MoJo

Ditto to Kirk - about my experience in the L.L.M. program (Tax) at Case Western Reserve University. Interestingly, a "name brand" L.L.M. may open a door for you, but what you do once you get there will determine whether you get to stay, or whether the door hits you in the hind-quarters on the way out. As you go through multiple employers through your career, the "name" becomes less and less important, and the "what have you done lately" becomes more and more important. CWRU's L.L.M. was also a very different (and more rewarding) experience than my J.D. program - but part of that was I had 10 years between finishing the J.D. and starting the L.L.M. - so part of the difference wasn't just the more practical aspects of the program, but rather my better appreciation of education as "training" rather than as a credential for marketability (and "big bucks" - or so I thought). Personally, I would opt for the best educational opportunity, rather than the credential. That's not to say that isn't what you have planned, but it may be a different approach in your evaluation.

Pardon my jumping in here, but I think people misinterpret the issue of "security" for a loan from a plan, in cases of earmarked loans (i.e. loans allocated to the account of the borrower). Security for the loan is the asset that is impaired for purposes of offsetting the loan in the event of default. In the example provided here, the security for the loan is the $25,000 balance (from which the actual proceeds of the loan are derived). The "cash" in the plan is replaced by a promissory note. Think of it this way - before the loan, the account has a value of $50,000. Immediately after the loan, the account still has a balance of $50,000, represented by a promissory note in the amount of $25,000, and another $25,000 in other assets. In the event of a default, the ONLY thing that would be removed from the account (at the appropriate time) would be the promissory note, leaving a balance in the account equal to the value of the other assets ($25,000, plus or minus investment experience). Hence, the "other" $25,000 is not "security" for the loan, because under NO circumstance could those assets be attached to satisfy the loan, in the event of default. My opinion is that the 50% rule had application only in the (old) world where loans were not earmarked to the account of the borrower (and were an assets of the plan allocatable to all participants). In this case, because of the potential that investment experience could erode an account balance, which would be offset in the event of default, that you could only borrow 50% of the balance, to reasonably ensure that there would be sufficient assets to offset the loan in the event of default. A long way of agreeing that, yep, you can take a hardship of the "other" 50% of the balance, because it isn't security for the loan - and the 50% rule only applies at the time the loan was taken out.

How many participants in a 401(k) plan would understand the mechanics of an Ameritrade account? I understand that Ameritrade does not function as a sub-t/a for purposes of processing trades, but does invest in the funds in an omnibus fashion. Typical participants aren't going to understand why there's all this hoopla about a 4:00ET deadline, and then have a 2:00 or earlier imposed on them inside the (k) plan.... If it ain't broke, don't fix it....

Economically, the impact may be negligible. From a participant perception perspective, it may be more impactful. Generally, my experience has been that sophisticated (in their own minds) participants challenge the processes employed in running a (k) plan already. This will cause them to feel, once again, they are being treated unfairly compared to the (non-(k) plan) general investing public. The non-sophisticated set will be split - half won't even know. The other half will wonder why they got the wrong price, but never be able to figure it out. Add the one day delay on investing (sometimes sizeable) contributions, and the potential impact can add up....

You know, I can't comment on this case specifically, because I haven't kept up with it, but it is interesting to note that our belief in the sanctity of human life has been eroded in many ways. It had been about 30 years since the State of Ohio had executed anyone. Now, in the last several years, about 6 people have been executed (which is a pittance compared to other states). Interesting that no one has raised a fuss about those lives. I guess our beliefs in the sanctity of life only apply to some, and not others. In my mind, life is precious, and if saveable with some modicum of quality (as defined by the person involved) then it should be saved. Each of us should examine our own beliefs, and those of our loved one (and for god's sake, ask them and talk to them to find out what their wishes are for life maintaining technologies), and do what is necessary to memorialize those wish. Most states now have mechanisms for doing so. Most people still don't take advantage of them.

