Employers who sponsor a Tax-qualified Retirement Plan and their corresponding Retirement Plan Participants share much more than a common interest in plan investments and the anticipated return for a given lineup. The concept of Risk – Reward is considered and analyzed at least quarterly by most retirement plan investment committees or the company retirement benefits committees as one of the normal duties for a retirement plan fiduciary. When engaged in a Risk – Reward discussion or an internal analysis, the topics of conversation which employer fiduciaries must come to grips with include the low returns of money market funds, historic returns on equities, liquidity and benefit responsiveness. Retirement plan participants will view the same data – but normally they will each process that information differently, since plan participants possess varying degrees of understanding around the asset class.
Plan Sponsor concerns for the Stable Value asset class cluster the around the appropriateness of Stable Value as an asset class; while plan participant decisions on whether or not to use Stable Value at all depends upon the participant’s ability to comprehend the Stable Value asset class.
Unfortunately, the best time to incorporate the Stable Value asset class is not when competing asset classes have been struggling – as has been the recent experience for domestic and foreign equities and fixed income. The best time to deploy the Stable Value asset class is prior to experiencing the need for the safe haven. For the Stable Value asset class to deliver the greatest value in working for plan participants the asset class should be either fully deployed or partially allocated well in advance of the need for such a conservative strategy. Just as no one ever became rich in a short time-frame by incorporating Stable Value, no one ever regretted a strategic allocation to Stable Value during a bear market – in either stocks or bonds.
