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News Release

Labor Department Proposes Class Exemption On Settlement of Litigation

Archived News Release — Caution: Information may be out of date.

Washington, DC - The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) today proposed a class exemption to facilitate the settlement of litigation by employee benefit plans with related parties.

The employee benefit community raised questions as to whether plans that release claims against related parties in exchange for cash violate the prohibited transaction provisions of the Employee Retirement Income Security Act (ERISA). The proposed exemption would allow plans to release claims against related parties in exchange for cash. In addition, the proposal would allow related parties to pay amounts owed to plans on an installment basis.

Among the conditions of the proposal is the requirement that the terms of the settlement be negotiated by a fiduciary not involved in the transaction that was the subject of the litigation. The proposal should remove any uncertainty and allow plan fiduciaries to properly carry out their responsibilities under ERISA by focusing on the merits of the settlement.

The proposed exemption is scheduled to be published in the February 11, 2003 Federal Register. Questions or comments about the proposed exemption should be directed to the Office of Exemption Determination at 202.693.8540.

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Archived News Release — Caution: Information may be out of date.

Employee Benefits Security Administration
February 10, 2003
Release Number