CHICAGO — A cross-border pension pooling structure developed by Northern Trust Co. could enable multinational companies to commingle their ERISA and non-U.S. pension assets, using a single fund to gain more control of investment management, particularly for global equity strategies.
The structure, which is awaiting approval from the Department of Labor as well as a U.S. patent, allows a multinational company to comply with withholding and other investment-related taxes particular to each country where its pension plans are based.
Northern Trust's system enables jurisdictions to tax only that investment income and gains particular to each country and not the entire pool.
Northern Trust applied for a U.S. patent for its development of the system and methodology.
"The patent applies only to tax-transparent vehicles" of cross-border pension pooling, said Kathy Dugan, Northern Trust's multinational product manager. "That's what is unique in what we are doing, and that is what is covered in patent application. The patent doesn't apply to the investment managing of the pools," typically managed by investment advisers selected by the multinational company.
It is the first time Northern has applied for a patent. Ms. Dugan doesn't know when U.S. patent authorities will make a decision.
The system was designed to comply with the Employee Retirement Income Security Act, although Northern Trust officials do not yet know if it will pass muster with the Labor Department to enable U.S.-based and non-U.S.-based multinationals to use the pooling vehicle for their ERISA pension assets.
"We have been working with the DOL to get their opinion" on the pooling vehicles, Ms. Dugan said.
Peter Hong, Labor Department spokesman, was unable to provide a response from officials before deadline.