Officials at the Employee Benefits Security Administration have answered a question about whether a welfare benefit plan can provide wellness benefits by using demutualization proceeds.
An official at the Employee Benefits Security Administration (EBSA) has answered a question about whether a welfare benefit plan can provide wellness benefits by using demutualization proceeds.
A lawyer for a transportation services firm covered by the Employee Retirement Income Security Act (ERISA) asked EBSA whether a company with a high rate of turnover that received $800,000 in common stock in September 2001 in connection with the demutualization of Prudential Financial Inc., Newark, N.J. (NYSE:PRU), could spend the proceeds from selling the stock on wellness programs for current employees.
The transportation company ended up with the Prudential stock as the result of a purchase of voluntary group term life and driver disability insurance arrangements.
The participants in the voluntary plans paid the full cost of the insurance.
"Absent plan terms to the contrary, in our view, fiduciaries of an employee welfare benefit plan may use demutualization proceeds that are plan assets for the benefit of all current participants and beneficiaries, rather than only for those who actually contributed to premium payments for the insurance policies," Louis Campagna, a division chief in the EBSA Office of Regulations and Interpretations, writes in an advisory opinion. "In the situation you describe, ERISA does not require plan fiduciaries to consider the interests of individuals who are no longer covered under the plan in deciding how to use such demutualization proceeds."
- Allison Bell
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.