As we know, the recently issued proposed 401(k) default investment regulations by the Department of Labor (DoL) allows 401(k) plan sponsors to select default investments funds that strive to achieve long-term capital appreciation as opposed to mere preservation of capital.

But what was the DoL’s basis for permitting the use of investments other than the historically selected money market and stability of principal funds?

The DoL used  a simulation model to estimate the impact of the proposed 401(k) default investment regulations on retirement savings in the U.S. The model, called PENSIM, was developed by the firm Policy Simulation Group that specializes in the use of computer simulation models to estimate the implications of private sector and public sector policies in the areas of portfolio management, health insurance and pensions.

For you policy wonks – and actuaries – in the crowd, here is a link to the 231 page PDF Overview of PENSIM.

Hat tip to Prudence Mann’s Fiduciary Investor blog.

The picture shown above is a screenshot of a title screen from The Investment Simulation Spreadsheet developed and copyrighted by Tom O’Haver, University of Maryland. It is believed that the use of a limited number of web-resolution screenshots qualifies as fair use under United States copyright law, as such display does not significantly impede the right of the copyright holder to sell the copyrighted material, is not being used to turn a profit in this context, and presents ideas that cannot be exhibited otherwise.