By Jim King, Prudential, SVIA Chairman
As 2015 draws to a close, so does my tenure as Chairman of the Board of the Stable Value Investment Association. It’s been an eventful and exciting six years for me serving on the Board and for the stable value industry as a whole. As I sat down to write my column this month, I thought it was an opportune time to look back on some of the challenges, opportunities and successes of the last few years.
As chairman from 2012–2015, I helped shepherd the SVIA through one of the most challenging and longest economic and regulatory cycles we’ve seen in years. I have been very fortunate to be supported by Gina Mitchell, President of the Association, who does most of the heavy lifting; Zach Gieske, Operations Analyst, who has brought the SVIA into the world of technology and social media; and a Board of Directors (including Chair-Elect Steve Kolocotronis, Nick Gage, Susan Graef, Aruna Hobbs, Helen Napoli and Marijn Smit) who tirelessly and passionately strive to promote and protect the asset class, educating and informing the influencers in the marketplace on the benefits of stable value.
Working together, we’ve successfully dealt with the challenge of finding and restoring capacity for stable value products—we’ve never been in better shape. In addition, we’ve demonstrated stable value funds’ strength and resiliency in a continued low-rate environment while overcoming “stable value fatigue” stemming from the financial crisis. In the “challenges” column, we’ve also seen stable value funds become a litigation target, due in part to the 2006 ERISA amendments.
Regulators have been active on several fronts. As a result of the 2010 Dodd-Frank Act, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) were tasked with determining whether stable value contracts should be subject to the same new regulations as financial swaps. The SVIA has worked diligently with the CFTC-SEC commission members and staff to educate them on stable value funds. This has included two responses to RFIs, including a second round of RFI once product definitions were defined, as well as several meetings with CFTC and SEC study team members, staff and commissioners.
During this same time period, the SVIA also needed to react to Department of Labor (DOL) actions that included new rulings on uniform disclosure of fees, expenses, turnover and benchmarks for all asset classes, as well as the ongoing debate over the expansion of fiduciary rules to cover all retirement assets, which fundamentally changes how all investment products are made available to DC plan sponsors/participants.
Additionally, there has been a sea change in the regulation of the conservative spectrum of DC investments. We have seen STIF reform by the OCC in 2012, and last year’s final regulations on money market funds, which will become effective in October of 2016.
We also provided commentary to the National Association of Insurance Commissioners’ (NAIC) separate account risk working group, advocating, along with several other financial industry organizations, for a principle-based approached to regulation of separate accounts, which the NAIC embraced.
Meanwhile, there continue to be areas of tremendous opportunity for stable value. The Government Accountability Office’s (GAO) review of qualified default investment alternatives (QDIAs) and a recommendation that the DOL take a closer look at challenges plan sponsors and stakeholders are having with QDIAs could potentially lead the DOL to revisit the possibility of stable value as a QDIA option.
The past several years have also witnessed the rise of target-date funds and managed accounts, and we have seen—and are actively working to promote—stable value’s role in custom target-date funds and managed accounts. Another significant item was the Financial Accounting Standards Board’s (FASB) simplification of disclosure requirements for employee benefit plans, which now recognizes and requires only contract value reporting for employee benefit plans that use stable value.
Specific to the SVIA, the past four years saw a strengthening of firms’ commitment to the Association’s goals and objectives. Members’ commitment was demonstrated by:
- The success we had in tackling a broad range of issues of import to the industry
- Increased attendance at SVIA Fall Forums and Spring Seminars
- Increased financial support of the Association in terms of dues, Value Program participation and reserves, which permit us to weather regulatory and economic challenges
Last, but most certainly not least, a major goal of my tenure as chairman has been educating the public and industry about stable value. We have had some notable successes. There’s been an abundance of positive press about stable value, including a publication from Bloomberg BNA in conjunction with the SVIA called A Guide to Stable Value Funds for Pension Plan Sponsors and Advisors and an article in Morningstar on stable value funds titled Tactics for Combating Low Bond Yields.
Along with the positive third-party press, we’ve had success promoting stable value on LinkedIn, Twitter, and the SVIA website, particularly through our stable value expert videos. Other successful education efforts have included:
- The Stable Value Insiders’ Views on Stable Value
- FAQs on guaranteed interest contracts
- FAQs on synthetic GICs
- FAQs on stable value basics
- Update of SVIA’s glossary
- Redesign of the SVIA website: stablevalue.org
Thank you to all of you who have helped to make the last six years so rewarding and stimulating. I look forward to seeing what the next six bring!