Over the last 10 years, the term “managed account” has taken on various meanings in the retirement plan industry. Depending on whom you speak to, in which industry segment, it may be used in different ways. Story Continued Below
In researching this article, we came to realize it was key to understand how potential sources defined managed account, to ensure we were discussing about the same product type—the managed account described by the Department of Labor (DOL) in its qualified default investment alternative (QDIA) regulation. That is: “an investment management service with respect to which a fiduciary … allocates the assets of a participant’s individual account to achieve varying degrees of long-term appreciation and capital preservation through a mix of equity and fixed-income exposures, offered through investment alternatives available under the plan, based on the participant’s age, target retirement date (such as normal retirement age under the plan) or life expectancy.”
On the following pages, we discuss the evolution of this type of investment and advice option—which, according to our annual PLANSPONSOR Defined Contribution (DC) Survey, has been in place at approximately one-third of retirement plans for the past few years—and try to answer some of plan sponsors’ most common questions about the products.
Will that one-third percentage grow as people age and look for more guidance, and as plan sponsors adjust for the fiduciary advice regulations? Does customization require employee engagement, and how should these accounts be explained to a participant base? Plan sponsors can use the articles that follow to help guide them as they consider and make such plan design decisions.