Amendments to Safe Harbor for Distributions From Terminated Individual Account Plans and Termination of Abandoned Individual Account Plans To Require Inherited Individual Retirement Plans for Missing Nonspouse Beneficiaries, 58459-58467 [E8-23424]
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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations
disclosure regarding the conditions
under which the cross-trades may take
place, including the written policies and
procedures described in section
408(b)(19)(H) of the Act. This disclosure
must be in a document that is separate
from any other agreement or disclosure
involving the asset management
relationship. For purposes of section
408(b)(19)(D) of the Act, the policies
and procedures furnished to the
authorizing fiduciary must conform
with the requirements of this regulation.
(4) The standards set forth in this
section apply solely for purposes of
determining whether an investment
manager’s written policies and
procedures satisfy the content
requirements of section 408(b)(19)(H) of
the Act. Accordingly, such standards do
not determine whether the investment
manager satisfies the other requirements
for relief under section 408(b)(19) of the
Act.
(1)(b) Policies and Procedures. In
General. This paragraph specifies the
content of the written policies and
procedures required to be adopted by an
investment manager and disclosed to
the plan fiduciary prior to authorizing
cross-trading in order for transactions to
qualify for relief under section
408(b)(19) of the Act.
(2) Style and Format. The content of
the policies and procedures required by
this paragraph must be clear and
concise and written in a manner
calculated to be understood by the plan
fiduciary authorizing cross-trading.
Although no specific format is required
for the investment manager’s written
policies and procedures, the
information contained in the policies
and procedures must be sufficiently
detailed to facilitate a periodic review
by the compliance officer of the crosstrades and a determination by such
compliance officer that the cross-trades
comply with the investment manager’s
written cross-trading policies and
procedures.
(3) Content (i). An investment
manager’s policies and procedures must
be fair and equitable to all accounts
participating in its cross-trading
program and reasonably designed to
ensure compliance with the
requirements of section 408(b)(19)(H) of
the Act. Such policies and procedures
must include:
(A) A statement of policy which
describes the criteria that will be
applied by the investment manager in
determining that execution of a
securities transaction as a cross-trade
will be beneficial to both parties to the
transaction;
(B) A description of how the
investment manager will determine that
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cross-trades are effected at the
independent ‘‘current market price’’ of
the security (within the meaning of
section 270.17a–7(b) of Title 17, Code of
Federal Regulations and SEC no-action
and interpretative letters thereunder) as
required by section 408(b)(19)(B) of the
Act, including the identity of sources
used to establish such price;
(C) A description of the procedures
for ensuring compliance with the
$100,000,000 minimum asset size
requirement of section 408(b)(19). A
plan or master trust will satisfy the
minimum asset size requirement as to a
transaction if it satisfies the requirement
upon its initial participation in the
cross-trading program and on an annual
basis thereafter;
(D) A statement that any investment
manager participating in a cross-trading
program will have conflicting loyalties
and responsibilities to the parties
involved in any cross-trade transaction
and a description of how the investment
manager will mitigate such conflicts;
(E) A requirement that the investment
manager allocate cross-trades among
accounts in an objective and equitable
manner and a description of the
allocation method(s) available to and
used by the investment manager for
assuring an objective allocation among
accounts participating in the crosstrading program. If more than one
allocation methodology may be used by
the investment manager, a description
of what circumstances will dictate the
use of a particular methodology;
(F) Identification of the compliance
officer responsible for periodically
reviewing the investment manager’s
compliance with section 408(b)(19)(H)
of the Act and a statement of the
compliance officer’s qualifications for
this position;
(G) A statement that the cross-trading
statutory exemption under section
408(b)(19) of the Act requires
satisfaction of several objective
conditions in addition to the
requirements that the investment
manager adopt and effect cross-trades in
accordance with written cross-trading
policies and procedures; and
(H) A statement which specifically
describes the scope of the annual review
conducted by the compliance officer.
(ii) Nothing herein is intended to
preclude an investment manager from
including such other policies and
procedures not required by this
regulation as the investment manager
may determine appropriate to comply
with the requirements of section
408(b)(19).
(c) Definitions. For purposes of this
section:
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58459
(1) The term ‘‘account’’ includes any
single customer or pooled fund or
account.
(2) The term ‘‘compliance officer’’
means an individual designated by the
investment manager who is responsible
for periodically reviewing the crosstrades made for the plan to ensure
compliance with the investment
manager’s written cross-trading policies
and procedures and the requirements of
section 408(b)(19)(H) of the Act.
(3) The term ‘‘plan fiduciary’’ means
a person described in section 3(21)(A) of
the Act with respect to a plan (other
than the investment manager engaging
in the cross-trades or an affiliate) who
has the authority to authorize a plan’s
participation in an investment
manager’s cross-trading program.
(4) The term ‘‘investment manager’’
means a person described in section
3(38) of the Act.
(5) The term ‘‘plan’’ means any
employee benefit plan as described in
section 3(3) of the Act to which Title I
of the Act applies or any plan defined
in section 4975(e)(1) of the Code.
(6) The term ‘‘cross-trade’’ means the
purchase and sale of a security between
a plan and any other account managed
by the same investment manager.
Signed at Washington, DC, this 29th day of
September, 2008.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
[FR Doc. E8–23434 Filed 10–6–08; 8:45 am]
BILLING CODE 4510–29–P
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Parts 2550 and 2578
RIN 1210–AB16
Amendments to Safe Harbor for
Distributions From Terminated
Individual Account Plans and
Termination of Abandoned Individual
Account Plans To Require Inherited
Individual Retirement Plans for
Missing Nonspouse Beneficiaries
Employee Benefits Security
Administration, Labor.
ACTION: Final rule.
AGENCY:
SUMMARY: This document contains a
final rule amending regulations under
the Employee Retirement Income
Security Act of 1974 that provide
guidance and a fiduciary safe harbor for
the distribution of benefits on behalf of
participants or beneficiaries in
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terminated and abandoned individual
account plans. The Department is
amending these regulations to reflect
changes enacted as part of the Pension
Protection Act of 2006 to the Internal
Revenue Code of 1986 (the Code), under
which a distribution of a deceased plan
participant’s benefit from an eligible
retirement plan may be directly
transferred to an individual retirement
plan established on behalf of the
designated nonspouse beneficiary of
such participant. Specifically, the
amended regulations require as a
condition of relief under the fiduciary
safe harbor that benefits for a missing,
designated nonspouse beneficiary be
directly rolled over to an individual
retirement plan that fully complies with
Code requirements. This final rule will
affect fiduciaries, plan service
providers, and participants and
beneficiaries of individual account
pension plans.
DATES: This final rule is effective
November 6, 2008.
FOR FURTHER INFORMATION CONTACT:
Stephanie L. Ward, Office of
Regulations and Interpretations,
Employee Benefits Security
Administration, (202) 693–8500. This is
not a toll-free number.
SUPPLEMENTARY INFORMATION:
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A. Background
This final rule amends two
regulations under the Employee
Retirement Income Security Act of 1974,
as amended, (ERISA or the Act) that
facilitate the termination of individual
account plans, including abandoned
individual account plans, and the
distribution of benefits from such plans.
