Pooled Separate Accounts and ERISA

[Guest curious jorge]

With regard to a pension investments in a non-guaranteed group annuity contract that is a pooled separate account, my understanding is that the amounts invested are ERISA plan assets. Why is it then that pension plans generally do not require insurance companies to acknowledge their fiduciary status in such contracts, which thereby would make the insurance companies investment managers under ERISA so as to limit fiduciary liability? Does this have to do with the fact that the insurance industry is heavily regulated?

[Demosthenes]

I heard this one from someone who was there, as a result of diligent lobbying, Group Annuity contracts issued by Insurance Companies are exempt from ERISA. The story was that they spread a lot of money around (this was pre PAC and campaign finance reform) to get GAs exempted

TITLE 29--LABOR

CHAPTER 18--EMPLOYEE RETIREMENT INCOME SECURITY PROGRAM

SUBCHAPTER I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

Subtitle B--Regulatory Provisions

part 4--fiduciary responsibility

Sec. 1103. Establishment of trust

(b) Exceptions

The requirements of subsection (a) of this section shall not apply--

(1) to any assets of a plan which consist of insurance contracts

or policies issued by an insurance company qualified to do business

in a State;

Sweet, huh?

[QDROphile]

That does not mean there is no fiduciary status/duty. It only means the assets do not have to be held in a trust.

[Guest curious jorge]

403(a) also indicates that trustees have sole and exclusive investment authority/discretion except to extent there's a named fiduciary or a delegation to investment manager. Although 403(b) says none of (a) applies when assets consist of insurance contracts, it seems more than a stretch to infer then that a fiduciary can insulate itself (i.e., delegate investment authority and liability with it)in an insurance contract situation in the same way as with an investment manager, only without jumping through the investment manager hoops.

[PLAN MAN]

I thought it was time to reopen this discussion. Under the group annuity contract, the insurance company admits they are an ERISA fiduciary with this language: "ERISA requires (insurance company) to act solely in the interest of plans and participants in administering plan assets. ERISA's fiduciary responsibility provisions may not apply to administration of general account assets by (insurance company)."

The question I still have is does this mean the insurance company is accepting the role of Investment Manager for the assets invested in the separate accounts? We can agree that the funds invested in the separate accounts are plan assets and the insurance company is a fiduciary by offering the investments.

However, must there be a formal appointment by the Employer and acceptance by the Insurance Company for the insurance company to be identified as an Investment Manager?