Trust Updates Archive

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•    Downscaling Examinations Asset Management DirectorLeaves OCC
The recent departure of the OCC director of asset management signals the agency’s move to downscale fiduciary examinations, say agency insiders. This is part of a larger move to “simplify” all bank examinations, says an OCC source speaking on background. While other OCC sources confirm his comment, they note that without simpler examinations the OCC may not meet its bank examination schedule.

•    Historical Overview of OCC Fiduciary Supervision
Until the early 1960s, the Federal Reserve was responsible for promulgating fiduciary regulations, while the OCC handled national bank examinations. The function within the OCC has shifted substantially over the years.

•    Fiduciary Risks—Lintecum Outlines Areas of Concern
Lisa Lintecum, who until February 6, 2004 was OCC Director of Asset Management, briefly outlines areas of risk exposure for fiduciaries.

•    Preemption—State-referred Consumer Complaints
A referral of a complaint by state officials to a national bank is not “visitation,” and national banks should not assert the OCC’s exclusive authority exempts them from addressing cus-tomer complaints, says the OCC in Advisory Letter AL 2004-2.

Mutual Fund Abuses—DOL Issues Guidance on Fiduciary  Duties
Plan fiduciaries face the difficult task of assessing the impact of late trading and market timing on their plans, says the U.S. Department of Labor. To assist them, the agency has issued a new guidance on the duties of employee benefit plan fiduciaries “in light of alleged abuses involving mutual funds.”

‘Partly Sunny’ Forecast for Cash Balance Pension Plans; IBM Decision
A bright day is dawning for businesses wanting to convert pension funding to cash balance plans.Responding to Congressional prodding, the U.S. Treasury has updated its proposal on the conversion of defined benefit to cash balance plans. Clouding the forecast is a recent court decision against IBM that could prove to be bad news for more than 300 companies that already converted or adopted cash balance plans.

•    Owner-Employee Protected by ERISA
The U.S. Supreme Court on March 2 unanimously held that a working owner of a business qualifies as a “participant” in a pension plan qualified under the Employment Retirement Income Security Act (ERISA). The court’s decision came in the case of Raymond Yates who, as a sole owner but not sole employee, repaid his loan from the company’s profit-sharing plan three weeks prior to his involuntary bankruptcy. While the issue that prompted this case was whether the repayment was a voidable transaction, the decision of the lower courts, in finding against Yates, turned primarily on whether he was an employee for purposes of ERISA.

•    Overcharges Cost BofA $110 Million and 10 Years of Litigation
After 10 years, Bank of America may finally be free of the litigation stemming from Security Pacific management fee overcharges. BofA acquired Security Pacific in 1992. Though BofA in late 2000 agreed to pay some $35 million to settle litigation involving management fee over-charges, the issue of whether simple or compound interest should have been used to compute beneficiaries’ reimbursement remained outstanding. However, a 2002 appeals court ruling against the bank all but assured additional monies would have to be paid. On February 19, the bank reached a final settlement with plaintiffs, for an additional $33 million, bringing the total reimbursement to trusts to in excess of $110 million. The over-charges by Security Pacific were estimated at $24 million.

-- Copyright ©2004 A.M. Publishing, Inc., Trust Regulatory News

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