The first regulation, codified at 29 CFR
2550.404a–3, provides plan fiduciaries
of terminated plans and qualified
termination administrators (QTAs) of
abandoned plans with a fiduciary safe
harbor for making distributions on
behalf of participants or beneficiaries
who fail to make an election regarding
a form of benefit distribution,
commonly referred to as missing
participants or beneficiaries. The second
regulation, codified at 29 CFR 2578.1,
establishes a procedure for financial
institutions holding the assets of an
abandoned individual account plan to
terminate the plan and distribute
benefits to the plan’s participants or
beneficiaries, with limited liability.1
Appendices to these two regulations
contain model notices for notifying
participants or beneficiaries of the
1 Under
§ 2578.1(d)(2)(vii)(B), a QTA is directed
to make distributions in accordance with the safe
harbor regulation.
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plan’s termination and distribution
options.
The safe harbor regulation provides
that both a fiduciary and a QTA will be
deemed to have satisfied ERISA’s
prudence requirements under section
404(a) of the Act if the conditions of the
safe harbor are met with respect to the
distribution of benefits on behalf of
missing participants from terminated
individual account plans.2 In general,
the regulation provides that a fiduciary
or QTA qualifies for the safe harbor if
a distribution is made to an individual
retirement plan within the meaning of
section 7701(a)(37) of the Code. See
§ 2550.404a–3(d)(1)(i). However, in
April 2006, when the Department
published this safe harbor regulation, a
distribution of benefits from an
individual account plan to a nonspouse
beneficiary was not considered an
eligible rollover distribution under the
provisions of section 402(c) of the Code
and, therefore, could not be rolled over
into an individual retirement plan.3 As
a result, the safe harbor regulation
mandated, among other requirements,
the distribution of benefits on behalf of
a missing nonspouse beneficiary to an
account that was not an individual
retirement plan. See § 2550.404a–
3(d)(1)(ii). Consequently, such
distributions were subject to income tax
and mandatory tax withholding in the
year distributed into the account.4
The Pension Protection Act of 2006,
Public Law 109–280, (PPA) changed the
characterization of certain distributions
from tax exempt plans and trusts to
permit such distributions to qualify for
eligible rollover distribution treatment.5
Section 829 of the PPA amended section
402(c) of the Code to permit the direct
rollover of a deceased participant’s
benefit from an eligible retirement plan
to an individual retirement plan
established on behalf of a designated
nonspouse beneficiary.6 These rollover
distributions would not trigger
immediate income tax consequences
and mandatory tax withholding for the
nonspouse beneficiary.
In light of the PPA’s changes to the
Code allowing a rollover distribution on
behalf of a nonspouse beneficiary into
an inherited individual retirement plan
with the resulting deferral of income tax
2 71
FR 20830 n. 21.
26 CFR 1.402(c)–2, Q&A–12.
4 71 FR 20828 n.14.
5 Section 829 of the Pension Protection Act.
6 Section 829 of the Pension Protection Act
requires that the individual retirement plan
established on behalf of a nonspouse beneficiary
must be treated as an inherited individual
retirement plan within the meaning of Code
§ 408(d)(3)(C) and must be subject to the applicable
mandatory distribution requirements of Code
§ 401(a)(9)(B).
3 See
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consequences, the Department, on
February 15, 2007, published in the
Federal Register an interim final rule
amending its regulatory safe harbor for
distributions from a terminated
individual account plan, including an
abandoned plan, and invited interested
parties to comment.7 The Department
received two comments, neither of
which related directly to the interim
final rule; both comments pertain to the
scope and impact of section 402(c) of
the Code, as amended by section 829 of
the PPA. Accordingly, the interim final
rule amending 29 CFR 2550.404a–3 and
29 CFR 2578.1 is adopted as a final rule
without change. In this regard, however,
the Department notes that section 410(a)
of the PPA amended section 4050 of
ERISA to permit terminating plans not
subject to the PBGC insurance program,
such as defined contribution plans, to
transfer the benefits of missing
participants to the Pension Benefit
Guaranty Corporation (PBGC). Section
410(c) of the PPA provides that the
amendments to section 4050 would be
effective for benefit distributions made
after the PBGC prescribes final rules
implementing such amendments. The
Department will further review whether,
and to what extent, changes to 29 CFR
2550.404a–3 and 29 CFR 2578.1 would
be appropriate following PBGC
regulations pursuant to section 4050 of
ERISA.
B. Overview of Final Rule
The final rule amends the
Department’s regulatory safe harbor for
distributions from terminated (including
abandoned) individual account plans to
require that a deceased participant’s
benefit be directly rolled over to an
inherited individual retirement plan
established to receive the distribution
on behalf of a missing, designated
nonspouse beneficiary. These
amendments eliminate the prior safe
harbor condition that required a
distribution on behalf of a missing
nonspouse beneficiary to be made only
to an account other than an individual
retirement plan. See § 2550.404a–
3(d)(1)(ii). Therefore, a distribution on
behalf of a missing nonspouse
beneficiary would satisfy this condition
of the safe harbor only if directly rolled
into an individual retirement plan that
satisfies the requirements of new section
402(c)(11) of the Code.8 The final rule
also makes conforming changes to the
content requirements of the mandated
participant and beneficiary termination
7 72 FR 7516 (Feb. 15, 2007). The interim final
rule was effective and applicable to distributions
made on or after March 19, 2007.
8 See also I.R.S. Notice 2007–7, 2007–5 I.R.B. 395.
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notice (and the related model notice
under the safe harbor at the Appendix
to § 2550.404a–3) and to the content of
the required participant and beneficiary
termination notice (and the related
model notice for abandoned plans at
Appendix C to § 2578.1). The specific
changes being made to § 2550.404a–3
and § 2578.1 are described below in
Section C and Section D of this
preamble, respectively. Concurrently
with publication of this final rule, the
Department is publishing a final
amendment to PTE 2006–06,9 which
clarifies that the exemption provides
relief to a QTA that designates itself or
an affiliate as the provider of an
inherited individual retirement plan for
a missing, designated nonspouse
beneficiary pursuant to the exemption’s
conditions. As noted in the preamble to
the proposed amendments to PTE 2006–
06, however, the Department interprets
PTE 2006–06 as currently available to
the QTA for its self-selection as an
inherited individual retirement plan
provider subject to the conditions of the
exemption.
C. Amendments Relating to the Safe
Harbor for Distributions From
Terminated Individual Account Plans
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1. Section 2550.404a–3(d)—Conditions
Paragraph (d)(1)(ii) of this section
requires that the distribution of benefits
on behalf of a nonspouse beneficiary of
a participant be made to ‘‘an account
(other than an individual retirement
plan)’’ because historically such
distribution was not eligible for rollover
into an individual retirement plan. This
condition is being revised to require that
the distribution of benefits on behalf of
a designated nonspouse beneficiary be
rolled over into an inherited individual
retirement plan that complies with the
requirements of section 402(c)(11) of the
Code, as permitted under the PPA for
distributions occurring after December
31, 2006.
Paragraph (d)(1)(iii)(C) of this section
permits as an alternative distribution
option that certain small benefits on
behalf of a nonspouse beneficiary of a
participant be distributed to ‘‘an
account (other than an individual
retirement plan)’’ that a financial
institution, other than the qualified
termination administrator, provides to
the public at the time of the
distribution. This alternative option is
similarly being revised to require the
rollover of benefits on behalf of a
designated nonspouse beneficiary to an
inherited individual retirement plan.
