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A recent call with a financial advisor in Massachusetts illustrates a common question about stable value investments.
Welcome to the Retirement Learning Center’s (RLC’s) Case of the Week. Our ERISA consultants regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans, and other types of retirement savings and income plans, including nonqualified plans, stock options, Social Security, and Medicare. This is where we highlight the most relevant topics affecting your business.
“My client must liquidate a stable value investment in their 401(k) plan. It is subject to a 12-month put. Could the Market Value Adjustment (MVA) cause fiduciary concerns?”
An MVA can raise fiduciary concerns, but it is not inherently a fiduciary violation. The key question is whether plan fiduciaries followed a prudent process in deciding to liquidate before satisfying the 12-month put, considering the MVA, reasonable alternatives, and participant impact.
Stable value investments are generally designed to permit normal participant-initiated withdrawals at contract (book) value. Plan-level withdrawals or other plan sponsor-initiated events, however, may be subject to contractual exit restrictions, including when the plan sponsor:
Terminates the contract or the plan's investment in the fund,
Changes investment providers or removes the stable value option, or
Otherwise initiates a withdrawal before satisfying applicable contractual exit provisions.
For many pooled stable value funds, a 12-month put allows the plan to receive contract value after giving the required notice and waiting the specified period. Exit provisions vary by product and contract; some use longer notice periods or installment payments.
If a plan exits before satisfying applicable contract-value exit provisions, the contract may permit payment at market value or apply an MVA. The MVA generally reflects the difference between contract and market value, subject to the contract's terms. When market value is below contract value, an early plan-level exit can reduce amounts available to affected participants.
The litigation in Harvey v. Bed Bath & Beyond, Inc. 401(k) Savings Plan Committee, No. 2:23-cv-20376-CCC-SDA (D.N.J.), illustrates this risk. Plaintiffs alleged fiduciary breaches based on, among other things:
Failing to prudently monitor the plan's investment in a guaranteed interest account (GIA) and its MVA risk;
Certifying allegedly false or misleading statements concerning the risk of loss;
Failing to take action as the risk of Bed Bath & Beyond's bankruptcy and a resulting MVA allegedly became foreseeable; and
Continuing to retain the GIA when plaintiffs alleged prudent capital-preservation alternatives were available.
In October 2025, the court approved a $1.95 million class settlement and dismissed the action with prejudice. Defendants denied wrongdoing, and the court did not decide the merits. The settlement does not establish that an MVA is a fiduciary breach, but it highlights potential litigation risk.
An early stable value exit can result in an MVA when market value is below contract value. The MVA itself does not establish a fiduciary breach. Plan fiduciaries should understand the exit terms, quantify participant impact, consider reasonable alternatives, and document their process. Legal and investment professionals should be consulted when a material MVA could result.