EBSA Proposes Exemption for Ford VEBA to Acquire Company Stock

December 9, 2009 (PLANSPONSOR.com) - The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) has announced a proposed exemption that would allow the Ford Motor Co. to transfer company securities to a voluntary employee beneficiary association (VEBA) trust which would provide health benefits to retirees.

An EBSA news release said the new health plan would cover in excess of 285,000 retirees and their dependents, and a small number of active employees. The exemption would permit the transfer of securities, permit Ford and its health plans to reimburse each other for benefit payments mistakenly paid by the wrong entity during the transition of benefits coverage to the new plan, and permit the automaker to recover deposits mistakenly made to the plan. 

The Employee Retirement Income Security Act (ERISA) 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 assets of the VEBA plan will be held by the same trust that holds the assets of the plans established by Chrysler and General Motors for their respective retirees; however, there will be three separate retiree accounts for each plan that is funded through the VEBA trust. The agency has already proposed the exemption for Chrysler (see EBSA Proposes ERISA Exemption for Chrysler VEBA) and GM (see DoL Proposes Exemption for GM VEBA to Hold Company Stock).

 EBSA said the primary condition of its proposal is the appointment of an independent fiduciary to represent the plan with regard to Ford 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.

The proposed exemption also would require 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 the return of mistaken deposits and an objective dispute resolution process.

The proposed exemption was published in the December 8 edition of the Federal Register.  Comments on the proposal and any requests for a public hearing can be emailed to Ford@dol.gov or faxed 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. NW, Washington, D.C. 20210, Attention: Application Number L-11575.