9 71
FR 20856 (April 21, 2006).
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Paragraph (d)(2)(ii)(A) of this section
is being revised to incorporate the
appropriate cross references to
individual retirement plan and
inherited individual retirement plan
and eliminate reference to ‘‘other
account.’’
Paragraphs (d)(2)(iii), (d)(2)(iv) and
(d)(3) of this section are being revised to
incorporate the appropriate cross
references to individual retirement plan
and inherited individual retirement
plan, and bank or savings association
accounts for certain small amounts.
2. Section 2550.404a–3(e)—Notice to
Participants and Beneficiaries
Paragraphs (e)(1)(iv), (e)(1)(v) and
(e)(1)(vi) of this section are being
revised to incorporate the appropriate
cross references to individual retirement
plan and inherited individual
retirement plan and eliminate reference
to ‘‘other account.’’
3. Section 2550.404a–3(f)—Model
Notice
The appendix to this section contains
a Notice of Plan Termination for
terminated individual account plans
other than abandoned plans that
currently includes an optional
paragraph referring to distributions to
nonspouse beneficiaries. This paragraph
is being deleted because distributions to
nonspouse beneficiaries will no longer
be required to be made to accounts other
than individual retirement plans. A
parenthetical is being added to the
fourth paragraph to clarify that
individual retirement plans established
on behalf of missing, designated
nonspouse beneficiaries are inherited
individual retirement plans.
D. Amendments Relating to the
Termination of Abandoned Individual
Account Plans
1. Section 2578.1(d)(2)(vi)—Notify
Participants
Paragraph (d)(2)(vi)(A)(5)(ii) of this
section is being revised to incorporate
the appropriate cross reference to
conditions for rollovers on behalf of
nonspouse beneficiaries in § 2550.404a–
3(d)(1)(ii).
Paragraphs (d)(2)(vi)(A)(5)(iii) and
(d)(2)(vi)(A)(6) of this section are being
revised to incorporate the appropriate
cross references to individual retirement
plan and inherited individual
retirement plan in § 2550.404a–3(d)(1)(i)
and (d)(1)(ii) and eliminate reference to
‘‘account.’’
Paragraphs (d)(2)(vi)(A)(7) and
(d)(2)(vi)(A)(8) of this section are being
revised to incorporate the appropriate
cross references to individual retirement
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58461
plan and inherited individual
retirement plan in § 2550.404a–3(d)(1)(i)
and (d)(1)(ii).
2. Section 2578.1(i)—Model Notices
Appendix C to this section contains a
Notice of Plan Termination for
abandoned plans that currently includes
an optional paragraph (‘‘Option 2’’)
referring to distributions to nonspouse
beneficiaries. This optional paragraph is
being deleted because distributions to
nonspouse beneficiaries will no longer
be required to be made to accounts other
than individual retirement plans. To
conform to this change, the instructions
for ‘‘Option 1’’ are being revised to
delete reference to ‘‘participant’s
spouse.’’ ‘‘Option 3’’ is renumbered as
‘‘Option 2’’ and the instructions are
revised to eliminate reference to ‘‘(or
special account for non-spousal
beneficiaries if you are a beneficiary
other than the participant’s spouse)’’
and ‘‘(or special non-spousal account).’’
A parenthetical is being added to
Option 1 and Option 2 to clarify that
individual retirement plans established
on behalf of missing, designated
nonspouse beneficiaries are inherited
individual retirement plans. ‘‘Option 4’’
is renumbered as ‘‘Option 3.’’
E. Regulatory Impact Analysis
Summary
By conforming regulations pertaining
to distributions from certain terminated
plans with recent changes to the Code,
this interim final rule preserves for
certain nonspouse beneficiaries of
deceased participants the opportunity to
take advantage of preferential tax
treatment newly permitted by the
Pension Protection Act for distributions
after December 31, 2006. Nonspouse
beneficiaries will benefit from the
preservation, on their behalf, of taxfavored savings set aside for retirement.
This final rule also will affect plan
fiduciaries, including QTAs, by altering
the procedures applicable to certain
termination distributions. The
Department anticipates that, rather than
increasing costs, these amendments will
reduce compliance costs modestly for
plan fiduciaries and QTAs. Because the
rule’s new distribution procedures for
terminated plans apply only to the
narrow group of nonspouse
beneficiaries who have not returned a
distribution election, the Department
believes that the rule’s economic impact
will be small, overall, but positive.10
10 As described earlier, the Department is
publishing, concurrently with publication of this
rule, amendments to PTE 2006–06, which will
establish under the conditions of the exemption
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request approved under OMB control
number 1210–0127. Accordingly, the
Department has not made a submission
for OMB approval of a revision in the
burden estimates in connection with
this final rule or the amendments to PTE
2006–06, published simultaneously
with this final rule.
Paperwork Reduction Act
The information collections included
in this final rule, together with
information collections included in the
amendments to PTE 2006–06, are
currently approved by the Office of
Management and Budget (OMB) under
OMB control number 1210–0127. This
approval is currently scheduled to
expire on June 30, 2009. The final rule
makes minor changes to the content
requirements of the participant and
beneficiary termination notices, as
described earlier in the preamble. These
conforming changes, which involve the
deletion or substitution of a small
number of words in each notice, do not
increase the burden of the information
collections and do not constitute a
substantive or material modification of
the existing information collection
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Executive Order 12866 Statement
Under Executive Order 12866, the
Department must determine whether a
regulatory action is ‘‘significant’’ and
therefore subject to the requirements of
the Executive Order and subject to
review by the Office of Management and
Budget (OMB). Under section 3(f) of the
Executive Order, a ‘‘significant
regulatory action’’ is an action that is
likely to result in a rule: (1) Having an
annual effect on the economy of $100
million or more, or adversely and
materially affecting a sector of the
economy, productivity, competition,
jobs, the environment, public health or
safety, or State, local or tribal
governments or communities (also
referred to as ‘‘economically
significant’’); (2) creating serious
inconsistency or otherwise interfering
with an action taken or planned by
another agency; (3) materially altering
the budgetary impacts of entitlement
grants, user fees, or loan programs or the
rights and obligations of recipients
thereof; or (4) raising novel legal or
policy issues arising out of legal
mandates, the President’s priorities, or
the principles set forth in the Executive
Order. Pursuant to the terms of the
Executive Order, it has been determined
that this action is not ‘‘significant’’
within the meaning of section 3(f) of the
Executive Order, and, therefore, is not
subject to review by OMB.
Congressional Review Act Statement
that a QTA may designate itself or an affiliate as the
provider of an inherited individual retirement plan
for a nonspouse beneficiary who has not returned
a distribution election. In assessing the economic
costs and benefits of this final rule, the Department
has taken into account the amendments to PTE
2006–06, which will make explicit the availability
of the conditional relief to parties that follow the
amended rules with respect to nonspouse
distributions, a result that the Department believes
will assist in the achievement of the purposes
underlying the regulations.
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Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (5 U.S.C. 551 et seq.) and
are likely to have a significant economic
impact on a substantial number of small
entities. Because the rule initially was
issued as an interim final rule, the RFA
does not apply and the Department is
not required to either certify that the
rule will not have a significant impact
on a substantial number of small
businesses or conduct an initial
regulatory flexibility analysis.
