Plans to be Allowed to Take Cash Settlements

February 10, 2003 ( - Plans would be able to settle lawsuits in exchange for cash without running afoul of ERISA's prohibited transaction rule, according to a proposed rule exemption.

The proposal, from the US Department of Labor’s Employee Benefits Security Administration (EBSA), also allows related parties to pay amounts owed to plans on an installment basis, the department announced.

Among the conditions of the proposal is the requirement that the terms of the settlement be negotiated by a fiduciary not involved in the transaction that was the subject of the litigation.   The proposal should remove any uncertainty and allow plan fiduciaries to properly carry out their responsibilities under ERISA by focusing on the merits of the settlement, the ESBA said.

The proposed exemption is scheduled to be published in the February 11, 2003 Federal Register.   Questions or comments should be directed to the Office of Exemption Determination at (202) 693-8540.