(a) In general. A plan that receives special financial assistance may invest amounts attributable to such assistance monies only in fixed income securities denominated in U.S. dollars and in accordance with this section. For purposes of this section, such securities are referred to as permissible investments.
(b) Other definitions. For purposes of this section -
(1) Adequate capacity to meet financial commitments means that the risk of default by the obligor is low and the full and timely repayment of principal and interest on the security is expected.
(2) Permissible fund vehicles mean exchange traded funds, mutual funds, pooled trusts, or other commingled securities whose investible assets are invested solely in fixed income securities denominated in U.S. dollars, with an average credit quality, weighted by market value, that meets the definition of investment grade.
(3) Investment grade means publicly traded securities for which the issuer has at least adequate capacity to meet the financial commitments under the security for the projected life of the asset or exposure.
(4) Leverage means the right to a return on a capital base that exceeds the investment which was contributed to the entity or instrument achieving a return.
(c) Holdings. A plan must hold permissible investments in either -
(1) Individual bonds, securities, or other debt securities; or
(2) Permissible fund vehicles.
(d) Quality of permissible investments. Permissible investments must be considered investment grade by a fiduciary, within the meaning of
section 3(21) of ERISA, who is or seeks the advice of an experienced investor (such as an Investment Advisor registered under
section 203 of the Investment Advisor's Act of 1940), except that up to 5 percent of the aggregate market value of a plan's assets attributable to special financial assistance may be invested in securities or permissible fund vehicles that were investment grade at the time of purchase but are no longer investment grade.
(e) Leverage and derivative limitations on permissible fund vehicles or portfolio of individual securities held by the plan.
(1) Permissible investments, whether held through permissible fund vehicles or directly through a portfolio of individual securities may not be supplemented by derivatives or otherwise leveraged in a way that could increase the interest rate risk or credit risk in the fund vehicle or portfolio beyond the risk in a portfolio of physical securities, meeting the definition of permissible investments in paragraph (a) of this section, equal to the market value of the portfolio; and
(2) Any notional derivative exposure, other than exposure gained through a permissible fund vehicle, must be supported by liquid assets that are cash or cash equivalents denominated in U.S. dollars.
29 C.F.R. § 4262.14 — Permissible investments of special financial assistance. · eCFR amendment effective 2021-07-12 · https://pensionresource.website/EAMain?content=EAMain.Law&id=cfr29-4262.14&asof=2021-07-12 · printed Oct 19, 2026