In 2007, the U.S. Department of Labor issued regulations dictating which types of investments would qualify as appropriate default investment options in defined contribution retirement savings plans. The DOL left stable value funds—then one of the most popular investments in retirement plans—off the list, concerned that plan participants would need exposure to stocks to meet their long-term retirement savings goals. Instead, the DOL designated target-date funds, which typically hold a mix of stocks, bonds, and sometimes cash, as Qualified Default Investment Alternatives (QDIAs).

Stable value funds have experienced negative cash flows since 2022. In a[EA1]  wide-ranging panel presentation at the 2024 SVIA Spring Seminar, retirement industry consultants and researchers suggested a few explanations for those outflows and also discussed steps plan sponsors can take to make their plans more responsive to the needs of plan participants.

Viewed in isolation, there are plenty of reasons to feel negative about the U.S. economy and financial markets. There’s the inverted yield curve in the bond market, which can be a harbinger of recession. Consumer confidence is low. Geopolitical tensions are high. And inflation, while moderating, is still weighing on the American psyche.