Nationwide Fixed (GIC) Investment Option

Answer: Yes, there is!  You need to be aware there can be restrictions on taking money back out of this account.  If you think you might want to take money back out of this investment in the near future or at any time in the future, then you might want to consider using another investment instead.  Consider using the Nationwide Money Market Fund if it is available in your case or consider using a Short Term Bond Fund.   

For the overall case, only 20% of the money in Nationwide Fixed can be removed in a 12 month period.  For example, if the overall plan had $100,000 in the Nationwide Fixed (GIC) at the beginning of a 12 month period and other participants have already transferred over $20,000 out of the account, then when the next person requests a transfer in the same 12 month period, they are going to run into the redemption limitation.

The automated systems will not warn you that this is a problem when you request the transaction, but we will be notified within a week that you ran into this limit and that your request was not honored.  We have been trying to get Nationwide to reprogram their systems to warn people as they choose to deposit money into Nationwide Fixed.  

If you tell the 800# or the Internet Web page to do such a transfer out of the Nationwide Fixed Fund, we recommend you check your account a day or two later to see if everything did get transferred. 

If not, give us a call immediately.  We can always request what is known as a "market value adjustment." 

What is that?  Nationwide will let you take money out of the account even if the 20% limitation has been exceeded if you are willing to accept what is called a market value adjustment.  Sometimes they tell us that the adjustment has no negative effect and other times, depending upon what has been happening to interest rates, they will tell us that there is some sort of negative adjustment to the dollars being requested for redemption.

Why is all of this necessary?  Well, in order to achieve the fairly attractive interest rate, Nationwide has to invest the money into long-term bonds or real estate.  Investments that are fairly illiquid.  If participants could pull all of their money out everytime money market funds were temporally paying higher returns than the GIC, then everyone would want their money out at once and Nationwide would have to liquidate the long-term investments at a loss.  In other words, they have to protect themselves against what you might call a "run on the bank".

If this bothers you, then do not use the Nationwide Fixed (GIC) option as one of your investments.  There are fairly low risk alternatives available.

If you have questions about the above, please call  Plan Design Consultants, Inc. at (650) 341-3322 and ask for the administrator of your plan.