Certified Plan Sponsor Professional (CPSP) Practice Exam

What is the intention behind the Qualified Default Investment Alternatives (QDIAs) regulations?

1. To eliminate investment risks for all participants

2. To provide fiduciary protection for plan sponsors

3. To mandate specific investment choices for participants

4. To increase employer contributions in retirement plans

The correct answer is: To provide fiduciary protection for plan sponsors

The intention behind the Qualified Default Investment Alternatives (QDIAs) regulations is to provide fiduciary protection for plan sponsors. QDIAs are designed to help employers fulfill their fiduciary duty by establishing a default investment option for participants who do not actively choose their investments. This is particularly significant because it allows plan sponsors to select a prudent investment option that aligns with participants' long-term retirement goals, thereby enhancing the overall efficacy and compliance of retirement plans. By utilizing a QDIA, plan sponsors protect themselves against claims of liability when participants are invested in these alternatives. This regulatory framework acknowledges that while not all participants may take an active role in investment decisions, they still deserve a reasonable and effective investment solution. In this context, the QDIAs are crafted to meet certain criteria and standards, which further ensures that the plan sponsors are not unfairly penalized if participants do not make active investment choices. This approach ultimately aims to encourage better retirement savings outcomes for individuals while safeguarding plan sponsors from potential legal repercussions related to non-participation in investment decision-making.