Regulatory Environment Update

February 2009

Fee Disclosure

The Department of Labor (DOL) had advanced two sets of proposed regulations affecting 401(k) plan fee transparency, one governing fee disclosure between service providers and employers and one governing fee disclosure to plan participants. Both sets of proposed regulations were aimed at private-sector plans and did not directly affect public sector plans (as the DOL does not have jurisdiction over these plans). The White House announced that any proposed regulations not completed prior to the end of the Bush Administration were on hold and would need to be reconsidered by the new Administration. This directly impacts the proposed service provider and participant fee disclosure regulations that were not finalized before the end of the Bush Administration.

HRA Beneficiary

ICMA-RC submitted a private letter ruling request to the Internal Revenue Service (IRS) that would provide a solution to the HRA beneficiary problem. The PLR would permit non-spouse/dependent beneficiaries to use RHS account tax-free by requiring that participants pay a nominal amount of imputed tax during their lifetime. The PLR would not, however, overturn the 2006 revenue ruling. Since its submission on August 25, 2008, ICMA-RC has been in discussions with the IRS. Recently IRS officials indicated that they may view our proposed solution favorably, but would prefer to rule on a plan with a more typical design than the one we submitted. We are in the process of resubmitting the request with another client with a more commonly-used funding mechanism for its plan. We are still hopeful of receiving a favorable ruling from the IRS by mid-year.

Treasury Money Market

The Treasury’s temporary guarantee program for money market funds provides certain limited protection in cases where a fund falls below $1 share value. The guarantee program was authorized through December 2008 and has since been extended until April 30, 2009. Only those funds that elected to participate in the program by October 8, 2008 are eligible to participate in any extension of the program. The Vantagepoint Money Market Fund invests substantially all of its assets in a money market fund managed by Invesco AIM Advisors, Inc., which has been granted protection under the Treasury's temporary guarantee program. Similarly, the VantageTrust Cash Management Fund invests all of its assets in the Vantagepoint Money Market Fund. Therefore, the protection will be available to the Vantagepoint Money Market Fund and the VantageTrust Cash management Fund and their respective shareholders.