PLANSPONSOR - December 2018/January 2019 - 42

FEATURE
Is Your QDIA Still a Good Fit?
What to weigh when you measure the appropriateness of your choice
T
he Pension Protection Act of 2006 (PPA), which amended
the Employee Retirement Income Security Act (ERISA),
provides a safe harbor for plan sponsor fiduciaries that
invest participant assets in qualified default investment alternatives
(QDIAs) in the absence of participant investment direction.
According to the 2018 PLANSPONSOR Defined Contribution
(DC) Survey, most defined contribution plan sponsors (73.3%)
have chosen a target-date fund (TDF) series as the QDIA, but
balanced funds and professionally managed accounts are also
explicitly acknowledged in the regulations. As with any investment
in a defined contribution plan's lineup, the QDIA must be
regularly monitored and, if necessary, changed.
The TDF Glide Path
Recognizing target-date funds' popularity, the U.S. Department
of Labor (DOL) Employee Benefits Security Administration
(EBSA) in 2013 prepared general guidance to assist plan fiduciaries
in selecting and monitoring the funds. If the monitoring
showed replacing the QDIA was warranted, plan fiduciaries
could then do so.
40 PLANSPONSOR.com December 2018 - January 2019
One of EBSA's suggestions was that plan fiduciaries understand
each TDF's underlying funds and how allocations to these
will change over time-in what is known as the glide path. Jason
Shapiro, director in the investment practice at Willis Towers
Watson in New York, says he has seen a need to adjust TDF series
options when considering whether the glide path is consistent
with provisions in the plan design. TDFs are categorized as " to
retirement " or " through retirement, " based on whether the asset
allocation settles at a fixed target-on the participant's retirement
date or sometime afterward.
Shapiro notes that the Defined Contribution Institutional
Investment Association (DCIIA), in a study on DC plan distribution
options, found it is much more common to see plan designs
that are tailored to drive retired or terminated participants out of
the plan. In this case, a through retirement glide path, which will
have a higher allocation to equities at a participant's retirement
age, may not be the best fit for this plan design, Shapiro says. " A
market hit could hurt the participant badly, " he says. A to retirement
glide path would be better.
Another reason to review your target-date fund's underlying
Art by Hye Jin Chung

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PLANSPONSOR - December 2018/January 2019

Table of Contents for the Digital Edition of PLANSPONSOR - December 2018/January 2019

PLANSPONSOR - December 2018/January 2019 - Cover1
PLANSPONSOR - December 2018/January 2019 - Cover2
PLANSPONSOR - December 2018/January 2019 - 1
PLANSPONSOR - December 2018/January 2019 - 2
PLANSPONSOR - December 2018/January 2019 - 3
PLANSPONSOR - December 2018/January 2019 - 4
PLANSPONSOR - December 2018/January 2019 - 5
PLANSPONSOR - December 2018/January 2019 - 6
PLANSPONSOR - December 2018/January 2019 - 7
PLANSPONSOR - December 2018/January 2019 - 8
PLANSPONSOR - December 2018/January 2019 - 9
PLANSPONSOR - December 2018/January 2019 - 10
PLANSPONSOR - December 2018/January 2019 - 11
PLANSPONSOR - December 2018/January 2019 - 12
PLANSPONSOR - December 2018/January 2019 - 13
PLANSPONSOR - December 2018/January 2019 - 14
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PLANSPONSOR - December 2018/January 2019 - 16
PLANSPONSOR - December 2018/January 2019 - 17
PLANSPONSOR - December 2018/January 2019 - 18
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PLANSPONSOR - December 2018/January 2019 - 20
PLANSPONSOR - December 2018/January 2019 - 21
PLANSPONSOR - December 2018/January 2019 - 22
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PLANSPONSOR - December 2018/January 2019 - 25
PLANSPONSOR - December 2018/January 2019 - 26
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PLANSPONSOR - December 2018/January 2019 - 28
PLANSPONSOR - December 2018/January 2019 - 29
PLANSPONSOR - December 2018/January 2019 - 30
PLANSPONSOR - December 2018/January 2019 - 31
PLANSPONSOR - December 2018/January 2019 - 32
PLANSPONSOR - December 2018/January 2019 - 33
PLANSPONSOR - December 2018/January 2019 - 34
PLANSPONSOR - December 2018/January 2019 - 35
PLANSPONSOR - December 2018/January 2019 - 36
PLANSPONSOR - December 2018/January 2019 - 37
PLANSPONSOR - December 2018/January 2019 - 38
PLANSPONSOR - December 2018/January 2019 - 39
PLANSPONSOR - December 2018/January 2019 - 40
PLANSPONSOR - December 2018/January 2019 - 41
PLANSPONSOR - December 2018/January 2019 - 42
PLANSPONSOR - December 2018/January 2019 - 43
PLANSPONSOR - December 2018/January 2019 - 44
PLANSPONSOR - December 2018/January 2019 - 45
PLANSPONSOR - December 2018/January 2019 - 46
PLANSPONSOR - December 2018/January 2019 - 47
PLANSPONSOR - December 2018/January 2019 - 48
PLANSPONSOR - December 2018/January 2019 - 49
PLANSPONSOR - December 2018/January 2019 - 50
PLANSPONSOR - December 2018/January 2019 - 51
PLANSPONSOR - December 2018/January 2019 - 52
PLANSPONSOR - December 2018/January 2019 - 53
PLANSPONSOR - December 2018/January 2019 - 54
PLANSPONSOR - December 2018/January 2019 - 55
PLANSPONSOR - December 2018/January 2019 - 56
PLANSPONSOR - December 2018/January 2019 - 57
PLANSPONSOR - December 2018/January 2019 - 58
PLANSPONSOR - December 2018/January 2019 - Cover3
PLANSPONSOR - December 2018/January 2019 - Cover4
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https://www.plansponsordigital.com/plansponsor/october-november_2019
https://www.plansponsordigital.com/plansponsor/august-september_2019
https://www.plansponsordigital.com/plansponsor/june-july_2019
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https://www.plansponsordigital.com/plansponsor/february-march_2019
https://www.plansponsordigital.com/plansponsor/december_2018-january_2019
https://www.plansponsordigital.com/plansponsor/october-november_2018
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