PWBA Field Office Press Release

PENSION AND WELFARE BENEFITS ADMINISTRATION USDL: 99-6

LABOR DEPARTMENT FINALIZES CLASS EXEMPTION ON FOREIGN EXCHANGE TRANSACTIONS

The U. S. Department of Labor today granted a class exemption for purchases and sales of foreign currencies between employee benefit plans and banks or broker-dealers.

Under Prohibited Transaction Exemption (PTE) 98-54, plans may engage in certain foreign exchange transactions which are normally prohibited under the Employee Retirement Income Security Act (ERISA). ERISA prohibits foreign exchange transactions by plans because of their prior relationships with banks and broker-dealers.

The final exemption allows plans to engage in certain foreign exchange transactions based on standing instructions from an independent fiduciary of the plan. Standing instructions authorize banks and broker-dealers to exchange currencies of different nations upon the occurrence of certain stated events which have been specified in instructions from a plan’s fiduciary.

Among the prospective conditions which must be met in order to obtain exemptive relief under PTE 98-54 are the requirements that banks and broker-dealers:

have no discretionary control over investment of plan assets involved in the foreign exchange transaction nor render advice to the plan regarding those assets;

maintain written policies and procedures specifying when and how foreign exchange transactions will be executed;

limit each transaction to no more than $300,000;

execute the transaction within specified time frames; and

provide written confirmations of the transactions to the independent plan fiduciary.

The final exemption, scheduled to be published in the Nov. 13 Federal Register, provides relief for foreign exchange transactions engaged in under standing instructions between June 18, 1991 and Jan. 12, 1999 under a modified set of conditions.

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