Guaranteed insurance accounts are fully compliant with the disclosure requirements under 408(b)(2). The DOL excluded fixed return investments from fee disclosure stating that these products must “provide a fixed or stated rate of return to the participant for a stated duration” which guaranteed insurance contracts do during the rate guarantee period. The DOL defined fixed return investments in the preamble to the fee disclosure regulations as “certificates of deposits, guaranteed investment contracts, variable annuity fixed accounts, and other similar interest bearing contracts from banks or insurance companies.”*
In addition to being classified as a fixed return investment and exempted from fee disclosure, the investments underlying the guaranteed insurance contracts are managed collectively in the insurer’s general account and are not earmarked to a specific liability. The spread earned by the insurer is not fixed, changes continuously, and is not known until after the expiration of the rate guarantee period, and as a result it cannot be easily attributed to specific products for purposes of disclosure. The general account stands behind all products and liabilities, including life as well as annuities, whereas with other stable value products the fee is built into the product and deducted directly from an earmarked portfolio’s return, allowing it to be reported and compared across similar products.
*Federal Register, Volume 75, Number 202, “Department of Labor, Employee Benefits Security Administration 29 CFR Part 2550, Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans; Final,” PAGE 64916.