With the rise of behavioral finance, more companies are electing to automatically enroll employees into their 401(k) plans and invest participants’ balances into default investments. If constructed and communicated properly, the default option will be deemed a Qualified Default Investment Alternative (QDIA), which relieves the employer of liability for losses and provides participants an appropriate long-term investment for their retirement savings. Plans with automatic enrollment help participants overcome inertia and are extremely beneficial for employees to achieve their retirement goals.
However, employers should also consider how they can best help employees who have made their own 401(k) elections or who have opted out of the plan. Are their contributions and investments appropriate?
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