The Department of Labor has announced that it intends to withdraw its controversial?áproposed changes to the definition of “fiduciary” under ERISA.?á The DOL expects to have a new proposal in 2012.
Seventh Circuit Provides Defined Contribution Plan Fiduciaries with Guidance on Prudence and a Reason to Pause
The U.S. Seventh Circuit Court of Appeals recently issued its opinion in George v. Kraft Foods Global, Inc., No. 10-1469 (7th Cir. April 2011), impacting fiduciaries to defined contribution retirement plans such as 401(k) plans. The plaintiffs had challenged the plan fiduciaries?ÇÖ decisions on three issues: the use of unitized accounting (a type of accounting in which participants have units in an investment fund instead of shares); the continued renewal of a record-keeper?ÇÖs contract without obtaining competitive bids for fees; and a directed trustee?ÇÖs practice of retaining the float (that is, keeping the interest earned on the funds set aside for a distribution check between the time the check is cut until it is actually cashed). A summary of the issues and the court?ÇÖs holdings can be found below. Unitized Accounting of Company Stock Fund – The plaintiffs argued that the fiduciaries breached their duties by failing to reach a… Continue Reading
The Department of Labor (DOL) recently finalized an amendment to Prohibited Transaction Exemption 96-23. PTE 96-23 permits certain transactions by an employee benefit plan that would otherwise be prohibited by ERISA, where the plan?ÇÖs assets are managed by an in-house asset manager (INHAM) and other conditions are satisfied. The amendment makes several changes to the existing exemption, including: expanding the definition of INHAM to include a subsidiary that is 80 percent or more owned by the employer or a parent; permitting transactions with a ?Ç£co-joint venturer?Ç¥ under certain circumstances; and extending the exemption to cover certain existing commercial real estate leases. The amendment also increases the exemption?ÇÖs ?Ç£related person?Ç¥ test threshold from 5 percent ownership to 10 percent, and increases from $50 million to $85 million the amount of assets that must be managed to qualify as an INHAM. The amendment can be found here.
The Department of Labor has issued final regulations addressing new disclosure rules that apply to plan administrators of ?Ç£participant-directed individual account plans.” While these new rules do not apply until plan years beginning on or after November 1, 2011 (for calendar year plans?ÇöJanuary 1, 2012), employers should begin talking to their third party adminstrators early this year to be sure the necessary disclosures and comparative information will be provided in accordance with these final regulations. You can find a detailed memorandum describing the new rules, along with links to the final regulations and the DOL’s model chart for providing the comparative information by clicking?áhere.
Sponsors of individually designed qualified retirement plans that have a zero or five as the last digit of their employer identification number (EIN) generally fall under?áCycle E of the Internal Revenue Service’s determination letter filing program.?á The deadline for Cycle E determination letter filings is January 31, 2011.