QDIA Sample Notices

Default investing the accounts of participants who do not select their own investments is a potential liability for plan fiduciaries. The use of enrollment kits, notices, and following “404(c)” rules already give plan fiduciaries protection, but the use of a Qualified Default Investment Alternative (QDIA) is the next level of protection. Using a QDIA for participants who do not select their own funds will provide plan fiduciaries, who are usually the trustees of the plan, protection from participants that may claim their account was not properly invested. Of course with added protection there are added rules and paperwork. There are three main types of QDIAs: life-cycle funds, balanced funds, and managed accounts. Any investment that follows the key principles of these arrangements will qualify, even if the investment is included within an annuity.

We recommend clients use a life-cycle or balanced-type fund as their default investment, even if a client is not using the QDIA rules. In addition to having a qualified fund as the default investment alternative, you must distribute an initial notice to a participant 30 days before becoming eligible, or 30 days before the first default-invested deposit occurs. Additionally, an annual notice to those participants who are invested by default in the QDIA at least 30 days prior to the beginning of each plan year.

If you need to review your plan’s default fund option please contact your plan’s financial advisor or your plan’s investment provider. If you have any questions about this letter and the QDIA rules please contact your assigned administrator at Retirement Planners.

Sample Notices:

Initial QDIA Notice for new default-invested participants
Generic Initial Notice
John Hancock Initial Notice
RPA Daily Initial Notice
ING Initial Notice
Nationwide Initial Notice
American Funds Initial Notice

Annual QDIA Notice
Generic Annual Notice
John Hancock Annual Notice
RPA Daily Annual Notice
ING Annual Notice
Nationwide Annual Notice
American Funds Annual Notice