Tom Harkin: “As chairman of the Health, Education, Labor, and Pensions Committee, the pensions community approached me about a…”

“As chairman of the Health, Education, Labor, and Pensions Committee, the pensions community approached me about a possible unintended consequence of the derivatives title of the Dodd-Frank Wall Street Reform and Consumer Protection Act. They were concerned that the provisions regulating swaps might also apply to stable value funds. Stable value funds are a popular, conservative investment choice for many employee benefit plans because they provide a guaranteed rate of return. As I understand it, there are about $640 billion invested in stable value funds, and retirees and those approaching retirement often favor those funds to minimize their exposure to market fluctuations. When the derivatives title was put together, I do not think anyone had stable value funds or stable value wrap contracts--some of which could be viewed as swaps--specifically in mind, and I do not think it is clear to any of us what effect this legislation would have on them. Therefore, I worked with Chairman Lincoln, Senator Leahy, and Senator Casey to develop a proposal to direct the SEC and CFTC to conduct a study--in consultation with DOL, Treasury, and State insurance regulators--to determine whether it is in the public interest to treat stable value funds and wrap contracts like swaps.”