Information Letter on Application of Fiduciary Provisions to Certain Default Investments

The DOL has issued an Information Letter on the application of ERISA’s fiduciary provisions to default investments with lifetime income features that contain certain liquidity and transferability restrictions.

Document Excerpt

This responds to your request regarding the application of the Employee Retirement Income Security Act of 1974 (ERISA) to TIAA’s “Income for Life Custom Portfolios” (ILCP). You state that the ILCP product meets all the conditions of a “qualified default investment alternative” (QDIA) under ERISA section 404(c)(5) and 29 CFR 2550.404c-5, except that the ILCP contains certain liquidity and transferability restrictions attributable to an annuity component that fail the frequency of transfer requirement described in paragraph (c)(5)(i) of the regulation. You believe ILCPs nonetheless should still be appropriate for a plan fiduciary to select as a default investment alternative because the annuity component allows the ILCP to provide in-plan access to an investment with a guaranteed rate of return and guaranteed lifetime income at retirement. You ask whether Title I of ERISA prohibits a plan fiduciary from selecting the ILCP as a default investment alternative for a participant-directed individual account plan.


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