On November 20, 2007, the Employee Benefits Security Administration (EBSA) announced a proposal to expand the type of consideration that can be accepted by an employee benefit plan in settlement of litigation. Although the Employee Retirement Income Security Act (ERISA) prohibits certain transactions, EBSA passed a regulation in 2003 generally exempting a plan’s receipt of consideration from a related party in settlement of litigation. Under the present regulation, the consideration has to be in the form of cash. The proposed amendment would permit the receipt of non-cash consideration, including the promise of future employer contributions, but only where the consideration can be objectively valued. The proposal also would permit plans to acquire, hold or sell non-qualifying employer securities such as warrants and stock rights where such securities are received in settlement of litigation, including bankruptcy proceedings.

The complete text of the proposal is available at http://www.dol.gov/ebsa/regs/fedreg/notices/20071121.htm.