The Department of Labor (DOL) has decided to ban stable value funds as default options in 401(k) plans. The decision is a blow for the insurance industry, which lobbied Congress and the DOL to include stable value among qualified default investment alternatives (QDIAs).
Robert Doyle, director of DOL’s Office of Regulations and Interpretations, Employee Benefits Security Administration, conceded at the American Council of Life Insurers (ACLI’s ) annual meeting in Washington October 23 that the DOL’s decision on stable value is “not good news for all.” Regardless, he told ACLI attendees, DOL “did not expand [QDIAs] to include stable value or capital preservation as a standard investment” in 401(k) plans. Jack Dolan, a spokesman for ACLI, said in an interview that while ACLI expected DOL’s decision on stable value, ACLI has been making the case to DOL for a year that “stable value should be an option.” Post the decision, ACLI now “really wants to get the message out” that for plan sponsors, stable value remains an “appropriate” investment vehicle to include in a 401(k) plan, even if it isn’t a QDIA.
Meanwhile, DOL’s long awaited changes to Form 5500 will be finalized and filed in the Federal Register this week, Doyle said.
Also look for technical changes to be made to the Pension Protection Act by year-end, added Thomas Reeder, Benefits Tax Counsel at the Treasury Department. “The PPA is very difficult to apply in places and it needs technical corrections,” Reeder said. There are currently bills in both houses of Congress, Reeder noted, which should be enacted this year. “If a technical bill doesn’t get enacted, we’ll be in trouble.”