"The insurance smoothes out the returns of the underlying portfolio," said Gina Mitchell, president of the Washington-based Stable Value Investment Association, a membership and trade group for the stable-value industry.

The insurance also comes with restrictions. The companies that provide the contracts, including Prudential Financial Inc. and JPMorgan Chase & Co., generally limit the circumstances under which they'll pay out and may also restrict how or when savers may transfer or withdraw their money.

"The insurance company is willing to guarantee this book value, but they're only willing to do that up to a point," said Stone of Plan Sponsor Advisors.

Investors usually can't move their money to competing investment options such as short- to intermediate-term bond funds for 90 days after withdrawing from a stable-value option, said Caswell of Galliard, which is a subsidiary of Wells Fargo and oversees about $68 billion in stable-value assets.

Surrender Charges

The insurance contracts can be even more restrictive. Savers in a stable-value annuity issued by TIAA CREF may only withdraw or transfer funds over a set schedule of 10 payments during nine years. Workers who quit a company that uses the product in its retirement plan may take a lump sum within their first 120 days of leaving, during which they would pay a 2.5 percent surrender charge.

Retirement-plan administrators such as Boston-based Fidelity Investments said these restrictions are disclosed in investment literature, even if participants don't always read it.

Those limitations allow TIAA CREF to offer a higher interest rate than it would be able to otherwise, said Phil Maffei, director of product management for the New York-based insurance and mutual-fund provider. The TIAA CREF annuity yielded 4 percent in August.

Insurance Caveats

Insurers also generally stipulate that they won't be liable under certain circumstances, which can leave savers with losses. Major layoffs, mergers and bankruptcies at the employer usually nullify a portfolio's insurance. That's because large outflows from a fund increase the likelihood that an insurer would have to pay out on the contracts they've issued.