Default Investment Alternatives Under Participant Directed Individual Account Plans, 23349-23350 [E8-9371]

Download as PDF Federal Register / Vol. 73, No. 84 / Wednesday, April 30, 2008 / Rules and Regulations with and all appeals or requests for further review are disposed of, the period in which an appeal may be taken has expired or the period in which a request for further review may be made has expired. The determination of whether there has been full compliance will be made within a reasonable time, given the volume and complexity of the records produced, after the later of the giving of all testimony or the production of all records requested by the summons or required by any order enforcing any part of the summons. If, following an enforcement order, collateral proceedings are brought challenging whether the production made by the summoned party fully satisfied the court order and whether sanctions should be imposed against the summoned party for a failing to do so, the suspension of the periods of limitations shall continue until the summons or any order enforcing any part of the summons is fully complied with and the decision in the collateral proceeding becomes final. A decision in a collateral proceeding becomes final when all appeals are disposed of, the period in which an appeal may be taken has expired or the period in which a request for further review may be made has expired. (f) Effective/applicability date. This section is applicable on April 30, 2008. Dated: April 17, 2008. Linda E. Stiff, Deputy Commissioner for Services and Enforcement. Eric Solomon, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. E8–9518 Filed 4–29–08; 8:45 am] BILLING CODE 4830–01–P DEPARTMENT OF LABOR Employee Benefits Security Administration 29 CFR Part 2550 RIN 1210–AB10 Default Investment Alternatives Under Participant Directed Individual Account Plans Employee Benefits Security Administration, Department of Labor. ACTION: Correcting amendments. mstockstill on PROD1PC66 with RULES AGENCY: The Department published in the Federal Register of October 24, 2007 (72 FR 60452), a final regulation providing relief from certain fiduciary responsibilities for fiduciaries of participant-directed individual account SUMMARY: VerDate Aug<31>2005 16:50 Apr 29, 2008 Jkt 214001 plans who, in the absence of directions from a participant, invest the participant’s account in a qualified default investment alternative. The final regulation implemented recent amendments to title I of the Employee Retirement Income Security Act of 1974 (ERISA) enacted as part of the Pension Protection Act of 2006, Public Law 109– 280. The Department has determined that two paragraphs in the final regulation, and one statement in the SUPPLEMENTARY INFORMATION, require correction. Accordingly, this document corrects the final regulation by revising these paragraphs. Effective Date: The amendments to the final regulation are effective on April 30, 2008. Applicability Date: The amendments to the final regulation apply on and after December 24, 2007. DATES: FOR FURTHER INFORMATION CONTACT: Allison Wielobob, Office of Regulations and Interpretations, Employee Benefits Security Administration, (202) 693– 8500. This is not a toll-free number. SUPPLEMENTARY INFORMATION: A. General Section 624(a) of the Pension Protection Act of 2006 (Pension Protection Act) added a new section 404(c)(5) to ERISA. Section 404(c)(5)(A) of ERISA provides that, for purposes of section 404(c)(1) of ERISA, a participant in an individual account plan shall be treated as exercising control over the assets in the account with respect to the amount of contributions and earnings which, in the absence of an investment election by the participant, are invested by the plan in accordance with regulations prescribed by the Secretary of Labor. On October 24, 2007, the Department of Labor (Department) published a final regulation implementing the provisions of section 404(c)(5) of ERISA. A fiduciary of a plan that complies with the final regulation will not be liable for any loss, or by reason of any breach, that occurs as a result of investment in a qualified default investment alternative. The regulation describes the types of investments that qualify as default investment alternatives under section 404(c)(5) of ERISA. B. Correcting Amendments The Department has determined that one statement in the text of the SUPPLEMENTARY INFORMATION to the final regulation and two regulatory provisions require amendment. PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 23349 1. Amendment of Supplementary Information Text In the Supplementary Information, 