Notice of Proposed Exemption Involving Retirement Clearinghouse, LLC (RCH or the Applicant)-Located in Charlotte, North Carolina, 55741-55750 [2018-24377]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 83, Number 216 (Wednesday, November 7, 2018)]
[Notices]
[Pages 55741-55750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24377]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Exemption Application No. D-11938]


Notice of Proposed Exemption Involving Retirement Clearinghouse, 
LLC (RCH or the Applicant)--Located in Charlotte, North Carolina

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemption.

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SUMMARY: This document gives notice of a proposed individual exemption 
from certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code).

DATES: Written comments and requests for a public hearing on the 
proposed exemption should be submitted to the Department December 24, 
2018.
    If the Department of Labor (Department) grants this proposed 
exemption, it will be effective for five years beginning on the date a 
final exemption is published in the Federal Register.

ADDRESSES: Comments should state the nature of the person's interest in 
the proposed exemption. If the commenter would be adversely affected by 
the exemption's approval, the comment should describe the manner in 
which the commenter will be adversely affected. A request for a hearing 
can be requested by any interested person who may be adversely affected 
by an exemption. A request for a hearing must state: (1) The name, 
address, telephone number, and email address of the person making the 
request; (2) the nature of the person's interest in the exemption and 
the manner in which the person would be adversely affected by the 
exemption; and (3) a statement of the issues to be addressed and a 
general description of the evidence to be presented at the hearing. The 
Department will grant a request for a hearing made in accordance with 
the requirements above where a hearing is necessary to fully explore 
material factual issues identified by the person requesting the 
hearing. A notice of such hearing shall be published by the Department 
in the Federal Register. The Department may decline to hold a hearing 
if: (1) The request for the hearing does not meet the requirements 
above; (2) the only issues identified for exploration at the hearing 
are matters of law; or (3) the factual issues identified can be fully 
explored through the submission of evidence in written (including 
electronic) form.
    All written comments and requests for a hearing (at least three 
copies) should be sent to the Employee Benefits Security Administration 
(EBSA), Office of Exemption Determinations, U.S. Department of Labor, 
200 Constitution Avenue NW, Suite 400, Washington, DC 20210. Attention: 
Application No. D-11938. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via email or FAX. Any such 
comments or requests should be sent either by email to: [email protected], 
or by FAX to (202) 693-8474 by the end of the scheduled comment period. 
The application for exemption and the comments received will be 
available for public inspection in the Public Documents Room of the 
Employee Benefits Security Administration, U.S. Department of Labor, 
Room N-1515, 200 Constitution Avenue NW, Washington, DC 20210.
    Warning: All comments received will be included in the public 
record without change and may be made available online at https://www.regulations.gov, including any personal information provided, 
unless the comment includes information claimed to be confidential or 
other information whose disclosure is restricted by statute. If you 
submit a

[[Page 55742]]

comment, EBSA recommends that you include your name and other contact 
information in the body of your comment, but DO NOT submit information 
that you consider to be confidential, or otherwise protected (such as 
your Social Security number or an unlisted phone number) or 
confidential business information that you do not want publicly 
disclosed. However, if EBSA cannot read your comment due to technical 
difficulties and cannot contact you for clarification, EBSA might not 
be able to consider your comment. Additionally, the https://www.regulations.gov website is an ``anonymous access'' system, which 
means EBSA will not know your identity or contact information unless 
you provide it in the body of your comment. If you send an email 
directly to EBSA without going through https://www.regulations.gov, your 
email address will be automatically captured and included as part of 
the comment that is placed in the public record and made available on 
the internet.

FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department 
at (202) 693-8546. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: This document contains a notice of proposed 
exemption that, if granted, would provide exemptive relief from the 
sanctions resulting from the application of Code section 4975, by 
reason of sections 4975(c)(1)(D) and (E) of the Code. The proposed 
exemption has been requested by RCH pursuant to section 408(a) of the 
Act and section 4975(c)(2) of the Code, and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 
66644, October 27, 2011).\1\ Effective December 31, 1978, section 102 
of Reorganization Plan No. 4 of 1978, 5 U.S.C. 1 (1996), transferred 
the authority of the Secretary of the Treasury to issue exemptions of 
the type requested to the Secretary of Labor. Therefore, this notice of 
proposed exemption is issued solely by the Department.
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    \1\ For purposes of this proposed exemption, references to the 
provisions of Title I of ERISA, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
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Summary of Facts and Representations \2\
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    \2\ The Summary of Facts and Representations is based on the 
Applicant's representations and does not reflect factual findings or 
opinions of the Department, unless indicated otherwise.
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    1. RCH is a limited liability corporation headquartered in 
Charlotte, North Carolina. RCH has two wholly-owned subsidiaries: RCH 
Securities, LLC, a broker-dealer member of FINRA; and RCH Shareholder 
Services, a registered transfer agent.
    2. RCH has developed an Auto-Portability Program (the RCH Program) 
that is designed to help employees who may have multiple job changes 
over their careers consolidate small accounts held in prior employers' 
individual account plans and rollover IRAs into their new employers' 
individual accounts or 401(k) plans. The objective of the RCH Program 
is to improve overall asset allocation, eliminate duplicative fees for 
small retirement saving accounts, and reduce leakage of retirement 
savings from the tax-deferred retirement saving system.\3\
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    \3\ This exemption does not cover transactions involving 
accounts with balances above $5,000 at the time of transfer to the 
new account.
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    3. The RCH Program services are designed to facilitate: (a) 
Automatic rollovers into default IRAs pursuant to 29 CFR 2550.404a-2 
from accounts in plans of individuals' former employers that are 
eligible for mandatory distribution under Code section 401(a)(31)(B) 
(Eligible Mandatory Distribution Accounts); (b) automatic rollovers 
into default IRAs pursuant to 29 CFR 2550.404a-3 of account balances 
from terminated defined contribution plans (Terminated Plan Accounts); 
and (c) automatic roll-in of funds in these default IRAs (Default IRAs) 
to an individual account plan maintained by the IRA owners' new 
employer when the IRA owner changes jobs.
    4. RCH uses a ``locate, match, and transfer'' technology that 
performs periodic queries of cooperating record-keepers' systems to 
ascertain if the IRA owner has become a participant in an individual 
account plan through re-employment. If the individual subsequently 
participates in a different individual account plan, RCH's service is 
designed to transfer the individual's Default IRA assets to that new 
plan. Some plans may elect to use Code section 401(a)(31)(B) for 
mandatory distributions to a Default IRA only after the RCH Program's 
locate and match services identify that the participant maintains an 
active plan account in the individual account plan of the separated 
participant's new employer.
    5. Under the RCH Program, participating plan sponsors designate RCH 
or a participating record-keeper to be the plan's Default IRA provider 
for automatic rollovers of mandatory distributions under Code section 
401(a)(31)(B) and for distributions from terminated defined 
contribution plans. The plans also agree to adopt plan amendments and 
resolutions necessary to carry out transfers under the RCH Program and 
to make disclosures to plan participants and beneficiaries about the 
RCH Program. The plans also agree that RCH and the participating 
record-keeper may use plan data to facilitate the RCH Program. An 
unaffiliated bank will be the custodian of the RCH Default IRA assets, 
and financial institutions unrelated to RCH or its affiliates will 
provide all investment products and investment management services for 
the RCH Default IRAs.
    6. RCH will generally enter into a Master Services Agreement (a 
Master Agreement) with record-keepers that will offer the RCH Program 
to their plan sponsor clients. The Master Agreement will describe how 
record-keepers and RCH will locate the accounts of individuals with 
Safe Harbor IRAs and Eligible Mandatory Distribution Accounts who have 
Plan accounts with their current employers (New Plan Accounts). The 
Plan sponsor or other plan fiduciary that is independent of RCH (an 
independent plan fiduciary) may approve of the RCH Program by executing 
agreements with their record-keepers (Record-keeping Agreements). 
Alternatively, independent plan fiduciaries may approve of the use of 
the RCH Program through a direct agreement with RCH (an RCH Agreement). 
The Record-keeping Agreement or RCH Agreement will provide that the 
account balance of an individual's Default IRA or Eligible Mandatory 
Distribution Account may be transferred to the plan of the individual's 
current employer if the RCH locate and match process determines that 
the individual maintains a New Plan Account with that employer.
    7. The RCH Program portability process begins with the employer or 
plan sending RCH data for separating participants in ongoing plans or 
participants in terminating plans, as applicable. RCH uses the 
following information to determine whether it can confirm a match: 
Social security number; first name; last name; middle name or initial; 
address; city; state; zip code; date of birth; and phone number on 
file. RCH does not share, sell or market any data obtained under the 
RCH Program, nor does it use the data for any purpose other than 
implementation of the RCH Program. All fees received by RCH in 
connection with the RCH Program are disclosed to, and approved by, the 
independent plan fiduciary in the applicable Record-keeping Agreement 
and/or RCH Agreement.

