COLLECTED WISDOM™ on Qualified Default Investment Alternative
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Abstract: With so many assets flowing into target-date funds, it is imperative that plan sponsors diligently select the glide path most appropriate for their participants. Chief Investment Officer for Hearst Corp. Roger Paschke and David Blanchett, head of retirement research for Morningstar Inc. offer a research-based case study on selecting a qualified default investment alternative for defined contribution plans.
Source: Planadviser.com, June 2018
Abstract: The transition period, from five years before retirement to five years after, is the most critical phase of lifecycle investing and potentially the most difficult to manage with a standard TDF glide path.
Source: Planadviser.com, August 2017
Abstract: A Qualified Default Investment Alternative is a provision available to 401k and 403b plans that reduces the potential personal liability of plan fiduciaries while improving the ability of participants to build toward retirement. Since a QDIA offers advantages to plan sponsor and participants alike, one might wonder what would prevent an employer from implementing one.
Source: Alliantwealth.com, August 2017
Abstract: There are different ways the industry is defining hybrid qualified default investment alternatives. Whether structured as a hybrid QDIA or not, experts agree managed accounts can be complementary to TDFs in a DC plan's investment menu.
Source: Plansponsor.com, July 2017
Abstract: Qualified Default Investment Alternatives (QDIAs) are a fairly recent invention but have already become a central component of the corporate defined contribution retirement system. Although target date funds have been the most popular choice to date, recently-introduced hybrid forms of QDIA represent a notable new variation.
Source: Russellinvestments.com, June 2017
Abstract: Even though the DOL has suggested that selecting a target-date fund with a lifetime income component as a plan's default investment alternative may be prudent, the protections afforded by ERISA 404(c) will not apply if the product does not meet all of the QDIA requirements. This means that a plan fiduciary will not be automatically insulated from liability for participants' investment losses by selecting this investment option as the default alternative.
Source: Alston.com, February 2017
Abstract: The DOL issued an information letter that indicated employer plan sponsors are entitled to use lifetime income products as a part of a prudent qualified default investment alternative (QDIA), even if the products contain certain liquidity and transferability restrictions.
Source: Blr.com, January 2017
Abstract: Commenting on the dramatic growth of target-date funds, the head of retirement research for Morningstar blogging in the Wall Street Journal asks the obvious question: when will we move to more customized solutions? Managed accounts offer that option, but barriers include costs and engagement.
Source: 401ktv.com, January 2017
Abstract: The DOL recently concluded that a target date fund with a fixed guaranteed annuity restricting transfers or withdrawals for a 12-month period does not meet the qualified default investment alternative requirements. But noting the need for lifetime income as a public policy issue, DOL said a fiduciary could prudently select a default investment that complies with all requirements of the QDIA regulation save the liquidity and transferability rules. Fiduciaries may be hard pressed, however, to select such an investment as a plan default investment because it does not protect them from liability for investing contributions on behalf of employees.
Source: Conduent.com, January 2017
Abstract: Target-date funds with annuities can now be considered prudent default investment options, so long as certain liquidity requirements are met, the Department of Labor said in informal guidance.
Source: Bna.com (registration may be required), January 2017
Abstract: The QDIA regulations do not establish fixed income or equity exposures necessary to satisfy the requirement for a mix within a QDIA, but an investment fund or product with zero fixed income would not qualify as a QDIA.
Source: Retirementlc.com, July 2016
Abstract: In order to provide the highest level of protection to fiduciaries, the default option should be appropriately analyzed, selected and monitored. Increasingly, sponsors are signing up for managed accounts, rather than target-date funds or diversified balanced funds, as the default option.
Source: Pionline.com, June 2016
Abstract: The only way to guard against excessive fiduciary liability exposure is to have a fully informed workforce. In addition, plan participants must be repeatedly notified of their QDIA exposure and reminded of their ability to opt out of the investment at any time. But, like the proverbial horse, you can lead employees to a periodic education meeting, but you can't get them to learn.
Source: Fiduciarynews.com, June 2016
Abstract: Target-date funds are the runaway top choice to serve as the default option for 401k plans. But successfully gathering assets doesn't necessarily mean that a TDF is the right choice for every plan's QDIA. It certainly doesn't mean that TDFs are well-suited for every plan participant, so plan fiduciaries should not act hastily in choosing a QDIA.
Source: Investmentnews.com (registration may be required), May 2016
Abstract: Target-date funds and other QDIAs are often thought of as set-it and forget-it investments, but new data from J.P. Morgan Asset Management highlights some troubling behaviors among participants invested in their plan's default.
