The Pension Protection Act of 2006 authorized the use of qualified default investment alternatives in defined contribution plans to help spur employees to participate in their workplace retirement plans. And although the regulation has encouraged employers to offer automatic enrollment and default investments like target-date funds, there are still some concerns that need to be addressed, according to a new report by the Government Accountability Office.
Many plan sponsors have stepped up to offer automatic enrollment into investments they feel are appropriate for long-term retirement savings, but while the PPA “encouraged the adoption of QDIAs through the creation of safe harbor plan designs, some plan sponsors find the final DOL regulations to be unclear, especially with regard to the consideration of participant ages when selecting a QDIA, the extent of fiduciary protection, and the flexibility to allow innovations in QDIA products,” the GAO said in its report, “401(k) Plans: Clearer regulations could help plan sponsors choose investments for participants.”
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