[[Page 55743]]

RCH as Default IRA Provider

    8. In the case of ongoing plans, RCH receives information 
identifying separated participant accounts that are subject to 
mandatory distribution under the Code. RCH sends a letter (a Mandatory 
Distribution Letter) informing the separated participants that their 
accounts will be automatically rolled over into a Default IRA unless 
they give affirmative directions on the disposition of their accounts 
within 30-90 days, depending on the time period selected by the 
independent plan fiduciary.\4\ In the case of a terminating plan, RCH 
sends a similar letter to all participants. RCH sends the notices 
required under the RCH Program to the last known address of the 
individual, as received from the individual's current employer. 
Individuals that are ``lost'' or ``missing'' do not participate in the 
RCH Program.\5\ RCH barcodes and scans each letter that is sent or 
received, and records internally when each letter is mailed.\6\ The 
Mandatory Distribution Letters also explain the plan's distribution 
options, disclose all fees and features of the RCH Program, and include 
a Code-required notice explaining various tax rules for eligible 
rollover distributions. All RCH Program communications are written to 
be easily understood by the recipient. The Mandatory Distribution 
Letters describe the RCH Program's automated transfer of the Default 
IRA to a new employer's individual account plan based on RCH's periodic 
automated searches for current employment status of Default IRA owners. 
The Mandatory Distribution Letters also advise that individuals may opt 
out of the automated transfer service, and the letters include a toll-
free number and information on contacting RCH. RCH represents that 
individuals receiving Mandatory Distribution notices are effectively 
given the opportunity to opt out by the use of a phone number that is 
operational and with a clearly available opt out choice in the main 
menu.
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    \4\ The Mandatory Distribution Letter is sent no later than the 
following business day after RCH receives the file from the plan 
sponsor indicating that a plan participant is eligible for mandatory 
distribution under section 401(a)(31)(B) of the Code.
    \5\ If RCH sends a Mandatory Distribution Letter to an 
individual's last known address and it is returned to RCH as 
undeliverable, RCH removes the individual from the portability 
features of the Program. RCH thereafter performs ongoing participant 
address validation searches via automated checks of National Change 
of Address records, two separate commercial locator databases, and 
RCH internal databases. These searches occur twice in the first year 
a participant's account is entered into the RCH system and once a 
year thereafter. RCH will also perform manual internet-based search 
activities in cases where a valid participant address is not 
obtained from the automated database checks. RCH will only 
reintroduce the individual to the Program upon receipt of a valid 
address.
    \6\ As the Department's Comment section below notes, RCH must 
take all prudent actions necessary to reasonably ensure that 
participant and beneficiary data are current and accurate, and that 
the appropriate participants and beneficiaries actually receive all 
of the required notices and disclosures, until the assets are 
transferred to a new plan account under the RCH Program.
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    9. RCH call center personnel are not licensed broker-dealers or 
registered investment advisers, and do not give legal, investment, or 
tax advice. Call center personnel are only authorized to: (a) Provide 
educational information on consolidating assets in a single 401(k) 
plan; (b) assist with the paperwork needed to create a new IRA, roll 
plan assets over to an IRA, or authorize a transfer to a new employer's 
401(k); (c) provide educational information to participants on the 
benefits of accumulating assets for retirement; (d) discuss the 
consequences of cashing out of a 401(k) or IRA; (e) verify the 
participant or Default IRA holder's identity; and (f) provide 
educational information on QDROs and beneficiaries.
    10. If the individual fails to respond to the Mandatory 
Distribution Letter within the stated timeframe, the independent plan 
fiduciary will direct the transfer of assets from the plan to the 
Default IRA. The custodian of the IRA assets will be an unaffiliated 
bank, and all investment products and investment management services 
for the IRAs will be provided by financial institutions that are 
unrelated to RCH and its affiliates. RCH will send a second notice to 
the individual (the Welcome Letter) no later than one business day 
after the assets are received by the Default IRA. The Welcome Letter 
will include the following information and disclosures: (a) The dollar 
amount of the IRA's assets; (b) identification of the investment fund 
in which the IRA's assets are invested; (c) a trade confirmation; (d) 
contact information including toll-free numbers for the call center and 
on-line access instructions; (e) a full and complete statement of all 
fees that are charged to the Default IRA, including all compensation, 
direct or indirect, received by RCH, related parties and participating 
record-keepers; (f) notice that the individual may instruct RCH or the 
participating record-keeper to transfer his or her balance from the 
Default IRA to another account at any time before the transfer of the 
IRA funds to the individual's account at his or her current employer 
plan, and that RCH will not transfer the Default IRA for at least 60 
days from the date of the Welcome Letter.
    11. While the assets are in the Default IRA, participating record-
keepers will use the RCH electronic records matching technology to 
search periodically (and no less than monthly) their plan/participant 
records, to identify potential matches of plan and IRA accounts. When 
there is a match, RCH validates the account information and sends a 
``Consent Letter'' requesting that the IRA owner/participant consent to 
transfer the IRA funds to the new employer's individual account plan. 
Since a transfer only occurs when the individual is identified as a 
participant in a new employer's plan, the Consent Letter is sent to the 
address provided to RCH by the record-keeper for the participant's new 
employer's plan (based on the assumption that the new employer's plan 
has the most up-to-date address for the individual). The participant 
can approve this ``roll-in transaction'' through affirmative consent. 
If the participant does not respond within 30 days of receipt of the 
Consent Letter, by affirmatively assenting or declining the roll-in, 
the RCH Program activates its default roll-in transaction provisions. 
Before a default roll-in occurs, the new employer's plan must agree to 
accept the roll-in under the terms in the new employer's plan. Once the 
new employer plan consents to the roll-in, RCH: Closes the IRA after 
withdrawing applicable fees from the IRA; and directs the roll in of 
the remaining balance into the participant's new-employer plan (which 
the responsible fiduciaries would automatically invest in the new 
employer's plan according to the participant's current investment 
elections, or if the participant has not made an election, into the 
plan's qualified default investment alternative). RCH then sends a 
notice to the IRA owner of the transfer of IRA funds to the new 
employer's plan, which will describe all the fees incurred by the IRA.

