The Fight Over QDIA

Two interest groups—life insurers and the mutual fund industry—are squaring off over which qualified default investment alternatives, or QDIAs, companies should be allowed to offer employees under the Department of Labor’s “safe harbor” provisions. Here are excerpts from the dueling comment letters submitted to the department.

From the American Council of Life Insurers:
   “Instead of creating a true ‘safe harbor’ and identifying factors that plan fiduciaries need to consider in selecting a default investment option, [the DOL’s Employee Benefits Security Administration] chose to endorse three specific types of investment products—lifecycle and target retirement date funds, balanced funds, and individual participant accounts managed by a professional investment manager. These current QDIA options do not include an investment option that is insulated from the volatility of equities, primarily focused on the preservation of principal, or that offers a guaranteed rate of return or guaranteed income during retirement. Guaranteed Products offer these critical participant protections. We believe this is an unacceptable shortcoming of the regulation.“

From the Investment Company Institute:
   “The range of options outlined in the Department’s safe harbor proposal will achieve the goals of automatic enrollment. Including stable-value funds would be inconsistent with the purpose of measures enacted in the Pension Protection Act of 2006 to facilitate automatic enrollment and enhance the utility of 401(k) plans. Research cited in [the American Council of Life Insurers’] letter in support of using stable-value funds as default investments is incomplete or misleading and ignores important policy considerations.” Click here for the full text of letter.
 

Additional Links:

Department of Labor Fact Sheet: Proposed Regulation Relating To Default Investment Alternatives Under Participant Directed Individual Account Plans

ACLI issue brief on workplace retirement issues