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Another ERISA Exemption Proposed

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An arm of the U.S. Department of Labor wants to let a retiree health plan associated with the old Chrysler Corp. invest in “New Chrysler Corp.” securities.

The Employee Benefits Security Administration has proposed an exemption from Employee Retirement Income Security Act that would let the New Chrysler Corp., Auburn Hills, Mich., transfer a $4.59 promissory note and company securities to a voluntary employees benefit association that would provide retiree health coverage for about 120,000 retirees and dependents.

EBSA recently a proposed a similar prohibited transaction exemption for the plans that will provide retiree health benefits for retirees who once worked for General Motors Corp., Detroit.

The old Chrysler is in bankruptcy court, and government officials and others are trying to arrange for its assets to be sold to an arm of Fiat Automobiles SpA, Turin, Italy.

The New Chrysler is now owned by the Canadian government, the U.S. Treasury, Fiat and the VEBA plan, EBSA officials report.

ERISA normally prohibits benefit plans from holding large amounts of employer securities, but “the law gives the department authority, however, to grant exemptions that protect the interests of plan participants and beneficiaries,” officials say.

“The primary condition of the proposal is the appointment of an independent fiduciary to represent the plan with regard to New Chrysler securities transactions,” officials say. “The independent fiduciary will determine in advance of taking any action regarding the securities that the action is in the interests of the plan and its participants and beneficiaries.”