Conduit Model Transfers

    12. A plan sponsor may designate a participating record-keeper 
(other than RCH) to be the plan's Default IRA provider. If the record-
keeper participates in the RCH Program, the Mandatory Distribution 
Letter, Welcome Letter, and the Consent Letter will all be sent to the 
individual by the participating record-keeper or RCH. In the case of a 
match, assets from a default IRA maintained by the participating 
record-keeper will be transferred to the new employer plan through a 
RCH default IRA acting as a conduit.
    Alternatively a plan sponsor may maintain an Eligible Mandatory

[[Page 55744]]

Distribution Account in its plan. If RCH or a participating record-
keeper determines that an individual has a New Plan Account at the 
individual's current employer, RCH or the participating record-keeper 
will send the individual a Mandatory Distribution Letter and a Consent 
Letter seeking affirmative consent from the individual to transfer the 
assets to the new plan. The Mandatory Distribution Letter will note 
that if the individual fails to contact RCH within 60 days of the 
Consent Letter, the individual's account balance will be transferred to 
the plan of the individual's current employer through an RCH Default 
IRA unless the individual ops out of the transfer. The Consent Letter 
will fully state the fees and other compensation, direct or indirect, 
of any type, associated with the RCH Program, and will explain that if 
the individual fails to opt out of the RCH Program within 60 days of 
receiving the Consent Letter, the assets will be transferred to the New 
Plan Account. If, after 30 days, the participant has not contacted RCH 
with instructions to opt in or opt out of the RCH Program, RCH will 
call the participant seeking consent to transfer the assets to the 
individual's new employer plan. RCH will send another Consent Letter 
that will reiterate the fees and compensation associated with the RCH 
Program. The second Consent Letter will explain that, unless the 
individual opts out of the RCH Program within 30 days of receiving the 
letter, RCH will direct the transfer of the assets to the New Plan 
Account (which the responsible fiduciaries would automatically invest 
in the new employer's plan according to the participant's current 
investment elections, or if the participant has not made an election, 
into the plan's qualified default investment alternative).
    13. If the individual does not provide affirmative direction to RCH 
within 30 days of the applicable Consent Letter, the assets of the 
Eligible Mandatory Distribution Account, or, if applicable, the assets 
of the non-RCH Default IRA, will be transferred to an RCH Default IRA, 
and then to the individual's New Plan Account.

Fees

    14. RCH, related parties and record-keepers will fully disclose to 
an independent plan fiduciary all fees and other compensation, direct 
or indirect, that they may receive in connection with the RCH Program. 
The independent plan fiduciary must approve any such fees or 
compensation prior to receipt. If RCH is selected as the Default IRA 
provider by the plan sponsor, the sole fees paid in connection with the 
IRA are: (a) A monthly administrative fee covering the provision of 
administrative services to the IRA; (b) a distribution fee in the event 
that the IRA is terminated and the IRA owner decides to cash out or 
transfer the IRA account balance to another qualified retirement plan; 
(c) a sub-transfer agency fee that the IRA investment provider pays to 
RCH, after the provider is selected by the plan's independent 
fiduciary; (d) a one-time communication fee, that reimburses RCH solely 
for the cost of issuing notices and forms associated with effectuating 
the transfer to a Default IRA; and (e) a distribution/roll-in fee (a 
Transfer Fee) paid if the IRA is terminated and the IRA account balance 
is rolled in to a new employer plan with the assistance of RCH. RCH 
receives only the Transfer Fee and communication fee if RCH is not 
selected as the Default IRA provider. The custodian of the IRA assets 
will be an unaffiliated bank, and all investment products and 
investment management services for the IRAs will be provided by 
financial institutions that are unrelated to RCH and its affiliates.
    15. RCH will not have authority to increase the amounts or types of 
fees or compensation received for these services once a Default IRA is 
established. Under the RCH Program's current pricing structure, the 
Transfer Fee will not exceed $59 for Account balances of $590 or more. 
If a participant's balance falls below $590 at the time of 
consolidation, the Transfer Fee will be reduced to not more than 10 
percent of the balance. Account balances of $50 or less do not pay a 
Transfer Fee. There also is a 20 percent reduction in the fee charged 
to an accountholder when the annual volume of roll-in transactions 
exceeds 1 million transactions per year, i.e., the benefits of scale 
are passed on to participants in the form of reduced fees. The 
participating plans' summary plan descriptions must fully disclose all 
fees and expenses under the RCH Program.\7\ RCH additionally states 
that if an individual does not respond to the applicable Consent 
Letter, or is unreachable by phone within a 10-day window following the 
last day of the Consent Letter, RCH will place a sell order with the 
mutual fund held in the Default IRA account. RCH will receive no sub 
transfer agency fee in connection with services rendered after the 
settlement date set forth in the applicable mutual fund's prospectus 
(the Settlement Date). In no case will the Settlement Date be later 
than three days following the date the relevant sell order is placed. 
RCH has no discretion regarding the timing of the Settlement Date. 
Further, once RCH has identified a match that will lead to a transfer 
to a new employer's plan, RCH will no longer charge the IRA the monthly 
administrative fee.\8\
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    \7\ The Department expresses no view as to the reasonableness of 
the maximum charges set forth in this paragraph, including the 
Transfer Fee, and notes that RCH may not receive fees or 
compensation, direct or indirect, in excess of reasonable 
compensation within the meaning of 29 CFR 2550.408b-2 and 29 U.S. 
Code Sec.  1108(b)(2).
    \8\ The fees and compensation are subject to the conditions of 
section 408(b)(2) of ERISA and section 4975(d)(2) of the Code. Also, 
to be eligible for the fiduciary safe harbor relief provided by 29 
CFR 2550.404a-2 and 29 CFR 2550.404a-3 the fees and compensation 
associated with the maintenance of the Default IRAs must meet the 
conditions of those regulations.
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    16. According to RCH, a computer simulation by the Employee 
Benefits Research Institute (EBRI) and Boston Research Technologies, 
suggests that the probability of the RCH program finding a missing 
participant in a new employer's plan is 66% (of all accounts owned by 
participants in the Program) in the first year, assuming that all 
record-keepers to plans participate in the RCH Program. That percentage 
increases to 85% when extending searches to subsequent years. Because 
these figures relate to the entire U.S. labor force, the likelihood of 
a match will depend on the number of record-keepers actually 
participating in the RCH Program. If record-keepers that participate in 
the RCH Program comprised 50% of the U.S. retirement market, RCH 
expects that approximately 33% of all accounts owned by participants in 
the Program would result in a match during the first year.
    17. Individuals covered by the RCH Program will receive Annual 
Statements (Annual Statements). Among other things, the Annual 
Statement will: (a) Fully and accurately describe all of the fees and 
compensation, direct or indirect, received by RCH, related parties and 
participating record-keepers; (b) explain the material features of the 
RCH Program, and; (c) tell the individual how to contact RCH and direct 
RCH or the participating record-keeper to transfer the balance into the 
plan of their current employer or another qualified designated 
investment alternative (QDIA) under the QDIA regulation (29 CFR 
2550.404c-5). RCH states that following the Transfer, RCH or the 
participating record-keeper will send the individual a confirmation 
that includes a description of the Transfer Fee.

