Labor Department issues final rule on participant-directed investments

Article Abstract:

The Labor Department has issued final regulations implementing ERISA 404(c)'s provisions on participant-directed individual account plans. 404(c) plans must give participants control over the assets in their accounts and the choice of a wide range of investments. Plan fiduciaries are not liable for losses from participant investment decisions in 404(c) plans. The employer's decision to implement such a plan depends on whether the administrative burdens of compliance outweigh the benefits of excusing plan fiduciaries from liability for investment losses.

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DOL issues class exemption on issues raised by Harris Trust

Article Abstract:

A prohibited transaction exemption issued by the Department of Labor (DOL) relieves insurers of some burdens stemming from the Supreme Court's Harris Trust decision, which held that funds in insurance companies' general accounts were subject to ERISA prohibited transaction and fiduciary duty rules. The DOL's final version of the exemption, incorporating comments from the insurance industry, allows for three separate exemptions, including one covering asset pool investment trusts.

Insurance industry, Life insurance industry

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Employer's one-time payment to s. 401(k) plan to restore losses incurred by mismanaged self-directed investments does not disqualify plan

Article Abstract:

The IRS in Private Letter Ruling 9807028 settled the issues regarding tax consequences and qualification status after employers make reimbursement payments to qualified defined employee contribution plans (401K) or participants. The ruling allows employers to take ordinary and necessary business expense deductions for the payments. The payments are not considered contributions under various IRC sections and will not disqualify the plans.

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