May 10, 1991
TO: PENSION MEMBERS NO. 18-91
RE: INSTITUTE COMMENT LETTER ON PROPOSED REGULATION CONCERNING
ERISA SECTION 404(c) PARTICIPANT DIRECTED INDIVIDUAL
ACCOUNT PLANS
__________________________________________________________
Attached is a copy of the Institute comment letter on the
Department of Labor proposed regulation concerning participant
directed individual account plans under section 404(c) of ERISA.
(See Institute Memorandum to Pension Members No. 11-91, dated March
13, 1991.)
The letter supports the regulation and urges its prompt
adoption in final form. The Institute also recommends several
clarifications to the regulation. First, the letter suggests that
participants in ERISA section 404(c) plans who have the opportunity
to invest their savings in guaranteed investment contracts should
be able to learn the financial condition of the GIC issuer.
Second, the letter urges the Department of Labor to clarify in the
final regulation or the preamble thereto that ERISA section 404(c)
is not designed to provide participants with less valuable
protections than are provided by the general fiduciary rules under
ERISA section 404(a). As such, an ERISA section 404(c) plan
fiduciary retains the ongoing duty to determine whether to replace
existing investment options, include additional options or alter
the frequency of transfer among options. Finally, with regard to
employer securities, the letter requests the Department of Labor to
specifically state in the regulation that employer securities
cannot function as one of the three core options under an ERISA
section 404(c) plan. The Institute also requests clarification
that ERISA section 404(c) may apply to employer securities even if
participants must disclose their plan purchases of such stock to
their employer in order to comply with Federal securities law
obligations.
The letter provides the Department of Labor with a discussion
of mutual fund experience with individual account plans. Most of
the statistics provided were gathered through the individual
account plan survey conducted last year. (See Institute Memorandum
to Pension Members No. 31-90, dated August 3, 1990.)
We will keep you informed of further developments.
W. Richard Mason
Assistant Counsel - Pension
Attachment