Participants Want Plans with Stable Value Option

The provider of customized retirement plan solutions released “Participant Attitudes Toward Stable Value Offerings,” which finds that the majority of respondents surveyed for the report describe stable value products as a necessity for a retirement savings plan. Other findings support the conclusion that participants place a high value on stable value investments.

“Our results show that over 90% of participants who have access to stable value products invest in them,” says Marijn Smit, president of Transamerica Stable Value Solutions Inc., based in Harrison, New York. “That is a confirmation to plan sponsors about the importance of providing access to this type of investment. Based on our results, they’re an important part of a well-diversified investment mix, and having access to these products appears to encourage participants to save for retirement and helps them invest with a greater sense of security.”

Other findings in the report include:

• Participants are more confident when investing in stable value. Respondents agreed that stable value investments could help them achieve a successful retirement outcome and reduce the impact of stock or bond market downturns.
• Stable value sets better plans apart from others. Participants have a higher opinion of plans that offer stable value investments.
• There is significant interest from participants who do not have access. More than 50% of respondents who do not have access to stable value investments as part of their retirement plan expressed interest in investing in this option.

Retirement industry experts believe that stable value investments still have a strategic role as a core menu option for 401(k) plans (see “Keep It Steady”). Experts also caution plan sponsors to be aware of the interest rate environment, which can affect stable value investments (see “The Risk of Rising Interest Rates on Stable Value Funds”).

The report notes that stable value generally refers to a relatively low-risk asset class that focuses on capital preservation and liquidity, while seeking to provide steady, positive returns to participants within certain types of savings plans. Stable value is available only in tax-qualified retirement savings plans, such as defined contribution plans, as well as in some tuition assistance plans. It is not available in either mutual funds or individual retirement accounts.

The findings of the report are based on an online survey of 350 defined contribution plan participants conducted in December 2013. Respondents include 132 participants ages 20 to 35, 65 participants ages 40 to 49, 95 participants ages 50 to 64, and 56 participants ages 65 or older. Among respondents, 184 have access to a stable value option in their retirement savings plan, 69 do not have access, and 97 are not sure.

A copy of the full report can be requested by emailing marketinsights@transamerica.com.