Labor Department Expands Exemption for Interest-Free Loans to Employee Benefit Plans

Archived News Release — Caution: Information may be out of date.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 announced publication of a final amendment to the class exemption on interest-free loans.

Prohibited Transaction Exemption (PTE) 80-26 is a class exemption that permits certain interest-free loans to a plan from a party in interest (e.g., from the employer that sponsors the plan) in instances where the plan faces a temporary cash shortage. This exemption was previously used following Y2K-induced computer problems and when the markets closed after the September 11, 2001 terrorist attacks. The interest-free loans facilitated by the exemption allow plans facing liquidity problems the ability to continue to pay benefits and for other purposes necessary for the ordinary operation of the plan.

The amendment removes the three-day limitation that previously applied to certain loans described in the exemption. Based on its experience, the department decided that removing the three-day limitation would facilitate these interest-free, unsecured loans that are beneficial to plans, without diminishing any of the safeguards designed to protect plans.

After review of the two comments on the December 15, 2004 proposal, the final amendment to PTE 80-26 was published with one minor change. The final amendment to the exemption is scheduled to be published in the April 7, 2006 Federal Register. For more information about the exemption, visit EBSA's Web site at www.dol.gov/ebsa.

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Archived News Release — Caution: Information may be out of date.

Contact Name: Gloria Della
Phone Number: 202.693.8664