[[Page 55745]]

Exemption Request for RCH's Receipt of Transfer Fee

    18. RCH requests an exemption for the receipt of the Transfer Fee 
in connection with the transfer under the RCH Program, of an 
individual's Default IRA or Eligible Mandatory Distribution Account 
assets to the individual's New Plan Account, without the individual's 
affirmative consent. Absent affirmative consent of the IRA owner/
participant, RCH acts as a fiduciary within the meaning of section 
4975(e)(3) of the Code in deciding to transfer the individual's RCH 
default IRA to the individual's new employer plan. Similarly, absent 
affirmative consent of the IRA owner/participant, in situations where a 
default IRA maintained by a third party record keeper is transferred to 
an RCH default IRA acting as a conduit to facilitate the transfer to an 
new employer's plan, RCH acts as a fiduciary within the meaning of 
section 4975(e)(3) of the Code in directing the transfer of the 
individual's default IRA to the RCH default IRA and subsequently to the 
new employer's plan.
    Section 4975(c)(1)(D) of the Code prohibits a fiduciary from 
causing a plan to engage in a transaction, if he or she knows or should 
know that the transaction constitutes a direct or indirect transfer to, 
or use by or for the benefit of, a party in interest of any assets of a 
plan. Section 4975(c)(1)(E) of the Code prohibits a fiduciary with 
respect to a plan from dealing with the assets of the plan in its own 
interest or for its own account.
    RCH's receipt of an additional fee (the Transfer Fee) in connection 
with transferring assets from a Default IRA to an individual's New Plan 
Account, without the individual's affirmative consent, violates 
sections 4975(c)(1)(D) and (E) of the Code, absent an exemption.

In the Interest of Affected Participants

    19. The Department has tentatively determined that the proposed 
exemption is in the interest of affected participants. In this regard, 
according to RCH, America's mobile workers too often receive cash 
distributions when they change jobs, depleting their retirement 
savings. RCH states that this leakage of retirement savings occurs at 
the highest percentages among individuals with the smallest accounts. 
RCH states that a significant portion of individuals who cash out small 
accounts are susceptible to financial exploitation. RCH posits that its 
Program could reduce retirement savings leakage by more than 50 percent 
for these small accounts. The conditions of the proposed exemption are 
designed to ensure that the interest of participants, beneficiaries, 
and IRA owners in their retirement assets are protected and managed in 
accordance with the applicable provisions of ERISA and the Internal 
Revenue Code.

Protective of the Rights of Participants and Beneficiaries

    20. The Department has tentatively determined that the proposed 
exemption is protective of affected plan participants. The RCH program, 
service providers, and associated fees are fully disclosed and approved 
by independent plan fiduciaries. All fees and compensation associated 
with the program are fully subject to the protections of section 
408(b)(2) of ERISA and section 4975(d)(2) of the Code. In addition, RCH 
represents that it has no financial incentives that would lead a 
reasonable person to believe that it is steering accounts to 
custodians, service providers, or investment providers based on its own 
financial interests, as opposed to the interests of the plan 
participants and IRA owners. Also, all fees charged to the Default IRA 
and Eligible Mandatory Distribution Account are frozen at the time the 
decision is made to transfer the assets from the Default IRA or 
Eligible Mandatory Distribution Account to the individual's current 
employer plan. In addition, RCH will not include exculpatory provisions 
in its contracts disclaiming or limiting RCH's liability for any 
improper transfers from a Default IRA or Eligible Mandatory 
Distribution Account. The provisions of the exemption were designed 
with the aim of ensuring that the rights of plan participants, 
beneficiaries, and IRA owners are protected.

Administratively Feasible

    21. The Department has tentatively determined that the proposed 
exemption is administratively feasible because all terms of the RCH 
Program including those governing Transfers must be clearly defined, 
reviewed, and contractually agreed to by the independent fiduciaries of 
the distributing and receiving plans. The Department notes that, as 
described below, an independent auditor will review the RCH Program, 
and submit a written report to the Department regarding the level of 
compliance of RCH to the notification, fee and distribution 
requirements of this exemption. In addition, the exemption will be 
subject to renewal after a five-year period. At that time, RCH will be 
expected to submit a new application providing the information 
necessary to assess the success of the program, as well as any 
shortcomings. Because of these protections, it is administratively 
feasible for the Department to issue the exemption and administer its 
responsibilities in connection with the exemption.

Department's Comment and Additional Conditions

    22. As noted above, RCH states that its Program will help achieve 
better overall asset allocation and eliminate duplicative fees through 
the consolidation of small retirement savings accounts, and that it 
will reduce leakage of retirement savings out of the tax-deferred 
retirement saving system. In proposing this exemption, the Department 
expects that the RCH Program will provide meaningful benefits to a 
significant number of individuals with Default IRAs or Eligible 
Mandatory Distribution Accounts. Because the RCH Program is new and the 
Department cannot confidently determine how successful the RCH Program 
will be at achieving its objectives, the Department proposes to limit 
the term of this exemption to five years. As part of its application to 
renew the exemption, RCH would be expected to provide information on 
the extent to which the RCH Program has provided meaningful benefits to 
a significant number of individuals with Default IRAs or Eligible 
Mandatory Distribution Accounts, including analysis of its success in 
matching accounts with new employers' plans. Similarly, RCH would be 
expected to show that asset transfers under the RCH Program were 
performed accurately, without undue delay, and with RCH receiving no 
more than the fees and compensation disclosed to, and approved by, the 
applicable independent plan fiduciaries.
    The Department is also proposing the following additional 
conditions. RCH must submit to an annual audit, performed by a 
qualified independent auditor (an Independent Auditor), in order to 
protect affected Plan participants. The Independent Auditor must be a 
person or entity with extensive knowledge of ERISA, the Code and the 
types of transactions that are described in this exemption, and who is 
capable of reviewing and analyzing the RCH Program and the requirements 
of this exemption in a manner sufficient to perform the audit. The 
Independent Auditor may derive no more than 2 percent of its annual 
compensation from services provided directly or indirectly to RCH or to 
any of its affiliates or related parties.

