Review your QDIA selection process

American Century Investments® provides a five-step framework to help you and your clients implement a prudent QDIA selection process.

5-step process helps manage fiduciary risk

Help your clients demonstrate that they satisfied their fiduciary obligations by adopting and implementing an objective and prudent Qualified Default Investment Alternative (QDIA) selection process. This five-step process provides a repeatable framework, allowing you to generate predictable results and save time while more effectively managing fiduciary risk.

#1: Assess participant needs

Look at participant demographics, behaviors, and financial sophistication. The assessment should include:

  • Participant ages
  • Compensation
  • Contribution rates
  • Asset allocation
  • Withdrawal rates 


Compare participant data to benchmarks based on demographic data. This assessment helps plan fiduciaries show that they’ve taken participant needs into account rather than using a one-size-fits-all approach.  

#2: Gather data for QDIA options

Once you understand participant needs, collect information from QDIA providers with investment strategies and philosophies that align with those needs. A standardized set of questions will help you compare providers. Make sure to keep all responses so you can use them to prove due diligence, if necessary. 

#3: Select a provider and document the process

Now evaluate the data, determine the type of QDIA most appropriate for your client’s plan, and select the QDIA. Make sure you document the entire process. Target-date funds are the most common QDIAs, but balanced funds and managed accounts also are used. After you choose the type of QDIA, analyze performance and risk, and evaluate fees and expenses. 

#4: Implement the QDIA

Beyond the legally required participant notices, effective communication with employees is vital. It gives them all the information they need to make prudent decisions about the plan’s investments, including the QDIA. Consider re-enrollment if participants can benefit from better asset allocation. 

#5: Monitor the selected QDIA

Consider how the QDIA will be monitored and whether the criteria in the current Investment Policy Statement (IPS) or other written plan guidelines is sufficient. If not, the IPS should be updated to include monitoring criteria specific to the QDIA.

Download the complete American Century guide to understand your potential responsibilities and liabilities when providing QDIA guidance. Get in-depth information about the selection process. 
  

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Revisiting your QDIA selection process

Help clients satisfy fiduciary obligations through a five-step process.

Download the advisor (PDF) and plan sponsor (PDF) guides.

  
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American Century Investment Services, Inc. is not affiliated with Lincoln Financial.

Through a single investment option, YourPath® portfolios allow retirement plan participants to invest in a mix of mutual funds and other investments that correspond to a specific risk profile and investment time horizon that includes the year (target date) in which the participant expects to retire.

As the target date approaches, the mix or asset allocation of funds or other investments making up the portfolio (and owned by the participant) will change, becoming less growth-oriented and more conservative as the target date approaches. The investment options within the portfolio involve risk and will not always be profitable. 

There is no guarantee that negative returns can or will be avoided. There is no guarantee that the portfolio will provide adequate income at and through your participants’ retirement. An investment made in an investment option may differ substantially from its historical performance and as a result, your plan participant may incur a loss. Past performance is no guarantee of future results.