Furthermore, because the final rule
imposes no additional costs on
employers or plans, the Department
believes that it would not have a
significant impact on a substantial
number of small entities. Accordingly,
the Department believes that no
regulatory flexibility analysis would be
required in any case under the RFA.
The final rule being issued here is
subject to the Congressional Review Act
provisions of the Small Business
Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and will be
transmitted to Congress and the
Comptroller General for review. The
final rule is not a ‘‘major rule’’ as that
term is defined in 5 U.S.C. 804, because
it does not result in (1) An annual effect
on the economy of $100 million or
more; (2) a major increase in costs or
prices for consumers, individual
industries, or Federal, State, or local
government agencies, or geographic
regions; or (3) significant adverse effects
on competition, employment,
investment, productivity, innovation, or
on the ability of United States-based
enterprises to compete with foreignbased enterprises in domestic and
export markets.
Unfunded Mandates Reform Act
For purposes of the Unfunded
Mandates Reform Act of 1995 (Pub. L.
104–4), the final rule does not include
any Federal mandate that may result in
expenditures by State, local, or tribal
governments, or impose an annual
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burden exceeding $100 million on the
private sector, adjusted for inflation.
Federalism Statement
Executive Order 13132 (August 4,
1999) outlines fundamental principles
of federalism and requires Federal
agencies to adhere to specific criteria in
the process of their formulation and
implementation of policies that have
substantial direct effects on the States,
the relationship between the national
government and the States, or on the
distribution of power and
responsibilities among the various
levels of government. This final rule
does not have federalism implications
because it has no substantial direct
effect on the States, on the relationship
between the national government and
the States, or on the distribution of
power and responsibilities among the
various levels of government. Section
514 of ERISA provides, with certain
exceptions specifically enumerated, that
the provisions of Titles I and IV of
ERISA supersede any and all laws of the
States as they relate to any employee
benefit plan covered under ERISA. The
requirements implemented in the final
rule do not alter the fundamental
provisions of the statute with respect to
employee benefit plans, and as such
would have no implications for the
States or the relationship or distribution
of power between the national
government and the States.
List of Subjects
29 CFR Part 2550
Employee benefit plans, Employee
Retirement Income Security Act,
Employee stock ownership plans,
Exemptions, Fiduciaries, Investments,
Investments foreign, Party in interest,
Pensions, Pension and Welfare Benefit
Programs Office, Prohibited
transactions, Real estate, Securities,
Surety bonds, Trusts and Trustees.
29 CFR Part 2578
Employee benefit plans, Pensions,
Retirement.
■ For the reasons set forth in the
preamble, the Department of Labor
amends 29 CFR chapter XXV as follows:
Title 29—Labor
Subchapter F—Fiduciary Responsibility
Under the Employee Retirement Income
Security Act of 1974
PART 2550—RULES AND
REGULATIONS FOR FIDUCIARY
RESPONSIBILITY
1. The authority citation for part 2550
continues to read as follows:
■
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Authority: 29 U.S.C. 1135 and Secretary of
Labor’s Order No. 1–2003, 68 FR 5374 (Feb.
3, 2003). Sec. 2550.401c–1 also issued under
29 U.S.C. 1101. Sec. 2550.404a–1 also issued
under sec. 657, Pub. L. 107–16, 115 Stat. 38.
Sections 2550.404c–1 and 2550.404c–5 also
issued under 29 U.S.C.1104. Sec. 2550.408b–
1 also issued under 29 U.S.C. 1108(b)(1) and
sec. 102, Reorganization Plan No. 4 of 1978,
5 U.S.C. App. 1. Sec. 2550.408b–19 also
issued under sec. 611, Pub. L. 109–280, 120
Stat. 780, 972, and sec. 102, Reorganization
Plan No. 4 of 1978, 5 U.S.C. App. 1. Sec.
2550.412–1 also issued under 29 U.S.C.1112.
2. Amend § 2550.404a–3 by revising
paragraphs (d)(1)(ii), (d)(1)(iii)(C),
(d)(2)(ii)(A), (d)(2)(iii), (d)(2)(iv), (d)(3),
(e)(1)(iv), (e)(1)(v), (e)(1)(vi) and the
appendix to read as follows:
■
§ 2550.404a–3 Safe Harbor for
Distributions from Terminated Individual
Account Plans.
*
*
*
*
(d) * * *
(1) * * *
(ii) In the case of a distribution on
behalf of a designated beneficiary (as
defined by section 401(a)(9)(E) of the
Code) who is not the surviving spouse
of the deceased participant, to an
inherited individual retirement plan
(within the meaning of section
402(c)(11) of the Code) established to
receive the distribution on behalf of the
nonspouse beneficiary; or
(iii) * * *
*
*
*
*
*
(C) An individual retirement plan
(described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section) offered by a
financial institution other than the
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qualified termination administrator to
the public at the time of the
distribution.
(2) * * *
(ii) * * *
(A) Seek to maintain, over the term of
the investment, the dollar value that is
equal to the amount invested in the
product by the individual retirement
plan (described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section), and
*
*
*
*
*
(iii) All fees and expenses attendant to
the transferee plan (described in
paragraph (d)(1)(i) or (d)(1)(ii) of this
section) or account (described in
paragraph (d)(1)(iii)(A) of this section),
including investments of such plan,
(e.g., establishment charges,
maintenance fees, investment expenses,
termination costs and surrender
charges), shall not exceed the fees and
expenses charged by the provider of the
plan or account for comparable plans or
accounts established for reasons other
than the receipt of a distribution under
this section; and
(iv) The participant or beneficiary on
whose behalf the fiduciary makes a
distribution shall have the right to
enforce the terms of the contractual
agreement establishing the plan
(described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section) or account
(described in paragraph (d)(1)(iii)(A) of
this section), with regard to his or her
transferred account balance, against the
plan or account provider.
(3) Both the fiduciary’s selection of a
transferee plan (described in paragraph
(d)(1)(i) or (d)(1)(ii) of this section) or
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58463
account (described in paragraph
(d)(1)(iii)(A) of this section) and the
investment of funds would not result in
a prohibited transaction under section
406 of the Act, unless such actions are
exempted from the prohibited
transaction provisions by a prohibited
transaction exemption issued pursuant
to section 408(a) of the Act.
(e) * * *
(1) * * *
(iv) A statement explaining that, if a
participant or beneficiary fails to make
an election within 30 days from receipt
of the notice, the plan will distribute the
account balance of the participant or
beneficiary to an individual retirement
plan (i.e., individual retirement account
or annuity described in paragraph
(d)(1)(i) or (d)(1)(ii) of this section) and
the account balance will be invested in
an investment product designed to
preserve principal and provide a
reasonable rate of return and liquidity;
(v) A statement explaining what fees,
if any, will be paid from the participant
or beneficiary’s individual retirement
plan (described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section), if such
information is known at the time of the
furnishing of this notice;
(vi) The name, address and phone
number of the individual retirement
plan (described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section) provider, if
such information is known at the time
of the furnishing of this notice; and
*
*
*
*
*
BILLING CODE 4510–29–P
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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations
SUBCHAPTER G—ADMINISTRATION AND
ENFORCEMENT UNDER THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF
1974
PART 2578—RULES AND
REGULATIONS FOR ABANDONED
PLANS
3. The authority citation for part
2578.1 continues to read as follows:
■
Authority: 29 U.S.C. 1135; 1104(a);
1103(d)(1).
