EBSA Press Release: Labor Department Grants Major Exemption On Investment Of Pension Assets [04/10/1996]

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In-house managers of large corporate pension plans can readily take advantage of more investment opportunities under a class exemption granted today by the U. S. Department of Labor.

Currently, when in-house managers want to make a transaction prohibited by the Employee Retirement Income Security Act (ERISA), they must either seek an individual exemption from the department, hire a qualified professional asset manager or forgo the investment opportunity.

Olena Berg, assistant secretary of labor for the Pension and Welfare Benefits Administration said, "This action opens the door for large plans to pursue beneficial investment opportunities without seeking the department's prior approval."

The department received a number of recommendations from the employee benefit community which helped shape the final exemption. A number fiduciary audit issues were clarified, including the role of the auditor, the content of the written policies and procedures that must be adopted by the in-house manager and the scope of the audit.

Under the general exemption, plans managed by in-house managers can engage in a variety of transactions with service providers if certain conditions are met. Only large employers whose plans have at least $250 million in assets, with $50 million under direct in-house management can use the exemption. It also requires that in-house managers be registered investment advisers and make all decisions concerning the affected transactions.

The special exemptions on leasing office or commercial space, leasing residential space to employees and the use of public accommodations owned by plans were adopted without modification.

The final exemption is scheduled to be published in the Wednesday, April 10 Federal Register.