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Archived News Release--Caution:
information may be out of date.
For more information call: (202) 219-8921.
Insurance companies holding pension assets in their
general accounts can now make transactions with parties related to employee
benefit plans they oversee as fiduciaries.
Federal pension law generally did not consider assets of
insurance company general accounts to include plan assets subject to the
Employee Retirement Income Security Act (ERISA). The 1993 Supreme Court
decision in the Harris Trust case, however, broadened the reach of the
fiduciary rules to include such assets in certain circumstances. That decision
concluded that funds allocated to an insurer's general account that vary with
the investment experience of the insurer are plan assets subject to ERISA's
fiduciary rules.
The Labor Department proposed an exemption last August in
response to a request from the American Council of Life Insurance for broad
relief from ERISA's prohibited transaction rules. The final Prohibited
Transaction Exemption (PTE) 95-60 announced today by the Labor Department
contains general and specialized relief for a variety of transactions between
insurance company general accounts and third parties.
If certain conditions are met, the general exemption allows
insurance company general accounts to:
- transact business with parties related to plan account holders;
- acquire and hold employer securities or real property.
In addition, a plan may acquire and hold qualifying
employer securities or real property which exceed certain limits of the law
when such holdings are aggregated with the general account holdings of employer
securities or employer property.
A major condition of the general relief is that a plan's
participation in the general account cannot exceed 10 percent of the total
liabilities of the insurer's general account. Based on public comments, the
final exemption was modified to make the 10 percent limit applicable only to
transactions occurring after publication of the exemption and to redefine the
way in which the limit is calculated.
The special exemptions, subject to certain conditions,
allow transactions with service providers to the insurer's general account.
They also allow furnishing incidental goods, services and facilities by places
of public accommodation (such as hotels) owned by the general account. Finally,
relief is provided for the operation of asset pool investment trusts in which
an insurance company general account has an interest due to its ownership of
subordinated certificates.
PTE 95-60 is scheduled to be published in today's Federal
Register.
Archived News Release--Caution:
information may be out of date.
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