“Senate to Plans: ‘No Swaps for You!’”

On May 20, 2010 the Senate passed its comprehensive financial reform bill, titled the "Restoring American Financial Stability Act of 2010" (the "Senate Bill").  One provision of the Senate Bill in particular has the potential to dramatically impact retirement plans subject to the Employee Retirement Income Security Act of 1974, as amended and the companies that sponsor them – which is to say, most of corporate America.  Governmental plans, States, State agencies, cities, counties, municipalities and other political subdivisions of State or Federal agencies would be similarly affected.

The provision could make it very difficult for plans to engage in many commonplace financial transactions that have been used as a tool to manage and reduce financial risk.  This Stroock Special Bulletin provides an overview of the provision, and highlights some of its implications for plan fiduciaries, plan sponsors and their corporate officers, investment managers of plans and their other financial service providers.