Employees of Chrysler LLC received 89 cents on the dollar, or a loss of 11 percent, when a stable-value fund the company offered in a supplemental savings plan liquidated in January 2009. Insurance on the fund, which was managed by Dwight Asset Management Co. LLC, didn't cover the shortfall because of restrictions on the insurance contracts. Kristel Garneau, a Dwight spokeswoman, declined to comment on the Chrysler fund citing client confidentiality.

A stable-value separately managed account offered to Lehman Brothers Holdings Inc. employees lost 1.7 percent in its liquidation in December 2008, because the portfolio's insurance stipulated it wouldn't pay in a bankruptcy. Lehman Brothers filed for bankruptcy under Chapter 11 on Sept. 15, 2008.

After accounting for that drop, the Lehman Brothers fund returned 2.2 percent total during 2008, said Bill Hensel, spokesman for Atlanta-based Invesco Ltd., which managed the fund.

Safe Haven

Such losses are rare, said Galliard's Caswell. Often companies have no need to liquidate a plan in a bankruptcy, and if they do they generally have more time to plan and are able to pay out participants' assets without losses, he said.

"Stable value's been a safe haven," said Mitchell of the trade association. "It's not risk free, but it is one that has continued to perform throughout the financial crisis and even in today's volatile market."

Stable value is a conservative investment option and participants should think of it as similar in risk to a short-term bond fund, rather than as a cash-equivalent, said Kristi Mitchem, head of global defined contribution for State Street Global Advisors, a unit of State Street Corp.

The funds returned 2.9 percent on average for the 12 months ending in August, compared with the 1.8 percent average return for short-term taxable bond mutual funds, according to data from Hueler Companies Inc. and Morningstar Inc.

Popular Option

"Defined-contribution plan participants tend to be a conservative group, often citing preservation of principal as a major factor in fund selection," said Christopher Rowlins, a consultant to plan providers with Fiduciary Investment Advisors LLC in Windsor, Connecticut. "That is one reason stable-value funds are and remain popular."