MIP II CL 3 – Are you looking for a way to save for retirement without taking too much risk? If so, you may want to consider MIP II CL 3, a stable-value fund offered by Fidelity Investments. MIP II CL 3 is a multiple employer plan (MEP) that is designed to provide stable returns and preserve capital while offering liquidity and diversification.
In this article, we will explain what a stable value fund is, what MIP II CL 3 is, how it works, what are its features and benefits, and how it compares to other stable value funds.
READ ALSO
- Multiple Employer Plans (MEP): A Guide for Small Businesses
- Wear and Tear Insurance: What You Need to Know (Overview)
- Estate Planning Under Trump – How It May Affect You
- 702(j) Retirement Plan: What Is It and How Does It Work?
- Cari Insurance: A Guide for Contractors and Car Owners
What Is a Stable Value Fund?
A stable value fund is a type of investment option that is commonly offered in retirement savings plans, such as 401(k), 403(b), or 457 plans. A stable value fund invests in high-quality fixed-income securities, such as bonds, and also uses contracts with insurance companies or banks to guarantee a minimum rate of return and principal protection.
A stable value fund aims to provide a stable net asset value (NAV) of $1 per unit, regardless of the market fluctuations of the underlying securities. A stable value fund also aims to provide a competitive yield that reflects the prevailing interest rates in the market.
A stable value fund can offer some advantages for retirement savers, such as:
- Low risk: A stable value fund can protect your principal and provide consistent returns, even when the market is volatile or interest rates are low.
- Liquidity: A stable value fund allows you to withdraw or transfer your money at any time, without any fees or penalties.
- Diversification: A stable value fund can diversify your portfolio and reduce your exposure to equity or bond market risks.
What Is MIP II CL 3?
MIP II CL 3 is a stable value fund that is part of the Managed Income Portfolio II (MIP II), a collective investment trust maintained by Fidelity Management Trust Company. MIP II is an MEP that is adopted by multiple unrelated employers who offer retirement savings plans to their employees.
Who Can Sponsor MIP II?
The MEP sponsor of MIP II is Fidelity Management Trust Company, which is responsible for the administration and management of the fund. The MEP sponsor selects and monitors the investment options, provides participant disclosures and notices, and performs compliance testing.
Who Can Join MIP II CL 3?
Employers who join MIP II must sign an agreement with the MEP sponsor to adopt MIP II CL 3 and abide by its terms and conditions. Employers can choose some features of the fund for their own employees, such as contribution rates and vesting schedules, but they must follow the overall fund design and rules set by the MEP sponsor.
How Does MIP II CL 3 Invest?
MIP II CL 3 invests primarily in high-quality fixed-income securities, such as U.S. Treasury and agency securities, corporate bonds, mortgage-backed securities, and asset-backed securities. MIP II CL 3 also invests in synthetic guaranteed investment contracts (GICs) and traditional GICs issued by insurance companies and banks. These contracts provide a guaranteed rate of return and principal protection to the fund.
How Does MIP II CL 3 Work?
MIP II CL 3 works similarly to other stable value funds, except that it covers multiple unrelated employers who participate in the MEP. The MEP sponsor establishes and maintains the fund document, files annual reports with the IRS and DOL, selects and monitors the investment options, provides participant disclosures and notices, and performs compliance testing.
What Are the Responsibilities of Employers?
Employers who join MIP II must make contributions to the fund on behalf of their eligible employees, according to the fund document and their own adoption agreement. Employers must also provide payroll data and employee information to the MEP sponsor or its designated administrator, and distribute enrollment materials and educational resources to their employees.
What Are the Benefits for Employees?
Employees who participate in MIP II CL 3 can make elective deferrals from their paychecks to the fund, up to the annual limit set by the IRS ($19,500 in 2021). Employees may also receive employer contributions from their employer, such as matching or profit-sharing contributions. Employees can choose how to invest their account balances among the investment options offered by the MEP sponsor. Employees can also access their account balances online or by phone, and receive periodic statements and updates from the MEP sponsor or its administrator.
What Happens When Employees Leave Their Employer?
