We’re going to continue the conversation on automatic features by discussing automatic QDIA, or qualified default investment alternative, and how it can help your employees with their investment decisions while providing you protection as the plan sponsor fiduciary.
Before we get started, if you are interested in learning about our process to structure a successful retirement program, you can request a complimentary copy of “The Quintessential 401(k)” here.
Last time, we talked about automatic enrollment and why it is the easiest, most effective way to get your employees enrolled in the plan. Let’s assume you actually did that and auto-enrolled an employee into your plan. The next step is the investment decision.
Let’s be real—nine out of 10 employees don’t know, don’t want to know, or don’t have the time to research and pick their own investment choices. Auto-QDIA is the perfect pairing with auto-enrollment because it automatically picks the investment choice for the participant.
This choice can be a risk-based fund, age-based fund, or custom model that does the diversification automatically for that employee.
Using automatic QDIA is a smart, simple way to help your employees with their investment decisions. One of the best parts about it is that you, the trustee or plan sponsor, get fiduciary protection underneath the Pension Protection Act of 2006.
In order to get this protection, the plan sponsor must implement it correctly by giving the 30-day notice and doing proper investment due diligence on the investment option used for the QDIA.
Stay tuned for our next video where we will go over the next auto feature that can supercharge your employee’s savings rate over time.
If you are interested in learning how we can restructure your current 401(k) plan and implement these powerful strategies, give us a call or send us an email. We would be happy to help you!