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ACTION REQUESTED
[19114]
August 22, 2005
TO: PENSION COMMITTEE No. 29-05
RE: DRAFT LETTER TO DOL ON AUTOMATIC ENROLLMENT DEFAULT OPTIONS
Attached for your review is a draft Institute letter to the Department of Labor on how to
define default investments in connection with a safe harbor for plan sponsors offering plans
with automatic enrollment features. At a recent meeting with DOL officials, the Institute
learned that DOL plans to develop guidance under ERISA Section 404(c) to encourage the use of
automatic enrollment by plan sponsors of defined contribution plans. This initiative has high
priority. DOL invited the Institute to provide suggestions on how default investments could be
described for purposes of a safe harbor.
The draft letter suggests that DOL include a specific investment option or model
portfolio that is (i) intended to provide diversification by investing in a range of asset classes,
and (ii) intended to vary the emphasis and exposure among such asset classes in a manner that
is consistent with the expectation that the participant will take distributions on or about an
anticipated year of retirement or distribution period. The letter suggests that DOL also include
an investment designed to be the complete investment program of a prudent investor. The
letter recommends that the safe harbor be available to sponsors in other default investment
situations as well. The draft letter also includes recommendations in connection with
participant disclosure and opportunity to direct a different investment.
Please provide any comments that you may have on the draft letter to me at 202 326
5826 or podesta@ici.org by August 31, 2005.
Mary S. Podesta
Senior Counsel - Pension Regulation
Attachment (in .pdf format)