Labor Department Updates Exemptions Permitting Transactions With Financial Institutions and Insurers

Archived News Release — Caution: Information may be out of date.

Washington, DC - The U.S. Department of Labor’s Employee Benefits Security Administration today published amendments to two existing class exemptions that will permit plans to engage in securities and other transactions with a greater number of financial institutions and insurers, if certain conditions are met. The Employee Retirement Income Security Act generally prohibits plans from entering into transactions with plan fiduciaries and other related parties unless an exemption applies.

Under the amendments to Prohibited Transaction Exemption (PTE) 75-1, a plan may engage in certain transactions with broker-dealers, reporting dealers and banks that are plan fiduciaries as long as the institutions and their affiliates do not have investment authority over or provide investment advice with regard to the plan’s assets involved in the transaction. The department also granted similar relief under PTE 84-24 for insurance agents and brokers, pension consultants and mutual fund principal underwriters to engage in transactions involving sales of insurance and mutual fund products and to receive related commissions.

The revised exemptions address consolidation in the financial services industry that has resulted in greater numbers of affiliations between financial institutions. One protection afforded by the exemptions is that the terms of the transactions are required to be as favorable to the plans as an arm’s length transaction with an unrelated party would be.

The amendments to PTE 75-1 are retroactively effective to January 1, 1975. The amendments to PTE 84-24 are effective on the date of publication in the Federal Register. The amended exemptions are scheduled for publication in the February 3, 2006 Federal Register.

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Archived News Release — Caution: Information may be out of date.

Contact Name: David James/Gloria Della
Phone Number: 202.693.4676/202.693.8664