“The safety and stability provided by stable value funds have made them a consistently popular choice for qualified plan participants, particularly during challenging economic times,” said Thomas Schuster, CFA, vice president and head of Stable Value Investment Products, MetLife. “That said, as the market stabilizes, plan sponsors and fund providers should not become complacent. While understanding of stable value contract provisions has increased slightly, knowledge of how these terms actually affect stable value outcomes is less well understood.”When accessing stable value, nearly two-thirds of plan sponsors (62%) indicate that they predominantly access or arrange their stable value offerings through a recordkeeper or full-service provider, and an additional 13% of plans access stable value funds through a TPA. A small number of plan sponsors (only 5%) access stable value through a pooled fund offered by an investment-only stable value manager, and even fewer (4%) use a qualified professional asset manager (QPAM) to access their stable value offerings. “The potential mixture of investment managers, wrap providers and contracts available today makes it especially important for the plan sponsor to recognize and become educated about the similarly wide variety of regulations that govern each type of arrangement,” added Warren Howe, National Sales Director, Stable Value Markets, MetLife. “This includes variations in wrap contract provisions and guarantees, in addition to the standard due diligence with regard to investment providers, strategies and guidelines.” CONSIDERATIONS FOR PLAN SPONSORS The 2013 MetLife Stable Value Study also offers some important implications for plan sponsors and those with whom they work to consider:
- Take affirmative steps to guard against complacency: While this study shows improvement in some aspects of plan sponsor understanding of stable value contract terms, it suggests that the knowledge of how these terms actually affect stable value outcomes is less well understood. Take the time to ask and have your stable value providers explain how their contracts will work for your plan.
- Become familiar with all three basic stable value contract structures: This study makes it clear that traditional GICs, separate account GICs and synthetic GICs are all well represented in today’s stable value options, and suggests that options are increasingly backed by more than one type of contract.
- Take the time to discuss the mechanics of your stable value option with your stable value providers: Both the contract and agreement terms and their effects – how they will work in practice – are important. This study indicates more progress on the former than the latter. The richness of choices that the current stable value market offers sponsors requires attention to how the providers, structures and access points selected all work together in support of the sponsor’s stable value option.
- Be mindful that adding more fiduciaries does not make a sponsor any less a fiduciary in its own right: This study suggests that the incidence of sponsors retaining advisors for help with arranging or monitoring their stable value options has climbed sharply since the 2010 study. Sponsors should be mindful that retaining an advisor is intended to assist them in meeting, rather than a substitute for, their own fiduciary responsibilities.
- Give thoughtful consideration to the interaction between 404(c) and QDIA safe harbors: Sponsors that have adopted a QDIA in connection with auto-enrollment whose overall plans are structured to rely on the 404(c) safe harbor should take care that focusing on the former does not undo the protections of the latter.
- Stay attuned to emerging financial regulatory reform and its potential effects on stable value: MetLife underscores the importance of plan sponsors and the practitioner community continuing to speak for stability in qualified retirement plan structures, and the importance of having flexibility to make the fiduciary decisions that are best for their own plan participants.
About the StudyAs a leading provider of Stable Value offerings for defined contribution plans, MetLife commissioned this study, which is a follow up to its inaugural 2010 study, because it was interested in furthering its understanding of various dimensions of stable value options from both the plan sponsor and the stable value fund provider’s perspectives. To conduct the research, MetLife engaged the services of Mathew Greenwald & Associates and Asset International, Inc., publishers of PLANSPONSOR and PLANADVISER magazines. Two separate studies were conducted – in-depth phone interviews with 19 stable value fund providers and an online survey of 140 plan sponsors. The stable value fund provider interview guide and the plan sponsor questionnaire were developed by staff at MetLife in collaboration with its research partners. About MetLife MetLife, Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers. Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit www.metlife.com.