Trust Updates Archive

Pensions 401k SEC Banks Trusts Labor Regulation News Fiduiciary Conflicts Revenue Sharing 12b-1 Nonspouse Annuities Cross-Trading DOL Final Rules -- Nonspouse Beneficiaries, Annuities, and Cross Trading

(Oct. 7, 2008--Chicago, IL) -- The U.S. Department of Labor today issued final rules on:

(1) distribution of 401(k) benefits for missing nonspouse beneficiaries in terminated plans,
(2) selection of annuity providers and
(3) cross trading of securities by ERISA-governed plans 

The Pension Protection Act of 2006 amended the Internal Revenue Code putting nonspouse beneficiaries on a par (favored tax status) with surviving spouses when rolling over retirement benefits of deceased participants. The DOL rule and related class exemption extend the existing safe harbor on establishing IRA for missing beneficiaries in terminated and  abandoned plans to include nonspouse beneficiaries. (See TRN, March 2007.). 

In the annuity area, the DOL is issuing two final rules on selection of annuity providers.  One rule limits the application of the “safest available” standard of Interpretive Bulletin 95-1 to defined benefit plans.  The other is a final regulation providing guidance, in the form of a safe harbor, for the selection of annuity providers by fiduciaries for benefit distributions from individual account plans.
The cross trading rule addresses the content of the policies and procedures which must be adopted by an investment manager before engaging in cross trades of securities between clients, including employee benefit plans.  The written policies and procedures must be fair and equitable to all account participants and must provide for appointment of a compliance officer who is responsible for periodically reviewing purchases and sales of securities made pursuant to the exemption to ensure compliance with the written policies and procedures. (See TRN, Feb. 2007)

The final rules were published today in the Federal Register.

For more on this topic, see the upcoming issue of Trust Regulatory News.

No statement in this issue is offered as or should
construed as legal opinion or advice

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