Benefits October 2, 2009

EBSA Proposes ERISA Exemption for Chrysler VEBA

October 2, 2009 (PLANSPONSOR.com) - The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) on Friday proposed giving an exemption to allow the New Chrysler Corp. to transfer approximately $4.59 billion in promissory notes and company securities to a Voluntary Employees Benefit Association (VEBA) Plan.
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The VEBA would provide retiree health benefits for about 120,000 retirees and dependents when it becomes effective on Jan. 1, 2010, EBSA said in a news release.

The company said New Chrysler had asked for such an exemption under the Employee Retirement Income Security Act (ERISA) so the VEBA could hold stock and debt of New Chrysler to facilitate the sale of the company to Fiat North America LLC (see Chrysler VEBA Funded in Post-Bankruptcy Deal ). While ERISA bars certain plans from holding large percentages of plan assets in the form of employer securities, the Department of Labor has the authority to exempt a plan from the provision.

align=”left”> According to the news release, the exemption would allow the securities transfer, permit New Chrysler 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 the automaker to recover mistaken deposits to the plan.

The assets of the VEBA plan will be held by the same trust that holds the assets of the plans established by Ford and General Motors for their respective retirees. There will be separate accounting for each plan maintained by the three companies that are now funded through a single trust.

Independent Fiduciary Appointment

EBSA said the primary condition of the proposal is the appointment of an independent fiduciary to represent the plan with regard to New Chrysler securities transactions. 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.

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align=”left”> 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, regulators said. In addition, the proposal sets time limits for the return of mistaken deposits and an objective dispute resolution process.

The proposed exemption is scheduled to be published in the October 5, 2009, edition of the Federal Register.

Comments on the proposal and any requests for a public hearing should be submitted to Chrysler@dol.gov 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-11566.

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