4160 / What is a designated investment alternative?

A designated investment alternative is any investment alternative designated by the plan into which participants and beneficiaries may direct the investment of assets held in, or contributed to, their individual accounts. Designated investment alternatives do not include “brokerage windows,” “self-directed brokerage accounts,” or similar plan arrangements that permit plan participants and beneficiaries to select investments beyond those designated by the plans.

Generally, a model portfolio is not considered a designated investment alternative if it is clearly presented to the participants and beneficiaries as merely a means of allocating account assets among specific designated investment alternatives. However, if in choosing a model portfolio, the plan participant acquires an equity security, unit participation, or similar interest in an entity that invests in some combination of the plan’s designated investment alternatives, the model portfolio would then be considered a designated investment alternative.