In our Client Alert dated September 29, 2008, we reported that some in the insurance industry have raised a question about participation in the Treasury's temporary guarantee program by money market funds that support variable insurance products. Specifically, would such participation cause all of the money market fund's portfolio securities to be counted as "government securities" of a single issuer in violation of the diversification requirements of Internal Revenue Code Section 817(h)?
On October 7, 2008 the IRS issued Notice 2008-92 stating that participation in the Program by an insurancededicated money market fund is not a violation of the diversification requirements of IRC §817(h) and the regulations thereunder. In addition, the Treasury Department and IRS will not assert that such a fund's participation in the Program causes the holder of a variable contract supported by a segregated asset account that invests in the fund to be treated as an owner of the fund.
The deadline for participation in the Program is today, October 8, 2008.