72 FR at 60456, the Department provides an explanation of paragraph (c)(5)(ii) of the final regulation. This paragraph provides that any transfer or permissible withdrawal from a qualified default investment alternative resulting from a participant’s or beneficiary’s election to make such a transfer or withdrawal during the 90-day period beginning on the date of the participant’s first elective contribution, or other first investment in a qualified default investment alternative, shall not be subject to any restrictions, fees or expenses, other than certain ongoing administrative and investment fees. The Department explained that this provision was intended to prevent the imposition of any restriction, fee, or expense on a transfer or permissible withdrawal of assets, whether assessed by the plan, the plan sponsor, or as part of an underlying investment product or portfolio. The Department also provided a few examples of restrictions that might inhibit a participant’s or beneficiary’s decision to withdraw, sell or transfer assets out of a qualified default investment alternative during this 90day period. One of the cited examples was a ‘‘round-trip’’ restriction on the ability of the participant or beneficiary to reinvest within a defined period of time. The Department has concluded that the reference to ‘‘round-trip’’ restrictions was too broad and should not have been included as an example of an impermissible restriction. ‘‘Roundtrip’’ restrictions, unlike fees and expenses assessed directly upon liquidation of, or transfer from, an investment, generally affect only a participant’s ability to reinvest in the qualified default investment alternative for a limited period of time. This is not a restriction prohibited by paragraph (c)(5)(ii) of the final regulation. However, to the extent that a ‘‘roundtrip’’ restriction would affect a participant’s or beneficiary’s ability to liquidate or transfer from a qualified default investment alternative or restrict a participant’s or beneficiary’s ability to invest in any other investment alternative available under the plan, it would be impermissible for purposes of paragraph (c)(5)(ii) of the final regulation. 2. Regulatory Text Amendments The Department is also amending language in paragraph (e)(3) of the regulation, describing persons that may manage a qualified default investment alternative. In response to comments on E:\FR\FM\30APR1.SGM 30APR1 mstockstill on PROD1PC66 with RULES 23350 Federal Register / Vol. 73, No. 84 / Wednesday, April 30, 2008 / Rules and Regulations the proposed regulation, paragraph (e)(3) was expanded to include a plan sponsor who is a named fiduciary of the plan. The Department intended that this expansion would broadly accommodate employers that manage their plan investments in-house. However, the reference to ‘‘plan sponsor’’ in paragraph (e)(3)(i)(C) has raised questions as to whether a committee that is a named fiduciary of the plan and is comprised primarily of employees of the plan sponsor can manage a qualified default investment alternative when that committee, pursuant to plan documents, is a named fiduciary. To address this uncertainty, the Department is amending paragraph (e)(3)(i)(C) to make clear that such a committee of the plan sponsor may manage a qualified default investment alternative. Finally, the Department is amending paragraph (e)(4)(v) of the final regulation. As explained in the Supplementary Information to the final regulation, this provision establishes a ‘‘grandfather’’-type rule to treat stable value products and funds as qualified default investment alternatives solely for purposes of investments made before the effective date of the final regulation. The Department included this provision to accommodate employers who had selected stable value products or funds as their default investments before the regulation’s effective date and who may not be able to transfer participants’ and beneficiaries’ assets out of such investments without incurring significant expenses. Following publication of the final regulation, the Department determined that the description of stable value products and funds as set forth in paragraph (e)(4)(v) may limit the availability of the ‘‘grandfather’’-type relief, contrary to the intention of the Department. To ensure broad application of this relief to stable value products and funds, the Department is changing paragraph (e)(4)(v) of the final regulation to provide that stable value products or funds must invest primarily in investment products that are backed by state or federally regulated financial institutions. For example, these investment