What is the difference between participant- vs sponsor-directed DC plans? I know that in sponsor-directed, the sponsor selects the investments, and in a participant-directed employees choose allocations among sponsor provided mutual funds. Does sponsor have any additional obligations in sponsor-directed plan compared to participant-directed? CFAI Candidate Readings just mention that sponsor-directed DC plan is a simpler version of DB pension plan w/o going into details. For those who have Schweser notes, additional question - Schweser compares DC and DB Pension plans on p10 of Book2 and mentions that DC plan discussed is sponsor-directed. If DC plan discussed was participant-directed, what would be different in advantages & disadvantages summarized in that table? Thanks!
“Does sponsor have any additional obligations in sponsor-directed plan compared to participant-directed?” Depending on the type of plan(legal structure), a sponsor directed DC plan requires the Board/Trustees to select a prudent/appropriate/reasonable asset allocation based on the underlying participants in the plan. In a participant directed plan, the Board/Trustees only have the responsibilities of selecting a reasonably diversified (I’ve heard as few as 2 options, one stock/one bond) program and reasonable investment options (i.e. selecting managers that do not deviate from their investment objective)