Vanguard Recommends Plan Sponsors Reenroll Participants

Advocating a sort of clean slate for all investors in 401(k) plans, Vanguard issued a report Thursday suggesting that all plan sponsors reenroll participants into qualified default investment alternatives (QDIAs).

As a result of the QDIA regulations issued in late 2007 by the Department of Labor, citing target-date funds, balanced funds and managed accounts as the three choices sponsors could use as QDIAs, “reenrollment has emerged as a way to improve the diversification of participant portfolios,” Vanguard said.

Ann Combs, principal with Vanguard Strategic Retirement Consulting, said: “Many sponsors are concerned that participants have failed to adequately diversify their portfolios due to inertia or lack of interest, thereby reducing the chances that they will accumulate sufficient savings for retirement. We believe reenrollment into a QDIA would promote better portfolio diversification for participants, improving participants’ chances of greater retirement security while providing plan sponsors with fiduciary relief.”