Common Questions About Our Stable Value Funds

Our stable value funds are designed to provide plan participants with a guaranteed return of principal and interest, along with attractive crediting rates and 100% liquidity. The funds are group annuities, backed by the financial strength of Standard Insurance Company. The investor receives a direct guarantee of principal and accrued interest from Standard Insurance Company. Participants’ accounts are recordkept at book value (principal and interest). All participants receive book value regardless of market conditions.

Stable value investments from The Standard offer a full guarantee of principal and accumulated interest to participants. Interest is credited on a portfolio rate method and all monies receive the same crediting rate. Interest crediting rates are stated on an annual effective basis, declared shortly (usually one week) before each quarter and are locked in and guaranteed not to change for the quarter.

Stable value funds from The Standard are available to qualified and non-qualified plans including 401(k), 403(b), 401(a), 457, 457(b), 457(f), 409A, cash balance, defined benefit and HSA/HRA plans with no minimum investment requirement.

• Guaranteed Crediting Rate — The guaranteed interest rate is declared in advance and locked in for the calendar quarter.
• Minimum Guaranteed Rate — The interest rate is contractually guaranteed never to be less than 1%. 
• Liquidity — Daily liquidity for participant withdrawals and transfers at book value (principal and interest), regardless of market conditions.
• Conservative Investments — A diversified, high-quality portfolio of fixed income securities plus commercial mortgages within Standard Insurance Company’s general account.
• Direct Guarantee — The Standard is able to provide stable value plan participants a full guarantee of principal and interest.
• Insurance Regulatory Oversight — State insurance regulators oversee insurer reserves and investments through regulation and regular audits.
• Strong Capital — We benefit from a strong capital and reserve position with a risk-based capital in excess of 400% of company action levels as of Dec. 31, 2021.
• Favorable Plan Level Discontinuance — Immediate payout at book value (principal and accumulated interest of book value payments over time).
• Portability — Easily trades to outside recordkeeping platforms. Fully portable in the event of a recordkeeper change.

Stable value funds from The Standard are not “wrap” products. As an insurance company, Standard Insurance Company is not dependent on the capacity and/or lack of willingness from third-party wrap providers. We manage our own assets and issue a guarantee of principal and interest directly to the plan sponsor. Our stable value funds are group annuity contracts issued by Standard Insurance Company and are record kept at book value (principal and interest). All participants receive book value regardless of market conditions.

The plan participant receives a direct guarantee of principal and accrued interest from Standard Insurance Company. That guarantee is backed by the full faith and creditworthiness of Standard Insurance Company. Deposits made to stable value funds from The Standard are deposited into Standard Insurance Company’s general account. Guarantees are based on the claims-paying ability of Standard Insurance Company and not on the value of the securities within the general account.

Standard Insurance Company has consistently received strong, favorable financial strength ratings from rating agencies through the years. As of September 2022, Standard Insurance Company had earned these financial strength ratings.

As a state-regulated insurance company, Standard Insurance Company maintains adequate reserves to meet its contractual guarantees. State insurance regulators oversee insurer reserves and investments through regulation and regular audits.

We benefit from a strong capital and reserve position with a risk-based capital in excess of 400% of company action levels as of Dec. 31, 2021.

The underlying general account portfolio is a broadly diversified, investment-grade, fixed-income portfolio. It is primarily invested in publicly traded bonds and commercial mortgages. As of June 30, 2022, the general account portfolio had an average rating of “A” as measured by Standard & Poor’s.

The underlying high-quality conservative investment approach and tight risk controls have enabled our general account portfolio to weather many marketplace storms since our founding in 1906. Outlined below are the key elements we maintain in controlling risk.

Bond Portfolio

The bond portfolio has an average portfolio rating of “A” as measured by Standard & Poor’s with additional focus on the mix of higher versus lower quality assets. The portfolio is diversified by geography, sectors and issuers with specific limitations placed on issuer exposure based on ratings.

Commercial Mortgage Loan Portfolio

Our commercial mortgage loans have consistently provided a superior balance of risk and return. We offer small commercial mortgage loans to borrowers who want a fixed rate over time, and we rigorously underwrite every commercial mortgage loan we make.

Our commercial mortgage loan portfolio continued its long history of excellent performance and outperformed many other asset classes once viewed as having higher credit quality. While commercial real estate markets faltered, our loan portfolio provided competitive risk-adjusted returns and a good cash-flow match with our liabilities. We maintain great confidence in our ability to place these quality, high-yielding assets on our balance sheet, and we will continue to seek the right type of borrowers in order to do so.

Standard Insurance Company sets crediting rates for each quarter using a process that is similar to other providers of similar products. The company strives to provide the highest return on a risk-adjusted basis for its plan participants.

Among the many factors Standard Insurance Company’s management team considers when setting rates are: projected investment earnings on investments held in the general account, projected cash flow, the interest rate at which new investments can be made, investment and interest-rate risk, investment management expenses, liquidity needs and the competitive environment.

Once the crediting rate is announced, it is guaranteed not to change during that calendar quarter. Crediting rates for the subsequent quarters can be higher or lower. However, the products are designed to minimize the changes in interest crediting rates. The portfolio design of this product contributes to this rate stability.

The guaranteed crediting rate resets are announced shortly before each quarter and guaranteed for the new quarterly period. The guaranteed rate applies to all assets in the fund.

The interest crediting rates declared by Standard Insurance Company and paid on contributions to the funds are expressed as annual effective interest crediting rates. An annual effective crediting rate means that a balance on deposit at the beginning of Day 1 will have grown by the annual effective rate at the end of Day 365. For example, if the annual effective rate is 3% (and assuming no transactions take place during that time period), $100 of deposit on Day 1 will grow to $103 at the end of Day 365. Interest is credited to balances on deposit in the fund on a daily basis based on the daily equivalent of the annual effective crediting rate (“daily factor”), which is applicable to such balances.

