Two new developments of particular interest to insurance-dedicated money market funds have recently emerged.
On October 8, 2008, the Treasury Department issued a press release announcing that money market funds maintaining a stable net asset value or share price greater than $1.00 will be eligible to participate in the Program. The deadline for these funds to enroll in the Program is 11:59 pm Washington, D.C. time on October 10, 2008. For other money market funds eligible to participate, the deadline remains 11:59 pm Washington, D.C. time on October 8, 2008. Please click here for the press release.
On October 7, 2008, the Treasury Department and the IRS issued Notice 2008-92, regarding the applicability of the Treasury Department’s Temporary Guarantee Program for Money Market Funds (the “Program”) to insurance-dedicated money market funds. Please click here for Notice 2008-92.
Notice 2008-92 makes it clear that coverage under the Program will be available to insurance-dedicated money market funds supporting variable contracts that otherwise satisfy the criteria for coverage.
In addition, Notice 2008-92 addresses tax issues we raised with the Treasury Department and the IRS and discussed in our September 24, 2008, legal alert, stating that those agencies will not assert that participation in the Program by an insurance-dedicated money market fund will cause a violation of the diversification requirements of Section 817(h) and the regulations thereunder or cause the holder of a variable contract supported by the fund to be treated as an owner of the fund (i.e., participation will not result in a violation of the Investor Control Rulings, including Rev. Rul. 77-85, 1977-1 C.B. 12; Rev. Rul. 80-274, 1980-2 C.B. 27; Rev. Rul. 81-225, 1981-2 C.B. 13; Rev. Rul. 2003-91, 2003-2 C.B. 347; Rev. Rul. 2003-92, 2003-2 C.B. 350). The Treasury Department and the IRS moved promptly and effectively to address these issues.