NEW YORK -- (Business Wire)
According to MetLife’s 2013 Stable Value Study, released today, the vast
majority (86%) of plan sponsors have been offering stable value as an
investment option in their defined contribution (DC) plans for more than
two years, and more than 78% are not planning to make changes to their
stable value offerings within the next year. Among those plan sponsors
that added stable value as an investment option in their DC plan in the
past two years, 47% said they did so to provide participants with a
“capital preservation fund,” 37% said stable value “offers higher
interest rates than other, comparable investments,” and the same
percentage said “it was recommended by their recordkeeper/TPA.”
MetLife commissioned this study of 140 plan sponsors and 19 stable value
fund providers to gain updated insights into the current landscape of
stable value products since its inaugural study, released in 2010. The
new study can be found at www.metlife.com/stablevaluestudy.
Among plan sponsors that offer stable value as an investment option in
either their 401(k) or 457 plan(s), 48% say that their plan’s stable
value option is backed in part by traditional GIC(s), 31% say they
include separate account GIC(s) and 19% have synthetic GIC(s). The
largest plans (10,000 or more plan participants) are more likely than
small plans (100 to 999 participants) to say their offering is backed in
part by a synthetic GIC (45% vs. 12%). About 75% of stable value fund
providers also indicated their offerings included more than one
However, when it comes to understanding the arrangements plan sponsors
have selected, more than one in five plan sponsors (22%) who offer
stable value to their participants said they did not know what types of
stable value contracts back their offering, and the low percentage of
smaller plans identifying synthetics as elements of their stable value
option suggests they may not be aware that pooled stable value funds
often incorporate all three types of contracts. This finding is
consistent with the results of MetLife’s 2010 Stable Value Study, though
the overall level of familiarity among plans sponsors and stable value
fund providers has increased for most factors since the initial study.
“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 Stable Value
About half of all DC plans offer a stable value option. Industry
estimates of the percentage of DC assets allocated to stable value range
from 17 to 37 percent. At least $540 billion associated with Stable
Value Investment Association (SVIA) member companies is allocated to
stable value funds.
About the Study
As 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.
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.
Meghan Lantier, 212-578-6734
Source: MetLife, Inc.
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