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Release Date: 09/26/2001
Release Number: 01-37
Contact Name: Gloria Della
Phone Number: 202.693.8666
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Washington, DC - The U.S. Department of
Labor’s Pension and Welfare Benefits Administration (PWBA) will publish
on Friday a proposed amendment to an existing class exemption which would
allow plans to receive interest free loans and extensions of credit from
related parties. The proposal is designed to address problems faced by
plans as a result of the terrorist attacks which occurred September 11,
2001. |
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As a result of terrorist attacks on the World Trade
Center and the Pentagon, all major stock markets in the United States were
closed from September 11 to September 14, 2001. Among other things, the
shutdown prevented buying, selling and/or trading of securities on these
markets. In addition, temporary impairments to communication systems,
pricing and valuation operations, and marketplace liquidity, may have
interfered with the operations of employee benefit plans. |
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The September 11, 2001 incidents may have caused
temporary cash flow problems that affect essential plan operations.
Interest free loans or extensions of credit could be used to facilitate
transfers of all or part of participants’ accounts from one investment
option to another, participant loans, temporary overdraft protection, or
participant withdrawal requests. |
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The proposed exemption would allow plans to receive
temporary loans and extensions of credit from related parties, like
employers, if certain conditions are met. This action amends an existing
exemption -- Prohibited Transaction Exemption 80-26 -- and is similar to
an amendment granted in 2000 in anticipation of Y2K problems. The
department has authority to provide administrative exemptions for
transactions which otherwise would be forbidden under the Employee
Retirement Income Security Act (ERISA). |
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The conditions of the exemption -- which are identical
to PTE 80-26 -- would allow loans and extensions of credit for no more
than 120 days, beginning September 11, 2001. All loans must be repaid by
January 9, 2002. Among the conditions of the temporary exemption are
requirements that:
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No interest or other fee is charged
to the plan and no discount for payment in cash is relinquished by the
plan
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The loans and extensions of credit
are unsecured
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Proceeds of the loans and extensions
of credit are used only for purposes incidental to ordinary plan
operations which are affected by the September 11 terrorist attacks
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The loans or extension of credits
are not directly or indirectly made by a plan
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Written comments and requests to hold a public hearing
should be submitted within 45 days to the Office of Exemption
Determinations, Pension and Welfare Benefits Administration, Room N-5649,
U. S. Department of Labor, 200 Constitution Avenue, N.W., Washington, D.
C. 20210, Attention: PTE 80-26 Amendment. |
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U.S. Department of Labor
news releases are accessible on the Internet. The information in this news
release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing
your request. Call 202.693.7773 or TTY 202.693.7775. |
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