Products December 4, 2019

Stable Value Guaranteed Income Fund Launched by John Hancock

The new fund is offered through a group annuity contract, with underlying assets issued and guaranteed by the John Hancock Life Insurance Company.

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John Hancock Retirement and John Hancock Investment Management, companies of Manulife Investment Management, have launched the John Hancock Stable Value Guaranteed Income Fund.

While previewing the new product, Patrick Murphy, CEO of John Hancock Retirement, said the fund represents a new principal stable value option within the firm’s lineup of retirement investments.

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According to John Hancock, the fund seeks to provide plan participants with steady and stable returns, guaranteed principal and interest, and daily liquidity. It does so by investing in John Hancock’s General Account, which Murphy describes as a well-diversified portfolio of investment-grade fixed income investments.

Technically, the new fund is offered through a group annuity contract, with underlying assets issued and guaranteed by the John Hancock Life Insurance Company. John Hancock Life Insurance Company has been a stable value asset manager since 2006, with total stable value assets under management greater than $2.7 billion.

“The fund is a valuable option for the conservative portion of anyone’s portfolio,” Murphy says. “For retirees and near retirees, its guarantee of principal and interest provides principal preservation and a predictable income stream that they can rely on during their retirement years. For individuals who are uncomfortable with market volatility and those seeking to diversify their investments across a range of asset classes, Stable Value Guaranteed Income Fund’s guarantee of principal and interest provides steady and stable returns protecting these assets from loss in the event of a market downturn.”

According to Murphy, the new fund generally will offer a rate higher than similar type investments, i.e., money market funds, without increased risk.

Effective immediately, the fund is available on the John Hancock Retirement open architecture platform. The fund will also be launched on John Hancock’s Signature Platform next year. The fund is available for 401(k), 401(a), governmental 457(b) and Taft-Hartley plans. It is fully portable and benefit responsive upon plan termination and has no initial investment minimums.

Asked how this new products announcement fits into the broader retirement plan industry conversation about “decumulation” of defined contribution (DC) plan assets, Murphy says that stable value funds, with their guarantee of principal and guaranteed payment of predictable income, can be a valuable part of a plan’s investment lineup and a participant’s decumulation strategy.

“As more plan sponsors focus on keeping terminated and retired participants in plan, including investment options that meet retirees’ spending needs and principal preservation objectives has become increasingly important,” he says.

Compliance December 4, 2019

Legislation Would Allow Retirement Plan Withdrawals to Pay Student Loan Debt

While this seems counterintuitive to the effort to discourage leakage from retirement accounts, a summary of the bill states, “The quicker student loan debt is paid down, the sooner workers can focus on retirement savings.”

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Senator Rand Paul, R-Kentucky, introduced S. 2962, the Higher Education Loan Payment and Enhanced Retirement (HELPER) Act, aimed at helping Americans more quickly and easily pay off their student loan debt and save more money for retirement.

HELPER Act would allow Americans to annually take up to $5,250 from a 401(k), 403(b), 457 plan or IRA—tax and penalty free—to pay for college or pay back student loans. These funds could also be used to pay tuition and expenses for a spouse or dependent.  

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The plan would enable two parents and a child, for example, to put over $15,000 in pre-tax funds in one year toward tuition or loan repayment if each set aside the maximum. “Currently, Americans can only pay for their student loans with after-tax money, placing an unnecessary constraint on their budget,” according to a news release from Paul’s office.

The bill would also allow employer-sponsored student loan and tuition payment plans to be tax free up to $5,250, and it would repeal the cap (and the phasing out) on deducting student loan interest, as student loans do not disappear when someone earns more money throughout their career.

While this seems counterintuitive to the effort to discourage leakage from retirement accounts, a summary of the bill states, “Because of student loan debt/repayment, workers are often not fully contributing to their [retirement plans] in the first place. The Paul bill changes the incentive to invest, since that money can be used to pay down burdensome debt. And the quicker student loan debt is paid down, the sooner workers can focus on retirement savings.”

To help give Americans the opportunity to save as much as possible for retirement, the legislation would also offer workers the choice to have an employer contribution to a retirement plan count as a Roth contribution. “While current law defers the taxes on employer contributions, forcing Americans to pay taxes on the funds and its gains in retirement, this change would allow workers to pay the taxes right away, freeing their savings to grow tax free and giving them greater financial security after they retire,” the news release explains.

Previously, Senators Ron Wyden, D-Oregon, and Ben Cardin, D-Maryland, introduced The Retirement Parity for Student Loans Act, which would permit 401(k), 403(b), and SIMPLE retirement plans to make matching contributions to workers as if their student loan payments were salary reduction contributions.

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