so the final regs are out and i have a practical application question. a participant is about to receive a contribution but has no investment elections on file. under the final regs, the PA is expected to give notice 30 days in advance of the first investment. in the meantime (the time between when contributions are received and the 30 days passes) what does the PA do with the money?

Also: Do the QDIA rules apply only to plans with automatic enrollment features? I would assume not, but want to make sure.

k man,
My read of the regs is that the QDIA protections don't apply until the end of the 30-day period, but that doesn't mean that the contribution can't be placed in the intended investment.

It applies to plans with directed investments regardless of automatic enrollment.

I understand that having a QDIA is a good idea for defined contribution plans that allow employees to direct their investments, and it would be especially useful to plans with automatic enrollment. But is having a QDIA a legal requirement for any plan? If so, for which types of plans is it a requirement?

A true QDIA, when used as the investment vehicle for participants who have not provided investment direction, gives 404©(5) protection to the plan fiduciary.

If the plan wants to have EACA provisions, (Eligible Automatic Contribution Arrangement), I believe they must comply with the QDIA rules, according to how I read the EACA requirements. The EACA provisions provide the plan with:

1. the Federal preemption regarding state withholding laws - that allows you to withhold deferrals from pay without obtaining a written participant election to defer,

2. the option to refund the "oops" deferrals that occur in the first 90 days of the participant's first automatic withholding (the employee reads the paycheck and wants that deferral money back), and

3. the extension of the refund deadline for failed ADP/ACP tests (from March 15 to June 30).


Watch out for funds that are not truly QDIAs - such as a target fund that has only equity positions - the DOL commented that those are not QDIAs.

Well, that's how I think it works anyway... So If the above is correct, and your plan is relying on EACA provisions, then the QDIA is a requirement. I'll be happy to hear from anyone else to confirm or correct this.

J4FKBC: Okay, that explanation makes sense to me. I'm going to see if I can get somebody to confirm it.

I am adding a comment to my earlier comment:

"1. the Federal preemption regarding state withholding laws - that allows you to withhold deferrals from pay without obtaining a written participant election to defer"

Just fyi: the plan does not have to have EACA provisions to get Federal pre-emption from any contrary State withholding requirements.

J4FKBC: I appreciate your comments. I was able to get confirmation regarding the EACA requirement to have a QDIA. I was told that QACAs, while not required to, will want to use QDIAs, and they will become EACAs just by going through that process.