Compliance October 5, 2015

Credit Suisse Can Continue Managing Retirement Plan Assets

The bank, which pled guilty to criminal charges last year, applied for an exemption that would enable it to keep its status as a qualified professional asset manager.
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The Department of Labor’s Employee Benefits Security Administration (EBSA) has granted a prohibited transaction exemption to Switzerland-based Credit Suisse, allowing it to keep its status as a qualified professional asset manager (QPAM).

The QPAM exemption allows asset managers to engage in transactions with parties in interest with respect to retirement plans without running afoul of the prohibited transaction restrictions of the Employee Retirement Income Security Act (ERISA) or the Internal Revenue Code. According to an EBSA Notice, the exemption covers some entities affiliated with the bank until November 2019, and covers others related to the bank until November 2024.

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The temporary exemption addresses an anti-criminal rule that states a QPAM or any of its affiliates must be able to cite a clear criminal record on a variety of crimes within 10 years immediately prior to a given transaction. On May 19, 2014, Credit Suisse pleaded guilty to criminal charges that it facilitated tax evasion by helping U.S. clients avoid paying taxes to the Internal Revenue Service.

Last year, the EBSA granted a temporary exemption to Credit Suisse, which will expire next month.

Administration October 5, 2015

Teamsters Plan Asks for Benefit Reductions Under MPRA

An actuary report says the Central States plan is projected to become insolvent in 2026.
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The Teamsters Central States, Southeast and Southwest Areas Pension Fund announced a “Rescue Plan” to members that includes a request to the Department of the Treasury to allow benefit reductions.

According to a letter from Susan Mauren, employee representative for the pension fund, the rescue plan distributes the burden of benefit reductions between retirees and active employees, but includes new re-employment rules for retirees and a cap for the maximum reduction. The Multiemployer Pension Reform Act of 2014 (MPRA) allows plans in “critical and declining status” to avoid insolvency by reasonably cutting benefits, including for those already in pay status.

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Pension plan members will get a vote on the benefit reductions, but the ultimate decision will come from the Treasury Department. This may be the first request for benefit reductions under the MPRA.

An actuary report attached to Mauren’s letter says the Central States plan is projected to become insolvent in 2026. Maureen noted that there is now only one active member per four retirees for whom contributions are made to the fund. In addition, many employers have withdrawn from the fund in the past decade. Further, she said, the Pension Benefit Guaranty Corporation (PBGC) multiemployer pension insurance program is projected to become insolvent before the Central States pension fund.

“That leaves two alternatives. Do nothing and current retirees will receive the same amount of benefits each month for a few more years. But, their payments will cease completely in a few years, and many who are entitled to a pension but not yet retired will receive nothing. Or cut benefits now so that current and future retirees have a pension they can count on for years to come, even if it is smaller,” Mauren wrote.

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