Compliance December 1, 2006

IRS Issues Guidance on Employer Stock Account Diversification

The Treasury Department and IRS have issued Notice 2006-107 providing transition guidance on the provision of the Pension Protection Act of 2006 (PPA) relating to diversification rights of plan participants and beneficiaries who have accounts held in publicly traded employer securities.
Reported by

The notice, which is not required before January 1, 2007, defines what is considered a publicly traded employer security as well as the individuals who have diversification rights. In addition, the notice provides rules for investments offered for diversification.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Permitted, as well as non-permitted, restrictions and conditions of divesture are spelled out for plan administrators and sets forth transition rules for existing limitations and grandfathered investments.

The PPA requires that a defined contribution plan that holds publicly traded company stock permit participants to diversify the stock accounts after three years of service. The plans must give participants a notice of their diversification rights as well as educational material about the importance of diversification.

The guidance includes information provided by the Department of Labor concerning the date by which participants and beneficiaries must be notified of their new rights. There is also a model notice that can be used to satisfy the notification requirement.

The notice is here.

Deals & People December 1, 2006

Great-West Sweeps Up More 401(k) Business

U.S. Bank Institutional Trust&Custody has agreed to sell its bundled 401(k) plan business to Great-West Retirement Services, but is keeping its defined benefit business.
Reported by
The company said in a press release that it will also retain its trust, custody, non-qualified plan and health savings account businesses. US Bancorp, the parent company of U.S. Bank, beefed up its trust and custody business last year with the purchase of Wachovia Corporation’s corporate trust and institutional custody operations.

“The acquisition of the Wachovia institutional custody business demonstrates our commitment and willingness to invest in this business,” said Diane Thormodsgard, president of U.S. Bank, in the press release. “The sale of the 401(k) business allows us to concentrate our focus and resources on businesses where we have significant scale and/or opportunity for growth.”

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

She said the company didn’t have enough bulk in the 401(k) business to ultimately make further spending worthwhile. “By industry standards today, a book of two to three million participants is necessary to support continued investment,” Thormodsgard continued. She said U.S. Bank had approximately 195,000 participants.



Followingthetransaction,Great-WestRetirementServices will provide 401(k), 401(a), 403(b)and457retirementplanservicestomorethan21,000plans representing nearly 3.5 million participants with more than $104 billion in assets, according to the announcement, which said the terms of the deal were not disclosed.

Great-West has been moving aggressively to become a bigger player in the retirement business, especially on the DC side.

The company snagged the 401(k) and defined benefit business of Metropolitan Life Insurance Company in June, an agreement that includes nearly 2,600 plans and $7.5 billion in assets. The purchase of MetLife’s business nearly doubled the number of participants in Great-West’s full-service 401(k) business.

In 2005, Federated Investors revealed plans to sell its recordkeeping operation to Great-West.

«