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ARTICLE · 07 NOVEMBER 2007

Stable-Value Funds Are Not Qualified Default Investment Alternatives

Thelen LLP
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The Pension Protection Act of 2006 (PPA) encouraged automatic enrollment in individual account plans by amending section 404(c) of ERISA to provide a safe harbor for plan fiduciaries who invest participant assets in the absence of participant investment direction.

United StatesFinance and Banking
David Foster
David Foster

The Pension Protection Act of 2006 (PPA) encouraged automatic enrollment in individual account plans by amending section 404(c) of ERISA to provide a safe harbor for plan fiduciaries who invest participant assets in the absence of participant investment direction. Once participants have been given an opportunity to direct the investment of their funds and fail to do so within a specified time, a plan fiduciary may invest those assets in a qualified default investment alternative (QDIA) and qualify for the safe harbor, assuming specified conditions are met.

On October 24, 2007, the Department of Labor (DOL) published final regulations that permit three types of QDIAs, all of which offer a mix of stocks and bonds (target date, life cycle and similar funds; balanced funds and managed accounts). These rules will become effective December 24, 2007.

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