Handbook of Finance: Financial Markets and Instruments

Chapter 63. Stable Value Investment Options for Defined Contribution Plans

BRIAN K. HAENDIGES, FSA, CRC, CRA

Head, Institutional Defined Contribution Plans, ING Retirement Services

Abstract: One of the most prevalent investment options used by defined contribution plans in the United States is a stable value option, one that provides protection of invested principal and accrued interest to individual plan participants. The funding vehicles that back stable value options are diverse, yet retain many common elements, including the accumulation of interest, some level of assurance of stability of principal, and the participant right to withdraw funds for plan benefits at book value. Both the purchasing of these products by defined contribution plan sponsors, and the issuance of them by providers, require careful consideration of those product features that are different from one product to another. This is especially important given an aging Baby Boomer population that is spurring a renewed interest in product capabilities that allow them to protect and manage the income on assets that they've accumulated for retirement. Stable value products and features are also attracting interest for applications outside of defined contribution plans, and the lessons learned from using these products in a defined contribution environment lend themselves to extrapolation in other venues.

Keywords: stable value option, stable value products, guaranteed interest rate, stability of principal, book value ...