Guaranteed insurance accounts are stable value investments that are offered to defined contribution plans such as 401(k), 457, 403(b) and some 529 tuition assistance plans on a full service or investment only basis. They are generally managed entirely and guaranteed directly by a single insurance company.*
Guaranteed insurance accounts are provided via a group annuity or funding agreement contract that can be issued from either the general account or the separate account of the insurer. The underlying assets are typically managed by the insurance company or an affiliated manager.
In all cases, guaranteed insurance accounts are backed by the full financial strength and credit of the issuing insurance company.
Guaranteed insurance accounts are similar to other stable value investments, such as pooled funds or individually managed funds, in that they deliver principal safety, cash like liquidity for participant driven transactions, and consistent, positive returns that are generally higher than money market funds. Much like pooled or collective stable value funds, guaranteed insurance accounts often cater to the needs of small to mid-size plans that may otherwise be unable to offer stable value as an investment option to their plan participants.
Stable value investments are tailored to meet the needs of a specific plan participant population and/or group of plans and their plan participants. While all stable value investments deliver the same basic benefits, there are differences in structure, levels of guarantees, as well as some contractual features. Having this multitude of structures enables plan fiduciaries to select the stable value investment that is best suited to their specific plan participants’ needs. The chart below provides an overview of stable value products.
*Insurance companies offer several product variations for stable value. These can be:
- Non-participating fixed term traditional GICs issued by the general account.
- Open maturity general or separate account guaranteed products with fixed rate for a period of time.
- Contracts with or without minimum floor guarantees that are in excess of 0%.
- Fee based synthetic wrap contracts or wraps that are issued by an insurance company separate account. These are held as an investment within the Stable Value Fund along with other wraps/GICs procured from other issuers.