The growth in synthetic GIC use has attracted attention from the Department of Labor to prevent abuses by issuers. Synthetic issuers may face government scrutiny if they wrap their own actively managed portfolio, said Ivan L. Strasfeld, the DOL's director-office of exemptions determinations.
He also said issuers who manage underlying assets and reset rates periodically without a pre-determined formula might be violating ERISA. He said his office has seen recent instances of actively managed synthetics in which the issuer also resets the rates, making the issuer the fiduciary. In that instance, ``the interests of the plan and the issuer may not be aligned,'' he said.