Department of Labor Proposal Will Advance Interests of Retirement Plan Participants

Washington, DC, May 31, 2007 - ICI supports a Department of Labor (DoL) proposed regulation that will enable employers to select default investments for plan participants that are appropriate for long-term investing.

Background
The DoL's proposal reflects the goals of Congress and the Administration in facilitating automatic enrollment in 401(k) plans, and proves consistent with the statutory language of the Pension Protection Act of 2006 (PPA). Specific measures in the PPA seek to facilitate automatic enrollment and enhance the utility of 401(k) plans for plan participants.

Research shows that automatic enrollment into employer-sponsored retirement plans boosts participation rates and savings. With this in mind, Congress carefully crafted measures to encourage employers to automatically enroll their employees, and recognized that the success of automatic enrollment depends on selecting appropriate contribution rates and investments on behalf of participants who give no instruction. Research shows that higher contribution rates and default investments with equity exposure make a positive difference in generating adequate retirement savings.

ICI Position
In a letter submitted to the Office of Management and Budget, ICI states that the currently proposed DoL regulation would significantly advance the interests of plan participants and beneficiaries by allowing employers to select default investments more likely to generate adequate retirement assets. Therefore, the Institute strongly supports the range of qualified default investment alternatives (QDIA) identified in the proposed regulation, noting that the range of options outlined in the DoL's safe harbor proposal will achieve the goals of automatic enrollment.

ICI disagrees with a suggestion put forward by the American Council of Life Insurers that the OMB should return the forthcoming final regulation for further consideration if the QDIA safe harbor does not include stable value funds. ICI believes this suggestion seeks to maintain a status quo that Congress intended to change, with the enactment of the PPA, for the benefit of participants and beneficiaries.

Related Links
This website includes a section devoted to retirement security issues, including implementation of the PPA by federal regulators.