In addition to providing an attractive solution to plans and participants seeking stability, liquidity, and yield, guaranteed insurance accounts provide the following benefits:
Crediting Rates - Rates are often fixed and guaranteed in advance for up to one year (sometimes longer) and must be greater than or equal to the guaranteed minimum rate. The crediting rate and its terms are defined in the contract and can be higher than other stable value investments because the insurance company generally has longer portfolio durations and the ability to invest in higher yielding assets, especially in the general account.
Guaranteed Minimum Interest Rate - While minimum rates vary by structure and type of product, all stable value structures guarantee a minimum rate of zero percent which ensures principal preservation. General account structures often guarantee the minimum rate at higher than zero percent, typically varying from one percent to three percent. At no stage in the life of the contract can the actual credited rate fall below these guaranteed minimum rates which are nondiscretionary and contractually stated.
Policy Holder Status - These products are insurance policies backed by the full faith and credit of the insurance company. Claims are pari-passu with policyholders and ahead of general creditors to the insurance company.*
Direct Guarantee - The insurance contract is issued directly to the plan which receives a guarantee of principal and interest from the insurer.
Option to Annuitize Savings - Guaranteed insurance account contracts in the retirement plan universe typically offer participants the option upon retirement of withdrawing money as needed or annuitizing (converting their balances into a regular income stream for life).
Regulatory Safeguards - State insurance regulators oversee insurer reserves and investments through regulation and regular audits. Most insurance companies maintain capital and surplus well in excess of regulatory requirements.
Strong Risk Management - Guaranteed insurance accounts are regulated as guaranteed products and the insurance industry employs a rigorous risk controlled approach to issuing and managing them.
Broad Usage and Capacity - Guaranteed insurance account contracts are flexible and broadly available across multiple plan types offering capacity to the marketplace.
Notes: *Separate accounts offer additional protection since assets in the general account that support the separate account are set aside and allocated to support and pay the claims of separate account policyholders first.