PLANSPONSOR - February/March 2019 - 15

DC Plans Are Slow to Adopt Hybrid QDIAs
PLAN fiduciaries and advisers should, as
a matter of course, be keeping abreast of
innovative market offerings that might
align with their participants' needs. One
such offering could be a new managed
account strategy.
Nathan Voris, managing director,
strategy, at Schwab Retirement Plan
Services, says managed accounts are
growing in market share. " Eighty-eight
percent of the eligible defined contribution
[DC] plans Charles Schwab administers
offer either managed accounts
or advice as an option, " he says. " I've
noticed, anecdotally, that the consultant
community is conducting more
due diligence regarding using managed
accounts as the QDIA [qualified default
investment alternative]. If the consultants
are starting to dig into the details,
that's a leading indicator there will be
some growth around the corner. "
Schwab recently built out the
TALKING POINT
Strategies to Manage Retirement Timing
49%
41%
37%
of employers think that
delayed retirements over
the next five years will
increase benefits costs.
are worried that delayed
retirements will increase
wage and salary costs.
are concerned that
workers who stay on past
normal retirement age
will block promotions for
younger employees.
Employers
have, therefore,
either
adopted or
plan to adopt
one or more of
the following
strategies
over the next
few years:
66% Offering financial
well-being programs to
pre-retirees.
49% Permitting retired
employees who are
collecting benefits to work
as consultants or contingent
workers.
30% Offering flexible
employment such as the
possibility of changing
positions.
27% Offering the ability to work
part time.
9% Allowing workers to take
a phased retirement.
Source: Willis Towers Watson, 2018 Longer Working Careers Survey
PLANSPONSOR.com February - March 2019 15
capability to offer dynamic QDIAs, which
are also known as hybrid QDIAs.
The entry point for a typical hybrid
QDIA is from a target-date fund (TDF).
But experts have come to recognize that
TDFs can lose their usefulness over time
and that moving into a more individualized
investment option, one that considers
more specific participant information,
may serve as a better choice for those
nearing retirement age.
Lorianne Pannozzo, senior vice president,
workplace planning and advice for
Fidelity Investment, says interest is picking
up on hybrid QDIAs. " The number of questions
we've been receiving from sponsors
and consultants has increased; however,
we don't have any who have [implemented
a hybrid solution], " she notes. " I'd say that
it's in its evaluation stage, and sponsors are
taking baby steps toward it but not making
it the standard for their plan. "
In Fidelity's Smart QDIA, plan
sponsors enroll employees in either a
target-date fund or a managed account,
Pannozzo says. " Simply put, some participants
will default to a TDF and eventually
switch to a managed account over time as
their situation changes and if the criteria
set forth is a fit. But it is unique to the
participant situation and sponsor criteria. "
When asked why plan sponsors are
slow to adopt managed accounts as the
QDIA, Pannozzo says, they are still evaluating
the option. She says the first step is
to make managed accounts available on
their platform. Then they should do more
campaigns about the active opt-in.
But, Pannozzo says, features such
as this take time to adopt. " For example,
automatic enrollment had been around for
a long time, but didn't take off until the
Pension Protection Act of 2006 [PPA]. Two
percent of plans had auto-enroll in 2006,
and now one-third have auto-enroll. "
-Judy Faust Hartnett
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