Conflict of Interest Rule-Retirement Investment Advice: Notice of Court Vacatur, 40589-40594 [2020-14260]

Download as PDF jbell on DSKJLSW7X2PROD with RULES Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Rules and Regulations Availability and Summary of Documents for Incorporation by Reference This document amends FAA Order 7400.11D, Airspace Designations and Reporting Points, dated August 8, 2019, and effective September 15, 2019. FAA Order 7400.11D is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11D lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points. Lists of Subjects in 14 CFR Part 71 Airspace, Incorporation by reference, Navigation (air). The Rule The FAA is amending Title 14 Code of Federal Regulations (14 CFR) part 71 by establishing Class E airspace extending upward from 700 feet above the surface of the earth at Gove County Airport, Quinter, KS. The Class E airspace will be established to within 5.5 miles of the Gove County Airport. This area would provide airspace for new Area Navigation Procedures at Gove County Airport, Quinter, KS. FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15. ■ Regulatory Notices and Analyses The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current, is non-controversial and unlikely to result in adverse or negative comments. It, therefore: (1) Is not a ‘‘significant regulatory action’’ under Executive Order 12866; (2) is not a ‘‘significant rule’’ under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. * Environmental Review The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, ‘‘Environmental Impacts: Policies and Procedures,’’ paragraph 5–6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment. VerDate Sep<11>2014 16:03 Jul 06, 2020 Jkt 250001 Adoption of the Amendment In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows: PART 71—DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS 1. The authority citation for part 71 continues to read as follows: Authority: 49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–1963 Comp., p. 389. § 71.1 [Amended] 2. The incorporation by reference in 14 CFR 71.1 of FAA Order 7400.11D, Airspace Designations and Reporting Points, dated August 8, 2019, and effective September 15, 2019, is amended as follows: ■ Paragraph 6005 Class E Airspace Areas Extending Upward From 700 Feet or More Above the Surface of the Earth. * * * * ANM WA E5 Quinter, KS Gove County Airport, KS (Lat. 39°02′19″ N, long. 100°14′02″ W) That airspace extending upward from 700 feet above the surface within a 5.5-mile radius of the Gove County airport, Quinter, KS. Issued in Seattle, Washington, on June 29, 2020. Shawn M. Kozica, Group Manager, Operations Support Group, Western Service Center. [FR Doc. 2020–14469 Filed 7–6–20; 8:45 am] BILLING CODE 4910–13–P DEPARTMENT OF LABOR Employee Benefits Security Administration 29 CFR Parts 2509 and 2510 RIN 1210–AB96 Conflict of Interest Rule—Retirement Investment Advice: Notice of Court Vacatur Employee Benefits Security Administration, Department of Labor ACTION: Final rule; technical amendment. AGENCY: This document implements the vacatur of the Department’s 2016 final rule defining who is a ‘‘fiduciary’’ under the Employee Retirement Income SUMMARY: PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 40589 Security Act of 1974. This document also reflects the removal of two prohibited transaction exemptions (PTEs 2016–01 and 2016–02) published with the 2016 final rule and the return of the amended prohibited transaction exemptions (PTEs 75–1, 77–4, 80–83, 83–1, 84–24, and 86–128) to their preamendment form. In addition, this document reinstates Interpretive Bulletin 96–1. DATES: Effective July 7, 2020. FOR FURTHER INFORMATION CONTACT: Luisa Grillo-Chope, Office of Regulations and Interpretations, Employee Benefits Security Administration (EBSA) (202) 693–8825; Susan Wilker, Office of Exemption Determinations, EBSA (202) 693–8557. SUPPLEMENTARY INFORMATION: On April 8, 2016, the Department of Labor published a final regulation titled ‘‘Conflict of Interest Rule—Retirement Investment Advice’’ (Fiduciary Rule) defining who is a ‘‘fiduciary’’ of an employee benefit plan under section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 (ERISA) as a result of giving investment advice to a plan or its participants or beneficiaries for a fee or other compensation. The Fiduciary Rule also applied to the definition of a ‘‘fiduciary’’ of a plan (including an individual retirement account (IRA)) under section 4975(e)(3)(B) of the Internal Revenue Code of 