4. Amend § 2578.1 by revising
paragraphs (d)(2)(vi)(A)(5)(ii),
(d)(2)(vi)(A)(5)(iii), (d)(2)(vi)(A)(6),
(d)(2)(vi)(A)(7), (d)(2)(vi)(A)(8) and
Appendix C to read as follows:
■
§ 2578.1 Termination of Abandoned
Individual Account Plans
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*
*
*
(d) * * *
(2) * * *
(vi) * * *
VerDate Aug<31>2005
*
*
18:31 Oct 06, 2008
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(A) * * *
(5) * * *
(ii) To an inherited individual
retirement plan described in
§ 2550.404a–3(d)(1)(ii) of this chapter
(in the case of a distribution on behalf
of a distributee other than a participant
or spouse),
(iii) In any case where the amount to
be distributed meets the conditions in
§ 2550.404a–3 (d)(1)(iii), to an interestbearing federally insured bank account,
the unclaimed property fund of the
State of the last known address of the
participant or beneficiary, or an
individual retirement plan (described in
§ 2550.404a–3(d)(1)(i) or (d)(1)(ii) of this
chapter) or
*
*
*
*
*
(6) In the case of a distribution to an
individual retirement plan (described in
§ 2550.404a–3(d)(1)(i) or (d)(1)(ii) of this
chapter) a statement explaining that the
account balance will be invested in an
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58465
investment product designed to
preserve principal and provide a
reasonable rate of return and liquidity;
(7) A statement of the fees, if any, that
will be paid from the participant or
beneficiary’s individual retirement plan
(described in § 2550.404a–3(d)(1)(i) or
(d)(1)(ii) of this chapter) or other
account (described in § 2550.404a–
3(d)(1)(iii)(A) of this chapter), if such
information is known at the time of the
furnishing of this notice;
(8) The name, address and phone
number of the provider of the individual
retirement plan (described in
§ 2550.404a–3(d)(1)(i) or (d)(1)(ii) of this
chapter), qualified survivor annuity, or
other account (described in
§ 2550.404a–3(d)(1)(iii)(A) of this
chapter), if such information is known
at the time of the furnishing of this
notice; and
*
*
*
*
*
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58466
DEPARTMENT OF THE INTERIOR
BILLING CODE 4510–29–C
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Signed at Washington, DC, this 29th day of
September 2008.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
[FR Doc. E8–23424 Filed 10–6–08; 8:45 am]
RIN 1010–AD29
Minerals Management Service
30 CFR Parts 203 and 260
[Docket ID: MMS–2007–OMM–0074]
Royalty Relief for Deepwater Outer
Continental Shelf Oil and Gas
Leases—Conforming Regulations to
Court Decision
Minerals Management Service
(MMS), Interior.
ACTION: Final rule.
AGENCY:
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58467
SUMMARY: This rule amends 30 CFR
parts 203 and 260 to conform the
regulations to the decision of the United
States Court of Appeals for the Fifth
Circuit in Santa Fe Snyder Corp., et al.
v. Norton. That decision found that
certain provisions of the MMS
regulations interpreting section 304 of
the Deep Water Royalty Relief Act are
contrary to the requirements of the
statute. MMS will determine lessees’
royalty under leases subject to Deep
Water Royalty Relief Act section 304, for
both past and future periods, in a
manner consistent with the Fifth
Circuit’s decision in the Santa Fe
Snyder case and this rule.
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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations
]]>Agencies
[Federal Register Volume 73, Number 195 (Tuesday, October 7, 2008)]
[Rules and Regulations]
[Pages 58459-58467]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23424]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Parts 2550 and 2578
RIN 1210-AB16
Amendments to Safe Harbor for Distributions From Terminated
Individual Account Plans and Termination of Abandoned Individual
Account Plans To Require Inherited Individual Retirement Plans for
Missing Nonspouse Beneficiaries
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document contains a final rule amending regulations under
the Employee Retirement Income Security Act of 1974 that provide
guidance and a fiduciary safe harbor for the distribution of benefits
on behalf of participants or beneficiaries in
[[Page 58460]]
terminated and abandoned individual account plans. The Department is
amending these regulations to reflect changes enacted as part of the
Pension Protection Act of 2006 to the Internal Revenue Code of 1986
(the Code), under which a distribution of a deceased plan participant's
benefit from an eligible retirement plan may be directly transferred to
an individual retirement plan established on behalf of the designated
nonspouse beneficiary of such participant. Specifically, the amended
regulations require as a condition of relief under the fiduciary safe
harbor that benefits for a missing, designated nonspouse beneficiary be
directly rolled over to an individual retirement plan that fully
complies with Code requirements. This final rule will affect
fiduciaries, plan service providers, and participants and beneficiaries
of individual account pension plans.
DATES: This final rule is effective November 6, 2008.
FOR FURTHER INFORMATION CONTACT: Stephanie L. Ward, Office of
Regulations and Interpretations, Employee Benefits Security
Administration, (202) 693-8500. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule amends two regulations under the Employee
Retirement Income Security Act of 1974, as amended, (ERISA or the Act)
that facilitate the termination of individual account plans, including
abandoned individual account plans, and the distribution of benefits
from such plans. The first regulation, codified at 29 CFR 2550.404a-3,
provides plan fiduciaries of terminated plans and qualified termination
administrators (QTAs) of abandoned plans with a fiduciary safe harbor
for making distributions on behalf of participants or beneficiaries who
fail to make an election regarding a form of benefit distribution,
commonly referred to as missing participants or beneficiaries. The
second regulation, codified at 29 CFR 2578.1, establishes a procedure
for financial institutions holding the assets of an abandoned
individual account plan to terminate the plan and distribute benefits
to the plan's participants or beneficiaries, with limited liability.\1\
Appendices to these two regulations contain model notices for notifying
participants or beneficiaries of the plan's termination and
distribution options.
---------------------------------------------------------------------------
\1\ Under Sec. 2578.1(d)(2)(vii)(B), a QTA is directed to make
distributions in accordance with the safe harbor regulation.
---------------------------------------------------------------------------
The safe harbor regulation provides that both a fiduciary and a QTA
will be deemed to have satisfied ERISA's prudence requirements under
section 404(a) of the Act if the conditions of the safe harbor are met
with respect to the distribution of benefits on behalf of missing
participants from terminated individual account plans.\2\ In general,
the regulation provides that a fiduciary or QTA qualifies for the safe
harbor if a distribution is made to an individual retirement plan
within the meaning of section 7701(a)(37) of the Code. See Sec.
2550.404a-3(d)(1)(i). However, in April 2006, when the Department
published this safe harbor regulation, a distribution of benefits from
an individual account plan to a nonspouse beneficiary was not
considered an eligible rollover distribution under the provisions of
section 402(c) of the Code and, therefore, could not be rolled over
into an individual retirement plan.\3\ As a result, the safe harbor
regulation mandated, among other requirements, the distribution of
benefits on behalf of a missing nonspouse beneficiary to an account
that was not an individual retirement plan. See Sec. 2550.404a-
3(d)(1)(ii). Consequently, such distributions were subject to income
tax and mandatory tax withholding in the year distributed into the
account.\4\
---------------------------------------------------------------------------
\2\ 71 FR 20830 n. 21.
