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Archived News Release--Caution:
information may be out of date.
For more information call: (202) 219-8921
Employee benefit plans could save millions of dollars in
brokerage fees under a U.S. Labor Department proposal that would allow the
transfer of benefit funds from bank investments to bank-affiliated no-load
mutual funds, a transaction currently prohibited except through exemption from
the Employee Retirement Income Security Act (ERISA).
The proposal for an exemption from ERISA is now up for
public comment and was carried in yesterday's Federal Register. It was prompted
by a request from Federated Investors, a mutual fund sponsor. If the exemption
is adopted, Federated contends employee benefit plans will save fees normally
incurred when plan assets are converted from collective investment funds to
mutual funds. Many banks have been switching from collective to mutual funds.
The department's proposed exemption would allow federal or
state banks to convert collective funds into mutual funds if:
- the bank discloses information about the mutual fund and the
conversion process, including why the exchange of investments is appropriate
for the plan;
- an independent plan fiduciary gives the bank advance written
authorization for each transfer of CIF assets in exchange for shares of a
mutual fund;
- plan clients pay no commissions or other fees in connection with the
purchase of mutual fund shares;
- written confirmation is provided to the independent plan fiduciary
within 105 days of the transactions;
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- within 30 days information is furnished which discloses the identify
of each security not listed on a national exchange or NASDAQ and the identity
of the pricing service or market-maker contacted to determine the value of such
securities;
- combined total fees received by a bank from a client plan for
services received cannot exceed reasonable compensation;
- the value of mutual fund shares received by a plan equals the
current market value of its pro-rata share of assets in the CIF on the date of
the exchange; and
- the independent plan fiduciary receives ongoing disclosure of
information such as an updated prospectus and a report or statement of fees
paid to the bank.
The proposed exemption is in the Nov. 13 Federal Register
or via the Internet at http://www.dol.gov/dol/pwba after Nov 20. Public
comments or requests for a hearing should be submitted in writing to the Office
of Exemption Determinations, Pension and Welfare Benefits Administration, Room
N-5649, 200 Constitution Avenue N.W., Washington, DC 20210, (Attention: "CIF
Conversion Class Exemption").
Archived News Release--Caution:
information may be out of date.
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