Boy. Nobody around here can take a joke. My morally repugnant comment was meant as such, as a reference to the fact that I now fall into the "older employee" category.... Nothing more. Nothing less. Nonetheless, while expectations may be inflated on the part of employees whose benefits are affected by a conversion to any alternate plan design, also consider that such changes affect "total compensation" and as such may be a unilateral modification of the employment agreement between employer and employee (which may be "legal" but nonetheless may be philosophically wrong). Not too long ago Schwab eliminated the match on their 401(k) plan - which they had every legal right to do - but it was a pay cut for participants in that plan. As I understand it (and I know many people who work at Schwab Retirement Plan Services) is that the explanation was take a pay cut in the form of a match elimination or face layoff lottery. An employer who promises to pay me x, plus y in benefits, who then changes y to y-z has reduced my pay. The employee can go elsewhere. But, if the employer induces the employee to the job with a DB plan that provides z% of pay after 30 years of service, and then after 25 years of service changes it something less has unilaterally adversely impacted that employee's ability to attain their financial goals, in many cases without any alternatives available to the employee to recover. I consider my benefits as part of my compensation, and reductions in my compensation are morally repugnant to me - especially considering no comensurate decrease in my responsibilities (indeed, the converse typically is true), UNLESS the alternative is worse. Unfortunately, too many times I've experienced changes in benefits - including reductions in health care coverages and subsidies and a conversion to a cash balance plan - that had no explanation, other than to increase shareholder value at the expense of the employees. Maybe that's why employees no longer exhibit much loyalty to their employers as they did in decades past. The issue nonetheless raised in my first post in this thread is whether the judge in the IBM case properly concluded that differences in rates of accrual of benefits (meaning the rate at which an age 65 annuity benefit is accrued) is a violation of ERISA. I must admit, that ASSUMING that the age 65 annuity benefit is the measure, then I agree with the judge, that differences in accrual rates are impermissable. The question then becomes whether the age 65 annuity benefit is the appropriate measure, and at first blush, I believe the judge has a reasonable basis for his decision....

Mike: My "morally repugnant" comment was meant to be humorous - as I seem to have crossed over that line which separates "older workers" from "younger workers", and not to be taken seriously.... I do find some plan designs (not unique to cash balance plans) to be morally repugnant on philosophical grounds (in that I don't like my tax dollars subsidizing others' discriminatory benefit plans), but as a professional in the field, I realize that the Code defines "discrimination" in terms other than what others would believe it to be. In fact, I utilize those provision on behalf of my clients routinely. We could certainly argue whether those provisions are appropriate or not. From my perspective, they are probably necessary evils. That is, without certain incentives to the decision makers, in many case there would be no retirement plan offered by the employer....

MGB - precisely my point (albeit far more concise and articulate). The judge took the position that annuity value was the only way to measure rate of benefit accrual (and if memory serves me correctly, had a rational for doing so based on language in ERISA).

No offense to anyone, but arguing over venue and "pro-labor" courts is really irrelevant. The court is the court, and judges rule on the basis of what is in front of them. What would be more productive is an analysis of the judges reasoning with respect to the facts presented to it. I've read the case, and "on its face" it follows that cash balance plans do discriminate against older workers because the rate of benefit accrual for older workers is less than the rate of benefit accruals for younger workers (which, if true, *IS* a violation of ERISA, possible other federal laws, and morally repugnant (ok, the latter is my personal opinion, being based upon the fact that I am on the cusp of being one of those "older workers)). The issue is - is it true? I haven't looked at the record (and probably won't) but it seems to me that the examples used by the judge may have some assumption errors, or foundational logic issues. That is, why is it that if a participant 25 years old works for next 10 years participating in cash balance plan accrues a benefit bigger than a 55 year old who works for the next 10 years participating in the plan? I think the obvious answer is that the future value of the younger worker's benefit at age 65 is going to include "interest accruals" post termination (i.e. its a simply future value calculation). Does that mean that the benefits received by the two participants are disparate, or are they actuarially equivalent? Looking at it another way, the immediate benefits payable to each of the participants would be equal - but would that not be problematic, as to the extent that there are equal, they are not "actuarially equivalent"? Just some musing to spur discussion..... Michael

p.s. - generally there are trust fees associated with holding an employer stock fund - which may be passed through to the participants. Our trustee charges $2,500 annually for hold the fund.

A reasonable cost for transactions in company stock would be actual cost (which is somewhat dependent on the way in which is occurs - i.e. traded on an exchange or traded with the company (which, if the latter, should have no costs associated with it). For exchange traded securities, we (as a bundled service provider) incur a charge of $0.03 per share (which is deducted from the transaction).

jmiskey: I agree in practice that what you say is correct - unfortunately, the DOL has taken the position that a prudent fiduciary would most certainly take the revenue sharing fees (i.e. to leave them on the table for the benefit of the mutual fund company would be a breach of duty) and then, once taken, belong to the plan. Most of the fees taken are 12b-1 fees, and hence can't inure back to the fund company (and do, in fact, in many case remain within the mutual fund until taken) Once taken, the issue of what to do with them becomes important. On the flip side, if a prudent fiduciary does not intend to take the revenue sharing fees, then they should be looking for a fund that has no 12b-1 fee program, or otherwise has a lower expense ratio. Many funds have multiple classes of shares and you can invest in one with no 12b-1 fee program expense.

