QDIA

QDIA stands for "qualified default investment alternative".

Under the Pension Protection Act (PPA) of 2006, fiduciary relief was provided for 401k plan sponsors who automatically place participants (who do not specifically choose other investments) into alternatives such as target-date or balanced fund investments.

QDIAs are intended to help ensure that plan participants who may not be comfortable or knowledgeable about making investment decisions are invested in well diversified investment portfolios with appropriate time horizons. According to the Department of Labor website:

A QDIA must satisfy the following requirements:

• A QDIA may not impose financial penalties or otherwise restrict the ability of a participant or beneficiary to transfer the investment from the qualified default investment alternative to any other investment alternative available under the plan.
• A QDIA must be either managed by an investment manager, or an investment company registered under the Investment Company Act of 1940.
• A QDIA must be diversified so as to minimize the risk of large losses.
• A QDIA may not invest participant contributions directly in employer securities.
• A QDIA may be:
Life-cycle or targeted-retirement-date fund;
Balanced fund; or
Professionally managed account.