Defined Contribution
5
Y
Nuances
To Managing
Fiduciary Liability
With QDIA
By James Brewer
ou might be interested
in knowing five things
about qualified default
investment alternatives (QDIAs)
that might not be on your radar
screen. Let’s start by defining
QDIA. ERISA and Department
of Labor regulations define how
plan fiduciaries can manage the
risk for investment decisions
made by employees in participantdirected 401(k) plans.
20 | SUMMER 2014
A QDIA has several
purposes for plan sponsors
and participants:
•
•
•
It encourages participants
to select an appropriate
investment for long-term
retirement savings;
It offers asset-class
diversification to manage
inflation and market risks;
It can reduce a plan
sponsor’s liability for
losses that result from
investments in the QDIA,
so long as the plan is
compliant; and
•
It forces participants to
make an affirmative election
to invest differently.
So, what are the 5 nuances
plan sponsors should know?
Balanced investments and managed
accounts can be used as QDIAs, in
addition to lifecycle or more traditional
investment products.
The point here is that the choice of QDIA
that is best for your employees (and
there can be a mix of more than one)
may benefit from the perspective of an
independent retirement-plan advisor.
Second, you are not required to offer a
QDIA, unless, of course, you want to
benefit from the potential for reduced