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Archived News Release — Caution: Information may be out of date.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 Exemption Saves Employees Plans' Fees On Plan Investments [08/08/1997]

For more information call: (202) 219-8921

 
	 
Employee benefit plans will save millions of dollars in brokerage fees
		under a U.S. Department of Labor class exemption allowing the transfer of
		benefit funds from banks and investment advisers to no-load mutual funds. Such
		transactions currently are prohibited by the Employee Retirement Income
		Security Act (ERISA) unless the department grants an exemption allowing the
		transactions. 
 
	 
Federated Investors, a mutual fund sponsor, requested the exemption last
		year to cover investments where plan assets are converted from collective
		investment funds to mutual funds. The company requested the exemption because
		many banks have been switching from collective investment funds (CIFs) to
		mutual funds. 
 
	 
The final exemption, however, was expanded to include transfers of plan
		assets by banks and non-bank registered investment advisers. Under the
		exemption, federal or state banks and registered investment advisers covered by
		the Investment Advisers Act of 1940 may convert plan funds into mutual funds
		if:
 
	 
     
		
  •  information is disclosed about the mutual fund and the conversion
		  process, including why the exchange of investments is appropriate to the
		  plan;
    •  
		
  •  an independent plan fiduciary approves in advance by written
		  authorization 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 identity
		  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.
    •  
	 
 
	 
Two major changes from the exemption proposed on Nov. 13, 1996, are:
		expansion of the scope of the exemptive relief to include non-bank registered
		investment advisers as parties to the transactions, and the option to use
		electronic mail or facsimile as a means of providing independent plan
		fiduciaries with confirmation statements relating to asset transfers.
 
	 

 
	 
Archived News Release — Caution: Information may be out of date.