TO PERMIT CERTAIN EXTENSIONS OF CREDIT FROM A REGISTERED
BROKER OR DEALER WHO IS NOT A FIDUCIARY. WE HAVE RECENTLY
PROPOSED A SEVEN MONTH'S EXTENSION OF THE MAY 1, 1978 EXPIRATION
DATE CONTAINED IN PROHIBITED TRANSACTIONS EXEMPTION 75-1
(THE BROKER-DEALER EXEMPTION). WITHOUT AN EXEMPTION ERISA
GENERALLY PROHIBITS BROKER-DEALERS FROM EFFECTING SECURITIES
TRANSACTIONS ON BEHALF OF A PLAN FOR WHICH THEY ARE FIDUCIARIES.
THE MAY 1, 1978 EXPIRATION DATE FOR THIS TYPE OF TRANSACTION
WAS INCORPORATED INTO THE EXEMPTION AT THE DIRECTION OF
CONGRESS AS SET FORTH IN THE CONFERENCE REPORT ACCOMPANYING
THE SECURITIES ACTS AMENDMENTS OF 1975. SECTION 11(A) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS ADDED BY THE 1975 AMENDMENTS,
PROHIBITS ANY MEMBER OF A NATIONAL SECURITIES EXCHANGE FROM
EFFECTING ANY TRANSACTION ON THE EXCHANGE FOR AN ACCOUNT WITH
RESPECT TO WHICH IT EXERCISES ANY INVESTMENT DISCRETION. THE
CONFERENCE REPORT INDICATED THAT THE AGENCIES RESPONSIBLE FOR
ADMINISTERING ERISA SHOULD GRANT AN EXEMPTION UNTIL MAY 1, 1978
TO FIDUCIARIES EFFECTING SECURITIES TRANSACTIONS SO THAT THE
ERISA AGENCIES AND THE SEC MIGHT DEVELOP CONSISTENT RULES.
WE NOTE THAT BOTH HOUSES OF CONGRESS HAVE RECENTLY ACTED TO
EXTEND SECTION 11(A)'S MAY 1, 1978 EFFECTIVE DATE.

PROHIBITED TRANSACTIONS EXEMPTIONS 77-3 AND 77-4 PERTAIN
77-3 PERMITS

TO TRANSACTIONS BETWEEN PLANS AND MUTUAL FUNDS.
THE PURCHASE OF MUTUAL FUND SHARES BY AN EMPLOYEE BENEFIT PLAN
THAT COVERS EMPLOYEES OF THE MUTUAL FUND. 77-4 PROTECTS THE

PURCHASE AND SALE BY AN EMPLOYEE BENEFIT PLAN OF MUTUAL FUND
SHARES WHEN A FIDUCIARY OF THE PLAN IS ALSO AN INVESTMENT

ADVISOR TO THE MUTUAL FUND.

PROHIBITED TRANSACTIONS EXEMPTION 77-9 PERMITS THE CONTINUED SALE OF INSURANCE PRODUCTS AND MUTUAL FUND SHARES TO PLANS AND THE RECEIPT OF COMPENSATION FOR THE SALES BY PENSION CONSULTANTS, INSURANCE AGENTS AND BROKERS, INSURANCE COMPANIES, INVESTMENT COMPANIES AND INVESTMENT COMPANY PRINCIPAL UNDERWRITERS WHO ARE ALSO PLAN FIDUCIARIES. THE SALES MUST BE ON ARM'S-LENGTH TERMS AND FOR NO MORE THAN REASONABLE COMPENSATION, AND, BECAUSE OF THE POTENTIAL FOR CONFLICT-OF-INTEREST, THE AVAILABILITY OF THE EXEMPTION IS LIMITED TO CERTAIN CLASSES OF DISQUALIFIED PERSONS, AND IS FURTHER CONDITIONED ON CERTAIN TYPES OF DISCLOSURE. WE PRESENTLY HAVE UNDER CONSIDERATION ADDITIONAL CONDITIONS AND TECHNICAL CHANGES WHICH WE HOPE WILL EASE ADMINISTRATIVE BURDENS IN THESE AREAS WHILE MAINTAINING

STATUTORY PROTECTIONS.

