Empower Retirement has announced the development of a qualified default investment alternative (QDIA) for retirement plans designed to help plan participants whose engagement with the retirement planning process changes over time.
The new model, known as “dynamic QDIA,” is based on research and development work by Great-West Investments and Empower that examines how some participants’ perception of retirement and their financial decision-making evolves over the course of their working years.
A joint white paper published by Empower and Great-West Investments explains that when individuals first enter the workforce at a young age, target date funds may be a suitable option because of the fact that there is less variance among that population. For example, they typically maintain a less complex investment profile and generally share a similar life stage.
According to a press release, a key component to Empower’s new QDIA model is achieving the right interplay between sponsors who have expressed a need for new thinking around engagement models and participants who do not make investing decisions. Part of the argument for a new QDIA model is that each individual’s financial needs are unique and become more prevalent over the course of time.
The new offering leverages existing QDIA regulations to direct participant savings into a competitive investment option, such as a target date fund, early in their careers. Later on, when a plan-specific, predetermined set of criteria are triggered, the participant is moved into a managed account, thereby offering the opportunity to receive personalized asset allocation and advisory services as they begin to focus on the transition to retirement.
Later this year, Empower will launch a new product offering to plan sponsors based on the dynamic QDIA concepts described in the paper.
Great-West Investments and Empower Retirement operate as units of Great-West Financial. Great-West Investments, with over $89 billion in assets under management and supervision. Empower Retirement, formed in 2014, is the nation’s second-largest retirement plan record keeper with some 8 million plan participants.
