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August 6, 2018

Insurance General Account Investments for 401(k) Plans

There are many different investment options available to a Plan Sponsor when initiating a new or administering an existing 401(k) plan.

If you decide to work with an insurance company for your 401(k) plan administration and investment selections, they will likely recommend the option of offering an investment in the company’s general account to your participants.

These are often called a fixed fund, guaranteed fund, a stable value fund, or insurance/investment contract. These accounts usually offer a guaranteed/stated rate of return or interest payment that is defined in the contract. They may be included as part of a group annuity contract offered by the insurer.

WHY ARE THESE 401(k) PLAN INVESTMENT TYPES BENEFICIAL?

Benefits to these accounts include a higher return rate than a standard money market fund and the amount is usually guaranteed not to drop below a stated interest rate which provides some predictability to the rate of return. 

The funds offer a “safe” place for investors when the equity markets are volatile. However, these funds can offer several restrictions, including requiring a lengthy period of time for liquidation if you choose to change providers.

You should also be aware that these funds are held in the general account of the insurer and they are subject to specific insurance regulations. Additionally, they are not protected in the event of financial difficulties encountered by the insurer.

If you are considering offering general account investments to your participants, review the credit worthiness of the insurer first.

When it’s time for your plan’s audit, it’s vital that you hire a trusted auditor. At Anders CPAs + Advisors we specialize in retirement plan audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete.

For assistance, contact the team at (314)-886-7913 to talk about your 401(k) audit needs or click the button below to request your free audit consultation.

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