GLOBAL - Northern Trust is in "discussions" with the US Department of Labor (DoL) over allowing multi-national companies to pool their US-based pension scheme assets in tax transparent vehicles based in Ireland and Luxembourg.
Both countries operate tax transparent vehicles – the Dublin-based Common Con-tractual Fund (CCF) and Luxembourg-based Fonds Commun de Placement (FCP) – that allow multi-nationals to pool their assets from various schemes based within Europe.
However, it is as yet unclear whether these arrangements comply with the indicia of ownership regulations under section 404(b) of the Employee Retirement Income Security Act (ERISA), to allow US-based pension schemes to pool through the vehicles.
Northern Trust has claimed to have created a pooling solution that resolves any potential taxation issues, but was reluctant to go ahead with the launch before getting the green light from the DoL.
Kathy Dugan, senior product manager, pooling at Northern Trust said the firm had made an advisory request which asked for an interpretation of whether certain arrangements involving multi-national cross-border pooling arrangements were consistent with the relevant section of ERISA.
According to a spokesperson from the DoL, under the indicia of ownership requirements, “plan assets may be maintained outside of the district courts of the US so long as the assets are under the management control of a fiduciary, corporation or partnership organised under the laws of the US.”
Though the DoL has yet to hand down a formal response, it appears likely a decision will be made within a few months.
Gavin Bullock, head of pension pooling at Deloitte said: “US multi-nationals are quite excited about the prospect of pooling in Europe. If there is a certain asset class or manager that the US plans do not have access to, they may choose to invest part of the US assets in a European pooling vehicle to get exposure to that asset class and/or manager.”
Currently only two tax transparent equity pooling vehicles have been fully implemented by multi-nationals – Unilever’s “Univest” in Luxembourg and IBM’s “IBM Diversified Global Equity Fund” in Dublin. Northern Trust said there were at least four more in the pipeline.
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