Check out the definition of Equity Wash in the glossary. An equity wash is a rule that requires a plan participant to move money from a stable value fund to a non-competing fund (like an equity fund) for a set period (usually 90 days) before it can be exchanged into a competing option (like a money market fund or short-term bond). It is designed to protect both participants and the stable value fund from the impact of “yield chasing” between investment options.

A stable value fund may have higher or lower yields than money market funds or even short-term bonds. However, in times of fluctuating interest rates, stable value funds can earn less, tempting participants to switch to money market funds. Without an equity wash, this switch could force the stable value fund manager to sell the underlying securities for prices that may hurt the fund's stability for everyone. To avoid this issue, many plan sponsors only offer either a stable value fund or a money market fund.