Archived News Release — Caution: Information may be out of date.
U.S. DEPARTMENT OF
LABOR
LABOR DEPARTMENT AUTHORIZES LIMITED EXEMPTION FOR
INSURANCE COMPANY GENERAL ACCOUNT ASSETS
Wed., July 12, 1995
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.
