Understanding Market Value Adjustments in Stable Value Retirement Funds

Market Value Adjustments (MVAs) in stable value funds present a nuanced challenge for retirement plan sponsors, particularly during recordkeeper transitions. Often, plan sponsors focus on crediting rates but overlook the termination conditions that trigger MVAs, potentially resulting in receiving less than the book value of their investments. This gap in understanding can lead to unexpected financial impacts during these transitions.

Understanding MVAs requires a grasp of when they are triggered and how they are calculated within the framework of stable value contracts. MVAs adjust the value of investments to reflect market conditions at the time of plan changes, which can affect payout values and participant balances. Awareness of these adjustments is critical for financial advisors and plan sponsors managing retirement plans.

Effective risk mitigation for MVAs hinges on thorough preparation and due diligence. Plan sponsors should carefully review their specific stable value contract provisions, including termination clauses and guarantees such as the “12-month put” that can secure a full book value payout if proper notice is given. Early consultation with advisors can help navigate these terms and avoid costly surprises associated with MVAs.

When confronted with a negative MVA, plan sponsors typically have three strategic options to manage the impact. These strategies involve understanding the portability of the stable value fund and negotiating contract terms to protect participant interests. Advisors play a key role in guiding sponsors through these complex decisions.

Lincoln Financial offers specialized stable value investment-only solutions under its Lincoln Cornerstone Series®, which includes the Lincoln Stable Value Account and Lincoln Stable Value Separate Account. These group fixed annuities are designed to provide stable investment options within retirement plans, backed by the issuer’s claims-paying ability and segregated account structures.

These products do not include participant recordkeeping services and are structured to meet diverse plan requirements. Understanding the nuances of these offerings can assist plan sponsors in selecting appropriate stable value solutions aligned with their fiduciary responsibilities and investment objectives.