1986 (Code). On the same date, the Department published two new administrative class exemptions from the prohibited transaction provisions of ERISA and the Code: The Best Interest Contract Exemption (PTE 2016–01) and the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs (PTE 2016–02), as well as amendments to the following previously granted exemptions: PTEs 75–1; 77–4; 80–83; 83–1; 84–24; and 86–128 (collectively, the PTEs). On June 21, 2018, the United States Court of Appeals for the Fifth Circuit issued a judgment and mandate vacating the Fiduciary Rule, the new PTEs, and the amendments to the previously granted PTEs in toto. Chamber of Commerce, 885 F.3d 360 (5th Cir. 2018); Mandate at 2, Chamber, 885 F.3d 360 (No. 17–10238) (ECF No. 00514522178). The vacatur had the effect of reinstating the prior regulatory text, i.e., the 1975 regulation 1 (1975 Regulation), reinstating Interpretive Bulletin 96–1, which had been removed and largely incorporated into the text of the 1 See E:\FR\FM\07JYR1.SGM 40 FR 50842–44 (Oct. 31, 1975). 07JYR1 40590 Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Rules and Regulations Fiduciary Rule, revoking PTEs 2016–01 and 2016–02, and returning the previously granted PTEs to their pre2016 rulemaking form. This document takes the administrative steps necessary to conform the regulatory text in the CFR and the text of the previously granted PTEs to the Fifth Circuit’s vacatur mandate. This technical amendment is a ministerial action to reflect the court’s decision which affects no legal rights or obligations and imposes no costs. This final rule reflects the Fifth Circuit’s vacatur of the Fiduciary Rule under section 3(21)(A)(ii) of ERISA and section 4975(e)(3)(B) of the Code. Consistent with Federal Register requirements, this final rule removes language from the CFR that the Fiduciary Rule added and reinstates the 1975 Regulation and Interpretive Bulletin 96–1. This amendment also corrects a typographical error in the original text of the 1975 Regulation, at 29 CFR 2510–3.21(e)(1)(ii). This document also reflects the Fifth Circuit’s vacatur of PTEs 2016–01 and 2016–02, the two new class exemptions granted in connection with the Fiduciary Rule, as well as the vacatur of the amendments to the previously granted exemptions, PTEs 75–1, 77–4, 80–83, 83–1, 84–24 and 86–128.2 The Department also withdraws the Proposed Best Interest Contract Exemption for Insurance Intermediaries, a related class exemption proposal that was not finalized.3 EBSA’s website will reflect all of these changes.4 jbell on DSKJLSW7X2PROD with RULES Procedural and Other Matters Section 553 of the Administrative Procedure Act, 5 U.S.C. 553(b)(3)(B), provides that when an agency for good cause finds that notice and public procedures are impracticable, unnecessary or contrary to the public interest, the agency may issue a rule without providing notice and an opportunity for public comment. The Department has determined that there is good cause for dispensing with public comments, inasmuch as this rule merely 2 The Federal Register citations for the applicable versions of the previously granted PTEs are as follows: PTE 75–1, 40 FR 50845 (Oct. 31, 1975), as amended at 71 FR 5883 (Feb. 3, 2006); PTE 77–4, 42 FR 18732 (Apr. 8, 1977); PTE 80–83, 45 FR 73189 (Nov. 4, 1980), as amended at 67 FR 9483 (March 1, 2002); PTE 83–1, 48 FR 895 (Jan. 7, 1983), as amended at 67 FR 9483 (March 1, 2002); PTE 84– 24, 49 FR 13208 (Apr. 3, 1984), as corrected, 49 FR 24819 (June 15, 1984), as amended, 71 FR 5887 (Feb. 3, 2006); and PTE 86–128, 51 FR 41686 (November 18, 1986), as amended, 67 FR 64137 (October 17, 2002). 3 See 82 FR 7336 (January 19, 2017). 4 Available at https://www.dol.gov/agencies/ebsa/ employers-and-advisers/guidance/exemptions/ class. VerDate Sep<11>2014 16:03 Jul 06, 2020 Jkt 250001 conforms the text in the CFR to reflect the mandate of the Fifth Circuit’s decision, which vacated the Department’s 2016 rulemaking in toto. Additionally, the Department finds that to provide notice and an opportunity to comment would be unnecessary because the Department is simply conducting the ministerial task of implementing the mandate issued by the Fifth Circuit. In addition, the Department finds that it has good cause to make the revisions immediately effective under section 553(d) of the Administrative Procedure Act, 5 U.S.C. 553(d). Section 553(d) provides that final rules shall not become effective until 30 days after publication in the Federal Register, ‘‘except . . . as otherwise provided by the agency for good cause,’’ among other exceptions. The purpose of this provision is to ‘‘give affected parties a reasonable time to adjust their behavior before the final rule takes effect.’’ Omnipoint Corp. v. FCC, 78 F.3d 620, 630 (D.C. Cir. 1996). The Department has determined that there is good cause for making this final rule effective immediately because it merely implements the court order that already vacated certain regulatory provisions, and reinstates the prior versions, with one minor typographical correction. Accordingly, this final rule is effective immediately upon publication. This final rule has been determined to be not significant for purposes of Executive Orders 12866 and 13563. Additionally, no analysis is required under the Regulatory Flexibility Act 5 or Sections 202 and 205 of the Unfunded Mandates Reform Act of 1999,6 because, for the reasons discussed above, the Department is not required to engage in notice and comment under the Administrative Procedure Act. This final rule does not have significant Federalism implications under Executive Order 13132. This final rule is not a significant regulatory action under Executive Order 12866, and is therefore not subject to Executive Order 13771, entitled Reducing Regulations and Controlling Regulatory Costs. The final rule is not subject to the requirements of the Paperwork Reduction Act of 1995 (PRA 95) (44 U.S.C. 3501 et seq.), because it does not contain a collection of information as defined in 44 U.S.C. 3502(3). The Congressional Review Act, 5 U.S.C. 801 et seq., generally provides that before certain actions may take 5 See 5 U.S.C. 601(2) (limiting ‘‘rules’’ under the Regulatory Flexibility Act, to rules for which a general notice of proposed rulemaking is published). 6 Public Law 104–4. PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 effect, the agency promulgating the action must submit a report, which includes a copy of the action, to each House of the Congress and to the Comptroller General of the United States. This final action is administrative and only implements the Fifth Circuit vacatur. Accordingly, the Department has determined that good cause exists, and that this technical amendment is not subject to the timing requirements of the Congressional Review Act. Statutory Authority This regulation is issued pursuant to the authority in section 505 of ERISA (Pub. L. 93–406, 88 Stat. 894; 29 U.S.C. 1135) and section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 237, and under Secretary of Labor’s Order No. 1–2011, 77 FR 1088 (Jan. 9, 2012). List of Subjects in 29 CFR Parts 2509 and 2510 Employee benefit plans, Pensions. For the reasons stated in the preamble, the Department is amending parts 2509 and 2510 of subchapters A and B of chapter XXV of title 29 of the Code of Federal Regulations as follows: Subchapter A—General PART 2509—INTERPRETIVE BULLETINS RELATING TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 1. The authority citation for part 2509 continues to read as follows: ■ Authority: 29 U.S.C. 1135. Secretary of Labor’s Order 1–2011, 77 FR 1088 (Jan. 9, 2012). Sections 2509.75–10 and 2509.75–2 issued under 29 U.S.C. 1052, 1053, 1054. Sec. 2509.75–5 also issued under 29 U.S.C. 1002. Sec. 2509.95–1 also issued under sec. 625, Pub. L. 109–280, 120 Stat. 780. ■ 2. Add § 2509.96–1 to read as follows: § 2509.96–1 Interpretive Bulletin Relating to Participant Investment Education. (a) Scope. This interpretive bulletin sets forth the Department of Labor’s interpretation of section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and 29 CFR 2510.3–21(c) as applied to the provision of investmentrelated educational information to participants and beneficiaries in participant-directed individual account pension plans (i.e., pension plans that permit participants and beneficiaries to direct the investment of assets in their individual accounts, including plans that meet the requirements of the Department’s regulations at 29 CFR 2550.404c–1). E:\FR\FM\07JYR1.SGM 07JYR1 Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES (b) General. Fiduciaries of an employee benefit plan are charged with carrying out their duties prudently and solely in the interest of participants and beneficiaries of the plan, and are subject to personal liability to, among other things, make good any losses to the plan resulting from a breach of their fiduciary duties. ERISA sections 403, 404 and 409, 29 U.S.C. 1103, 1104, and 1109. Section 404(c) of ERISA provides a limited exception to these rules for a pension plan that