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2.

Class Exemption

Multiemployer and Multiple employer.

On March 26, 1976, the Department and the Internal Revenue
Service granted permanent exemptions from the prohibitions
of sections 406 (a) and 407(a) respecting three classes of
transactions in which multiemployer and multiple employer
plans are involved. These permanent class exemptions deal
with delinquent employer contributions, construction loans
and office space, administrative services and goods, each of
which is described below.

a. Delinquent Employer Contributions.

Effective January 1, 1975, this exemption permits an
extension of time for making a contribution by contributing
employers, permits the plan to accept less than the entire
amount of a contribution owed in satisfaction of the entire
amount of such contribution and allows the plan to consider
a contribution uncollectable, in whole or in part, and
to terminate efforts to collect such contributions.

This exemption permits plans covered by the exemption to
make construction loans to a participating employer under
certain circumstances. The exemption is in two parts -- the
first is a prospective exemption effective June 3, 1975, the
second is retroactive applicable to loan transactions
occurring between January 1, 1975 (the effective date of the
prohibited transaction provisions of ERISA) and June 2, 1975.

c.

Office Space, Administrative Services and Goods.

This exemption permits the leasing of office space or the
provision of administrative services or sale or leasing of
goods by a multiple employer plan to a participating
employee organization, participating employer, or partici-
pating employer association, or to another multiple employer
plan which is a party in interest with respect to such plan,
provided that certain conditions are met. The exemption is
in two parts the first is a prospective exemption
effective June 12, 1975, the second is retroactive to
January 1, 1975, the effective date of the prohibited
transaction provisions of ERISA, and permits such
transactions which occurred on or before June 12, 1975.

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Investment Industries and Employer Benefit Plans

On April 8, 1977, the Department and the Internal Revenue
Service granted a class exemption that allows under certain
conditions the purchase and sale by an employee benefit plan
of shares of a registered open-end investment company
(mutual fund) when a fiduciary with respect to the plan
(e.g., an investment manager) is also the investment adviser
for the investment company.

A number of safeguards for plan participants and beneficiaries are contained in the class exemption. The fact that mutual funds and investment advisers are regulated extensively provides further protection for participants and beneficiaries.

The class exemption is in two parts

(1) retroactive to January 1, 1975, the effective date of the prohibited transactions provisions of ERISA, and (2) prospective commencing 90 days after the exemption was granted, allowing a reasonable time for firms to bring procedures into compliance.

On April 8, 1977, the Department of Labor and the Internal Revenue Service granted a class exemption that would allow the acquisition and sale of shares of a registered open-end investment company (mutual fund) by an employee benefit plan which covers employees of the mutual fund or the mutual fund's investment adviser, or principal underwriter, or an affiliate thereof.

The exemption is consistent with statutory exemptions
permitting: (1) investments by an "in-house" plan of a bank
or similar financial institution in deposits in the bank,
and (2) the purchase of insurance contracts by a plan from
the company whose employees are covered by the plan.

The exemption is retroactive to January 1, 1975 and contains conditions for the protection of plan participants and beneficiaries.

5. Transfer of Life Insurance and Annuity Contracts to
Employee Benefit Plans

On June 21, 1977, the Department of Labor and the Internal Revenue Service granted a class exemption for the transfer of certain individual insurance contracts to employee

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benefit plans by plan participants or by employers, any of whose employees participate in the plan,

The exemption is effective as of January 1, 1975 and
contains safeguards for the protection of the plans,
participants and beneficiaries.

6. Transfer of Life Insurance and Annuity Contracts from Employee Benefit Plans, Participants, etc.

On June 21, 1977, the Department of Labor and the Internal Revenue Service granted a class exemption that enables an employee benefit plan to sell individual life insurance contracts and annuities to (1) a plan participant insured under such policies, (2) a relative of such insured participants who is the beneficiary under the contract, (3) an employer, any of whose employees are covered by the plan, or (4) another employee benefit plan, for the cash surrender value of the contracts, provided certain conditions are satisfied.

This class exemption permits the continuation of the traditional practice by plan participants of buying their life insurance contracts from their employee benefit plans when their plan would otherwise surrender the policy, so that coverage may continue. Certain safeguards were placed in the exemption to ensure that plan participants are adequately protected. The exemption is effective as of January 1, 1975.

7.

Insurance Agents, Pension Consultants, Investment
Company Principal Underwriters

On June 24, 1977, the Department of Labor and the Internal Revenue Service granted a class exemption for insurance agents and brokers, pension consultants, insurance companies, investment companies and investment company principal underwriters. The exemption permits receipt of compensation, including both fees and commissions, for the sale of insurance and investment company products and the provision of consulting and other services to employee benefit plans if certain conditions are met.

Congress authorized the Department and the Internal Revenue Service to grant exemption from the prohibited transaction provisions because it recognized that the broad prohibitions of the Act would prevent certain traditional practices and

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relationships which could be beneficial to employee benefit plans. To a large extent, the practices covered in this exemption are of this type and the restrictions contained in regulations under section 408 (b)(2) applicable to service providers and this exemption are intended to assure tnat they are non-abusive.

Since the Agencies recognize the need to allow affected
persons sufficient lead time to make any necessary changes
in their operations in order to comply with the conditions
of the exemption, the exemption contains staggered effective
dates. An exemption is granted for all covered transactions
until October 31, 1977, if the transactions are effected in
the ordinary courses of business, are at arm's-length and
the commissions and fees received are reasonable, while for
certain of the covered transaction turther conditions become
effective after October 31, 1977.

Subsequently, certain conditions which were to become effective November 1, 1977 were postponed until May 1, 1978. The postponement will provide time for the Agencies to ascertain whether these conditions have any effects, which were unintended and, if so, to propose amendments to correct

them.

The Agencies have also proposed for public comment two additional conditions applicable for certain of the covered transactions entered into after December 31, 1978.

8. Multiple Employer Plans (Extension of ABC Class
Exemption)

On July 1, 1977, the Department of Labor granted a class exemption from the restrictions of section 406(b)(2) in order to allow transactions involving the provision of office space, administrative services and the sale or leasing of goods between a multiple employer plan and a participating employer, participating employee organization, participating employer association, or another multiple employer plan.

The exemption is designed to parallel and supplement the "C" portion of the class exemption granted in March 1976 to multiple employer plans by the Department and the Internal Revenue Service. That exemption covered the provision of office space, administrative services and the sale or leasing of goods to a party in interest by a multiple employer plan, but provided exemptive relief only from the provisions of sections 406 (a) and 407(a) of ERISA.

While the exemption extends the previously granted relief to section 406(b)(2), it does not extend to aspects of the transaction which may be subject to other restrictions of ERISA.

The exemption is in two parts the first, containing conditions appropriate for a prospective class exemption effective June 12, 1975; the second part would be retroactive to January 1, 1975, the effective date of the prohibited transaction provisions of ERISA.

Multiple Employer Trusts (METs)

The following lists of Department letters, amicus brief, and news release includes all substantive Departmental issuances regarding METS. In all six letters and the amicus brief the Department expressed the view that specific METS were not employee benefit plans covered under ERISA.

*As a result of this Advisory Opinion, the Secretary of Labor was sued by MMEBA, which sought a declaration that the Opinion was incorrect. The Secretary's motion to dismiss the suit, for failure to allege a judicable case or controversy, was granted on May 8, 1978. MMEBA v. Marshall, 77 4434 RF, U.S.D.C.C.D.Cal.).

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