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For the ninth year, P&I and the Defined Contribution Institutional
Investment Association recognizes innovation and excellence by plan sponsors to improve the retirement security of participants.

KATIE BALESTRIERI, ORRICK, HERRINGTON & SUTCLIFFE

Establishing ‘dynamic QDIA’ pays off in a lot of different ways

Law firm Orrick, Herrington & Sutcliffe LLP wanted to go one step beyond merely offering a target-date fund as the qualified default investment alternative for the firm’s $680 million 401(k) plan.


After some shopping around, it decided to go with a new type of QDIA that marries targetdate funds with a managed account for participants aged 45 and up. 

 

“We felt it was the great new next step in furthering our participants’ retirement goals and doing what’s best for them,” said Katie Balestrieri, the firm’s San Francisco-based director of benefits and compensation, who received an Excellence Award for her efforts.

The new “dynamic QDIA” offered through Empower Retirement – the plan’s record keeper — would default participants under the age of 45 into a target-date fund and those over the age of 45 into a managed account. Participants initially invested in a target-date fund would eventually transition into the managed account once they hit age 45.

 

The law firm offered a managed account option in its 401(k) plan some 15 years ago but had to eliminate it due to compatibility issues with the record keeper it used at the time, Ms. Balestrieri said.

“We’ve always been looking for ways to reintroduce it because we felt that it was such a valuable option for people in our plan,” she said.

 

The firm introduced the new QDIA option in June 2019 with 90% of the plan’s 1,710 participants adopting it.

 

Since its reintroduction, the firm has observed positive participant behavior. More participants, for example, are now in age-appropriate investments, Ms.Balestrieri said. As of March 31, 83% of participants had an asset allocation within 10% of the age-appropriate target-date fund, up 15 percentage points from June 2019.

 

The new QDIA option has also led participants using the managed account to add assets outside the Orrick 401(k) plan. The new managed account service allows participants to link directly to outside 401(k)s, IRAs and other savings on a real-time basis. “The values are live,” Ms. Balestrieri said, adding that transparency into participants’ outside assets helps “get into the nitty-gritty of what their situation is.”

 

Since its introduction, 15% of participants using the managed account have added outside assets, she said. Ms. Balestrieri touted the low asset-based fee associated with the managed account. “Even at the highest tier of cost, it’s well below what anyone would pay to have their accounts managed professionally,” she said. 

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