products may be issued directly by such institutions. Alternatively, the principal and accrued interest on the investment products may be backed by contracts issued by such institutions. The Department finds, in accordance with section 553(b) of the Administrative Procedure Act (5 U.S.C. 553(b)), that notice and public comment is not necessary. This document merely amends a statement in the SUPPLEMENTARY INFORMATION to the final VerDate Aug<31>2005 16:50 Apr 29, 2008 Jkt 214001 regulation regarding the application of a regulatory provision and modifies two provisions to address public uncertainty regarding their scope. For the same reason, the Department finds good cause for making this document effective upon publication in the Federal Register. C. Regulatory Impact Analysis None of the correcting amendments being adopted herein will alter the analysis or data contained in the regulatory impact analysis of the final regulation. See 72 FR at 60466 (October 24, 2007). List of Subjects in 29 CFR Part 2550 Employee benefit plans, Exemptions, Fiduciaries, Investments, Pensions, Prohibited transactions, Real estate, Securities, Surety bonds, Trusts and trustees. I Accordingly, 29 CFR part 2550 is corrected by making the following correcting amendments: PART 2550—RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY 1. The authority citation for part 2550 continues to read as follows: I Authority: 29 U.S.C. 1135; sec. 657, Pub. L. 107–16, 115 Stat. 38; and Secretary of Labor’s Order No. 1–2003, 68 FR 5374 (Feb. 3, 2003). Sec. 2550.401b–1 also issued under sec. 102, Reorganization Plan No. 4 of 1978, 43 FR 47713 (Oct. 17, 1978), 3 CFR, 1978 Comp. 332, effective Dec. 31, 1978, 44 FR 1065 (Jan. 3, 1978), 3 CFR, 1978 Comp. 332. Sec. 2550.401c–1 also issued under 29 U.S.C. 1101. Sections 2550.404c–1 and 2550.404c– 5 also issued under 29 U.S.C. 1104. Sec. 2550.407c–3 also issued under 29 U.S.C. 1107. Sec. 2550.408b–1 also issued under 29 U.S.C. 1108(b)(1) and sec. 102, Reorganization Plan No. 4 of 1978, 3 CFR, 1978 Comp. p. 332, effective Dec. 31, 1978, 44 FR 1065 (Jan. 3, 1978), and 3 CFR, 1978 Comp. 332. Sec. 2550.412–1 also issued under 29 U.S.C. 1112. 2. Amend § 2550.404c–5 by revising paragraphs (e)(3)(i)(C) and (e)(4)(v)(A) to read as follows: I § 2550.404c–5 Fiduciary relief for investments in qualified default investment alternatives. * * * * * (e) * * * (3) * * * (i) * * * (C) the plan sponsor, or a committee comprised primarily of employees of the plan sponsor, which is a named fiduciary within the meaning of section 402(a)(2) of the Act; * * * * * (4) * * * (v) * * * PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 (A) Subject to paragraph (e)(4)(v)(B) of this section, an investment product or fund designed to preserve principal; provide a rate of return generally consistent with that earned on intermediate investment grade bonds; and provide liquidity for withdrawals by participants and beneficiaries, including transfers to other investment alternatives. Such investment product or fund shall, for purposes of this paragraph (e)(4)(v), meet the following requirements: (1) There are no fees or surrender charges imposed in connection with withdrawals initiated by a participant or beneficiary; and (2) Such investment product or fund invests primarily in investment products that are backed by State or federally regulated financial institutions. * * * * * Signed at Washington, DC, this 24th day of April, 2008. Bradford P. Campbell, Assistant Secretary, Employee Benefits Security Administration, Department of Labor. [FR Doc. E8–9371 Filed 4–29–08; 8:45 am] BILLING CODE 4510–29–P DEPARTMENT OF DEFENSE Department of the Army 32 CFR Part 501 Employment of Troops in Aid of Civil Authorities Department of the Army, DoD. Final rule. AGENCY: ACTION: SUMMARY: This action removes 32 CFR Part 501, Employment of Troops in Aid of Civil Authorities. The regulations are being removed because they are obsolete and no longer govern policies for the Department of the Army in planning and operations involving the use of Army resources in the control of actual or anticipated civil disturbances. The program responsibility has been transferred to the Office of the Assistant Secretary of Defense for Homeland Defense. DATES: Effective April 30, 2008. ADDRESSES: Department of the Army, Office of the Deputy Chief of Staff, G– 3/5/7, DAMO–ODS, 400 Army Pentagon, Washington, DC 20310–0400. FOR FURTHER INFORMATION CONTACT: Ms. Loretta Phillips, (703) 692–7459. SUPPLEMENTARY INFORMATION: The responsibility for this program was originally with the Department of the E:\FR\FM\30APR1.SGM 30APR1