WE HAVE ALSO PROPOSED AN EXEMPTION TO PERMIT A VARIETY OF TRANSACTIONS BETWEEN INSURANCE COMPANY POOLED SEPARATE ACCOUNTS AND PARTICIPATING PLANS AND OTHER RELATED DISQUALIFIED PERSONS.

COORDINATION WITH OTHER AGENCIES

YOU ALSO ASKED ABOUT OUR EXPERIENCE IN ACHIEVING EFFECTIVE COORDINATION WITH OTHER FEDERAL AGENCIES. AS YOU KNOW, THE INTERRELATED JURISDICTIONAL SCHEME OF ERISA NECESSITATES AND,

INDEED, MANDATES A HIGH LEVEL OF COOPERATION AND COORDINATION BETWEEN AND AMONG THE RESPONSIBLE AGENCIES. IN RECOGNITION OF THIS MANDATE, DURING THE EARLY STAGES OF IMPLEMENTATION, THE THREE RESPONSIBLE AGENCIES, THE SERVICE, DOL, AND PBGC, CREATED TWO IMPORTANT STEERING COMMITTEES TO PROVIDE COORDINATED POLICY AND PROGRAM DIRECTION. THE ERISA POLICY BOARD AND THE ERISA COORDINATING COMMITTEE SERVED WELL TO PROVIDE THE NEEDED DIRECTION DURING THE FORMATIVE YEARS, AND CONTINUE TO DO SO TODAY, AS NEEDED, ALTHOUGH ON A MORE INFORMAL BASIS.

EMANATING FROM THE OPERATION OF THESE COORDINATING GROUPS CAME THE CONSOLIDATION OF DOL AND IRS ANNUAL RETURNS INTO ONE RETURN FORM AND, THROUGH COORDINATION OF THE DOL "PLAN YEAR" AND IRS "TAX YEAR" CONCEPTS, WE ESTABLISHED JOINT FILING DATES. WE HAVE NOW INCLUDED A SUBSTANTIAL PART OF PBGC'S DATA INFORMATION NEEDS INTO THE ANNUAL RETURN AND HAVE DEVELOPED A SINGLE RETURN, ONE AGENCY (IRS), FILING PROCEDURE AND ONE COMPUTER SYSTEM TO SERVICE THE RETURN AND DATA INFORMATION NEEDS OF ALL THREE AGENCIES. THIS COMBINED RETURN PROCESSING AND COMPUTER SYSTEM, ON A COST-SHARING BASIS, WILL PROVIDE MICROFICHE COPIES OF ALL RETURNS TO DOL, MICROFICHE COPIES AS NEEDED TO PBGC, AND DATA EXTRACTS TO ALL THREE AGENCIES AS NEEDED TO ADMINISTER THE ACT. IN ADDITION TO THE ABOVE, THE SERVICE WILL ASSUME FULL RESPONSIBILITY FOR SECURING DELINQUENT RETURNS AND ASSESSING DELINQUENCY PENALTIES.

