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Qualified Default Investment Alternatives
The Pension Protection Act of 2006 (PPA) created the concept of a Qualified Default Investment
Alternative (QDIA) to meet the needs of workers who fail to elect investment options for
contributions into defined contribution retirement plans that allow participant investment
direction. As a result, the U.S. Department of Labor issued regulations regarding QDIAs.
If certain conditions are satisfied, the regulations
provide employers safe harbor relief from fiduciary
liability for investment outcomes experienced by
participants whose contributions are invested
in a QDIA due to their failure to elect their own
investments. The relief is the same as that provided
to plan fiduciaries under ERISA section 404(c) with
respect to participant-directed investments. The
regulations, however, do not relieve fiduciaries of their
obligations to prudently select and monitor QDIAs, or
from any liability that results from failure to do so.
Requirements
Under the regulations, four types of QDIAs are
considered appropriate for participants and
beneficiaries who fail to direct the investment of their
contributions:
1.A product with a mix of investments that
takes into account the individual’s age,
retirement date, or life expectancy (i.e., a lifecycle or targeted-retirement-date-fund)
2.An investment service that allocates
contributions among existing plan options to
provide an asset mix that takes into account
the individual’s age or retirement date (i.e.,
a professionally-managed account)
3.A product with a mix of investments that
takes into account the characteristics of the
group of employees as a whole, rather that
each individual (i.e., a balanced fund)
4.A capital preservation product for only the first
120 days of participation. If a participant fails to
provide an investment direction by the end of the
120-day period, amounts must be transferred to
another QDIA that has been selected by the plan
fiduciaries as the long-term default investment
Participants and beneficiaries must be given a
meaningful opportunity to choose investments for
their contributions prior to investment in the QDIA.
Notice must be provided to participants and
beneficiaries at least 30 days prior to (1) eligibility
or (2) the first investment in the QDIA. For plans
with automatic enrollment, the initial notice can be
received on or before the date of eligibility provided
that the participant can receive a distribution of
all elective deferrals automatically withheld and
contributed within the 90-day period following the
initial contribution (this provision applies only to an
Eligible Automatic Contribution Arrangement which
is in effect for a full plan year). In addition, an annual
notice must be provided no less than 30 days prior
to the beginning of each subsequent plan year that
contributions continue to be invested in the QDIA.
Both the initial and annual notices must be written
in a manner that can be understood by the average
participant and include the following information:
• A description of the circumstances that
lead to the investment in the QDIA
• A description of the QDIA, including a
description of the investment objectives,
risk and return characteristics, and fees and
expenses related to the investment alternative
• An explanation of the right of a participant and
beneficiary in a QDIA to direct the investment of
those assets to any other investment alternative
under the plan, including a description of
any applicable restrictions, fees or expenses
in connections with such transfer
• An explanation of where a participant may
obtain investment information concerning the
other investment alternatives under the plan.
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Products and financial services provided by
American United Life Insurance Company® | a OneAmerica® company
One American Square, P.O. Box 368 | Indianapolis, IN 46206-0368 | (317) 285-1877 | www.oneamerica.com
R-20761 08/23/12
Participants whose contributions are invested in
a QDIA must receive the same information (i.e.,
prospectuses) as participants who make their own
investment elections.
Participants or beneficiaries whose accounts are
invested in a QDIA must have the ability to direct
investments out of a QDIA at least as frequently
as from other plan investments, but no less than
quarterly. Distributions from a QDIA within the 90-day
period following the initial QDIA investment cannot
be subject to financial penalties, such as a surrender
charge or a liquidation, exchange or redemption fee.
After the 90-day period, the normal restrictions, fees
and expenses of the plan will also apply to a QDIA.
For those plan sponsors who chose stable value
products as the plan’s default investment prior
to December 24, 2007, these arrangements are
grandfathered with respect to contributions made
before that date.
A QDIA must be managed either by an investment
manager, plan trustee, a plan sponsor who is named
fiduciary or an investment company registered under
the Investment Company Act of 1940.
A QDIA generally may not invest participant
contributions in employer securities.
Tax qualified retirement plans from American United
Life Insurance Company® (AUL) are funded by an
AUL group annuity contract. While a participant
in an annuity contract may benefit from additional
investment and annuity related benefits under the
annuity contract, any tax deferral is provided by the
plan and not the annuity contract.
Group variable annuity contracts are issued by AUL
and registered group variable annuity contracts are
distributed by OneAmerica Securities, Inc., Member
FINRA, SIPC, a Registered Investment Advisor, 433 N.
Capitol Ave., Indianapolis, IN 46204, 1-877-285-3863,
which is a wholly owned subsidiary of AUL.
Registered Group Variable Annuities are sold
by prospectus. Both the product prospectus and
underlying fund prospectuses can be obtained
from your investment professional or by writing
to American United Life Insurance Company®,
433 N. Capitol Ave, Indianapolis, IN 46204,
1-877-285-3863. Before investing, carefully consider
the fund’s investment objectives, risks, charges and
expenses. The product prospectus and underlying
fund prospectus contain this and other important
information. Read the prospectuses carefully before
investing.
For more information regarding qualified
default investment alternatives, contact
your plan services consultant.
© 2012 OneAmerica Financial Partners, Inc. All rights reserved.
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Products and financial services provided by
American United Life Insurance Company® | a OneAmerica® company
One American Square, P.O. Box 368 | Indianapolis, IN 46206-0368 | (317) 285-1877 | www.oneamerica.com
R-20761 08/23/12