How the Guaranteed Stable Investment credited rate is determined

DATE | 02/20/23
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In April 2022, Prudential announced the completion of the sale of its full-service retirement business to Empower. As a result, the name of the Prudential Guaranteed Investment has been changed to Guaranteed Stable Investment. This is a change in name only, no changes to the fund have taken place and no action is required on your part.

Each year the announcement of the Guaranteed Stable Investment (GSI) (formerly the Prudential Guaranteed Investment) credited rate prompts questions from participants such as: Who decides the rate? How is it calculated? Does the Federal Reserve (Fed) rate influence the decision? We have some answers to these questions and more.

Why isn’t the rate higher?

Stable value funds like the GSI are not built to pivot quickly along with changes in interest rates. Stable value fund crediting rates typically take longer to respond to changes in market interest rates—both during times of rising and falling interest rates. This is a benefit to participants when interest rates are dropping or at a sustained low level, because participants continue to benefit from a higher crediting rate for a longer period.

For example, the average 12-month certificate of deposit yield was below 1% throughout the entirety of the 2010’s and into the 2020’s ( During the 2010’s, the GSI crediting rate ranged from 3.15% to 5%. We were fortunate to benefit from conditions where stable value funds offered exceptional value for so long.

The other side of the coin is that when market interest rates rise—especially when they rise rapidly—the crediting rate takes time to respond. Rates have been low for a long time, so the investments within the GSI portfolio still carry those lower interest rates. This will change as those investments reach maturity.

Who decides on the rate?

The Board of Trustees at Member Benefits has the final say on the guaranteed rate. They base their decision on the analysis and reports provided by Member Benefits’ professional staff and GSI fund investment managers. Empower Capital Management manages the GSI for the WEA TSA Trust and WEAC IRA programs.

In addition, because the contributions made to the GSI are invested in the bond market, investment managers pay close attention to factors that influence the price of bonds.

To determine the upcoming year’s crediting rate, managers analyze the expected return on the money currently invested. Next, they look at maturing investments and anticipate how that money will be re-invested and how much it might earn. Finally, they consider new contributions such as how much new money will be available for investment, where it will be invested, and the anticipated rate of return.

What goes in to evaluating the quality and stability of the fund?

Analysis and comparison of stable value contracts goes well beyond the current year crediting rate. Among the things we consider are investment performance, contract language and provisions, financial stability of the issuer, and management cost. We evaluate management performance as well as our contract in general on a regular basis. Historically, Prudential’s investment management track record has been excellent.

This year we applied an additional layer of scrutiny to our review due to Empower Retirement’s purchase of Prudential’s retirement and stable value business. We found that the contract represents an excellent value for our members, and that we have contract provisions that are difficult to find elsewhere. Those factors are not always apparent in the current year crediting rate, but are equally important to the long-term success and stability of the fund.

I hear about the Fed raising rates. What does that mean?

The Fed sets the interest rate that member banks charge each other to borrow money. The Fed adjusts the rate to stimulate economic growth or slow the economy in order to control inflation. The Fed has been consistently raising rates this year to fight inflation.

How does the Fed rate affect investments in stocks, bonds, and the GSI?

The stock market responds quickly to interest rate changes by the Fed. Bonds are also sensitive to interest rates. Bond prices move opposite to interest rates, rising when rates fall and falling when rates rise. However, this has the greatest impact on bonds traded on the open market. GSI portfolio managers do not trade bonds on the open market. In their case, bonds are bought and held until maturity to provide the stability needed to generate a consistent rate of return. Because rates have risen sharply and quickly, bonds held within the GSI portfolio still carry those lower interest rates. Again, this will change as those investments reach maturity.

History of the GSI

From time to time we field questions regarding our GSI interest rate, especially in environments when interest rates are on the rise. The general question people ask is: How is it that the current guaranteed rate can ever be lower than short-term certificate of deposit (CD) or money market rates?

Not apples to apples

The GSI rate and CD or money market account rates are not an apples to apples comparison. Our GSI account is a long-term savings vehicle, with goals and strategies fit for long-term investing. And unlike CDs, you do not need to tie up your money for a specified length of time in order to earn the crediting rate. Be cautious with investment vehicles that require long holding periods and/or carry penalties for getting out early—as the current economic environment illustrates, sometimes things change very quickly.

Goals and strategies

Empower Capital Management manages the GSI. Their description for the goals and strategies of this fixed income account are:

The goal of this portfolio is to maximize the long-term rate of return consistent with insuring the safety of invested assets. By carefully structuring a portfolio of commercial mortgages plus privately placed and publicly traded debt securities, the portfolio manager seeks to achieve higher long-term yields than are available from public offerings, as well as an essential degree of liquidity.

In short, the GSI account has a long-term strategy designed to earn investors a higher return over time than could be realized by investing in the CDs or money markets offered commercially.

Some final considerations

We recognize that the current interest rate environment is affecting how the GSI crediting rate compares to some other fixed-rate investments. This is not a surprise given the set of circumstances that have played out in the economy. No investment category—stocks, bonds, real estate, etc.—thrives in every set of economic conditions.

But it is important not to allow short-term circumstances to interfere with your long-term best interests. The economy moves in cycles, and the lower-yielding investment holdings within the GSI will eventually cycle through. As interest rates level out, we will return to an environment where long-term investment managers tend to outperform the short-term approach.

Here is a final factor to consider. Members have left our 403(b) or IRA programs in the past when interest rates have risen quickly, creating a similar temporary spread between stable value and external fixed investment rates. Eventually, when the interest rate environment normalized, those members wanted to return for the better crediting rate offered in our program. Unfortunately, many who moved their full account balance out of the program were unable to qualify because they no longer met eligibility requirements.

Our program is “once in, always in.” If you retain a balance within the program, you do not need to re-satisfy eligibility requirements to bring money back into the program—so you can stay with us.


Interest is compounded daily to produce a yield net of Empower’s administrative fee of 0.60%. Empower Annuity Insurance Company (EAIC) is compensated in connection with this product by deducting an amount for investment expenses and risk from the investment experience of certain assets held in EAIC’s general account.
All earnings on investments are credited gross of 403(b) and IRA program fees.
The Guaranteed Stable Investment Fund is a group annuity insurance product issued by EAIC. Amounts contributed to the contract are deposited in EAIC’s general account. Payment obligations and the fulfillment of any guarantees specified in the group annuity contract are insurance claims supported by the full faith and credit of EAIC. EAIC periodically resets the interest rate credited on contract balances, subject to a minimum rate specified in the group annuity contract and subject to change. Past interest rates are not indicative of future rates. Participant Level Protections (PLPs) are in place to help preserve the guarantee of the fund. PLPs may limit your ability to withdraw funds from the fund. For more information on the PLPs and how it may affect your account, please call Retirement and Investment Services at 1-800-279-4030, Extension 8568.
This article is for informational purposes only and should not be construed as a recommendation.