[[Page 55746]]

    An audit is necessary, in part, because the individual plan 
fiduciaries responsible for authorizing and monitoring Program 
participation would otherwise lack the information necessary to 
determine that the asset transfers, notices, and investments 
contemplated by the RCH Program have been performed in compliance with 
the law and in accordance with the terms of the relevant Agreements. 
The exemption therefore requires the Independent Auditor to review a 
representative sample of transactions sufficient for the Independent 
Auditor to determine whether: (a) The notices met the timing and 
content requirements of this exemption, and were written and delivered 
in a manner reasonably designed to ensure that affected individuals 
would both receive and understand the notices; (b) asset transfers were 
conducted in accordance with this exemption and the Agreements, and the 
New Plan Accounts, participants, and beneficiaries received all the 
assets they were due pursuant to the methodology (i) authorized in 
advance by independent fiduciaries of the affected Plans, and (ii) 
properly disclosed to affected individuals; (c) fees and compensation, 
direct or indirect, of any type, that RCH, related parties and 
participating record-keepers received in connection with the RCH 
Program are consistent with the fees authorized by appropriate Plan 
fiduciaries; were properly disclosed to the affected individuals in 
accordance with the terms of this exemption; did not exceed reasonable 
compensation, as defined in Section 408(b)(2) of ERISA, Section 
4975(d)(2) of the Code and 29 CFR 2550.408c-2 of the Department's 
regulations; (d) individuals receiving Mandatory Distribution notices 
were effectively given the opportunity to opt-out by the use of a phone 
number that was operational and with a clearly available opt-out choice 
in the main menu \9\ and (e) the other conditions of this exemption 
have been met.
---------------------------------------------------------------------------

    \9\ The auditor should use, among other methods, confirmations 
to individuals with amounts rolled over to determine whether such 
individuals were given an effective chance to opt-out or otherwise 
tried to unsuccessfully opt-out of the program.
---------------------------------------------------------------------------

    The Auditor must complete the audit within six months following the 
twelve-month period to which the audit relates, and must submit a 
written report to the Office of Exemption Determinations within thirty 
days. The audit report will become a part of the public record for this 
exemption. The report must contain the methodology used by the Auditor 
and a detailed assessment of the degree of RCH's compliance with the 
findings required by the audit.
    23. This exemption also requires that RCH not sell or market the 
plan or participant data it obtains in connection with the RCH Program 
to third parties, nor may it use the data for any purpose other than 
the proper administration of the RCH Program. Further, RCH may not 
receive any fees or compensation, direct or indirect, from third 
parties other than an asset-based, sub-transfer agency fee that is paid 
to RCH from an IRA investment provider that is selected by an 
independent plan fiduciary, solely for shareholder services related to 
the investment options in which RCH Default IRA assets are invested 
under the RCH Program. RCH may not in any way, directly or indirectly, 
act in a manner that affects the amount of sub-transfer agency fee it 
receives under the Program. In this regard, the amount of sub-transfer 
agency fee received by RCH must result solely from written directions 
and written agreements between plan sponsors and investment funds that 
are independent of RCH, without any influence or direction from RCH.
    RCH may not restrict or limit the ability of unrelated third 
parties to develop, market and/or maintain a locate-and-match process 
separate from RCH's process that facilitates the transfer of Default 
IRA assets or Eligible Mandatory Distribution Account assets to an 
individual's New Plan Account (e.g., by requiring record-keepers to 
exclusively use RCH for such processes). RCH may not receive more than 
reasonable compensation for its services within the meaning of Section 
408(b)(2) of ERISA, Section 4975(d)(2) of the Code, and 29 CFR 
2550.408c-2 of the Department's regulations, and RCH must comply with 
its obligations as a covered service provider under 29 CFR 2550.408b-2. 
RCH represents that it will not provide investment advice, as described 
in ERISA section 3(21) or Code Section 4975(e)(3) and accompanying 
regulations, to individuals with assets held in a Default IRA or 
Eligible Mandatory Distribution Account, in connection with any 
transaction relating to the RCH Program.
    24. RCH may not include exculpatory provisions in its contracts 
disclaiming or limiting RCH's liability in the event that the RCH 
Program results in an improper transfer from a Default IRA or Eligible 
Mandatory Distribution Account. RCH may not improperly delay transfers 
from a Default IRA or Eligible Mandatory Distribution Account to a New 
Plan Account. In this regard, the RCH Program must query on at least a 
monthly basis whether a participant with a New Plan Account in the RCH 
Program has a Default IRA or an Eligible Mandatory Distribution Account 
covered by the RCH Program. Where the RCH Program identifies a match, 
if the affected individual does not make a timely response to the 
notifications described above, the assets of the Default IRA or 
Eligible Mandatory Distribution Account must be immediately transferred 
to the participant's New Plan Account following the Settlement Date. 
RCH may not have any discretion under the RCH Program to affect the 
timing or amount of the transfer, other than to deduct the appropriate 
fees.
    25. All fees and expenses under the RCH Program must be fully 
disclosed in participating plans' summary plan descriptions.
    26. RCH must verify the accuracy of all participant and beneficiary 
data, including address and identification information, at the time 
assets are first transferred to a Default IRA or Eligible Mandatory 
Distribution Account for participation in the RCH Program. All Program-
related communications to the individuals must adhere to a plain 
language standard, designed to ensure that affected individuals 
understand the communications. RCH must take all prudent actions 
necessary to reasonably ensure that participant and beneficiary data 
are current and accurate, and that the appropriate participants and 
beneficiaries, in fact, receive all the required notices and 
disclosures, until the assets are transferred pursuant under the 
program to a new plan. Once RCH has identified a match that will lead 
to a transfer to a new employer's plan, RCH will no longer charge the 
IRA the monthly fee.

