Question about Stable Value Funds

[Luvdogs]

We transferred a significant amount from mutual funds to the stable value fund within my husband's traditional 401K from his former employer. Inception date is 1974 so it's been around a long time and average is about 2.5% for the last 10 years. We did this late last year but have had money in this fund for over 30+ years.

It is managed by Fidelity but his employer was a financial services company (insurance company) but says "The Contracts and securities purchased for the fund are backed solely by the financial resources of the issuers of such Contracts and securities."

Does this mean if his former employer would go bk that this would be worthless?

I always thought the stable value fund was "safe." Can stable value funds go down in value? We could transfer it to an IRA and buy CDs within that for our "cash."

Sorry if this is a dumb question...

Thanks!

 

[Jerry1]

That clause means that it’s not FDIC insured. Fidelity holds various contracts with other entities to maintain that fund. Those are the contracts they are referring to. Not contracts with your husbands employer.

 

[sengsational]

True, the solvency of the former employer shouldn't be the concern. The solvency of the issuer would be your only concern. Stable value funds "don't go down", instead there's kind of an "insurance like thing" that goes on. I'd say before the price went down, you'd be notified that withdrawals were being limited, and that's only if the issuer was in dire straights.