Fundamentally, I think you need to look at this a little differently - which leads to the conclusion that revenue sharing fees typically are going to be plan assets. Where do the fees come from? They are generated off of the assets held within the plan (and yes, in the case of mutual funds by virtue of the investment of fund assets, which are typically not considered plan assets, but would not exist but for the invest by the plan in the fund) and are paid via some mechanism inherent in the operation of the fund itself (such as 12b-1 fee programs, sub-t/a arrangements, or even investment management fees). BUT FOR the investment fund paying the revenue sharing to the service provider, the assets of the plan invested in the fund would typically be larger - and hence, by taking the revenue sharing fees, the plan has lost value which otherwise would have been gain to the participants. The DOL, in my experience, has now gone so far as to question promotional give-aways (such as drawings at conferences, golf outings, client conferences and the like) because no matter how you slice it, the funds used to pay for those events/gifts were funds that had they not been taken would have enhanced the return to participants, and hence are a misuse of plan assets, and are a violation of the exclusive benefit rule (which holds that only "reasonable" expenses may be paid by plan assets). If spending money on gifts earned through revenue sharing arrangements is evidence of the less than reasonableness of fees PAID BY PLAN ASSETS, in violation of the exclusive benefit rule, then the revenue sharing fees received must be, in the DOL's eyes, plan assets. Trust me on this one. We fought. We lost. We even pointed out the eggregious things our competition was doing for their client conference and trade conferences (Palm Springs? All expenses paid except for airfare? DVD players? Ping clubs?) We got nailed on a $200 Best Buy gift certificate, and 9 holes of public course golf at our client conference located at our corporate headquarters (a long, long way away from Palm Springs).

A few years back the DOL issued a pair of Advisory Opinions on the fundamentals involved here. unfortunately, they did not encompass the variety of arrangements that can be , and have been, implements. The opinions centered around Frost National Bank's structure of rebates/offsets. Start there. Where I've seen excess revenue sharing, it typically 1) is used to reduce billables to zero; 2) it is used to pay other legitimate plan expenses (audits, legal, etc (as long as they are not settlor functions); 3) they are used to increase services (more days of education, custom materials, etc.); and then, maybe 4) used to increase participant benefits. I agree that the rebating of certain kinds of revenue would be an NASD violation, but generally, you can suck up the excess revenue rather effectively in other ways.

Which bar exam are you referring to, mbozek? I can assure you the Ohio bar exam includes federal income tax questions, as does Virginia's (or at least they did in 1985 and 1988, respectively). The question posed here is not whether the interpretation of tax code sections is the practice of law (one can argue both sides of that rather persuasively), but rather whether the advice given in structuring a retirement plan and the drafting of the documents to give effect to the resulting design can effectively be segregated. Mere tax code interpretation would make virtually any business consultant, or really any business person, guilty of the unauthorized practice of law - many business decisions (if not all of them) take into consideration the tax implications of that decision. Clearly the drafting of the plan documents is a function of the practice of law; where the disagreement comes in, and where I understand the crux of the argument in N.C. and elsewhere is, is whether you can "consult" on the design of the plan, and advise appropriately, without considering how that design translates into the legal documents. N.C. and others argue that the two aspects of the business are inseparable, and hence, the practice of law is engaged in at anytime the end result is the production of legal plan documents. Others (mostly in the business) argue that designing a plan is a wholly separate activity from the production of plan documents, and therefore not the practice of law. So far, in most jurisdictions, the issue has been resolved in favor of those in the business, and not the bar. IMHO, it is a rather specious argument on behalf of those in the bar (and I count myself among those). It of necessity relegates the lawyers to the position of scrivener only, and not of a legal business advisor. That is, in order to make the argument that the consultations are meaningless without the end result of legal plan documents, we perpetuate the myth that only lawyers can write legal documents (presumably because of the training necessary to use those "magic words" that give effect to arcane legal concepts). That is a ridiculous argument considering well over 90% of all business transactions in this country still occur only on a handshake. Further, the argument could be used against lawyers to the extent that the outcome of a discussion is not something "exclusively" within the practice of law and hence the "exclusive" province of another professional (like a CPA - where the unauthorized practice of accountancy can be an issue as well). As a lawyer, and a consultant, and hopefully as a trusted advisor, I like to see my clients issues from a variety of perspectives, and to gather information from all of them prior to forming an opinion, or giving advice, and in doing so, I believe I can give better service, as part of a team of professionals, than any one of us could give alone. Just my two cents worth....

