Re-enrolling employees who initially deferred, defaulting participants to a
qualified default investment alternative (QDIA), and adding an automatic escalation piece have become more commonplace in smaller plans, according to Dan Peluse, director of retirement plan services at Wintrust Wealth Management.
More than 10 years out, for many retirement plan advisers, the PPA’s expansion of automatic enrollment for 401(k) plans and other defined contribution (DC) plans--along with its creation of the
qualified default investment alternative (QDIA) safe harbor and the approval of automatic salary deferral escalations--has completely redefined the old approach to plan design.
Most in the industry would agree that automated plan design has been the primary instrument by which plan sponsors change the course of participant retirement success--that, coupled with the ability to default participants into a well-diversified asset allocation in the form of a
qualified default investment alternative (QDIA).
Part of the reason the
qualified default investment alternative regulation--found in the Pension Protection Act of 2006 (PPA)--was viewed as so helpful to participants was because they often just want an answer to the question: “What should I do?” Under the regulation, participants could be told that if they didn’t want to make a decision, it would be made for them.
Stable value and money market funds were the most common
qualified default investment alternative (QDIA), and today 85.5% of plans use target-date funds for the QDIA.
All are re-enrolled into the
qualified default investment alternative (QDIA).