments have had on investors, the authors wanted to study their stickiness, or rather, the likelihood that plan participants would initially accept the default and remain in it.

Source: Morningstar.com, May 2019

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