RETIREMENT
RETIREMENT TOOLS
Issues, Ideas and Insights from
Janus Retirement Strategy Group
Three types of
potential QDIA’s:
Qualified Default
Investment Alternatives
and the Pension Protection Act of 2006
■ Balanced Fund
History
■ T
arget-Date/Life
Cycle Fund
The Pension Protection Act of 2006 (PPA) amended the Employee
Retirement Income Security Act of 1974 (ERISA) to give relief from
liability to plan fiduciaries for investment outcomes of individual
accounts when the participant’s assets are automatically invested in a
Qualified Default Investment Alternative (QDIA). One of the underlying
goals of the PPA is to encourage the participation in defined
contribution plans nationwide.
■ Managed Account
On December 24, 2007 the Department of Labor (DOL) finalized the
rules implementing the PPA, including those which outline what qualifies
as a QDIA and the requirements of a plan offering a QDIA.
?
What is a QDIA?
In order to qualify as a QDIA the investment must meet four basic
criteria set out by the DOL.
1. The investment may not impose financial penalties or otherwise
restrict the ability of a participant or beneficiary to transfer the
investment from the QDIA to any other investment alternative
available under the plan.
2. The investment generally must be either managed by an
investment manager (as defined by ERISA), or an investment
company registered under the Investment Company Act of 1940
(i.e., a mutual fund).
3. A QDIA generally may not invest participant contributions directly
in employer securities.
4. The investment is a qualifying vehicle, which includes Balanced
Funds, Target-Date/Life Cycle Funds and Managed Accounts.
It is important to note that offering a QDIA does not relieve a plan
fiduciary of responsibility for choosing the appropriate QDIA and
monitoring ongoing performance and there are additional rules to
follow upon implementation of a QDIA and auto-enrollment features.
INSTITUTIONAL INVESTOR USE ONLY/
NOT FOR PUBLIC VIEWING OR DISTRIBUTION
Considerations Before Choosing a QDIA
Below is a sample list of questions to consider prior to choosing or
recommending a Qualified Default Investment Alternative to any defined
contribution plan.*
■ Does this product meet all four requirements
non Target-Date funds — is the target level of
■ For
the plan documents provide for the use of
■ Do
■ A
re additional educational materials
to qualify as a QDIA?
a QDIA?
■ If choosing a Target-Date fund – do the
underlying funds meet the plans’ Investment
Policy Standards?
■ Does the plan sponsor fully understand
the purpose of a QDIA and the funds
that qualify?
■ Is the plan sponsor aware of its fiduciary
responsibilities in relation to implementing
a QDIA?
■ If choosing a Target-Date fund is single ­—
versus multi-manager — an appropriate
choice for the plan, and does it provide
enough diversification?
risk appropriate for the whole plan?
made available to participants in addition to
the required documents (e.g., prospectuses,
shareholder reports, proxy statements)?
■ D
oes automatic investment into a QDIA only
occur if a participant is provided the opportunity
to direct the investment of assets in their account
but does not do so?
■ W
ill there be other investment options in
the plan?
■ Is the QDIA designed to provide capital
preservation (i.e., is there a fixed-income
component to the QDIA)?
*This list is for illustrative purposes only. It does not represent
a complete list of factors a plan sponsor should consider when
selecting a QDIA.
■ If choosing a Target-Date fund – does the
glide path clearly define the investment
time horizon?
To learn more about how Janus might
have QDIA appropriate funds please call
877.33JANUS (52687).
GET THE INFORMATION YOU
NEED FROM THE JANUS
RETIREMENT STRATEGY GROUP
Look to Janus for information on how
changes in retirement plan regulation
might affect you and the clients you serve.
To learn more, please call
877.33JANUS (52687).
Please consider the charges, risks, expenses and investment
objectives carefully before investing. For a prospectus or, if
available, a summary prospectus containing this and other
information, please call Janus at 877.33JANUS (52687) or
download the file from janus.com/info. Read it carefully
before you invest or send money.
The tax information contained herein is provided for informational purposes only
and should not be construed as legal or tax advice. Your clients’ circumstances may
change over time so it may be appropriate for you and your client to evaluate tax
strategy with the assistance of a professional tax advisor. Federal and state tax laws
and regulations are complex and subject to change. Laws of a particular state or laws
that may be applicable to a particular situation may have an impact on the applicability,
accuracy, or completeness of the information contained in this document. Janus does
not have information related to and does not review or verify your clients’ financial or
tax situation. Janus is not liable for your use of, or any tax position taken in reliance on,
such information.
This document is not intended to be legal or fiduciary advice or a full representation of
all responsibilities of plan sponsors and advisors.
Janus Distributors LLC (07/12)
FOR INSTITUTIONAL INVESTOR USE ONLY/NOT FOR PUBLIC VIEWING OR DISTRIBUTION
C-0612-14731 06-30-13
199-15-12813 07-12