The Department of Labor today proposed new regulations on default investment options that would make it easier for fiduciaries of 401(k) plans and other participant-directed defined contribution plans to use automatic enrollment.
As expected, the proposed rules make clear that fiduciaries generally won't be held liable if defaults include rationally selected balanced funds, targeted retirement-date or lifecycle funds and managed-account options. However, fiduciaries would be liable for prudent selection and monitoring of default offerings. Also, qualified default options cannot include direct investments in employer stock.
Default investments have often been allocated to super-safe, low-return fixed income and stable value funds, largely to protect plan fiduciaries from the liability they could face under ERISA if a more aggressive default investment were to go sour.
The proposed rules will be published in the Federal Register on Wednesday, with final regulations to be in place by Feb. 14, Assistant Secretary of Labor Ann Combs said during a conference call today.