Department of Labor Releases Guidance on Qualified Default Investment Alternative Regulations
On April 29, 2008, the Department of Labor (DOL) issued technical corrections and guidance to regulations issued last October on qualified default investment alternatives (QDIA) for ERISA plans. The corrections make three changes to the final regulations.
First, the DOL amended the description of the grandfather provision for stable value funds, eliminating language indicating that a stable value fund must be designed to “guarantee” principal and a rate of return. As revised, the regulation states that stable value funds and products are designed to “preserve principal and provide a rate of return consistent with intermediate investment grade bonds”. In addition, the corrected regulation provides that a grandfathered stable value fund “invests primarily in investment products that are backed by State or federally regulated financial institutions”.
Second, the DOL reversed its previous position that “round-trip” restrictions are prohibited as restrictions that might inhibit a participant’s or beneficiary’s decision to withdraw, sell or transfer assets out of a QDIA during the 90-day period following an initial default investment. As a result, typical round-trip restrictions will be permissible in a QDIA.
Third, the DOL expanded the list of persons who may manage QDIAs to include a committee that is a named fiduciary of the plan and comprised primarily of employees of the plan sponsor.
The DOL also released a Field Assistance Bulletin No. 2008-03 that provides guidance on a series of frequently asked questions, a Department of Labor News Release, and a Department of Labor Fact Sheet.