[10541]
December 8, 1998
TO: PENSION COMMITTEE No. 84-98
RE: SALOMON SMITH BARNEY SUBMITS PROPOSAL TO AMEND TRAK
EXEMPTION
______________________________________________________________________________
Salomon Smith Barney has submitted an individual exemption request with the Department of
Labor to amend the previously issued exemption involving its Personalized Investment Advisory Service
product, otherwise known as the TRAK exemption, PTE 94-50. The amendment request includes the
following provisions: (1) amendment of PTE 94-50 for corporate mergers that have changed the names
of the parties described in PTE 94-50 to permit broader distribution of TRAK-related products; (2)
implementation of a recordkeeping reimbursement offset system under the TRAK program; and (3)
institution of an automated reallocation option under the TRAK program.
The merger provision would permit the organizations created by the subsequent mergers
involving Smith Barney since the issuance of PTE 94-50, including those with Salomon Brothers and
Citicorp Inc., to participate in the TRAK program. The recordkeeping reimbursement provision would
permit funds involved in the TRAK program to reimburse plan recordkeepers certain recordkeeping
fees. The Board of Trustees of the funds recently approved a recordkeeping reimbursement amount of
$12.50 for each investment position held by a participant. In addition, after applying such
reimbursement to recordkeeping expenses charged by recordkeepers of the plans, any excess
reimbursement would be applied to reduce other fees and expenses, including, but not limited to, the
plan-level investment advisory fee for asset allocation recommendations. If implemented, the funds
would pay the appropriate reimbursement amount directly to the recordkeeper of the plan. The affected
plan would then be required to pay only the balance of the fee.
Finally, Salomon Smith Barney wishes to modify the TRAK program to institute an automatic
reallocation feature whereby an independent plan fiduciary could elect to have his current asset
allocation adjusted automatically whenever the consulting group changes the recommended asset
allocation model followed by a plan or participant. An independent plan fiduciary would be required to
make such an election in writing. However, if the reallocation to be made in response to the consulting
group’s recommendation exceeds an increase or decrease of more than 10 percent of the percentage
allocation to any one investment option, Salomon Smith Barney will not automatically readjust a plan
account. Under such circumstances, a written notice would be sent to the plan fiduciary describing the
proposed reallocation. If the plan fiduciary would like Salomon Smith Barney to automatically adjust the
account, the notice would instruct the plan fiduciary to do nothing. However, if the plan fiduciary does
not want to follow the reallocation recommendation, he must contact the financial consultant within 30
days.
Comments are due to the Department by December 24, 1998. A copy of the exemption request
is attached.
Kathryn A. Ricard
Assistant Counsel
Attachment