Wednesday, October 13, 2010

DOL Grants Prohibited Transaction Exemption to General Motors

The United States Department of Labor's ("DOL") Employee Benefits Security Administration ("EBSA") has granted an individual prohibited transaction exemption -- PTE No. 2010-30 --that will allow General Motors Co. to transfer company securities (including common stock, preferred stock, and a $2.5 billion promissory note) to a health plan established for GM retirees. The exemption, which covers the the United Auto Workers GM Retiree Medical Benefits Plan and its associated UAW Retiree Medical Benefits Trust is effective retroactive to July 10, 2009. Generally speaking, the exemption allows GM to transfer certain assets to its voluntary employees' beneficiary association ("VEBA") plan to provide for post-retirement health benefits. Without the exemption, the large transfer of employer securities to the plan likely would have resulted in a violation of ERISA's prohibited transaction rules, which prohibit certain benefit plans from holding large percentages of plan assets in the form of employer securities. See for more information and the text of the PTE.