One of the problems of a stable value fund in a change of fund or plan termination, is the dreaded market value adjustment.
Plaintiffs Paul Harvey and Lela LaPlante (who both claim to have lost 10% of their stable value account balance) on behalf of the Bed Bath & Beyond, Inc. 401(k) Savings Plan have filed a lawsuit suit against the Bed Bath & Beyond, Inc. 401(k) Savings Plan Committee, and others for having failed to monitor the prudence of the Plan’s investment in the MassMutual Guaranteed Interest Account (GIA).
The lawsuit was filed in the U.S. District Court for the District of New Jersey. The lawsuit claims that upon termination because of the bankruptcy of BBB, the contract value was subject to an adjustment based on the market value of the underlying investments purchased by MassMutual using the assets in GIA. The market value adjustment was substantial and negative, wiping out around 10% of the value of participants’ principal preservation accounts, totaling more than $5 million.