What I'm trying to understand is the risk associated with the stable value fund. Stable value funds that I've encountered in the past have been insured with GICs issued by a variety of insurers to diversify risk. As far as I can tell, that's not the case with this fund. The description of the investment says it's an unsecured general obligation of MetLife, so it seems to have the characteristics of short-term debt more than what I would think of as a stable value fund:
All contributions received by the Trust will be invested by a deposit under a Funding Agreement, dated as of January 13, 2003, between
MetLife and CollegeInvest, as administrator of the Plan and trustee for the Trust (the "Funding Agreement"). The ability of
CollegeInvest to repay the amount you contributed and interest earnings on your contribution under the Plan is contingent upon the
payment of distributions by MetLife to the Trust under the Funding Agreement. The obligation of MetLife to repay the amounts
deposited under the Funding Agreement and pay interest thereon to the Trust as described herein is an unsecured obligation of MetLife.
IN SHORT, YOU COULD LOSE MONEY (INCLUDING THE AMOUNT YOU CONTRIBUTED), OR NOT EARN ANY
RETURN ON YOUR CONTRIBUTION, IF METLIFE FAILS FOR ANY REASON TO PAY INTEREST OR REPAY
AMOUNTS DEPOSITED UNDER THE FUNDING AGREEMENT
Investment of Plan Assets
The Funding Agreement - Overview. Contributions to the Trust are being invested by deposit under the Funding Agreement.
Deposits made under the Funding Agreement become commingled with the general account of MetLife. MetLife is obligated to repay
the amounts deposited under the Funding Agreement and an investment return based on an interest rate as described below.
The general account of MetLife supports its obligations under the Funding Agreement. No substitution, collateralization or other
safeguards relating to the credit of MetLife will be provided under the Funding Agreement, even in the event of a downgrade of the
financial strength credit ratings of MetLife or any other indication that the ability of MetLife to pay the amounts guaranteed under the
Funding Agreement may have been impaired.
Am I reading this correctly? 3% still seems like a good rate of return, but I want to make sure I understand what I'm getting into.