Northern Trust has received an advisory opinion from the US Department of Labor that clears the way for US pension that clears the way for US pension plan participation in cross-border pension pooling vehicles meeting certain requirements.
These vehicles are set up by multinational corporations in order to gain efficiencies and improved corporate governance over global pension funds.
The advisory opinion clarifies that the use of pooled offshore vehicles to hold the assets of the US pension plans and non-US pension plans of multinational corporations administered by Northern Trust in the manner described in the advisory opinion would not violate certain requirements of the Employee Retirement Income Security Act (ERISA) that relate to the holding of currencies or securities offshore.
“Northern Trusts cross-border pooling solution was designed to comply with ERISA regulations, and we are pleased to have this confirmed by the federal authorities. Ever since we pioneered cross-border pooling seven years ago, clients have expressed an interest in pooling assets from subsidiary pension plans across the globe, including the United States. With this Department of Labor advisory opinion, we expect more multinational companies to capitalize on the benefits of bringing cross-border assets together for investment management purposes. This is a prime example of our leadership in the global pension markets,” says Tim Theriault, president of Corporate and Institutional Services, Northern Trust.
Northern Trust supports tax-transparent and non-tax-transparent pooling vehicles for more than $26 billion in assets on behalf of some of the most sophisticated multinational companies and investment managers around the globe. Using a proprietary system to support custody and fund accounting, Northern Trust launched the first vehicle for cross-border pension pooling in 2001. Northern Trust then worked with a multinational client-led consortium in 2005 to create the first two fully tax-transparent, cross border pension pooling vehicles.
Northern Trust worked with clients and outside counsel to request an advisory opinion from the US Department of Labor to confirm that their pooling service was compliant with certain ERISA regulations. The opinion was issued to Northern Trust this week.
“This is a very exciting development for cross-border pooling. Now US subsidiary plans will be able to leverage strategic investment platforms established by their parent company and realise benefits including access to best-in-class investment managers and enhanced governance and risk management. Our innovative solution supports funds with multiple countries of investment and multiple countries of investor and this advisory opinion clears the way for truly comprehensive, global solutions that include large ERISA plans,” says Phillip Caldwell, global product manager for cross-border pooling, Northern Trust.