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On August 30, 2010, the U.S. Department of Labor’s Employee Benefits Security Administration (”EBSA”) published a proposed rule in the Federal Register that would update and clarify exemption procedures for ERISA’s prohibited transactions provisions.
ERISA generally prohibits plan fiduciaries from causing their plans to engage in certain transactions that could potentially lead to conflicts of interest or self-dealing. However, Congress has provided certain limited exceptions to ensure that this prohibition does not prevent plans from engaging in harmless customary business practices, including loans to plan participants, payment of reasonable compensation for services necessary for the operation of the plan, loans to employee stock ownership plans, and routine deposits of plan funds in certain financial institutions.
Additionally, the current rules provide that the Secretary of Labor may grant administrative exemptions on an individual or class basis if the Secretary or her delegate finds that such an exemption is administratively practical and would benefit the plan and protect the interests of its participants and beneficiaries. The recently proposed rule would streamline and modernize the process for granting such administrative exemptions, by consolidating the procedures for exemptive relief in a single, comprehensive final regulation, and clarifying the types of information and documentation generally required for an exemption filing. It further aims to improve transparency for plan participants and other interested parties, while removing outdated disclosure requirements.
The proposed rule also accounts for technological developments which have arisen since the establishment of the original procedures in 1990. This includes providing for electronic filing and the use of email for certain required submissions.
The deadline for public comments is October 14.