DoL Publishes Final Rule on ERISA Transaction Exemptions

The Employee Benefits Security Administration (EBSA) published a final rule updating the procedures for filing and processing applications for prohibited transaction exemptions under the Employee Retirement Income Security Act (ERISA).

The final rule was published in the October 27, 2011, edition of the Federal Register.

The rule consolidates the existing policies and guidance on the exemption process into a single source, and clarifies the types of information and documentation required to submit a complete filing. It also expands the method for transmitting filings to include electronic submissions, and makes exemptions more understandable for participants and other interested parties.

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The updates include: 

  • A requirement that applicants provide interested persons with a brief objective summary of complex transactions;
  • Guidance on the amount of compensation that may be received by a fiduciary or an appraiser when they are paid by a related party (or its affiliate) to the exemption transaction;
  • Clarification of the content of specialized statements, as needed, from “qualified independent fiduciaries,” “qualified independent appraisers” and other relevant experts;
  • A description of the current standards for obtaining retroactive exemptive relief.

“This rule is designed to simplify and bring transparency to the exemption application process,” said Phyllis C. Borzi, Assistant Secretary of Labor for the EBSA. “It is reflective of the administration’s commitment to update and refine regulations to make compliance easier, while also promoting openness around transactions involving worker benefit plans.”

The final rule will be effective December 27, 2011, and applies to all exemptions filed on or after that date.    

Visit http://s.dol.gov/JH to view the final rule.

Employees More Aware of Future Financial Responsibility

A 2011 third quarter survey by Financial Finesse finds U.S. employees are more aware that their financial future is in their own hands, with less help from government and employer-sponsored benefits.

Financial Finesse found that participants are asking more questions about retirement planning this year compared to last (34% of respondents in 3Q2011 versus 26% in 3Q2010). Additionally, retirement plan participation rates are being self-reported at 91% year-to-date, offering evidence that employees have increased awareness of their need to be more self-reliant when it comes to saving for retirement.

Employees are remaining calm about their investment strategies according to the data, despite recent stock market volatility. The percent of questions Financial Finesse received about investing increased slightly (from 12% in Q2 to 14% in Q3) in comparison to the recent 14.3% decline in the S&P 500 and an overall tumultuous quarter.

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Employees’ financial stress is decreasing as employees continue to improve their cash management skills. The number of employees reporting high or overwhelming financial stress is down from just over 32% last year to just under 21% year-to-date for 2011. In addition, just under 16% of employees report having no financial stress, up from about 3% of employees in 2010.

Liz Davidson, CEO and Founder of Financial Finesse says these and other findings from the report indicate that employees have shown a high level of resilience in the face of a difficult economy.

“Employees are not burying their heads in the sand,” she said. “They have accepted that this is the ‘new normal,’ and they’re persevering through it. I’m really impressed with how they are rising to the occasion. They’re seeking education and continuing to take the right steps to improve their finances rather than giving up.”

However, Davidson warns that U.S. employee retirement preparedness remains low, with just 15% of employees year-to-date reporting they are on track to replace 80% of their income (or their goal) in retirement.

“While employees are definitely moving in the right direction, the landscape is shifting at a faster rate than employees are compensating for,” she added. “All the dynamics of rising inflation, higher tax rates, fewer companies providing monthly pension income to retirees, and depleted home values are coming together in a perfect storm that will require even more from employees than what they’re doing now in order to have a secure financial future.”

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