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ARTICLE · 31 MARCH 2016

Life And Annuity Series: Stable Value Funds

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Class action plaintiffs have long claimed that insurance companies may become ERISA fiduciaries when offering variable annuity products and funds to 401(k) plans.

United StatesEmployment and HR
Charles C. Platt
Charles C. Platt
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Class action plaintiffs have long claimed that insurance companies may become ERISA fiduciaries when offering variable annuity products and funds to 401(k) plans.

The Colorado federal court decision in Teets v. Great West Life & Ann. Ins. Co. reminds us that insurance companies may also be subject to ERISA claims when offering fixed annuity-type products. 

According to the complaint, Great-West issued what sounds like a stable value fund to 401(k) plans through a group annuity contract. Money invested in the fund was deposited in Great-West's general account; the fund paid a fixed rate of interest on contributions, and guaranteed that rate would not fall below 0%. The quarterly interest rate paid was set by Great-West at its discretion, and Great-West earned a "spread" between the rate it paid and the rate it earned on all contributions. The class action arose when a plan participant claimed that Great-West had violated ERISA by setting interest rates that

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