WASHINGTON The Labor Department on April 29 announced that existing contributions to many stable value funds offered by mutual fund companies will be protected under qualified default investment alternative rules.
Under the departments original QDIA regulation, which went into effect late last year, only stable value funds that guaranteed a rate of return essentially those offered only by insurance companies would have received grandfathered protection for previous contributions. A Labor Department bulletin states that grandfathered stable value funds need only be designed to preserve principal and provide a rate of return generally consistent with that earned on intermediate investment grade bonds.
The correction clarifies that most mutual fund stable value funds are grandfathered, said Jason Bortz, an ERISA attorney with the law firm Davis & Harman LLP.
The Labor Department also said participants could be barred from taking money out of a QDIA and then reinvesting it in the same option soon thereafter. Previously, employers could not impose such market-timing restrictions on participants.