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October 31, 2006 at 01:28 PM
The Employee Benefits Security Administration has given defined benefit pension plans permission to increase revenue by lending securities to a wider range of borrowers.
EBSA, an arm of the U.S. Department of Labor, has adopted Prohibited Transaction Exemption 2006-16, a batch of guidance that permits pension plans to lend securities to broker-dealers and banks in Canada, the United Kingdom and some other foreign countries.
The PTE also will permit plans to accept more types of collateral from the borrowers.
The types of collateral now on the approved list include negotiable certificates of deposits payable in the United States; mortgage-backed securities; the British pound, the Canadian dollar, the Swiss franc, Japanese yen and the Euro; securities issued by multilateral development banks; notes and bonds issued by foreign governments; and irrevocable letters of credit issued by some foreign banks.
EBSA has sharply limited pension plans’ ability to lend securities and make other types of investments because of concerns about fiduciary responsibility provisions and other provisions in the Employee Retirement Income Security Act.
