EACA and QDIA fund

[52626]

Under the EACA the participant has 90 days to request their funds if they do not want to enroll.  The account adjusted for income is paid to the participant

Question - the Recordkeeper wants to invest the Auto Enrolled deferrals into an "interim" fund until the end of the 90 days vs. the QDIA. Then if the participant did not request payment, the account is moved to the QDIA.

I can not find that the interim fund is a requirement.  Everything indicates the AE is funded to the QDIA and if the participant takes his payment during the 90 days, they get the value of the deferral account ( gain or loss).  Am I correct.  Is this just the  process for the recordkeeper vs regulation?

Thanks

 

[Peter Gulia]

Of plans that provide a default investment intended as a qualified default investment alternative, many provide only a permanent QDIA, but some provide a time-limited temporary QDIA, “designed to preserve principal[.]”

29 C.F.R. § 2550.404c-5(e)(4)(iv)(A) https://www.ecfr.gov/current/title-29/part-2550/section-2550.404c-5#p-2550.404c-5(e)(4)(iv)(A).

Some plan sponsors choose this so a defaulted-in participant who claims an early-out permissible withdrawal (if the plan provides it) would not suffer a principal loss on the investment.

After an initial period runs out, the QDIA becomes the permanent QDIA.

This is a plan sponsor’s plan-design choice; but it might be influenced by a service provider’s preference or service condition.