The Department of Labor's ERISA Advisory Council is studying whether more regulation is needed for stable value funds, a core DC investment option that has been shaken by recent market turmoil.
The council, which will examine stable value funds on the second day of its July 21-23 meeting, will recommend whether the DOL's Employee Benefits Security Administration should provide additional requirements or guidelines for the design and marketing of stable value funds to plan sponsors and retirement services providers.
In addition, the council will recommend whether additional guidance is needed to help plan sponsors and their consultants choose, value and monitor stable value funds.
Trisha Brambley, a member of the council and president of RESOURCES for Retirement in Newtown, Pa., said this scrutiny of stable value funds is largely driven by the increasing number of plan participants moving into such funds, often from target-date funds. “We also need to ask what's in these funds and can they achieve their stated objectives,” she said. “In the past, I think plan sponsors just selected these options based on returns.”
The 15-member group also will look into whether the current disclosures to participants about stable value funds are sufficient, and investigate whether it would be appropriate to include stable value as a qualified default investment alternative in 401(k) plans. The council plans to report its findings to the Department of Labor in October, said Stephen McCaffrey, a member of the council and senior counsel, National Grid USA, New York, which has a $2.9 billion DC plan.
“Like most fiduciaries, we're closely monitoring our stable value investments, as well as other investments in our portfolio — given the current market environment,” Mr. McCaffrey said. He said the discussion will be similar to what was addressed in last month's joint Securities and Exchange Commission and Department of Labor hearing on target-date funds.
Gina Mitchell, president of the Stable Value Investment Association, Washington, said she believed the hearings will lack the controversy of the target-date debate. “Given these unprecedented times, everyone is trying to do their due diligence, and I think it's an opportunity for stable value funds to tell their story,” she said. “This asset class has held up remarkably well, providing principal protection and a steady return.”