Notice to Interested Persons

    Notice of the proposed exemption will be provided to all interested 
persons within 15 days of the publication of the notice of proposed 
temporary five-year exemption in the Federal Register. The notice will 
be provided to all interested persons in the manner agreed upon by the 
applicant and the Department and will contain a copy of the notice of 
proposed exemption as published in the Federal Register and a 
supplemental statement, as required pursuant to 29 CFR 2570.43(a)(2). 
The supplemental statement will inform interested persons of their 
right to comment on and to request a hearing with respect to the 
pending exemption. All written comments and/or requests for a hearing 
must be received by the Department within forty-five days of the date 
of

[[Page 55747]]

publication of this proposed exemption in the Federal Register.
    All comments will be made available to the public.
    Warning: If you submit a comment, EBSA recommends that you include 
your name and other contact information in the body of your comment, 
but DO NOT submit information that you consider to be confidential, or 
otherwise protected (such as a Social Security number or an unlisted 
phone number) or confidential business information that you do not want 
publicly disclosed. All comments may be posted on the internet and can 
be retrieved by most internet search engines.

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, among other things, require a fiduciary 
to discharge his duties respecting the plan solely in the interest of 
the participants and beneficiaries of the plan and in a prudent fashion 
in accordance with section 404(a)(1)(b) of the Act; nor does it affect 
the requirement of section 401(a) of the Code that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemption, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemption, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

Proposed Five Year Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974, as amended (ERISA), and section 4975(c)(2) of the Internal 
Revenue Code of 1986, as amended (the Code), and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 
66644, October 27, 2011).\10\
---------------------------------------------------------------------------

    \10\ For purposes of this proposed exemption, references to the 
provisions of Title I of ERISA, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

    If the proposed exemption is granted, the sanctions resulting from 
the application of Code section 4975, by reason of sections 
4975(c)(1)(D) and (E) of the Code, shall not apply to the receipt of a 
Transfer Fee, as defined in Section III(i), by RCH in connection with 
the transfer of assets from an individual's Default IRA, as defined in 
Section III(h), to the individual's New Plan Account, as defined in 
Section III(a) (the Transfer), following the individual's nonresponse 
to two letters informing the individual that the assets will be 
transferred if he or she fails to contact RCH within the later of: 
Sixty days of the first letter; or thirty days of the second letter. 
Relief under this exemption is solely available for the payment of a 
Transfer Fee by a Default IRA to RCH in connection with the transfer of 
$5,000 or less from the Default IRA to a New Plan Account, pursuant to 
either a Default IRA Model Transfer, as defined in Section III(l) or a 
Conduit Model Transfer (as defined in Section III(k).

Section I. Conditions

    (a) Any and all fees and compensation, direct or indirect, 
associated with the Program must be fully disclosed to, and approved 
by, a plan fiduciary that is independent of RCH (an independent plan 
fiduciary) in the applicable agreement. With respect to approval of a 
Transfer Fee, the approval must be given prior to the transfer from the 
plan to the Default IRA. The fees and compensation (direct or indirect) 
RCH receives in connection with the transfer under the Program of a 
Conduit Model Transfer, as defined in Section III(k), is limited to a 
Transfer Fee and communication fee paid by a Default IRA. All fees and 
expenses under the Program must be fully disclosed in participating 
plans' summary plan descriptions;
    (b) RCH does not sell or market Plan or Plan participant-related 
data RCH accesses or obtains to third parties in connection with the 
Program, nor does RCH use the data for any purpose other than 
administration of the Program;
    (c) RCH does not receive any fees or compensation, direct or 
indirect, from third parties other than asset-based sub-transfer agency 
fees paid to RCH from an IRA investment provider, where such IRA 
investment provider is selected by an independent plan fiduciary. The 
asset-based sub-transfer agency fee must be solely for shareholder 
services related to the investment options in which IRA assets are 
invested under the Program and may not exceed reasonable compensation 
as defined in Section 408(b)(2) of ERISA, Section 4975(d)(2) of the 
Code, and 29 CFR 2550.408c-2 of the Department's regulations. RCH may 
not receive any fees or compensation, direct or indirect, from third 
parties other than an asset-based, sub-transfer agency fee that is paid 
to RCH from an IRA investment provider that is selected by an 
independent plan fiduciary, solely for shareholder services related to 
the investment options in which IRA assets are invested under the RCH 
Program. Such selection must be made independent of influence, 
suggestion or assistance by RCH, and RCH may not in any way, directly 
or indirectly, act in a manner that affects the amount of sub-transfer 
agency fees it receives under the Program.
    (d) RCH does not restrict or limit the ability of unrelated third 
parties to develop, market and/or maintain a locate-and-match process 
separate from RHC's process that facilitates the transfer of Default 
IRA assets or Eligible Mandatory Distribution Account assets;
    (e) The disclosures described below in paragraphs (f) and (g) must 
be:
    (1) Written in a manner calculated to be understood by the average 
intended recipient. To the extent reasonably possible, such disclosures 
must limit or eliminate technical jargon and long, complex sentences, 
and use clarifying examples and illustrations. No communication 
required by this exemption shall be made or written in a way that 
misleads, misinforms, or fails to properly inform the intended 
recipient; and
    (2) sent to the last known address of the individual after RCH 
verifies the accuracy of the participant data (including the 
participant's and any beneficiary's social security number, first name, 
last name, middle name or initial, address, city, state, zip code, date 
of birth, and phone number);

[[Page 55748]]

