Stable value funds are insurance products that guarantee a return of principle and plus interest rate at a contract rate to participants. According to an article in the May 2013 Employee Benefit Adviser magazine, it is the plan sponsor’s fiduciary duty to evaluate what the worst case scenario would be should the plan, not the individual participant, choose to terminate a stable value fund at a time when the market value of the fund is below the book value of the fund. Some stable value funds may offer a put option that would guarantee that fund participants would receive book value on their investment even if the fair market value is less than its book value at the time of plan level termination.
As a plan sponsor, are you aware of the provisions for termination of stable value funds in your plan?
If there is no put option associated with your stable value fund, does the plan have alternative methods to compensate participants for their potential loss should the fund be terminated?