I’m encouraged by the DOL’s issuance of Advisory Opinion 2025-04A, which affirms that a managed-account strategy incorporating a lifetime income component can qualify as a Qualified Default Investment Alternative (QDIA). This is an important milestone for defined-contribution plans.
Here are a few thoughts for retirement-plan sponsors and fiduciaries:
1. Broadening default investment design The Opinion confirms that default investment options can now include more than traditional target-date or balanced funds, specifically, a managed account that gradually allocates into an income-generating portfolio (including annuity-type guarantees) can qualify as a QDIA. Plan fiduciaries should review whether their current default offering aligns with this evolving landscape.
2. Liquidity and transferability remain essential One of the keys to the DOL’s comfort was that the program preserved participant rights: the ability to transfer or withdraw assets without surrender penalties and full notice disclosures were built in. Fiduciaries considering lifetime-income default options must ensure these structural features are present, the devil is always in the details.
3. Fiduciary diligence in selecting insurers and guarantees Even though lifetime-income components (including variable annuities or GLWB-type features) are now more clearly permissible, the Opinion emphasizes the continuing duty of prudent selection and monitoring of insurers and guarantee structures. Adopting the safe harbor frameworks for annuity-provider selection remains best practice.
4. Education and communication matter more than ever When you mix “accumulation” vehicles with “decumulation” features (i.e., lifetime income), participants and sponsors need clear education: how the income guarantee works, what happens if withdrawals exceed the guaranteed amount, what options exist for beneficiaries. Without proper communication, the risk is misunderstanding and unintended behaviour.
5. Opportunities for sponsors to differentiate This development opens the door for plan sponsors who want to move beyond “just a target-date fund” in their default lineup. Offering a managed-account QDIA with a lifetime-income component may help address the growing concern that participants will outlive their savings. On the flip side, cost, governance and operational complexity require thoughtful vetting.
In short: the regulatory door is now more clearly open for default investment offerings that combine accumulation and guaranteed lifetime income features — but as always, the fiduciary bar isn’t lowered. Sponsors should proceed deliberately: update governance charters, review vendor capabilities, ensure participant notice and liquidity rights, and reinforce education.
If your plan or committee is evaluating a QDIA redesign or adding a managed-account + lifetime-income option, I’d be happy to discuss the key checklist items and governance implications.