Agencies

[Federal Register Volume 73, Number 84 (Wednesday, April 30, 2008)]
[Rules and Regulations]
[Pages 23349-23350]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-9371]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2550

RIN 1210-AB10


Default Investment Alternatives Under Participant Directed 
Individual Account Plans

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Correcting amendments.

-----------------------------------------------------------------------

SUMMARY: The Department published in the Federal Register of October 
24, 2007 (72 FR 60452), a final regulation providing relief from 
certain fiduciary responsibilities for fiduciaries of participant-
directed individual account plans who, in the absence of directions 
from a participant, invest the participant's account in a qualified 
default investment alternative. The final regulation implemented recent 
amendments to title I of the Employee Retirement Income Security Act of 
1974 (ERISA) enacted as part of the Pension Protection Act of 2006, 
Public Law 109-280. The Department has determined that two paragraphs 
in the final regulation, and one statement in the SUPPLEMENTARY 
INFORMATION, require correction. Accordingly, this document corrects 
the final regulation by revising these paragraphs.

DATES: Effective Date: The amendments to the final regulation are 
effective on April 30, 2008.
    Applicability Date: The amendments to the final regulation apply on 
and after December 24, 2007.

FOR FURTHER INFORMATION CONTACT: Allison Wielobob, Office of 
Regulations and Interpretations, Employee Benefits Security 
Administration, (202) 693-8500. This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

A. General

    Section 624(a) of the Pension Protection Act of 2006 (Pension 
Protection Act) added a new section 404(c)(5) to ERISA. Section 
404(c)(5)(A) of ERISA provides that, for purposes of section 404(c)(1) 
of ERISA, a participant in an individual account plan shall be treated 
as exercising control over the assets in the account with respect to 
the amount of contributions and earnings which, in the absence of an 
investment election by the participant, are invested by the plan in 
accordance with regulations prescribed by the Secretary of Labor. On 
October 24, 2007, the Department of Labor (Department) published a 
final regulation implementing the provisions of section 404(c)(5) of 
ERISA. A fiduciary of a plan that complies with the final regulation 
will not be liable for any loss, or by reason of any breach, that 
occurs as a result of investment in a qualified default investment 
alternative. The regulation describes the types of investments that 
qualify as default investment alternatives under section 404(c)(5) of 
ERISA.

B. Correcting Amendments

    The Department has determined that one statement in the text of the 
SUPPLEMENTARY INFORMATION to the final regulation and two regulatory 
provisions require amendment.

1. Amendment of Supplementary Information Text

    In the Supplementary Information, 72 FR at 60456, the Department 
provides an explanation of paragraph (c)(5)(ii) of the final 
regulation. This paragraph provides that any transfer or permissible 
withdrawal from a qualified default investment alternative resulting 
from a participant's or beneficiary's election to make such a transfer 
or withdrawal during the 90-day period beginning on the date of the 
participant's first elective contribution, or other first investment in 
a qualified default investment alternative, shall not be subject to any 
restrictions, fees or expenses, other than certain ongoing 
administrative and investment fees. The Department explained that this 
provision was intended to prevent the imposition of any restriction, 
fee, or expense on a transfer or permissible withdrawal of assets, 
whether assessed by the plan, the plan sponsor, or as part of an 
underlying investment product or portfolio. The Department also 
provided a few examples of restrictions that might inhibit a 
participant's or beneficiary's decision to withdraw, sell or transfer 
assets out of a qualified default investment alternative during this 
90-day period. One of the cited examples was a ``round-trip'' 
restriction on the ability of the participant or beneficiary to 
reinvest within a defined period of time. The Department has concluded 
that the reference to ``round-trip'' restrictions was too broad and 
should not have been included as an example of an impermissible 
restriction. ``Round-trip'' restrictions, unlike fees and expenses 
assessed directly upon liquidation of, or transfer from, an investment, 
generally affect only a participant's ability to reinvest in the 
qualified default investment alternative for a limited period of time. 
This is not a restriction prohibited by paragraph (c)(5)(ii) of the 
final regulation. However, to the extent that a ``round-trip'' 
restriction would affect a participant's or beneficiary's ability to 
liquidate or transfer from a qualified default investment alternative 
or restrict a participant's or beneficiary's ability to invest in any 
other investment alternative available under the plan, it would be 
impermissible for purposes of paragraph (c)(5)(ii) of the final 
regulation.

2. Regulatory Text Amendments

    The Department is also amending language in paragraph (e)(3) of the 
regulation, describing persons that may manage a qualified default 
investment alternative. In response to comments on

[[Page 23350]]

