Video 2: Understanding Why a QDIA Matters




Understanding QDIA for 401(k) Plans with Auto-Enrollment | PSI


Enhancing Participation with QDIA in 401(k) Plans


QDIA Video

Automatic enrollment has proven highly effective in increasing 401(k) participation rates, particularly in larger plans. However, auto-enrollment often leads to situations where employees fail to make investment choices, necessitating a default investment option.

What is a Qualified Default Investment Alternative (QDIA)?

A Qualified Default Investment Alternative (QDIA) is an investment designed to provide growth potential and meet regulatory criteria, offering plan sponsors ERISA section 404(c) protection against fiduciary liability for investment choices made by employees who don’t select their own investments.

Types of QDIAs

To comply with regulations, a QDIA can be a target-date fund, a balanced fund, or a professionally managed account. Selecting a QDIA involves considering the demographic of your workforce and your role as the plan fiduciary.

Benefits of Offering a QDIA

  • Reduces fiduciary liability for default investments made on behalf of employees.
  • Makes auto-enrollment more attractive, increasing participation rates.
  • Promotes cost efficiency in the retirement plan.

Let’s work together to ensure that your plan’s QDIA is well-suited for your employees and compliant with regulations. Contact us to discuss how QDIAs can enhance your 401(k) plan.