U.S. District Court Finds No Fiduciary Breach for Change in Qualified Default Investment Alternative


The U.S. District Court in the Western District of Kentucky recently ruled in favor of plan fiduciaries that adopted a qualified default investment alternative (QDIA) for an employer’s tax-qualified retirement plans. In Bidwell v. University Medical Center, Inc., No. 3:10-cv-00005-TBR (W.D. Ky. Apr. 17, 2011), the court ruled that a plan administrator did not breach its fiduciary duties when it did the following:

- Changed the plans’ default investment fund from a conservative stable value fund focused on capital preservation to a comparatively more aggressive “life cycle” fund invested in a mixture of equity and fixed income investments.

- Automatically transferred amounts held in the stable value fund to the life cycle fund for participants who did not make a different election.

Due to the timing of the transfer (July 2008) and prevailing market conditions, some plan participants incurred significant investment losses as a result of the increased equity investment exposure in the life cycle fund. Despite these investment losses, the court determined that the plan fiduciaries complied with the QDIA safe harbor established pursuant to the Pension Protection Act of 2006 (PPA) and, as such, were not liable for the investment losses.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morgan Lewis | Attorney Advertising

Written by:


Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.