The Spark Institute Commends DOL on Clarified QDIA Rules

SIMSBURY, CT, October 24, 2007 -- The SPARK Institute today commended the U.S. Department of Labor (DOL) for issuing final qualified default investment alternatives (QDIA) regulations. "We are pleased to see that the final rules address many of the concerns of retirement plan record keepers and provide clear guidance for incorporating QDIAs in auto enrollment programs," said Larry Goldbrum, General Counsel of The SPARK Institute.

"We are particularly pleased that the DOL provided exceptions to the 30-day advance notice requirement," said Goldbrum. While employers generally still need to provide at least 30 days advance notice, there is now an exception where participants can be notified concurrently with enrollment if their plan provides them with the opportunity to opt out within 90 days without incurring a withdrawal tax. "In our discussions with the DOL, The SPARK Institute requested that the notice requirement be satisfied when the notice is provided with the enrollment materials, and that suggestion has been incorporated in the new rules," Goldbrum said.

Goldbrum noted several other key issues for plan sponsors and administrators that were addressed in the regulations:

• Existing Default Funds ("non-stable" funds) - Plan sponsors can get relief with respect to certain assets in pre-existing "non-stable" investment default funds. The regulations, in-effect, provide grandfathered relief for existing default funds that are not stable investment funds and that meet the notice and other requirements under the regulations, as requested by The SPARK Institute.
• Stable Funds - From a practical and administrative standpoint, The SPARK Institute is pleased that the DOL took steps to minimize the potential administrative and investment disruption to stable funds through the grandfathering and short term investment rules.
• Fund Materials - The DOL modified the fund materials requirements so that defaulted participants need only be provided with a copy of a mutual fund's prospectus, other fund materials (e.g., annual reports) upon request, and proxy materials only if the plan provides for pass through voting.
• Redemption Fees - The DOL was very clear in stating that funds imposing redemption fees or other transaction specific charges within the first 90 days of the investment will not qualify for safe harbor relief.
• Annual Notice - The new regulations state that the annual notice regarding QDIAs can no longer be included in the SPD and instead must be a separate notice. The DOL recognized that important information can be easily overlooked when provided in an overwhelming lengthy disclosure document.
• Rollovers - Concerns regarding rollovers were partially addressed by allowing notice 30 days in advance of the investment in the QDIA. A lingering issue, according to Goldbrum, is that plan sponsors don't have control over when the rollover is received. So, if a rollover is received and invested before the 30 days notice period lapses then the safe harbor relief may be limited.

About SPARK Institute

The SPARK Institute is the leading voice in Washington for the retirement services industry. Through the combined expertise of its member companies, The SPARK Institute provides research, education, testimony and comments on pending legislative and regulatory issues to members of Congress and relevant government agency officials. This disciplined process and resulting solutions help shape America's retirement future.

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