Information Letter on Use of Target Date Funds for Lifetime Income

In conjunction with the IRS’ release of Notice 2014-66, the Department of Labor has issued an Information Letter discussing the implications of using a series of target date funds to provide lifetime income from a defined contribution plan.

Document Excerpt

This responds to your request for the Department of Labor’s (the Department) views on whether a series of target date funds (Funds) could serve as “qualified default investment alternatives” within the meaning 29 CFR §2550.404c-5 (the QDIA regulation), in light of the Funds’ investments in unallocated deferred annuity contracts, described in Internal Revenue Service (IRS) Notice 2014-66 (the Notice). You also ask whether, and to what extent, the Department’s “annuity selection safe harbor,” 29 CFR §2550.404a-4, is available in connection with the selection of the unallocated deferred annuity contracts as investments of the Funds. You indicate that plan sponsors have raised these questions with the Department of the Treasury.


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