\3\ See 26 CFR 1.402(c)-2, Q&A-12.
\4\ 71 FR 20828 n.14.
---------------------------------------------------------------------------
The Pension Protection Act of 2006, Public Law 109-280, (PPA)
changed the characterization of certain distributions from tax exempt
plans and trusts to permit such distributions to qualify for eligible
rollover distribution treatment.\5\ Section 829 of the PPA amended
section 402(c) of the Code to permit the direct rollover of a deceased
participant's benefit from an eligible retirement plan to an individual
retirement plan established on behalf of a designated nonspouse
beneficiary.\6\ These rollover distributions would not trigger
immediate income tax consequences and mandatory tax withholding for the
nonspouse beneficiary.
---------------------------------------------------------------------------
\5\ Section 829 of the Pension Protection Act.
\6\ Section 829 of the Pension Protection Act requires that the
individual retirement plan established on behalf of a nonspouse
beneficiary must be treated as an inherited individual retirement
plan within the meaning of Code Sec. 408(d)(3)(C) and must be
subject to the applicable mandatory distribution requirements of
Code Sec. 401(a)(9)(B).
---------------------------------------------------------------------------
In light of the PPA's changes to the Code allowing a rollover
distribution on behalf of a nonspouse beneficiary into an inherited
individual retirement plan with the resulting deferral of income tax
consequences, the Department, on February 15, 2007, published in the
Federal Register an interim final rule amending its regulatory safe
harbor for distributions from a terminated individual account plan,
including an abandoned plan, and invited interested parties to
comment.\7\ The Department received two comments, neither of which
related directly to the interim final rule; both comments pertain to
the scope and impact of section 402(c) of the Code, as amended by
section 829 of the PPA. Accordingly, the interim final rule amending 29
CFR 2550.404a-3 and 29 CFR 2578.1 is adopted as a final rule without
change. In this regard, however, the Department notes that section
410(a) of the PPA amended section 4050 of ERISA to permit terminating
plans not subject to the PBGC insurance program, such as defined
contribution plans, to transfer the benefits of missing participants to
the Pension Benefit Guaranty Corporation (PBGC). Section 410(c) of the
PPA provides that the amendments to section 4050 would be effective for
benefit distributions made after the PBGC prescribes final rules
implementing such amendments. The Department will further review
whether, and to what extent, changes to 29 CFR 2550.404a-3 and 29 CFR
2578.1 would be appropriate following PBGC regulations pursuant to
section 4050 of ERISA.
---------------------------------------------------------------------------
\7\ 72 FR 7516 (Feb. 15, 2007). The interim final rule was
effective and applicable to distributions made on or after March 19,
2007.
---------------------------------------------------------------------------
B. Overview of Final Rule
The final rule amends the Department's regulatory safe harbor for
distributions from terminated (including abandoned) individual account
plans to require that a deceased participant's benefit be directly
rolled over to an inherited individual retirement plan established to
receive the distribution on behalf of a missing, designated nonspouse
beneficiary. These amendments eliminate the prior safe harbor condition
that required a distribution on behalf of a missing nonspouse
beneficiary to be made only to an account other than an individual
retirement plan. See Sec. 2550.404a-3(d)(1)(ii). Therefore, a
distribution on behalf of a missing nonspouse beneficiary would satisfy
this condition of the safe harbor only if directly rolled into an
individual retirement plan that satisfies the requirements of new
section 402(c)(11) of the Code.\8\ The final rule also makes conforming
changes to the content requirements of the mandated participant and
beneficiary termination
[[Page 58461]]
notice (and the related model notice under the safe harbor at the
Appendix to Sec. 2550.404a-3) and to the content of the required
participant and beneficiary termination notice (and the related model
notice for abandoned plans at Appendix C to Sec. 2578.1). The specific
changes being made to Sec. 2550.404a-3 and Sec. 2578.1 are described
below in Section C and Section D of this preamble, respectively.
Concurrently with publication of this final rule, the Department is
publishing a final amendment to PTE 2006-06,\9\ which clarifies that
the exemption provides relief to a QTA that designates itself or an
affiliate as the provider of an inherited individual retirement plan
for a missing, designated nonspouse beneficiary pursuant to the
exemption's conditions. As noted in the preamble to the proposed
amendments to PTE 2006-06, however, the Department interprets PTE 2006-
06 as currently available to the QTA for its self-selection as an
inherited individual retirement plan provider subject to the conditions
of the exemption.
---------------------------------------------------------------------------
\8\ See also I.R.S. Notice 2007-7, 2007-5 I.R.B. 395.
\9\ 71 FR 20856 (April 21, 2006).
---------------------------------------------------------------------------
C. Amendments Relating to the Safe Harbor for Distributions From
Terminated Individual Account Plans
1. Section 2550.404a-3(d)--Conditions
Paragraph (d)(1)(ii) of this section requires that the distribution
of benefits on behalf of a nonspouse beneficiary of a participant be
made to ``an account (other than an individual retirement plan)''
because historically such distribution was not eligible for rollover
into an individual retirement plan. This condition is being revised to
require that the distribution of benefits on behalf of a designated
nonspouse beneficiary be rolled over into an inherited individual
retirement plan that complies with the requirements of section
402(c)(11) of the Code, as permitted under the PPA for distributions
occurring after December 31, 2006.
Paragraph (d)(1)(iii)(C) of this section permits as an alternative
distribution option that certain small benefits on behalf of a
nonspouse beneficiary of a participant be distributed to ``an account
(other than an individual retirement plan)'' that a financial
institution, other than the qualified termination administrator,
provides to the public at the time of the distribution. This
alternative option is similarly being revised to require the rollover
of benefits on behalf of a designated nonspouse beneficiary to an
inherited individual retirement plan.
Paragraph (d)(2)(ii)(A) of this section is being revised to
incorporate the appropriate cross references to individual retirement
plan and inherited individual retirement plan and eliminate reference
to ``other account.''
Paragraphs (d)(2)(iii), (d)(2)(iv) and (d)(3) of this section are
being revised to incorporate the appropriate cross references to
individual retirement plan and inherited individual retirement plan,
and bank or savings association accounts for certain small amounts.
2. Section 2550.404a-3(e)--Notice to Participants and Beneficiaries
Paragraphs (e)(1)(iv), (e)(1)(v) and (e)(1)(vi) of this section are
being revised to incorporate the appropriate cross references to
individual retirement plan and inherited individual retirement plan and
eliminate reference to ``other account.''
3. Section 2550.404a-3(f)--Model Notice
The appendix to this section contains a Notice of Plan Termination
for terminated individual account plans other than abandoned plans that
currently includes an optional paragraph referring to distributions to
nonspouse beneficiaries. This paragraph is being deleted because
distributions to nonspouse beneficiaries will no longer be required to
be made to accounts other than individual retirement plans. A
parenthetical is being added to the fourth paragraph to clarify that
individual retirement plans established on behalf of missing,
designated nonspouse beneficiaries are inherited individual retirement
plans.