permits a participant or beneficiary to exercise control over the assets in his or her individual account. The Department of Labor’s regulation, at 29 CFR 2550.404c–1, describes the kinds of plans to which section 404(c) applies, the circumstances under which a participant or beneficiary will be considered to have exercised independent control over the assets in his or her account, and the consequences of a participant’s or beneficiary’s exercise of such control.1 With both an increase in the number of participant-directed individual account plans and the number of investment options available to participants and beneficiaries under such plans, there has been an increasing recognition of the importance of providing participants and beneficiaries whose investment decisions will directly affect their income at retirement, with information designed to assist them in making investment and retirement-related decisions appropriate to their particular situations. Concerns have been raised, however, that the provision of such information may in some situations be viewed as rendering ‘‘investment advice for a fee or other compensation,’’ within the meaning of ERISA section 3(21)(A)(ii), thereby giving rise to fiduciary status and potential liability under ERISA for investment decisions of plan participants and beneficiaries. In response to these concerns, the Department of Labor is clarifying herein the applicability of ERISA section 3(21)(A)(ii) and 29 CFR 2510.3–21(c) to the provision of investment-related educational information to participants and beneficiaries in participant directed 1 The section 404(c) regulation conditions relief from fiduciary liability on, among other things, the participant or beneficiary being provided or having the opportunity to obtain sufficient investment information regarding the investment alternatives available under the plan in order to make informed investment decisions. Compliance with this condition, however, does not require that participants and beneficiaries be offered or provided either investment advice or investment education, e.g. regarding general investment principles and strategies, to assist them in making investment decisions. 29 CFR 2550.404c–1(c)(4). VerDate Sep<11>2014 16:03 Jul 06, 2020 Jkt 250001 individual account plans.2 In providing this clarification, the Department does not address the ‘‘fee or other compensation, direct or indirect,’’ which is a necessary element of fiduciary status under ERISA section 3(21)(A)(ii).3 (c) Investment Advice. Under ERISA section 3(21)(A)(ii), a person is considered a fiduciary with respect to an employee benefit plan to the extent that person ‘‘renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority to do so . . . .’’ The Department issued a regulation, at 29 CFR 2510.3–21(c), describing the circumstances under which a person will be considered to be rendering ‘‘investment advice’’ within the meaning of section 3(21)(A)(ii). Because section 3(21)(A)(ii) applies to advice with respect to ‘‘any moneys or other property’’ of a plan and 29 CFR 2510.3– 21(c) is intended to clarify the application of that section, it is the view of the Department of Labor that the criteria set forth in the regulation apply to determine whether a person renders ‘‘investment advice’’ to a pension plan participant or beneficiary who is permitted to direct the investment of assets in his or her individual account. Applying 29 CFR 2510.3–21(c) in the context of providing investment-related information to participants and beneficiaries of participant-directed individual account pension plans, a person will be considered to be rendering ‘‘investment advice,’’ within the meaning of ERISA section 3(21)(A)(ii), to a participant or beneficiary only if: (i) The person renders advice to the participant or beneficiary as to the value of securities or other property, or makes recommendations as to the advisability of investing in, purchasing, or selling 2 Issues relating to the circumstances under which information provided to participants and beneficiaries may affect a participant’s or beneficiary’s ability to exercise independent control over the assets in his or her account for purposes of relief from fiduciary liability under ERISA section 404(c) are beyond the scope of this interpretive bulletin. Accordingly, no inferences should be drawn regarding such issues. See 29 CFR 2550.404c–1(c)(2). It is the view of the Department, however, that the provision of investment-related information and material to participants and beneficiaries in accordance with paragraph (d) of this interpretive bulletin will not, in and of itself, affect the availability of relief under section 404(c). 