Employees who leave their employer can keep their account balances in MIP II CL 3, roll them over to another retirement plan or IRA, or cash them out (subject to taxes and penalties). Employees who move to another employer within the MEP can continue to participate in MIP II CL 3 without interruption. Employees who move to an employer outside the MEP can transfer their account balances to their new employer’s plan, if allowed, or to an IRA.
How Does MIP II CL 3 Compare to Other Stable Value Funds?
MIP II CL 3 is one of the many stable value funds available in the market. Each stable value fund may have different features, benefits, and risks, depending on the fund sponsor, the investment strategy, the contract providers, and the plan participants. Therefore, it is important to compare and evaluate different stable-value funds before choosing one for your retirement savings plan.
Some of the factors that you may want to consider when comparing stable-value funds are:
- Performance: How has the fund performed in terms of yield, return, and volatility over different time periods and market conditions? How does the fund compare to its benchmark and peers?
- Fees: How much does the fund charge in terms of management fees, administrative fees, contract fees, and other expenses? How do these fees affect the fund’s net return and NAV?
- Investment options: What are the types and quality of the fixed-income securities and contracts that the fund invests in? How diversified and liquid are the fund’s investments? How does the fund manage interest rate risk and credit risk?
- Contract terms: What are the terms and conditions of the contracts that the fund uses to guarantee a minimum rate of return and principal protection? How secure and reliable are the contract providers? What are the risks and consequences of contract termination or withdrawal?
- Plan features: What are the features and benefits of the retirement savings plan that offers a stable value fund? How flexible and convenient are the plan’s contribution, withdrawal, and transfer options? How informative and helpful are the plan’s disclosures, notices, and educational resources?
By comparing different stable-value funds based on these factors, you can find the best option for your retirement savings goals and risk tolerance. You can also consult with a financial professional or a plan administrator for more guidance and advice.
Frequently Asked Questions (F&Qs)
What is a Fidelity Money Market account?
A Fidelity Money Market account is a type of savings account that offers high liquidity and low minimum balance requirements. It is a good option for people who need to access their money quickly and easily.
Fidelity Money Market accounts offer a variety of features, including:
- High liquidity: You can access your money easily through online banking, mobile banking, or ATMs.
- Low minimum balance requirements: There is no minimum balance requirement to open a Fidelity Money Market account, and you only need to maintain a $2,500 balance to avoid fees.
- Interest: Fidelity Money Market accounts earn interest, and the current interest rate is 0.42% APY.
- Convenience: Fidelity Money Market accounts are convenient to use, and you can link them to your checking account for easy transfers.
How does a stable value fund work?
A stable value fund is a type of mutual fund that invests in high-quality, short-term fixed-income securities. The goal of a stable value fund is to preserve capital and provide a steady stream of income.
Stable value funds work by purchasing a variety of fixed-income securities, such as government bonds, corporate bonds, and money market instruments. These securities are typically insured by an insurance company, which guarantees that investors will not lose money.
Stable value funds typically have a constant net asset value (NAV) of $1 per share. This means that the value of your investment will not fluctuate with the market, even if the value of the underlying securities changes.
Stable value funds are a good option for investors who are looking for a safe and conservative investment. They are also a good option for investors who need to preserve capital for a specific purpose, such as retirement or college savings.
Here are some of the pros and cons of stable-value funds:
Pros:
- Capital preservation: Stable value funds are designed to preserve capital, even in times of market volatility.
- Income: Stable value funds can provide a steady stream of income.
- Liquidity: Stable value funds are liquid, which means that you can easily sell your shares if you need to.
Cons:
- Lower returns: Stable value funds typically have lower returns than other types of investments, such as stocks or bonds.
- Fees: Stable value funds may have higher fees than other types of investments.
- Risk: There is still some risk associated with stable value funds, as the underlying securities could default.
Does Fidelity offer a stable value fund?
Yes, Fidelity offers a stable value fund. The Fidelity Stable Value Portfolio is a commingled pool of the Fidelity Group Trust for Employee Benefit Plans and managed by Fidelity Management Trust Company. It is designed to preserve capital, with a secondary objective of providing a level of income over time that is consistent with the preservation of capital.