D. Amendments Relating to the Termination of Abandoned Individual
Account Plans
1. Section 2578.1(d)(2)(vi)--Notify Participants
Paragraph (d)(2)(vi)(A)(5)(ii) of this section is being revised to
incorporate the appropriate cross reference to conditions for rollovers
on behalf of nonspouse beneficiaries in Sec. 2550.404a-3(d)(1)(ii).
Paragraphs (d)(2)(vi)(A)(5)(iii) and (d)(2)(vi)(A)(6) of this
section are being revised to incorporate the appropriate cross
references to individual retirement plan and inherited individual
retirement plan in Sec. 2550.404a-3(d)(1)(i) and (d)(1)(ii) and
eliminate reference to ``account.''
Paragraphs (d)(2)(vi)(A)(7) and (d)(2)(vi)(A)(8) of this section
are being revised to incorporate the appropriate cross references to
individual retirement plan and inherited individual retirement plan in
Sec. 2550.404a-3(d)(1)(i) and (d)(1)(ii).
2. Section 2578.1(i)--Model Notices
Appendix C to this section contains a Notice of Plan Termination
for abandoned plans that currently includes an optional paragraph
(``Option 2'') referring to distributions to nonspouse beneficiaries.
This optional paragraph is being deleted because distributions to
nonspouse beneficiaries will no longer be required to be made to
accounts other than individual retirement plans. To conform to this
change, the instructions for ``Option 1'' are being revised to delete
reference to ``participant's spouse.'' ``Option 3'' is renumbered as
``Option 2'' and the instructions are revised to eliminate reference to
``(or special account for non-spousal beneficiaries if you are a
beneficiary other than the participant's spouse)'' and ``(or special
non-spousal account).'' A parenthetical is being added to Option 1 and
Option 2 to clarify that individual retirement plans established on
behalf of missing, designated nonspouse beneficiaries are inherited
individual retirement plans. ``Option 4'' is renumbered as ``Option
3.''
E. Regulatory Impact Analysis
Summary
By conforming regulations pertaining to distributions from certain
terminated plans with recent changes to the Code, this interim final
rule preserves for certain nonspouse beneficiaries of deceased
participants the opportunity to take advantage of preferential tax
treatment newly permitted by the Pension Protection Act for
distributions after December 31, 2006. Nonspouse beneficiaries will
benefit from the preservation, on their behalf, of tax-favored savings
set aside for retirement. This final rule also will affect plan
fiduciaries, including QTAs, by altering the procedures applicable to
certain termination distributions. The Department anticipates that,
rather than increasing costs, these amendments will reduce compliance
costs modestly for plan fiduciaries and QTAs. Because the rule's new
distribution procedures for terminated plans apply only to the narrow
group of nonspouse beneficiaries who have not returned a distribution
election, the Department believes that the rule's economic impact will
be small, overall, but positive.\10\
---------------------------------------------------------------------------
\10\ As described earlier, the Department is publishing,
concurrently with publication of this rule, amendments to PTE 2006-
06, which will establish under the conditions of the exemption that
a QTA may designate itself or an affiliate as the provider of an
inherited individual retirement plan for a nonspouse beneficiary who
has not returned a distribution election. In assessing the economic
costs and benefits of this final rule, the Department has taken into
account the amendments to PTE 2006-06, which will make explicit the
availability of the conditional relief to parties that follow the
amended rules with respect to nonspouse distributions, a result that
the Department believes will assist in the achievement of the
purposes underlying the regulations.
---------------------------------------------------------------------------
[[Page 58462]]
Executive Order 12866 Statement
Under Executive Order 12866, the Department must determine whether
a regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the Office
of Management and Budget (OMB). Under section 3(f) of the Executive
Order, a ``significant regulatory action'' is an action that is likely
to result in a rule: (1) Having an annual effect on the economy of $100
million or more, or adversely and materially affecting a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
Pursuant to the terms of the Executive Order, it has been determined
that this action is not ``significant'' within the meaning of section
3(f) of the Executive Order, and, therefore, is not subject to review
by OMB.
Paperwork Reduction Act
The information collections included in this final rule, together
with information collections included in the amendments to PTE 2006-06,
are currently approved by the Office of Management and Budget (OMB)
under OMB control number 1210-0127. This approval is currently
scheduled to expire on June 30, 2009. The final rule makes minor
changes to the content requirements of the participant and beneficiary
termination notices, as described earlier in the preamble. These
conforming changes, which involve the deletion or substitution of a
small number of words in each notice, do not increase the burden of the
information collections and do not constitute a substantive or material
modification of the existing information collection request approved
under OMB control number 1210-0127. Accordingly, the Department has not
made a submission for OMB approval of a revision in the burden
estimates in connection with this final rule or the amendments to PTE
2006-06, published simultaneously with this final rule.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and are likely to
have a significant economic impact on a substantial number of small
entities. Because the rule initially was issued as an interim final
rule, the RFA does not apply and the Department is not required to
either certify that the rule will not have a significant impact on a
substantial number of small businesses or conduct an initial regulatory
flexibility analysis. Furthermore, because the final rule imposes no
additional costs on employers or plans, the Department believes that it
would not have a significant impact on a substantial number of small
entities. Accordingly, the Department believes that no regulatory
flexibility analysis would be required in any case under the RFA.
Congressional Review Act Statement
The final rule being issued here is subject to the Congressional
Review Act provisions of the Small Business Regulatory Enforcement
Fairness Act of 1996 (5 U.S.C. 801 et seq.) and will be transmitted to
Congress and the Comptroller General for review. The final rule is not
a ``major rule'' as that term is defined in 5 U.S.C. 804, because it
does not result in (1) An annual effect on the economy of $100 million
or more; (2) a major increase in costs or prices for consumers,
individual industries, or Federal, State, or local government agencies,
or geographic regions; or (3) significant adverse effects on
competition, employment, investment, productivity, innovation, or on
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets.
Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), the final rule does not include any Federal mandate that may
result in expenditures by State, local, or tribal governments, or
impose an annual burden exceeding $100 million on the private sector,
adjusted for inflation.
Federalism Statement
Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism and requires Federal agencies to adhere to
specific criteria in the process of their formulation and
implementation of policies that have substantial direct effects on the
States, the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. This final rule does not have federalism
implications because it has no substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Section 514 of ERISA provides, with certain
exceptions specifically enumerated, that the provisions of Titles I and
IV of ERISA supersede any and all laws of the States as they relate to
any employee benefit plan covered under ERISA. The requirements
implemented in the final rule do not alter the fundamental provisions
of the statute with respect to employee benefit plans, and as such
would have no implications for the States or the relationship or
distribution of power between the national government and the States.
List of Subjects
29 CFR Part 2550
Employee benefit plans, Employee Retirement Income Security Act,
Employee stock ownership plans, Exemptions, Fiduciaries, Investments,
Investments foreign, Party in interest, Pensions, Pension and Welfare
Benefit Programs Office, Prohibited transactions, Real estate,
Securities, Surety bonds, Trusts and Trustees.
29 CFR Part 2578
Employee benefit plans, Pensions, Retirement.
