The Department of Labor's ERISA Advisory Council should endorse the use of standard wraps — contracts provided by insurers or banks to protect stable value funds from interest-rate fluctuations — to ease the due-diligence burden of plan sponsors that offer stable value funds to their participants, Jason Scott, managing director at Financial Engines, said today in testimony before the council.
Mr. Scott also recommended the council endorse the “timely and routine disclosure” of a stable value fund's market value relative to book value to plan sponsors and participants.
But David Wray, president of the Profit Sharing/401(k) Council of America, argued against additional regulations for stable value funds, according to the text of testimony he was scheduled to deliver this afternoon. Mr. Wray said additional regulation could stifle innovation and limit the ability of plan sponsors to react to changing circumstances.
Mr. Wray suggested a list of best practices to offer guidance to plan sponsors instead of regulation. “It would be beneficial if the council developed such a list for use by plan sponsors in the selection and monitoring (of) stable value funds, and put it on the department's website,” his testimony said.
The council is planning to 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.