IS IT TIME FOR A PLAN REFRESH?
The duty to provide participants with sufficient information to make consistently informed retirement investment decisions is a basic fiduciary responsibility under ERISA Section 404(a). However, there could be some plan committees who feel their participants are not consistently making prudent decisions.
According to a 2016 JP Morgan survey1 nearly 75 percent of participants say they are not confident with selecting investments. It is no surprise they found that 80 percent of participants surveyed have portfolios that do not match their stated risk tolerance. Also, according to an Investment Company Institute (ICI) research report2, only six percent of participants changed their asset allocation in 2016. This percentage has been similar since 2007 including during the 2008 market crash. No rebalancing after violent market movement? This does not look like “consistently informed investment decisions” as per ERISA.
Plan refresh is a process by which participants are notified that all existing assets and future contributions will be invested in the plan’s target date fund (TDF) (Qualified Default Investment Alternative (QDIA)) based on each participant’s date of birth, unless the participant notifies the plan otherwise. This is the same process as for other QDIA default actions.
