Labor Department Proposes Amendment For Underwriter Exemptions

Archived News Release — Caution: Information may be out of date.

Washington, DC - The U. S. Department of Labor's Pension and Welfare Benefits Administration (PWBA) today proposed an amendment to a group of individual prohibited transaction exemptions known as the Underwriter Exemptions.
The Underwriter Exemptions permit plans to hold securities representing interests in certain investment trusts. The proposed amendment would repeal existing requirements that trustees of the investment trusts be independent of the underwriter of the securities.

In proposing the amendment, PWBA recognizes that the requirements calling for independent trustees has become onerous and disadvantageous to plan investors in light of the shrinking number of banks participating in the corporate trust business. The industry has represented to PWBA that trustees in such transactions do not have the opportunity or the incentive to act in a manner detrimental to plan investors. Moreover, the underwriters’ interest would be limited after issuance of the securities.

Therefore, PWBA has determined that permitting the trustee to be an affiliate of the underwriter will benefit plan investors without posing additional risk of loss. PWBA notes that the trustee must be independent of all other parties to the transaction.

ERISA allows the department to grant an administrative exemption from the restrictions imposed by ERISA's prohibited transaction provisions.

The proposed amendment is scheduled to be published in the May 22, 2002 Federal Register. Comments on the proposal or requests for a hearing should be submitted by email or fax to 202.219.0204 by July 5, 2002, or by postal mail to:

U. S. Department of Labor
Pension and Welfare Benefits Administration
Office of Exemption Determinations
200 Constitution Avenue, NW, Room N-5649
Washington, D.C. 20210

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Archived News Release — Caution: Information may be out of date.