Effective January 1, 2023, the Prudential Guaranteed Investment was renamed to the Guaranteed Stable Investment. The Prudential Retirement Insurance & Annuity Company (PRIAC) was purchased by Empower Annuity Insurance Company (EAIC). As you read this article, any reference to PRIAC should be replaced with EAIC. Any reference to Prudential should be replaced by Empower.
A detailed evaluation of the Guaranteed Investment and our partnership with Prudential Retirement Insurance and Annuity Company (PRIAC) in their role as manager of the account wrapped up last fall. In the end, the team found that under the current market conditions, PRIAC still provides one of the strongest guarantees and crediting rates in the marketplace.
New participant level protections
Continuing with PRIAC brought the addition of participant level protections (PLP) to the Prudential Guaranteed Investment Account (PGI)—403(b) and IRA. These protections kick in to preserve the guarantee of the fund and are state of the art in terms of plan participant protections. The PLP puts controls in place that effectively restrict withdrawals if certain economic conditions exist (simultaneously) that would jeopardize the safety of the fund and those participating in it. The PLP cannot be activated until July 1, 2018.
Benefit responsive withdrawals are not impacted
It’s important to note that the fund will still be benefit responsive, meaning:
- 403(b) participants will STILL be able to receive their PGI balance upon retirement, disability, death, termination of employment, in-service withdrawals after age 59½, and as required minimum distributions (RMDs) at age 73 (effective January 1, 2023) (age 70½ if reached prior to January 1, 2020).
- IRA participants will STILL be able to receive their PGI balance upon death and as RMDs at age 73 (effective January 1, 2023) (age 70½ if reached prior to January 1, 2020).
What triggers the PLP?
Certain transfers or withdrawals may be limited to 20% of a member’s balance per calendar year if certain market conditions exist. There are three triggers that all need to exist at the same time before the PLP kicks in:
The yield on one or more specified benchmarks is greater than or equal to the crediting rate of the PGI.
The total cash going out from the PGI exceeds a specified threshold. Basically, more cash is going out than coming in.
The market value of the underlying investments supporting the PGI is less than or equal to the PGI book value. (The book value of an asset is its original purchase cost, and market value is the price that could be obtained by selling an asset on a competitive, open market.
Until all these conditions exist at the same time, the PLP is not in effect and participants can freely withdraw/transfer PGI funds in either program.
If all the conditions exist at the same time, the PLP is activated and is in effect for the remainder of the calendar year.
What happens once the PLP is triggered?
Once the PLP is activated, the amount of PGI withdrawals and/or transfers for the year are measured against the participant’s beginning of the year PGI balance. (For 2018, however, the account balance will be as of February 1.)
If the withdrawal/transfer amount is greater than 20% of the participant’s first of the year account balance, a participant will only be able to make transfers and withdrawals that are benefit responsive for the remainder of the year. The 20% PLP limit is tracked separately for the 403(b) and IRA PGI accounts.
|Counts toward PLP limit
|Restricted after limit is met
|Benefit responsive withdrawals*
|Transfers between PGI 403(b) and IRA
|Transfers from PGI to another investment inside or outside of the WEA 403(b) and IRA
|Auto-rebalance or initial enrollment in model portfolio resulting in transfer out of PGI
|All other non-benefit- responsive transfers or withdrawals from PGI
|*Benefit responsive withdrawals are not the same for 403(b) and IRA accounts as noted in the article.
While the PLP may feel restrictive, it is important for the protection of members and the longevity of the fund. Other providers often impose more restrictive PLP terms.
*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. For more information, go to weabenefits.com/empower.