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For the reasons set forth in the preamble, the Department of Labor
amends 29 CFR chapter XXV as follows:
Title 29--Labor
Subchapter F--Fiduciary Responsibility Under the Employee Retirement
Income Security Act of 1974
PART 2550--RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY
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1. The authority citation for part 2550 continues to read as follows:
[[Page 58463]]
Authority: 29 U.S.C. 1135 and Secretary of Labor's Order No. 1-
2003, 68 FR 5374 (Feb. 3, 2003). Sec. 2550.401c-1 also issued under
29 U.S.C. 1101. Sec. 2550.404a-1 also issued under sec. 657, Pub. L.
107-16, 115 Stat. 38. Sections 2550.404c-1 and 2550.404c-5 also
issued under 29 U.S.C.1104. Sec. 2550.408b-1 also issued under 29
U.S.C. 1108(b)(1) and sec. 102, Reorganization Plan No. 4 of 1978, 5
U.S.C. App. 1. Sec. 2550.408b-19 also issued under sec. 611, Pub. L.
109-280, 120 Stat. 780, 972, and sec. 102, Reorganization Plan No. 4
of 1978, 5 U.S.C. App. 1. Sec. 2550.412-1 also issued under 29
U.S.C.1112.
0
2. Amend Sec. 2550.404a-3 by revising paragraphs (d)(1)(ii),
(d)(1)(iii)(C), (d)(2)(ii)(A), (d)(2)(iii), (d)(2)(iv), (d)(3),
(e)(1)(iv), (e)(1)(v), (e)(1)(vi) and the appendix to read as follows:
Sec. 2550.404a-3 Safe Harbor for Distributions from Terminated
Individual Account Plans.
* * * * *
(d) * * *
(1) * * *
(ii) In the case of a distribution on behalf of a designated
beneficiary (as defined by section 401(a)(9)(E) of the Code) who is not
the surviving spouse of the deceased participant, to an inherited
individual retirement plan (within the meaning of section 402(c)(11) of
the Code) established to receive the distribution on behalf of the
nonspouse beneficiary; or
(iii) * * *
* * * * *
(C) An individual retirement plan (described in paragraph (d)(1)(i)
or (d)(1)(ii) of this section) offered by a financial institution other
than the qualified termination administrator to the public at the time
of the distribution.
(2) * * *
(ii) * * *
(A) Seek to maintain, over the term of the investment, the dollar
value that is equal to the amount invested in the product by the
individual retirement plan (described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section), and
* * * * *
(iii) All fees and expenses attendant to the transferee plan
(described in paragraph (d)(1)(i) or (d)(1)(ii) of this section) or
account (described in paragraph (d)(1)(iii)(A) of this section),
including investments of such plan, (e.g., establishment charges,
maintenance fees, investment expenses, termination costs and surrender
charges), shall not exceed the fees and expenses charged by the
provider of the plan or account for comparable plans or accounts
established for reasons other than the receipt of a distribution under
this section; and
(iv) The participant or beneficiary on whose behalf the fiduciary
makes a distribution shall have the right to enforce the terms of the
contractual agreement establishing the plan (described in paragraph
(d)(1)(i) or (d)(1)(ii) of this section) or account (described in
paragraph (d)(1)(iii)(A) of this section), with regard to his or her
transferred account balance, against the plan or account provider.
(3) Both the fiduciary's selection of a transferee plan (described
in paragraph (d)(1)(i) or (d)(1)(ii) of this section) or account
(described in paragraph (d)(1)(iii)(A) of this section) and the
investment of funds would not result in a prohibited transaction under
section 406 of the Act, unless such actions are exempted from the
prohibited transaction provisions by a prohibited transaction exemption
issued pursuant to section 408(a) of the Act.
(e) * * *
(1) * * *
(iv) A statement explaining that, if a participant or beneficiary
fails to make an election within 30 days from receipt of the notice,
the plan will distribute the account balance of the participant or
beneficiary to an individual retirement plan (i.e., individual
retirement account or annuity described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section) and the account balance will be invested in
an investment product designed to preserve principal and provide a
reasonable rate of return and liquidity;
(v) A statement explaining what fees, if any, will be paid from the
participant or beneficiary's individual retirement plan (described in
paragraph (d)(1)(i) or (d)(1)(ii) of this section), if such information
is known at the time of the furnishing of this notice;
(vi) The name, address and phone number of the individual
retirement plan (described in paragraph (d)(1)(i) or (d)(1)(ii) of this
section) provider, if such information is known at the time of the
furnishing of this notice; and
* * * * *
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[[Page 58464]]
[GRAPHIC] [TIFF OMITTED] TR07OC08.034
[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED]
[[Page 58465]]
SUBCHAPTER G--ADMINISTRATION AND ENFORCEMENT UNDER THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974
PART 2578--RULES AND REGULATIONS FOR ABANDONED PLANS
0
3. The authority citation for part 2578.1 continues to read as follows:
Authority: 29 U.S.C. 1135; 1104(a); 1103(d)(1).
0
4. Amend Sec. 2578.1 by revising paragraphs (d)(2)(vi)(A)(5)(ii),
(d)(2)(vi)(A)(5)(iii), (d)(2)(vi)(A)(6), (d)(2)(vi)(A)(7),
(d)(2)(vi)(A)(8) and Appendix C to read as follows:
Sec. 2578.1 Termination of Abandoned Individual Account Plans
* * * * *
(d) * * *
(2) * * *
(vi) * * *
(A) * * *
(5) * * *
(ii) To an inherited individual retirement plan described in Sec.
2550.404a-3(d)(1)(ii) of this chapter (in the case of a distribution on
behalf of a distributee other than a participant or spouse),
(iii) In any case where the amount to be distributed meets the
conditions in Sec. 2550.404a-3 (d)(1)(iii), to an interest-bearing
federally insured bank account, the unclaimed property fund of the
State of the last known address of the participant or beneficiary, or
an individual retirement plan (described in Sec. 2550.404a-3(d)(1)(i)
or (d)(1)(ii) of this chapter) or
* * * * *
(6) In the case of a distribution to an individual retirement plan
(described in Sec. 2550.404a-3(d)(1)(i) or (d)(1)(ii) of this chapter)
a statement explaining that the account balance will be invested in an
investment product designed to preserve principal and provide a
reasonable rate of return and liquidity;
(7) A statement of the fees, if any, that will be paid from the
participant or beneficiary's individual retirement plan (described in
Sec. 2550.404a-3(d)(1)(i) or (d)(1)(ii) of this chapter) or other
account (described in Sec. 2550.404a-3(d)(1)(iii)(A) of this chapter),
if such information is known at the time of the furnishing of this
notice;
(8) The name, address and phone number of the provider of the
individual retirement plan (described in Sec. 2550.404a-3(d)(1)(i) or
(d)(1)(ii) of this chapter), qualified survivor annuity, or other
account (described in Sec. 2550.404a-3(d)(1)(iii)(A) of this chapter),
if such information is known at the time of the furnishing of this
notice; and
* * * * *
[[Page 58466]]
[GRAPHIC] [TIFF OMITTED] TR07OC08.035
[[Page 58467]]
[GRAPHIC] [TIFF OMITTED] TR07OC08.036
Signed at Washington, DC, this 29th day of September 2008.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
[FR Doc. E8-23424 Filed 10-6-08; 8:45 am]
BILLING CODE 4510-29-C