Four01Kman: We've suggested a similar approach (assuming the contract in-kind within a separate account - placing an additional insurance wrap over the account so that for plan recordkeeping purposes, the wrap "book value" is used, then terminating the contract and reinvesting the proceeds appropriately). By using the added wrap over the top, the "value" to the plan won't change as a result of a change in the underlying investment, in the same way that the value of a synthetic GIC doesn't change when the portfolio manager trades (either at a gain or a loss) the underlying fixed income portfolio. Now, "prove it...." For the record, I am an attorney, and have been shopping this arround my contacts in the profession, as well as through others to a fair number of other attorneys. Most concur that it is an interesting issue, and that the practice of the industry has been inconsistent (i.e. see my previous post about market value equalizers v. allocating market value losses to participants when no substitute stable value fund is offered (or when one doesn't want to do a market value equalizer) v. what I've been told is a common practice in the stable value business to do exactly what we've proposed).

No doubt there are fiduciary implications here - but the trustees have evaluated the situation and are prepared to make that decision - i.e. that want to go from a single issuer credit to a diversified pool - but without any allocation of the market value gain or change in the current stated rate. The issue is more on the qualification side. Nothing much has happened yet - except the research continues (and the industry continues to do these kind of transactions almost daily - albeit with no firm resolution of the issue). I still find it interesting that in the negative market value situation, that some providers (mostly insurance companies) will provide a "market value equalizer" on the transfer of the business to them which takes the market value, grosses it up to book value, and amortizes the difference over the duration of the underlying portfolio. What we've proposed is the same thing, except that instead of a negative market value adjustment, we have a positive one.... I guess those providers are just doing so without clear authority....

Everyone know's that the state sport of West Virginia.....

True, mbozek, but with interest rates at present historical lows (my money market is now paying .58%), wiith considerably more potential for increases than decrease (you can't go below zero!) and with insurance companiies now averaging a B or below credit quality, the conservative approach appears to be diversifcation in the highest credit quality product available (the synthetic has over 100 issuers, more than half in govies and agencies, an average credit quality of AA+, no more than 1.5% in any one issuer, no issue below A rating, and average duration (factoring out current cash flow in), of about 2.2 years - you can't get more conservative than that). The examples you cite were in a high(er) interest rate environment where the direction of rates were anybodies guess. I wish it were my money - I can't get close to the 5%+ this fund is paying....

mbozek - you're cautions are well taken, which is why the concerns exist with respect to this matter; however, in reality, these transactions occur virtually daily without a second thought (synthetics are generally a better buy when rates are low, and are expected to trend upwards, as they more closely track rates. Traditional GICs are better when rates are high, and are expected to trend lower, as they don't track as closely and will maintain the higher yield longer). The fiduciary angle is being well covered, and the appropriate process and documentation has been developed (and there are other reasons for doing this deal other than locking in the higher yield/market value gain, i.e. single issuer paper is becoming riskier and riskier (Cigna is one step away from junk status, for one, other's have had issues as well). The point of this thread, (apart from this specific set of facts) is, as well, to ascertain whether something which truly is standard operating procedure in the inducstry with respect to changes in stable value funds is appropriate. If it isn't, lots of people have problems. If it is, then there ought to be a way to logically demonstrate that appropriateness. Demonsthenes: Well, I would disgree that a gain is always recognized (or even that a loss is always recognized). I've seen many, many circumstances where an insurance company will take another's contract in (cashing it in at a loss) and replacing it with a contract that maintains the prior book value. I believe they refer to it as a "market value equalizer," and they amortize the market value loss over an extended period of time (through lower crediting rates) with their own back-end load, or termination arrangement, to recapture any unamortized loss in case the contract is prematurely terminated. Now granted, I have some reservations about such a strategy for many reasons, but it in fact happens, and it is in fact is identical to this situation, except the numbers have minus signs in front of them.