    (f) Transfers Involving RCH Default IRAs. RCH will direct the 
transfer of assets from a Default IRA to a New Plan Account only after 
RCH furnishes the following notifications to the individual in the 
manner required by paragraph (e) above:
    (1) Mandatory Distribution Letter. RCH must provide a ``Mandatory 
Distribution Letter'' to an individual who is eligible for mandatory 
distribution under section 401(a)(31)(B) of the Code prior to 
establishing a Default IRA for that individual. The Mandatory 
Distribution Letter is sent no later than the following business day 
after RCH receives the file from the plan sponsor indicating that the 
individual is eligible for mandatory distribution under section 
401(a)(31)(B) of the Code, and must include:
    (A) A description of the available Plan distribution options, 
including the independent Plan fiduciary's selection of the Default 
IRA;
    (B) A notice that the individual has 30-90 days (as determined by 
the independent plan fiduciary) to contact RCH and specify a different 
distribution option before his or her account is transferred into the 
Default IRA;
    (C) A description of how the Program works, including a description 
of all material Program features and a complete and accurate statement 
of all fees that are charged to accounts in the Program, as well as all 
compensation, direct or indirect, of any type received by RCH, related 
parties and participating record-keepers in connection with the 
Program;
    (D) An explanation of distributions eligible for rollover treatment 
as required under section 402(f) of the Code;
    (E) A statement that at any time the individual can direct RCH to 
transfer the balance into the ERISA-covered plan of his or her current 
employer or to another account;
    (F) A statement that unless the individual specifies an alternative 
distribution option, the individual's plan balance will be transferred 
into a Default IRA;
    (G) A notice that if the Locate and Match process, as defined in 
Section III(b), finds that the individual maintains another Plan 
account sponsored by his or her current employer, RCH will send the 
Consent Letter, described below, and seek the individual's consent to 
transfer assets from the Default IRA to the Plan of the individual's 
current employer; and
    (H) A statement that the individual may opt out of the transfer by 
calling or writing RCH, and an explanation of how such individual can 
effectively opt out.
    (2) Welcome Letter. RCH must furnish each individual a ``Welcome 
Letter'' immediately upon the transfer of assets to a Default IRA. The 
Welcome Letter is sent no later than the following business day after 
RCH receives an individual's assets in a Default IRA. The Welcome 
Letter must include:
    (A) A notice that RCH opened an IRA on behalf of the individual;
    (B) All relevant information regarding the Default IRA, including: 
Applicable account fees; the name of the investment fund into which the 
individual's assets were transferred; the fund's symbol; the total 
dollar amount of assets invested; the number of fund shares; and the 
fund share price;
    (C) A trade confirmation;
    (D) RCH's contact information, including toll-free numbers for the 
service center and on-line access instructions;
    (E) A full and complete description of all fees charged to the 
Default IRA, and all compensation, direct or indirect, of any type, 
received by RCH, related parties and participating record-keepers in 
connection with administration of the Program;
    (F) A notice that the individual may contact RCH and transfer his 
or her balance from the Default IRA to another account at any time 
before RCH locates and verifies the individual's account at the plan 
sponsored by his or her current employer;
    (G) A statement that RCH will not transfer the Default IRA for at 
least 60 days from the date of the Welcome Letter. The notice shall 
further state that if the individual takes no action within the 60 
days, and if the Locate and Match process finds that the individual 
maintains a New Plan Account, RCH will send the Consent Letter and seek 
the individual's consent to transfer the assets of the Default IRA to 
the plan of the individual's new employer. The notice will also state 
that if the individual fails to contact RCH within 30 days of receiving 
the Consent Letter, RCH will transfer the Default IRA balances to the 
Plan of the individual's current employer.
    (3) Annual Statements. At least annually, RCH must furnish an 
``Annual Statement'' to the individual which includes a description of:
    (A) All fees the account will pay under the Program and a 
description of all the Program's material features, including a 
complete and accurate statement of all compensation, direct or 
indirect, of any type, received by RCH, related parties and 
participating record-keepers in connection with the Program;
    (B) A statement that the individual may contact RCH and direct RCH 
to transfer the balance into the Plan of his or her current employer or 
another account if he or she contacts RCH before RCH locates the 
individual's account at their new employer plan; and
    (C) A statement that if the Locate and Match process finds that the 
individual maintains another individual account plan at his or her 
current employer, RCH will send the Consent Letter and seek the 
individual's consent to transfer the assets of the Default IRA to the 
plan sponsored by the individual's current employer. The notice will 
also state that if the individual fails to contact RCH within 30 days 
of receiving the Consent Letter, RCH will transfer the Default IRA 
balances to the plan sponsored by the individual's current employer.
    (4) Consent Letter. For transfers of assets from a Default IRA to 
the New Plan Account, no later than the following business day after 
verification through the Locate and Match Process that the individual 
has opened a New Plan Account, RCH must send the Consent Letter, which 
must include:
    (A) A notification that the individual's Default IRA has been 
matched with the individual's New Plan Account;
    (B) A request for the individual's consent to transfer the assets 
from the Default IRA to the New Plan Account. The Consent Letter will 
also state that if the individual fails to contact RCH within 30 days 
of receipt of the Consent Letter, RCH will transfer the Default IRA 
balances to the plan sponsored by the individual's current employer.
    (C) A statement of all fees and other compensation, direct or 
indirect, of any type, associated with the Program and with the 
transfer of assets to the Plan sponsored by his or her current 
employer.
    (g) Other Transfers. Assets will be transferred from an Eligible 
Mandatory Distribution Account to a RCH Default IRA and then to a New 
Plan Account, or from a non-RCH Default IRA to an RCH Default IRA and 
then to a New Plan Account, only after the following notifications are 
provided to the individual in the manner required by paragraph (e) 
above: (1) A Mandatory Distribution Letter that is sent when it is 
determined under the RCH Program that an individual on whose behalf a 
non-RCH Default IRA has been established, or an Eligible Mandatory 
Distribution Account has been maintained at a prior employer, has 
opened a New Plan Account at the individual's current employer. The 
Mandatory Distribution Letter will contain the information described in 
paragraph (f), as applicable, and will note that if the individual 
fails to

[[Page 55749]]

