Secretary of Labor Hilda L. Solis Print This Page Print This Page  Decrease Text Size Increase Text Size Text Size  Email This Page E-mail This Page

Archived News Release — Caution: Information may be out of date.

U.S. DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

EBSA Press Release: Labor Department Proposal Allows Conversion Of Plan Investments To Mutual Funds [11/14/1996]

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;
    •  
		
  •  
    •  
		
  •  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.