|
 Printer-Friendly Version
Archived News Release--Caution:
information may be out of date.
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.
| 