Yes, the guaranteed minimum interest rate offered by stable value funds from The Standard is 1%. This is guaranteed for the life of the contract.

The Standard strives to offer competitive crediting rates consistently over all phases of the economic cycle. We invest in high-quality fixed-income investments and mortgage loans that provide the highest returns on a risk-adjusted basis. On the fixed income side, we invest mainly in high-quality publicly traded securities (average rating of A). We have a niche in the mortgage loan space where we specialize in smaller commercial loans that provide superior returns. Because we underwrite, service and hold all of our loans, we have complete control of these investments. Our delinquency rates have consistently been very low (0.235% as of June 30, 2022). As a result, our portfolio yield remains attractive. We anticipate being able to offer a compelling yield no matter the interest-rate environment.

No. Participant withdrawals and transfers are freely permitted daily according to plan provisions. Stable value funds from The Standard provide participants with full book value liquidity for benefit payments (death, disability or retirement) and transfers to other investment options. Competing funds are prohibited to safeguard the fund and participants from negative arbitrage activities, particularly during a period of rapidly rising interest rates coupled with large cash outflows.

A competing fund means any investment option offered by the plan that:

• Is a fund that seeks to maintain a stable value per unit or to maintain preservation of principal (i.e., stable value fund, money market fund or cash equivalent fund).
• Is an allocation or fixed-income fund that has more than 75% invested in U.S.-dollar denominated investment-grade securities with a target duration of three years or less.
• Allows access to other investment options or funds that have the same preceding characteristics unless Standard Insurance Company provides written consent to the contrary.

Yes. The funds are fully portable and can be kept as an investment option in the event there is a recordkeeper change. The funds trade through the industry standard NSCC trading system and can easily interface with outside recordkeepers.

• Fully guaranteed rate — The interest crediting rate is guaranteed for the full calendar quarter.
• Minimum guaranteed interest-rate floor — The interest rate is contractually guaranteed never to be less than 1%. This is guaranteed for the life of the contract.
• Principal guarantee — Participant principal and interest are fully guaranteed by Standard Insurance Company never to decline.
• Direct guarantee — Standard Insurance Company is able to provide stable value investors a fully transparent guarantee.

Insurance company options of guaranteed fixed-rate stable value funds generally have the objective of preserving a participant’s invested capital (or principal) while providing liquidity and steady, positive returns exceeding those available in money market investments over time. Most stable value investment options have historically provided gross returns similar to short- to intermediate-maturity bond strategies but without the daily volatility.

Outlined below are some of the key characteristics of each product and the advantages stable value products offer over money market funds.

Money Market Funds

A money market fund is a mutual fund considered a low-risk investment option that invests in U.S. Treasuries, agencies, CDs, commercial paper and other instruments with maturities less than 13 months. In addition, money market funds seek a stable $1 net asset value and often generate a low, single-digit return for investors.

• Many retirement plans can include government and institutional money market funds.
• Government money market funds continue to seek a stable $1 net asset value and often generate a low, single-digit return for investors.
• Institutional money market funds have a floating net asset value. They can impose liquidity fees and temporarily suspend withdrawals (known as gates) in certain circumstances.

Insurance company guaranteed-rate stable value funds have the advantage when it comes to:

• Historically higher yields from intermediate-term bond funds without the volatility.
• A minimum interest rate floor of 1% – guaranteed for the life of the contract.
• Being considered a low risk option; however, one key difference at the participant level is the existence of some form of principal guarantee – a safety net in the form of an insurance guarantee.

Standard Insurance Company is able to provide plan sponsors a conservative risk-controlled proven investment approach and a full guarantee offered through Standard Insurance Company. The funds are an attractive stable value solution for participants seeking safety, liquidity and yield.

The funds are available to qualified and non-qualified plans including: 401(k), 403(b), 401(a), 457, 457(b), 457(f), 409A, HSA/HRA plans and force-out IRAs with no minimum investment amount. In addition to the benefits outlined below, the fund includes an attractive revenue-sharing component that plan sponsors find beneficial in offsetting administrative costs.

The key differentiators are:

• Guaranteed interest crediting rate —The guaranteed interest crediting rates have remained attractive and stable compared to many of our competitors who have struggled with their business mix and capital levels.
• Full guarantee of principal and accumulated interest — Participant balances in the fund are fully guaranteed against loss of both principal and accumulated interest earnings.
• Insurance regulatory oversight — State insurance regulators oversee insurer reserves and investments through regulation and regular audits.
• Strong capital — We benefit from a strong capital and reserve position with a risk-based capital in excess of 400% of company action levels as of Dec. 31, 2021.
• Quarterly rate resetting — The guaranteed interest rate is declared in advance and locked in for the calendar quarter. A quarterly crediting rate option more closely tracks the current interest rate environment and provides participants with a smooth and stable rate reset.
• Minimum interest rate floor — The interest rate is contractually guaranteed never to be less than 1%. This is guaranteed for the life of the contract. The minimum interest rate floor is consistent across all plan types.
• Favorable plan-level discontinuance — The funds pay immediately at book or market value, or in installments over time depending upon the interest rate environment. The market value lump sum would never result in a payout less than principal plus interest accumulated at the 1% minimum interest-rate guarantee.
• Portability — The funds are fully portable and can be kept as an investment option in the event there was a recordkeeper change. The funds trade through the industry standard NSCC trading system and can easily interface with outside recordkeepers.

Stable value funds from The Standard offer a proven conservative investment approach along with a full guarantee of principal and interest offered through Standard Insurance Company. The Standard has strong, favorable financial strength ratings and has been making good on its promises and guarantees for more than 100 years.