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Archived News Release--Caution: information may be out of date.

EBSA Press Release: Labor Department Proposes ERISA Rule for Insurance Companies, Increased Protection for Plan Investments in Insurance Products [12/22/1997]

For more information call: (202) 219-8921

The U.S. Labor Department today issued a proposed Employee Retirement Income Security Act (ERISA) rule for insurance companies, which also increases opportunities for employee benefit plans to evaluate their insurance policy investments.

A 1993 Supreme Court ruling in the Harris Trust case concluded that insurance companies, under certain conditions, become fiduciaries subject to ERISA rules. Today's proposed rule provides a broad "safe harbor" by stating that insurance companies would not be deemed fiduciaries under ERISA by virtue of plan investment in general account policies issued by an insurer on or before Dec. 31, 1998.

To qualify for the safe harbor, the proposal requires insurance companies to:

• disclose to plan clients the method by which expenses and income are allocated to the contract prior to entering a contract;
• allow plans to terminate or discontinue a policy upon 90 days' notice to the insurer and to elect either a lump sum payment without penalty or annual installment payments over a five-year period with interest;
• give plans written notice of certain amendments 60 days prior to their taking effect, and
• obtain the authorization of an independent plan fiduciary prior to the sale of a transition policy.

On July 12, 1995, the Labor Department granted a class exemption giving insurance companies conditional relief for transactions between their general accounts and companies that had prior relationships with investing plans. This class exemption will continue to provide limited relief for insurers who do not meet the requirements of the proposed exemption.

The public may submit written comments on the proposal by March 23, 1998 and address them to the Pension and Welfare Benefits Administration, Office of Exemption Determinations, Room N-5649, 200 Constitution Ave., NW, Washington, D.C. 20210, Attention: "General Account Contracts." Comments also may be submitted by Internet to: empad@jpwba.dol.gov.

Archived News Release--Caution: information may be out of date.