How Often Should You Review Your QDIA?

Created by Kelly Knudsen, Modified on Wed, 14 Aug at 2:55 PM by Kelly Knudsen

Reviewing your Qualified Default Investment Alternative (QDIA) isn't just a best practice; it's a critical part of fulfilling your fiduciary duty as a plan sponsor. The QDIA is the investment where participants' contributions are directed if they don't make an active choice. Since it plays such a vital role in the retirement outcomes of your employees, it's essential to regularly evaluate whether it's still the best option for your plan [1].

At a minimum, you should review your QDIA on an annual basis. An annual review allows you to assess the performance of the default investment, ensuring it continues to align with your plan's objectives and the needs of your participants [2]. This review should cover the investment's performance against relevant benchmarks, its fees, and whether the fund's risk profile is appropriate for your participant demographic [3].

"Once selected, the QDIA should be reviewed periodically for suitability as well as any time the plan undergoes a significant change or the participant base changes dramatically." [1]

However, you shouldn't wait for the annual review if there are significant changes within your plan or the broader market. For instance, a change in your employee base—such as a shift toward younger workers or an increase in participants nearing retirement—could necessitate a different default investment with a more suitable risk-return profile. Similarly, any major economic shifts or regulatory updates could prompt a review of whether your current QDIA is still the best fit [4].

Documenting these reviews is also key. By keeping thorough records of each review, including the rationale for any decisions made, you demonstrate your adherence to fiduciary best practices. This documentation can protect you and your organization if your choices are ever called into question [5].

"The biggest, most important rule is that a fiduciary has to be careful of what they pick in a QDIA and they have to monitor it on an ongoing basis," says Robyn Credico, managing director of retirement at Willis Towers Watson [2].

In summary, while an annual review of your QDIA is the baseline, staying attuned to changes in your workforce, market conditions, and the regulatory environment will help ensure your default investment continues to serve your participants well. Being proactive in this area not only upholds your fiduciary duty but also helps secure better outcomes for your plan participants [3] [4].

For support in managing your fiduciary responsibilities, visit Fiduciary In A Box.

References:

[1] American Century Investments. (n.d.). QDIA Selection & Evaluation. Retrieved from https://www.americancentury.com/advisors/defined-contributions/qdia-evaluation/

[2] PLANSPONSOR. (2021, February 11). A Review of QDIA Regulations. Retrieved from https://www.plansponsor.com/in-depth/review-qdia-regulations/

[3] SmartAsset. (2021, November 10). Qualified Default Investment Alternative (QDIA). Retrieved from https://smartasset.com/retirement/qdia

[4] Income America. (n.d.). QDIA Options | Qualified Default Investment Alternatives. Retrieved from https://incomeamerica.com/articles/qdia-default-options-for-employee-retirement-plans/

[5] Human Interest. (2022, February 10). Using 401(k) QDIA to Limit Fiduciary Liability. Retrieved from https://humaninterest.com/learn/articles/what-is-a-401k-qdia-qualified-default-investment-alternative/