F R E Q U E N T LY A S K E D Q U E S T I O N S
The Guaranteed Account.
For Representative use only. Not to be viewed by or distributed to the general public.
What is the Guaranteed Account?
The Guaranteed Account is a fixed interest rate group annuity contract (Form 2009-DA)
issued by CMFG Life Insurance Company (CMFG Life). Similar group annuities may be
referred to as fixed interest, guaranteed interest or stable value accounts.
Who can purchase the
Guaranteed Account?
The Guaranteed Account is only available to retirement plans qualified under Section 401
of the Internal Revenue Code. It is not available to other types of retirement plans, including
403(b), 457(b), nonqualified, cash balance or defined benefit plans.
The contract is not available as a funding option if the plan also makes available (1) a
competing allocation option as defined in the contract, which includes similar annuity
contracts, money market accounts and short-term bond funds; or (2) a self-directed
brokerage account option.
There are several “stable value
accounts” available. How does
the Guaranteed Account differ
from these other options?
Allocations to the Guaranteed Account become part of CMFG Life’s general assets, also
called the general account, which support the guarantees provided by CMFG Life under
the contract. The declared interest rates are guaranteed for a minimum period regardless of
market fluctuations, and principal and interest credited are guaranteed (except in limited
circumstances related to a plan terminating the contract).
Many stable value funds are structured as collective investment funds segregated from an
insurance company’s general assets. While they are often wrapped by an insurance contract
meant to provide for a stable net asset value per share, that insurance contract generally
provides no guarantees to the fund’s shareholders.
Unlike some segregated accounts, the Guaranteed Account is not subject to price
fluctuations or “marking to the market”.
Are there any transfer restrictions
or surrender charges to which
participants are subject?
Participants are generally free to transfer in and out of the Guaranteed Account. However,
the plan or record keeper may impose additional transfer restrictions.
The Guaranteed Account expects
interest rates higher than many
money market fund yields, yet
it provides liquidity similar to a
money market account. How can
CMFG Life do this?
Unlike many money market funds, the Guaranteed Account is solely available to qualified
retirement plans, which tend to have more stable fund flows than other types of accounts.
This allows CMFG Life to invest in longer-term assets that provide a higher yield. Two
contractual provisions — a competing funds provision and imposing a market value
adjustment in limited circumstances, mitigate this risk.
Why is there a competing
funds provision?
The Guaranteed Account is not available to plans that offer a similar account option.
A similar account would be another stable value account, a money market, certain shortterm bond accounts, or a self-directed brokerage option. Restricting competing options
allows CMFG Life to manage risk better because fund flows are more stable (warranting
more competitive interest rates), without the need to impose surrender charges or transfer
restrictions at the participant level.
What is the Competing
Allocation Option Endorsement
(aka, the Competing Funds
Endorsement)?
The Guaranteed Account may not be added to a plan containing a competing fund in its
lineup. By adding the Endorsement, a plan may contain the Guaranteed Account with a
competing fund, assuming the competing fund allows it. The Endorsement does impose
transfer restrictions to and from the Guaranteed Account plus an interest rate 50 basis
points lower than a plan without it.
ADVISOR SOLUTIONS
Continued on back
The Guaranteed Account Understanding
the market value
adjustment.
FREQUENTLY ASKED QUESTIONS
The market value adjustment is applied to a plan when it chooses to terminate its contract
and take a lump sum distribution. The plan receives the lesser of the contract’s guaranteed
value or market value.
A plan may avoid the market value adjustment by taking equal quarterly installment payments
over five years instead of a lump sum distribution. If the plan chooses the installment option,
all benefit provisions under the contract, excluding transfers and additional contributions, will
continue in-force until the contract’s guaranteed value is depleted.
The market value adjustment formula is shown below.
If interest rates have risen, on average, during the prior five-year period, the market value
adjustment factor will likely result in a decrease to the single lump sum payment amount.
Conversely, if interest rates have declined, the market value adjustment factor likely will not
affect the payment amount in most states.
Note that the single lump sum payment will be equal to the lesser of item (1) or (2) below
in all states except Florida and North Dakota, where the single lump sum payment is always
equal to item (2) below.
This provision also enables CMFG Life to offer very competitive interest rates and liquidity for
plan participants. Only if the plan sponsor terminates could a market value adjustment be
reflected in adjustments made to individual participant account balances and is a common
provision to stable value contracts.
The Market Value Adjustment Formula:
(1) the contract value as of the termination date; or
(2) the adjusted contract value* as of the termination date.
*The adjusted contract value is equal to the contract value multiplied by the
Market Value Adjustment Factor = (1+A)^6, divided by (1+B)^6, where:
A = the average yield of the Merrill Lynch BBB 7 to 10-Year U.S. Corporate Index,
computed as an average of the last complete sixty (60) months of such rates,
or the number of complete months since the contract effective date, if less,
determined as of the time of distribution; and
B = the yield of the Merrill Lynch BBB 7 to 10-Year U.S. Corporate Index
determined as of the time of distribution.
The Guaranteed Account is a fixed, group annuity contract issued by CMFG Life Insurance Company,
administrative office, Madison, WI (Base Contract Form #2009-DA). The Group Annuity Contract is only offered for
sale to qualified retirement plans and is available in all states.
After the initial guaranteed interest period, interest rates may be adjusted quarterly and are credited daily.
The stated interest rate represents an annual interest rate and may not have been adjusted to reflect plan
administration, transaction or contract fees. There are no penalties assessed by the Guaranteed Account for
benefit payments or other withdrawals taken by participants. Certain contract fees are currently waived. This
contract is subject to a market value adjustment if the plan terminates the contract and elects a lump sum
distribution, which may result in a payout of less than 100% of principal and interest credited. Guarantees are
based on the claims-paying ability of the insurer.
5910 MINERAL POINT ROAD • MADISON, WI 53705 800.356.2644, EXT. 665.8754
THEGUARANTEEDACCOUNT.COM
CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding
company, its subsidiaries and affiliates. Life, accident, health and annuity insurance products are issued and
underwritten by CMFG Life Insurance Company, which is located in Madison, WI.
Securities distributed by CUNA Brokerage Services, Inc., member FINRA/SIPC, a registered broker dealer.
CMRS-920490.1-0514-0616 © CUNA Mutual Retirement Solutions 2014 All rights reserved.