Source: Plansponsor.com, January 2016
Abstract: The Department of Labor's final fiduciary rule could be released before the next presidential inauguration in January 2017. For some, it is a very ambitious time frame and raises a question about how they can do it in that time frame.
Source: Consultrms.com, September 2015
Abstract: A recent GAO report takes a look at the various factors plan sponsors consider when they pick and monitor default investments, and the results of their monitoring efforts, which hinge on plan-specific considerations.
Source: Planadviser.com, September 2015
Abstract: The basic premise of a managed account is the construction of a completion portfolio with participants' defined contribution assets, built around their whole asset profile and individual circumstances. Paper posit that managed accounts, customized at the participant level, have the ability to improve retirement outcomes if designed and implemented appropriately.
Source: Towerswatson.com, June 2015
Abstract: Fiduciary responsibility requires the careful selection of default retirement investments. Benefit advisers can add value with knowledgeable advice on qualified default investment alternatives, including through the use of selection tools.
Source: Benefitnews.com, June 2015
Abstract: A growing number of retirement plan participants, and retirement plan assets, are being invested in the default option selected for the plan. The existence of default funds isn't exactly a new phenomenon. Arguably it's as old as that first participant enrollment form returned without the investment election section completed. Here are four things you should know about default funds.
Source: Napa-net.org, March 2015
Abstract: Companies that sponsor 401k plans need to consider employee demographics when deciding which types of qualified default investment alternative to offer, according to research by Manning & Napier.
Source: Benefitnews.com, March 2015
Abstract: If a Qualified Default Investment Alternative is supposed to help employees, how can it increase your fiduciary risk? The QDIA is supposed to go under a due diligence screen similar to your other investments. This screen is your fiduciary liability unless you transfer the risk to a financial professional that takes on the risk of its selection, monitoring and replacement. Many financial professionals and the press say that the target date strategy is the most popular. They often then rush to recommend its use. However, what is it and what are the other choices?
Source: 401kadvisor.us, October 2014
Abstract: This paper is intended to discuss how plan demographics and sponsor goals may influence the QDIA selection process, and covers the following points: Selecting an appropriate type of QDIA in light of plan demographics and sponsor goals; If the fiduciary decides to use TDFs, selecting specific target date fund investment strategies that best fit plan demographics and sponsor goals; and, Given the DOL’s guidance for plan sponsors to consider custom glide path alternatives, the demographics that may suggest a need for customization.
Source: Manning-napier.com, September 2014
Abstract: A key provision of the PPA was providing a safe harbor for plan fiduciaries investing participant assets in certain types of default investment alternatives in the absence of participant investment direction. Article discusses the conditions must be met for fiduciary relief.
Source: Strategicbenefitservices.com, June 2014
Abstract: The provisions of the Pension Protection Act of 2006 defined target-date funds as one of three types of QDIAs for use in qualified retirement plans. While the final regulations require plan fiduciaries to meet several technical and operational requirements to qualify for safe harbor protection, the following discusses the utilization of the Manning & Napier target-date options as QDIAs, and provides guidelines for translating individual participant birthdates into a Manning & Napier target-date option when target-date funds are being utilized as the default investment.
Source: Manning-Napier.com, June 2014
Abstract: When examining retirement plan design, sponsors naturally have many questions. What investments should be offered to plan participants? Are the participants legally protected? Are you, as a plan sponsor, legally protected? A decision that speaks to all of these questions is whether to choose a qualified default investment alternative or a non-QDIA investment as the default investment for plan participants.
Source: Plansponsor.com, July 2013
Abstract: In light of the benefit to participants of using TDFs and the fiduciary protections offered by the QDIA rules, fiduciaries are well advised to add TDFs to the investment line-up and to take steps to cause as many participants as possible to be invested in those funds. This white paper discusses legal principles and industry practices, and then illustrate the advantages of using the re-enrollment process to provide the greatest protection for plan fiduciaries.
Source: Drinkerbiddle.com, June 2013
Abstract: A qualified default investment alternative, or QDIA, is intended to encourage investment of employee assets in appropriate vehicles for long-term retirement savings. This Q&A will help you understand how selecting QDIAs that comply with the Department of Labor regulations can reduce fiduciary liability for plan sponsors and help participants save for retirement.
Source: Invesco.com, October 2012
Abstract: In Bidwell v. University Medical Center, Inc., the Sixth Circuit ruled that an employer was not liable for resulting financial losses when it transferred assets in participants' retirement plan accounts from a stable value fund to a Qualified Default Investment Alternative ("QDIA") even though the participants had previously elected the stable value fund.
Source: Bryan Cave, July 2012
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