the proposed regulation, paragraph (e)(3) was expanded to include a 
plan sponsor who is a named fiduciary of the plan. The Department 
intended that this expansion would broadly accommodate employers that 
manage their plan investments in-house. However, the reference to 
``plan sponsor'' in paragraph (e)(3)(i)(C) has raised questions as to 
whether a committee that is a named fiduciary of the plan and is 
comprised primarily of employees of the plan sponsor can manage a 
qualified default investment alternative when that committee, pursuant 
to plan documents, is a named fiduciary. To address this uncertainty, 
the Department is amending paragraph (e)(3)(i)(C) to make clear that 
such a committee of the plan sponsor may manage a qualified default 
investment alternative.
    Finally, the Department is amending paragraph (e)(4)(v) of the 
final regulation. As explained in the Supplementary Information to the 
final regulation, this provision establishes a ``grandfather''-type 
rule to treat stable value products and funds as qualified default 
investment alternatives solely for purposes of investments made before 
the effective date of the final regulation. The Department included 
this provision to accommodate employers who had selected stable value 
products or funds as their default investments before the regulation's 
effective date and who may not be able to transfer participants' and 
beneficiaries' assets out of such investments without incurring 
significant expenses.
    Following publication of the final regulation, the Department 
determined that the description of stable value products and funds as 
set forth in paragraph (e)(4)(v) may limit the availability of the 
``grandfather''-type relief, contrary to the intention of the 
Department. To ensure broad application of this relief to stable value 
products and funds, the Department is changing paragraph (e)(4)(v) of 
the final regulation to provide that stable value products or funds 
must invest primarily in investment products that are backed by state 
or federally regulated financial institutions. For example, these 
investment products may be issued directly by such institutions. 
Alternatively, the principal and accrued interest on the investment 
products may be backed by contracts issued by such institutions.
    The Department finds, in accordance with section 553(b) of the 
Administrative Procedure Act (5 U.S.C. 553(b)), that notice and public 
comment is not necessary. This document merely amends a statement in 
the SUPPLEMENTARY INFORMATION to the final regulation regarding the 
application of a regulatory provision and modifies two provisions to 
address public uncertainty regarding their scope. For the same reason, 
the Department finds good cause for making this document effective upon 
publication in the Federal Register.

C. Regulatory Impact Analysis

    None of the correcting amendments being adopted herein will alter 
the analysis or data contained in the regulatory impact analysis of the 
final regulation. See 72 FR at 60466 (October 24, 2007).

List of Subjects in 29 CFR Part 2550

    Employee benefit plans, Exemptions, Fiduciaries, Investments, 
Pensions, Prohibited transactions, Real estate, Securities, Surety 
bonds, Trusts and trustees.

0
Accordingly, 29 CFR part 2550 is corrected by making the following 
correcting amendments:

PART 2550--RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY

0
1. The authority citation for part 2550 continues to read as follows:

    Authority: 29 U.S.C. 1135; sec. 657, Pub. L. 107-16, 115 Stat. 
38; and Secretary of Labor's Order No. 1-2003, 68 FR 5374 (Feb. 3, 
2003). Sec. 2550.401b-1 also issued under sec. 102, Reorganization 
Plan No. 4 of 1978, 43 FR 47713 (Oct. 17, 1978), 3 CFR, 1978 Comp. 
332, effective Dec. 31, 1978, 44 FR 1065 (Jan. 3, 1978), 3 CFR, 1978 
Comp. 332. Sec. 2550.401c-1 also issued under 29 U.S.C. 1101. 
Sections 2550.404c-1 and 2550.404c-5 also issued under 29 U.S.C. 
1104. Sec. 2550.407c-3 also issued under 29 U.S.C. 1107. Sec. 
2550.408b-1 also issued under 29 U.S.C. 1108(b)(1) and sec. 102, 
Reorganization Plan No. 4 of 1978, 3 CFR, 1978 Comp. p. 332, 
effective Dec. 31, 1978, 44 FR 1065 (Jan. 3, 1978), and 3 CFR, 1978 
Comp. 332. Sec. 2550.412-1 also issued under 29 U.S.C. 1112.


0
2. Amend Sec.  2550.404c-5 by revising paragraphs (e)(3)(i)(C) and 
(e)(4)(v)(A) to read as follows:


Sec.  2550.404c-5  Fiduciary relief for investments in qualified 
default investment alternatives.

* * * * *
    (e) * * *
    (3) * * *
    (i) * * *
    (C) the plan sponsor, or a committee comprised primarily of 
employees of the plan sponsor, which is a named fiduciary within the 
meaning of section 402(a)(2) of the Act;
* * * * *
    (4) * * *
    (v) * * *
    (A) Subject to paragraph (e)(4)(v)(B) of this section, an 
investment product or fund designed to preserve principal; provide a 
rate of return generally consistent with that earned on intermediate 
investment grade bonds; and provide liquidity for withdrawals by 
participants and beneficiaries, including transfers to other investment 
alternatives. Such investment product or fund shall, for purposes of 
this paragraph (e)(4)(v), meet the following requirements:
    (1) There are no fees or surrender charges imposed in connection 
with withdrawals initiated by a participant or beneficiary; and
    (2) Such investment product or fund invests primarily in investment 
products that are backed by State or federally regulated financial 
institutions.
* * * * *

    Signed at Washington, DC, this 24th day of April, 2008.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
[FR Doc. E8-9371 Filed 4-29-08; 8:45 am]
BILLING CODE 4510-29-P