Probably an oversimplification., rcline46. The one thing I like about an ERISA practice is that nothing is black and white. The GOAL of ALL, including the trustees and their attorneys is to make this happen.... And in fact, it happens all the time, but "proof" seems to be elusive of the correctness of either position. Getting an opinion is an option, BUT, the issue I think is more of an IRS one, and not a DOL one, and I don't think this is a plr-able situation. Besides, timing is critical, or the economics of the deal change with the value of the underlying portfolio. It's been suggested that the contract be transfered, in kind, into a separate account, and"wrapped" with another book value wrapper, and then liquidated (underneath the wrapper, which then becomes the new synthetic. And ideas?

mbozek: This transaction is the former (i.e., a contract with a book value of $1 million at 5% is being exchanged for another "contract" with a book value of $1 million at 6%). The reason this can be done is the replacement deal is a synthetic GIC run through a separate account, which isn't encumbered by the prior insurance company's expenses and experience. The market value of the underlying assets in both the prior and the post fund will also be equal (say, $1.2 million). The current GIC contract is open-ended (i.e. has no true maturity date), but most contracts I've seen pay book value at termination (and not market value adjusted values). I agree there is a fiduciary issue of whether the trustees should cancel the existing contract and capture the gain for the benefit of the participants, but they have reasoned (rightly or wrongly) that it is in the best interest of the participants, and therefore prudent, to maintain a fund which has a guaranteed rate (reset annually) at above market rates rather than suffer a lower rate going forward on a higher balance. In essence, as well, that market value gain in the existing contract is being captured (over time) as it has caused the interest rate to be above market (i.e. the gain is "amortized" over the average duration of the underlying portfolio to achieve that above market rate. Conversely, if there were a market value loss, the loss would be amortized producing a below market crediting rate for the next year or two (or until the underlying portfolio generates gains...)). While thie current contract is a "GIC" of sorts issued by an insurance company, it behaves very much like a synthetic. If interest rates change, there is a risk that the gain will evaporate, and next year's crediting rate will suffer, but the trustees are unconcerned by that currently. Replacing the GIC with the synthetic offers a better underlying investment strategy with lower expenses which the trustees believe will produce better returns on the fund (better than the GIC, anyway) going forward - provided the current market value gain can be "captured" and utilized to support that rate (i.e. NOT allocated currently to participants). Structurally, the replacement deal is IDENTICAL to the current contract, as both use market value gains (or losses) to increase (or decrease) furture credinting rates. Economically, the synthetic (arguably) offers a better investment option by reducing expenses, and benefitting from a different underlying investment strategy. The trouble with the client relying on counsel (which, of course is generally a good thing) is that their theory here is the antithesis of the entire stable value industry's current practices - and it isn't a "schlock" sub-advisor (you'd recognize the name if you do anything in the stable value field), and they have had their GC, and their outside counsel review this (trying to "disprove a negative" as it were), and I'm an attorney as well (but not representing the plan/trust/trustees) and have talked to other counsel all of of whom, recognize that the industry would typically not consider this a concern, but can't find authority to "disprove that negative," or conversely, to indicate these transactions are truly inappropriate (and shutting down the ability of one to capture assets to fund a synthetic GIC strategy). Katherine: The goal here is to NOT recognize the gain as allocable to participant accounts, as it does destroy the economics of the deal, and in the trustees mind, the value of the fund to the participants (the trustees do not want to have rates going forward adjusted to market - they want to maintain above market crediting, and would like to capture even greater above market crediting by going to the synthetic strategy). A few more facts: This is, of course, a Taft-Hartley plan, and hence, much ado is paid to the perceptions of the participants (members). The trustees will NOT allow the current crediting rate to be reduced - even though by "cashing in the contract and reinvesting the proceeds at current market rates" theoretically has no net economic impact on the membership. But *you* explain to a trademen that yesterday he was getting 5% on a 1x account balance, and tomorrow he or she is going to get 3.5% on a 1.5x account balance. You wouldn't get past the 3.5% before you'd be in trouble.... So, the issue is justification of essentially what happens many times each year in a "GIC to synthetic" transaction of maintaining book value on the participant records, and utilizing a gain to maintain a rate going forward. Interesting problem, to say the least. And who says ERISA isn't an exciting field to be in?????

