DoL Proposes Exemption for GM VEBA to Hold Company Stock

September 17, 2009 ( - The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) has proposed an exemption that, if granted, would allow General Motors Co. (GM) to transfer company securities including common stock, preferred stock, and a $2.5 billion promissory note, to a health plan established for the company's retirees.

A DoL press release explained that the large transfer of employer securities to the plan violates the Employee Retirement Income Security Act (ERISA), which prohibits certain plans from holding large percentages of plan assets in the form of employer securities; however, the law gives the department authority to grant exemptions that protect the interests of plan participants and beneficiaries.

The exemption would allow the securities transfer, permit GM and its health plans to reimburse each other for benefit payments mistakenly paid by the wrong entity during the transition to the new plan, and permit GM to recover mistaken deposits to the plan.

A major condition of the proposal is the appointment of an independent fiduciary to represent the plan with regard to GM securities transactions, according to the announcement. 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.  

The proposed exemption also requires the review of benefit payments by an independent third party administrator and auditor for each of the plans and an objective dispute resolution process. In addition, the proposal sets time limits for return of mistaken deposits and an objective dispute resolution process.

The proposed exemption is scheduled to be published in the September 18, 2009, edition of the Federal Register .   Comments on the proposal and any requests for a public hearing should be submitted to or by fax to 202-219-0204.   Paper-based comments should be sent to the Office of Exemption Determinations, Employee Benefits Security Administration, Room N-5700, U.S. Department of Labor, 200 Constitution Ave. N.W., Washington, D.C. 20210, Attention: Application Number L-11568.