Defined contribution plan sponsors may want to reenroll participants with a new plan design strategy that resets participants' investments into a qualified default investment alternative (QDIA).
A Vanguard study, entitled Improving Plan Diversification through Reenrollment in a QDIA, found that reenrollment into a QDIA is a plan design strategy that can improve diversification of plan assets in a quick way, while ensuring that plan sponsors meet their fiduciary duties.
"Many sponsors are concerned that participants have failed to adequately diversify their portfolios due to inertia or lack of interest, thereby reducing the chances that they will accumulate sufficient savings for retirement," says Ann Combs, principal of Vanguard Strategic Retirement Consulting.
"[R]e-enrollment into a QDIA would promote better portfolio diversification for participants, improving participants' chances of greater retirement security, while providing plan sponsors with fiduciary relief," she added.
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