ICI Applauds DOL's 401(k) Default Choices
October 29, 2007
The Department of Labor has decided not to include stable-value funds as one of its recommended default options for 401(k) plans under the Pension Protection Act. Instead, the DOL is advocating balanced funds, lifecycle funds and a professionally managed, diversified portfolio as the default choices.
Investment Company Institute President and Chief Executive Officer Paul Schott Stevens applauded the decision, saying, "The Department of Labor has worked hard to implement Congress' intention in the Pension Protection Act with respect to default investment options in 401(k) and other defined contribution retirement plans. The regulation issued today will help ensure that the defined contribution system works as effectively as possible for the millions of working Americans who depend upon it for a financially secure retirement."
"Stable-value funds are a valuable component of 401(k) plans, but for the purpose of this rule, we had to decide if it was an appropriate investment to put every dime of a person's retirement savings, and it's not the optimal retirement savings vehicle," said Assistant Secretary of Labor Bradford P. Campbell.
Companies have used stable-value funds as the default choice for fear of lawsuits. The American Council of Life Insurers had advocated guaranteed as a default option. About two-thirds of 401(k) plans now offer stable-value funds as an investment option.
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