IN ADDITION TO CONSOLIDATING THE PBGC DATA ELEMENTS INTO THE ANNUAL RETURN, WE ARE NOW WORKING WITH THAT AGENCY TO STRUCTURE A ONE-STOP TERMINATION PROCEDURE SO THAT EMPLOYERS OR PLAN ADMINISTRATORS WHO ARE CONTEMPLATING TERMINATING THEIR DEFINED BENEFIT PLANS NEED FILE WITH ONLY ONE AGENCY. UNDER THIS PROCEDURE WORK WOULD BE COORDINATED BETWEEN THE AGENCIES BUT SEPARATE RESPONSES WOULD BE FURNISHED THE REQUESTOR SINCE THE AGENCIES HAVE SEPARATE STATUTORY RESPONSIBILITIES CONCERNING PLAN TERMINATION (IN THE CASE OF IRS THIS CONCERN IS THE TAX QUALIFICATION OF THE TERMINATING PLAN AND FOR PBGC THE CONCERN IS, OF COURSE, THE SUFFICIENCY OF PLAN ASSETS). AS A FURTHER EXPANSION OF THE USE OF THE ONE AGENCY COMPUTER SYSTEM THE IRS AND DOL WILL BE CONDUCTING AN EXTENSIVE STUDY OF THE FEASIBILITY OF USING COMPUTER PROBABILITY PROFILES, ALSO KNOWN AS DISCRIMINATE FUNCTION CONCEPTS, IN THE IDENTIFICATION OF PLANS WHICH MAY BE IN VIOLATION OF FIDUCIARY STANDARDS OR DEFICIENT IN FORM OR OPERATION.

BECAUSE THE PRINCIPAL OBJECTIVE AND EFFORT OF IRS SINCE THE PASSAGE OF ERISA HAS BEEN TO PROVIDE TIMELY RESPONSE TO APPLICATIONS FOR DETERMINATION AS TO REQUALIFICATION UNDER THE PROVISIONS OF THE ACT, OUR COMPLIANCE EFFORTS HAVE BEEN EXTREMELY LIMITED AND, ACCORDINGLY, OUR COMPLIANCE COORDINATION WITH DOL HAS BEEN LIMITED. THE SERVICE HAS, HOWEVER, PROMPTLY AUTHORIZED AND MADE AVAILABLE RETURN AND RETURN INFORMATION TO THE DEPARTMENT WHEN AND AS REQUESTED.

SINCE BOTH AGENCIES WILL SOON BE MOVING INTO A MORE EXTENSIVE COMPLIANCE PROGRAM, WE HAVE DEVELOPED A FORMALIZED COORDINATED COMPLIANCE AND LITIGATION PROCEDURE WHICH WILL PROVIDE FOR THE UNRESTRICTED FLOW OF INFORMATION BETWEEN THE AGENCIES FROM THE TIME A CASE IS IDENTIFIED FOR EXAMINATION THROUGH POSSIBLE LITIGATION. THE PROCEDURE PROVIDES FOR EITHER JOINT OR COORDINATED EXAMINATIONS, AND MOST IMPORTANTLY, WILL ELIMINATE DUPLICATION OF EFFORT AND THE RESULTING BURDEN ON TAXPAYERS WHO OTHERWISE WOULD BE REQUIRED TO RESPOND TO THE INVESTIGATIONS OF TWO SEPARATE AGENCIES AT DIFFERENT TIMES.

IN ORDER TO FAMILIARIZE THE FIELD MANAGERS OF BOTH AGENCIES WITH THE OPERATION OF THE PROPOSED PROCEDURE, A JOINT IRS-DOL REGIONAL MANAGERS MEETING WAS HELD IN WASHINGTON, D.C. IN JANUARY OF THIS YEAR. HAVING CONSIDERED THE VIEWS OF OUR RESPECTIVE FIELD OFFICIALS, THE AGENCIES NOW ANTICIPATE PROMPT ADOPTION OF THE PROCEDURE. THE IMPLEMENTATION OF THE COORDINATED COMPLIANCE PROCEDURE WILL REMOVE THE RESTRICTIONS TO EFFECTIVE AND COOPERATIVE INTERAGENCY COMMUNICATION. IN ADDITION, THE RECENT PUBLICATION OF TEMPORARY REGULATIONS WITH RESPECT TO CODE SECTION 6103'S DISCLOSURE REQUIREMENTS SHOULD FURTHER RESOLVE COORDINATION PROBLEMS.

IN ADDITION TO EXTENSIVE COORDINATION WITH OUR TWO ASSOCIATE AGENCIES IN THE ADMINISTRATION OF ERISA, THE SERVICE AND DOL HAVE ENGAGED IN COOPERATIVE EFFORTS WITH THE