UPDATE 1-US Treasury ruling aims to block pension transfers

(Adds details on Treasury's ruling)

WASHINGTON, Aug 6 (Reuters) - The U.S. Treasury on Wednesday ruled that employers cannot transfer most pension plans to an unrelated entity without an accompanying transfer of significant business assets, operations or employees.

The ruling aims to prevent transfers of tax-qualified pension plans to unrelated firms that only operate the plans. However, the Bush administration also unveiled principles that it said could guide the development of new legislation that could permit pension plan transfers in some cases.

The Treasury said federal law requires qualified pension plans be established by employers for the "exclusive benefit of its employees or their beneficiaries."

It said transferring a pension plan to a third party in a move that is not part of an acquisition of business assets or operations would benefit a firm whose sole business aim is to profit from the operation of the plan.

Such a transfer would not qualify for tax benefits, Treasury said, because an unrelated pension operator would not be considered an employer and because the benefits would not be exclusive to employees and beneficiaries.

The Treasury said it, the Labor Department, the Commerce Department and the Pension Benefit Guaranty Corp developed guidelines for new laws that would permit transfers where the transaction is in the "best interest of plan participants, their beneficiaries, employers and the pension insurance system."

Under this "legislative framework", a "frozen" pension plan under which benefits are no longer accruing could be transferred to an entity unrelated to the employer or former employer of plan participants if certain conditions were met.

These include advance notice to all parties including regulators; that plan acquirers be in strong financial condition and in well-regulated sectors; that parties to the transfer demonstrate that the transfer is in the best interest of participants and their benefits would be exposed to less risk; and transfer limitations be imposed to prevent undue concentration of risks. (Reporting by David Lawder, Editing by Chizu Nomiyama)