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Labor: Be Careful With Fund Settlements

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Federal regulators want benefit plan intermediaries and plan fiduciaries to use some commonsense when they get market-timing settlement payments from money managers.

Intermediaries and fiduciaries assume fiduciary responsibility when they get the payments, Robert Doyle, a Labor Department director, writes in Field Assistance Bulletin Number 2006-01.

Intermediaries can avoid assuming fiduciary responsibility for market-timing settlement payments if they refuse to take the payments, but they could get in trouble if they refuse to take the payments and that hurts the ability of a benefit plan to receive settlement payments, Doyle writes.

Plan fiduciaries must come up with reasonable, fair and objective methods for allocating settlement payments, but they can come up with reasonable methods to decide, for example, what to do if a plan’s records are not complete enough for the fiduciary to calculate exactly which plan members lost exactly how much money due to market-timing problems.

A copy of the field assistance bulletin is on the Web at Document Link