Understanding Key Drivers of Participant Cash Flows for Individually Managed Stable Value Funds

In this paper, we investigate the behavioral and statistical characteristics of cash flows for stable value funds provided by numerous U.S. employee benefit plans. We analyze participant-initiated aggregated flow data, representing approximately 80% market large employer plans with stand-alone wraps within a 401(k) offering. By leveraging unique dataset contextualizing ecosystem, examine lapse hypotheses. Our findings highlight key hypotheses modeling lapses generating risk scenarios. demonstrate that exhibit medium- to long-term non-monotonic trends. Factors plan sponsor’s such as employment growth, default options, introduction new investment significantly impact participant behavior indirectly. Moreover, find flight-to-safety plays dominant role during global crises. Although mass due reputational issues is observed, their probability occurrence low. Other discussed in literature, moneyness hypothesis, are found be less prevalent context.