The Department of Labor (DoL) issued the first regulation under the Pension Protection Act of 2006 (PPA) which deals with what is a permissible default fund.
The PPA provides a safe harbor for plan fiduciaries investing participant assets in certain types of default investment alternatives in the absence of participant investment direction. The regulation provides fiduciary relief if the fund is a qualified default investment account (QDIA) as defined in the proposed regulation. As expected, the default fund could have equity exposure as in a:
- Targeted-retirement-date fund;
- Balanced fund; or
- Professionally managed account
Plan fiduciaries still have responsibility for the selection and monitoring of the QDIA.
Here is the link to the DoL’s Fact Sheet that summarizes the proposed regulation.