contact RCH within 60 days of the Consent Letter described below, the 
individual's account balance will be transferred to the plan of the 
individual's current employer through an RCH Safe Harbor IRA unless the 
individual opts out of the transfer;
    (2) A Consent Letter is sent when the RCH Program determines that 
an individual on whose behalf a non-RCH Default IRA has been 
established, or on whose behalf an Eligible Mandatory Distribution 
Account is maintained at a prior employer, has opened a New Plan 
Account at the individual's current employer. The Consent Letter will 
fully state the fees and other compensation, direct or indirect, of any 
type, associated with the RCH Program, and will explain that if the 
individual fails to opt out of the RCH Program within 60 days of 
receiving the Consent Letter, the assets will be transferred to the New 
Plan Account.
    (3) Another Consent Letter is sent if, after 30 days following the 
first Consent Letter, the participant has not contacted RCH with 
instructions to opt in or opt out of the RCH Program. The Consent 
Letter will explain that, unless the individual opts out of the RCH 
Program within 30 days of receiving the letter, RCH will direct the 
transfer of the assets to the New Plan Account;
    (h) The Plan maintaining the New Plan Account and the Plan 
maintaining the Eligible Mandatory Distribution Account are each a 
qualified retirement plan as described under section 401(a) of the 
Code;
    (i) The Plan maintaining the New Plan Account has authorized the 
transfer of assets from other qualified retirement accounts;
    (j) Amounts transferred under the Program to the New Plan Account 
will be automatically invested according to the individual's current 
investment elections under the terms of the Plan or, if no such 
elections were made, under the qualified default investment alternative 
as defined under ERISA section 404(c)(5) and established under the 
terms of the Plan;
    (k) The RCH Default does not incur any fees or charges, direct or 
indirect, after the Program identifies a match with between a New Plan 
Account, except for the Transfer Fee and communication fee;
    (l) RCH submits to an annual audit, performed by a qualified 
independent auditor, as defined in Section III(j). The auditor must 
review a representative sample of transactions and related 
undertakings, sufficient for the auditor to make the following 
determinations:
    (1) Whether the notices met the timing and content requirements of 
this exemption, and were written and delivered in a manner reasonably 
designed to ensure that affected individuals would both receive and 
understand the notices;
    (2) Whether the asset transfers were conducted in accordance with 
this exemption and the applicable written agreement, and the New Plan 
Accounts, participants, and beneficiaries received all the assets they 
were due;
    (3) Whether the fees and compensation, direct or indirect, of any 
type, received by RCH, related parties and participating record-keepers 
in connection with the Program are consistent with the fees authorized 
by appropriate Plan fiduciaries; were properly disclosed to the 
affected individuals in accordance with the terms of this exemption; 
and did not exceed reasonable compensation, as defined in Section 
408(b)(2) of ERISA, Section 4975(d)(2) of the Code, and 29 CFR 
2550.408c-2 of the Department's regulations;
    (4) Whether individuals receiving Mandatory Distribution notices 
were effectively given the opportunity to opt-out by the use of a phone 
number that was operational and with a clearly available opt-out choice 
in the main menu; and
    (5) Whether the conditions of this exemption have been met;
    (m) The Auditor must complete the audit within 6 months following 
the 12-month period to which the audit relates, and the Auditor must 
submit a written report to the Office of Exemption Determinations 
within 30 days of completion detailing its findings, and the report 
will be part of the public record for this exemption. The written 
report must describe the Auditor's methodology in performing the Audit 
and must contain a detailed description of the Auditor's findings;
    (n) RCH does not include exculpatory provisions in its contracts 
disclaiming or limiting RCH's liability in the event that the RCH 
Program results in an improper transfer from a Default IRA or Eligible 
Mandatory Distribution Account; and
    (o) RCH does not provide investment advice, as described in ERISA 
section 3(21) or Code Section 4975(e)(3) and accompanying regulations, 
with respect to the assets held in a Default IRA or Eligible Mandatory 
Distribution Account;
    (p) The Program queries on at least a monthly basis whether a 
participant with a New Plan Account in the Program has either a Default 
IRA or an Eligible Mandatory Distribution Account covered by the 
Program. If the Program identifies a match, and the affected individual 
does not respond in a timely manner to the required notifications, RCH 
will immediately direct the transfer of the assets of the Default IRA 
or Eligible Mandatory Distribution Account to the participant's New 
Plan Account following the Settlement Date, as defined in Section 
III(m). RCH does not have discretion under the RCH Program to affect 
the timing or amount of the transfer, other than to deduct the 
appropriate fees;
    (q) All fees and expenses under the Program must be fully disclosed 
in participating plans' summary plan descriptions;
    (r) RCH verifies the accuracy of all participant and beneficiary 
data, including address and identification information, when assets are 
first transferred to a Default IRA or Eligible Mandatory Distribution 
Account;
    (s) RCH takes all prudent actions necessary to reasonably ensure 
that participant and beneficiary data are current and accurate, and 
that the appropriate participants and beneficiaries, in fact, receive 
all the required notices and disclosures, until the assets are 
transferred under the Program to a New Plan Account; and
    (t) RCH may not receive a Transfer Fee in connection with a roll-in 
transaction to an ERISA-covered Plan sponsored or maintained by RCH.

Section II. Record-Keeping Requirements

    (a) RCH maintains for 6 years the records necessary to enable the 
persons described below to determine whether the conditions of this 
exemption have been met, except that:
    (1) A prohibited transaction will not be considered to have 
occurred if, solely because of circumstances beyond the control of RCH, 
the records are lost or destroyed before the 6-year period ends; and
    (2) No party in interest other than RCH will be subject to the 
civil penalty that may be assessed under section 502(i) of the Act or 
to the taxes imposed by section 4975(a) and (b) of the Code, if the 
records are not maintained or are not available for examination as 
required below:
    (b)(1) Except as provided in Section II(b)(2) and notwithstanding 
any provisions of section 504(a)(2) of the Act, the records referred to 
in Section II(a) are unconditionally available at their customary 
location for examination during normal business hours by:
    (i) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;

[[Page 55750]]

    (ii) Any individual or fiduciary of a Plan participating in the 
Program; and
    (iii) None of the persons described in Section II(b)(l)(ii) shall 
be authorized to examine trade secrets of RCH, or commercial or 
financial information which is privileged or confidential.

Section III. Definitions

    (a) The term ``New Plan Account'' means any account maintained by a 
Plan that has received contributions or experienced investment activity 
within the preceding three months and is held for the benefit of an 
individual that maintains active employment with the plan sponsor;
    (b) The term ``Locate and Match'' means the technological process 
relied upon by RCH and participating record-keepers to identify 
multiple accounts maintained by the same individual.
    (c) The term ``Eligible Mandatory Distribution Account'' means an 
account with assets that is eligible for mandatory distribution under 
section 401(a)(31) of the Code at the individual's prior employer plan;
    (d) The term ``Plan'' means an individual account defined 
contribution plan that satisfies the automatic rollover rules under 29 
CFR 2550.404a-2 or 3;
    (e) The term ``Program'' means the RCH Auto Portability Program as 
it is described in this exemption and as it applies to Eligible 
Mandatory Distribution Accounts and Default IRAs, as defined in this 
section;
    (f) The term, ``RCH'' means Retirement Clearinghouse LLC or any 
affiliates;
    (g) The term ``record-keeper'' means record-keepers that are 
independent of RCH and any Affiliates of the record-keepers who elect 
to participate in the Program.
    (h) The term ``Default IRA'' means an individual retirement account 
with assets that is described in Section 408(a) of the Code and 
established pursuant to, and satisfies the requirements of, Section 
401(a)(31) of the Code and regulations at 29 CFR 2550.404a-2;
    (i) The term ``Transfer Fee'' means the fee paid to RCH for 
processing the transfer of assets from the Default IRA or Eligible 
Mandatory Distribution Account to the Current Plan Participant Account.
    (j) The term ``Independent Auditor'' means a person or entity with 
extensive knowledge of ERISA, the Code and the types of transactions 
described in this exemption, and who is capable of reviewing and 
analyzing the Program and the requirements of this exemption in a 
manner sufficient to perform the audit. The Independent Auditor may 
derive no more than 2 percent of its annual compensation from services 
provided directly or indirectly to RCH or any of its affiliates or 
related parties;
    (k) In a ``Conduit Model Transfer,'' RCH first transfers an 
individual's assets from either an Eligible Mandatory Distribution 
Account or a non-RCH default IRA to an RCH default IRA, and then 
transfers the assets to a New Plan Account based upon the RCH Program's 
determination that the individual has opened a New Plan Account at the 
individual's current employer;
    (l) In an ``RCH Default IRA Model Transfer,'' the plan transfers an 
individual's assets to an RCH Default IRA, and RCH transfers the assets 
to a New Plan Account based upon the RCH Program's determination that 
the individual has opened a New Plan Account at the individual's 
current employer;
    (m) The term ``Settlement Date'' means the settlement date set 
forth in an applicable mutual fund's prospectus. In no case will the 
Settlement Date be later than three days after the date the relevant 
sell order is placed. RCH has no discretion regarding the timing of the 
Settlement Date.
    (n) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (o) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.

    Signed at Washington, DC, this 2nd day of November 2018.
Lyssa Hall,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2018-24377 Filed 11-6-18; 8:45 am]
 BILLING CODE 4510-29-P