If your plan contains stable value funds take a look at the fine print of these contracts. There might be penalties for early termination that you weren’t aware of that may have an impact on your fiduciary liabilities.
Employer initiated events such as the employer’s decision to leave the fund for other insurers, to end offering stable value funds altogether, major layoffs, mergers or the company’s bankruptcy interrupt prompt and/or full payment to the insurer. These events can void the stable value fund contract and trigger a surrender charge. The issuer considers these surrender fees an adjustment to the fair market value of the fund, typically in the form of a percentage of plan assets (potentially 10%) charged on a sliding scale based on how long the plan has been active in the fund. Any employer decision regarding the stable value fund and plan participation should be carefully considered for its impact to participant assets and the fiduciary’s liability if such a charge is enforced.
Do you know what events in your stable value fund contract trigger surrender charges?