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of targeted audits which, when combined with our computerbased targeting, will assist us in directing resources toward the most serious violations. In geographic areas where there appear to be pervasive abuses of pension and welfare funds, we have begun to use a task force approach to comprehensively investigate and correct violations of ERISA.

As part of improving our compliance strategy, we are working with the IRS on implementing a joint examination strategy. We expect to formalize procedures shortly that will provide for a more efficient use of our combined enforcement resources, and which will keep both agencies fully informed of the other's activities.

Although ERISA is now three years old, it is still a relatively new program. Through the joint efforts of many, including both the public and private sectors, a great number of the problems which initially precluded the Department from being able to effectively administer this program have been resolved. While admittedly there exist other matters which have yet to be reconciled, we look to the same spirit of cooperation for the resolution of these problems. Nevertheless, I believe, as I indicated earlier, that the Department's administration and enforcement of ERISA is now effectively responding to the Act's

objectives, that of protecting the rights and interests of the American worker in his or her pension and welfare benefits, and it is our intention to continue to explore for new and better ways by which to yet more comprehensively carry out the purposes of this legislation.

This concludes my prepared remarks. Should you have

any questions, I shall be happy to respond to them.

MATERIALS SUBMITTED FOR THE RECORD

o Enclosure 1

Question 5: Statistical Analysis of

the receipt and processing status of exemption requests for prohibited transactions; list of class exemptions.

o Enclosure 2

Question 9: Summaries of all opinions the Department has issued on preemption questions.

o Enclosure 3 - Question 14: Analysis of the universe of employee benefit plans regulated by the Department.

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Application Categories

Inception July-Sept/Oct-Dec Jan-Mar | Apr-Jun | Jul-Sep 1Oct-Dec 1Jan-Mar | Apr | TOTALI (Jun 1976 1

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| PROCESSING COMPLETED

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| 300* 1

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Pension and Welfare Plan cases. Also some actions may be enroute between Agencies.

*Tentative Denials

Final Review DOL or IRS

Pending: Published in Federal Register

Individual Exemption
Covered by Class Exemption

143

47

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TOTAL

300

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Class Exemptions

There have been eight class exemptions issued since the
EKISA was enacted in September 1974. These cover 114
separate applications.

Exemptions for Transactions Between Plans and Securities
Broker-Dealers and Others

On October 31, 1975, the Department and the Internal Revenue Service issued exemptions from prohioitions respecting certain classes of transactions involving employee benefit plans and certain broker-dealers, reporting dealers, and banks in connection with securities transactions.

The class exemptions granted deal with agency transactions and services, principal transactions generally, underwritings, market-making activities, and extensions of credit in connection with securities transactions, each of which is described below.

Agency Transactions and Services. This class exemption
permits certain persons who are parties in interest with
respect to employee benefit plans to effect securities
transactions on behalf of such plans, to perform certain
functions incidental to effecting such transactions, and to
provide certain limited advisory and research services to
plans. With one exception, the exemption does not apply to
transactions effected by plan fiduciaries, as defined in
Section 3(21)(A) of ERISA and the regulations. The
exception is to permit fiduciaries to effect securities
transactions on behalf of a plan and to perform certain
related functions until May 1, 1978, if the fiduciary
ordinarily and customarily did so on May 1, 1975.
portion of the exemption was designed to parallel section
11(a) of the Securities Exchange Act of 1934, which
generally prohibits broker-dealers from effecting
transactions on a national securities exchange after
May 1, 1978 for accounts over which the broker-dealer
exercises investment discretion. It might be noted that
Congress has enacted legislation postponing the effective
date of the prohibition of section 11(a) described above,

This

and the Department and the Internal Revenue Service have proposed to extend this portion of the class exemption.

Principal Transactions. This class exemption permits, subject to certain conditions, the purchase or sale of securities between an employee benefit plan and any of the following parties in interest, provided that they are not plan fiduciaries: (1) a broker-dealer registered under the Securities Exchange Act of 1934, (2) a reporting dealer who makes primary markets in securities of the U.S. Government or its agencies and reports daily to the Federal Reserve Bank of New York its positions in such securities and borrowings thereon, and (3) a bank supervised by the United States or a State. One of the conditions of the exemption is that certain records be kept and made available. Underwritings. This class exemption permits, subject to certain conditions, the purchase or other acquisition of securities by an employee benefit plan during the existence of an underwriting or selling syndicate with respect to the securities, from any person other than a plan fiduciary, when a plan fiduciary is a member of the syndicate. Among the conditions are that the amount of securities purchased be limited to 3 percent of the securities being offered and to 3 percent of the plan's total assets, and that certain records be kept and made available.

Market-Making. This class exemption permits, subject to certain conditions, the purchase or sale of securities between an employee benefit plan and a market-maker with respect to such securities who is also a plan fiduciary. Among the conditions are that there be at least one market-maker other than the fiduciary with respect to the securities, and that certain records be kept and made available.

Extensions of Credit. This class exemption permits, subject to certain conditions, the extension of credit to an employee benefit plan by a party in interest. Among the conditions are that the party in interest (1) be a broker or dealer registered under the Securities Exchange Act of 1934, and (2) not be a plan fiduciary unless he or any affiliate receives no interest or other consideration in connection with the extension of credit. Another of the conditions is that certain records must be kept and made available.

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