The U.S. Department of Labor recently proposed an exemption that would allow the General Motors Co. to transfer company securities, including common stock, preferred stock and a $2.5 billion promissory note, to a health plan established for the company’s retirees.

The retiree health plan of the Detroit-based company will cover approximately 700,000 retirees and dependents when it becomes effective on Dec. 31, 2009.

Under ERISA, an employer that attempts to transfer a substantial amount of company stock into a plan violates the law. Nevertheless, ERISA gives authority to the DOL to grant exemptions that protect the interests of plan participants and beneficiaries.

The exemption, if granted, would permit GM to transfer securities to allow the company and its health plans to reimburse each other for benefit payments mistakenly paid by the wrong entity during the transition to the new plan, and allow GM to recover mistaken deposits to the plan.

The exemption also calls for an independent fiduciary to represent the retiree health plan with securities transactions. The independent fiduciary will determine whether to take action against the plan sponsor for violating the interests of the plan and its participants and beneficiaries.

In addition, the proposed exemption requires that the independent third-party administrator and auditor for each of the plans review benefit payments and conduct an objective dispute resolution process.

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