I don't think I'm being clear. The asset of the plan is a GIC contract which does not change in value (except to the extent that interest is credited at the stated rate). As long as the contract is in force, there are no gains to allocate. If this were NOT the case, then the concept of a stable value fund (either a GIC, a pool of GICs (collective trust) or a synthetic GIC would never work - as there would never be a "stable" value. Clearly, that is not the case.... Think of it this way: Upon termination, there is a contractual "penalty" - a termination charge or a surrender charge, if you will, which will alter the value of the contract - but only at the time of the termination. That "penalty" is formula driven, and the formula is based on the "market value" of a separate account managed by the insurance company issuing the contract. This pool of assets is NOT an asset of the plan's trust (only the contract is, which does not change in value, hence no current allocation issues exist). Because of the way the termination charge formula is written, it is possible that the penalty will produce a "negative charge", or a gain. So, NO gain exists until the contract is terminated, but the gain on termination is calculable in advance, and we know that if terminated today, the formula would produce a gain. I understand that a life insurance policy is generally carried at cash surrender value, which fluctuates, but I think that is not analogous to a stable value fund. Bottom line - there is NO current problem with not having allocated the gain as it accrued, because none ever accrued, or could be accrued, per the terms of the contract, until the termination occurs. So, now, the question still arrises as to whether there in fact is a gain which is allocatable to specific accounts of participants at the time of the termination of the contract, considering that there is a substitute fund, into which the gross proceeds would reinvested, at "book value" with the gain being amortized as an above market current stated interest rate? This is the scenario that occurs all the time when one GIC contract is substituted for another. The subadvisor on the fund (one of the two largest stable value managers in this country) has indicated that they do it hundreds of times, and no one has ever raised the issue of the market value gain being currently allocatable to participants accounts - indicating rather that the "new" or substitute investment (another GIC contract in many cases) is simply purchased at a premium to book value, and the enhanced yield justifies the premium (which is, in effect, the market value gain that exists at the prior contract's termination). That is, a bond purchased with a 6% yield will cost more than a bond purchased at a 5% yield. So, in effect, the gain is "allocated."

In the case of a stated rate stable value fund, the value of the contract (think GIC) reportable to the participants is the book value (cost plus accrued earnings at the stated rate). The underlying assets, which are not assets of the trust (by virtue of the insurance contract over the top of it (think synthetic GIC), but are rather assets in the insurance companies general (or separate) accounts form the basis of the amount of cash the trust will receive in the event of contract termination. That is, participants are guaranteed book value as long as the contract is in force (as a general obligation of the insurance company), but receive only market value of the underlying assets in the event of contract termination (i.e. the value of the underlying assets without the insurance wrap).

A client has stated rate stable value fund in it's plan, which is in the form of an insurance company issued contract. Currently, the contract has a market value gain (i.e. the market value of the underlying pool of assets exceeds the book value allocated to the participant accounts). The contract is terminable at market value currently. Client wants to terminate the contract (capturing the market value gain) and transfer the funds (including the market value gain) to a new provider, who can guarantee a higher stated rate. Stable Value Advisors say this happens all the time. Outside counsel says the termination of the insurance contract may trigger an "allocatable event" which would require that the market value gain be allocated to the participant accounts currently as an investment gain, and can't be used to support a higher guaranteed rate in the future, on the theory that if it were a market value loss realized, with no replacement fund, the participants' would suffer an investment loss - hence, they should likewise receive any gain. Of course, allocating the MV gain would render the strategy of a provider shift to capture a higher going forward crediting rate impossible. The client would like the higher rate going forward. On one level, that may sound appropriate, except when you consider that 1) the current insurance company (that issued the contract) is in fact using that gain (amortized over time) to support the rate it is guaranteeing (which is above current market) (which raises the question of whether the fiduciaries should terminate the contract just to capture that gain for allocation purposes only); and 2) the gain was accrued over time, and much of it was accrued previously (i.e. the current investors in the fund may not be the ones who were investors in the fund when the gain was accrued) - hence if an "allocatabel event" occurs, one who invests on the day before the proceeds were realized would benefit equally with one who had been invested in the fund for a period of time. I have been unable to find any authority to indicate whether the MV gain is an allocatable item to the participants (who were "guaranteed nothing but preservation of principle plus a state interest rate), or can be used to support a rate going forward, with a different issuer. That is, is the act of terminating the contract with a replacement ready to take the assets immediately a realization of the MV gain such that it should be allocated to the participants currently, rather than amortized (and credited to them) as a higher crediting rate going forward? The closest analogy I have found deals with demutualization proceeds. The DOL has apparently indicated that demutualization proceeds may be used to provide future benefits (i.e. higher crediting rates going forward, as opposed to being allocatable to current investors in the fund(s)).