April 13, 2018

ERISA Tips: QDIA Regulations Enjoy Fiduciary Relief Under 404(c)

 

The latest installment of ERISA Tips concerns QDIA regulations and fiduciary relief under ERISA Section 404(c).

Editor’s Note: ERISA Tips is a feature provided with you in mind — to make the newsletter more useful to you! If you have any content for ERISA Tips or the 403(b) Advisor that you would like to contribute or suggest, please contact John Iekel, editor of the 403(b) Advisor, at jiekel@usaretirement.org.

This tip is taken from Michael Webb’s article “The Top Five Things You Need to Know About ERISA 404(c),” which originally ran on Nov. 21, 2014.

At one time, ERISA Section 404(c) protection was only afforded to investments that were actively selected, so default investments could not qualify for 404(c) protection. However, that all changed with the Pension Protection Act of 2006, which extended the fiduciary liability relief under 404(c) to qualified default investment alternatives (QDIAs) as well.

Thus, presuming that all QDIA requirements are followed, participants who are defaulted to a QDIA may not make a claim for a fiduciary breach relative to the election of that investment option, even though the election was by default and not an active election. However, as is the case with active investment elections, the fiduciary liability relief does NOT extend to claims addressing the selection and monitoring of the QDIA itself.