3 The Department has expressed the view that, for purposes of section 3(21)(A)(ii), such fees or other compensation need not come from the plan and should be deemed to include all fees or other compensation incident to the transaction in which the investment advise has been or will be rendered. See A.O. 83–60A (Nov. 21, 1983); Reich v. McManus, 883 F. Supp. 1144 (N.D. Ill. 1995). PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 40591 securities or other property (2510.3– 21(c)(1)(i); and (ii) the person, either directly or indirectly, (A) has discretionary authority or control with respect to purchasing or selling securities or other property for the participant or beneficiary (2510.3– 21(c)(1)(ii)(A)), or (B) renders the advice on a regular basis to the participant or beneficiary, pursuant to a mutual agreement, arrangement or understanding (written or otherwise) with the participant or beneficiary that the advice will serve as a primary basis for the participant’s or beneficiary’s investment decisions with respect to plan assets and that such person will render individualized advice based on the particular needs of the participant or beneficiary (2510.3–21(c)(1)(ii)(B)).4 Whether the provision of particular investment-related information or materials to a participant or beneficiary constitutes the rendering of ‘‘investment advice,’’ within the meaning of 29 CFR 2510.3–21(c)(1), generally can be determined only by reference to the facts and circumstances of the particular case with respect to the individual plan participant or beneficiary. To facilitate such determinations, however, the Department of Labor has identified, in paragraph (d), below, examples of investment-related information and materials which if provided to plan participants and beneficiaries would not, in the view of the Department, result in the rendering of ‘‘investment advice’’ under ERISA section 3(21)(A)(ii) and 29 CFR 2510.3–21(c). (d) Investment Education. For purposes of ERISA section 3(21)(A)(ii) and 29 CFR 2510.3–21(c), the Department of Labor has determined that the furnishing of the following categories of information and materials to a participant or beneficiary in a participant-directed individual account pension plan will not constitute the rendering of ‘‘investment advice,’’ irrespective of who provides the information (e.g., plan sponsor, fiduciary or service provider), the frequency with which the information is shared, the form in which the information and materials are provided (e.g., on an individual or group basis, in writing or orally, or via video or computer software), or whether an identified category of information and materials is furnished alone or in combination with other identified categories of information and materials. 4 This IB does not address the application of 29 CFR 2510.3–21(c) to communications with fiduciaries of participant-directed individual account pension plan plans. E:\FR\FM\07JYR1.SGM 07JYR1 jbell on DSKJLSW7X2PROD with RULES 40592 Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Rules and Regulations (1) Plan Information. (i) Information and materials that inform a participant or beneficiary about the benefits of plan participation, the benefits of increasing plan contributions, the impact of preretirement withdrawals on retirement income, the terms of the plan, or the operation of the plan; or (ii) information such as that described in 29 CFR 2550.404c–1(b)(2)(i) on investment alternatives under the plan (e.g., descriptions of investment objectives and philosophies, risk and return characteristics, historical return information, or related prospectuses).5 The information and materials described above relate to the plan and plan participation, without reference to the appropriateness of any individual investment option for a particular participant or beneficiary under the plan. The information, therefore, does not contain either ‘‘advice’’ or ‘‘recommendations’’ within the meaning of 29 CFR 2510.3–21(c)(1)(i). Accordingly, the furnishing of such information would not constitute the rendering of ‘‘investment advice’’ for purposes of section 3(21)(A)(ii) of ERISA. (2) General Financial and Investment Information. Information and materials that inform a participant or beneficiary about: (i) General financial and investment concepts, such as risk and return, diversification, dollar cost averaging, compounded return, and tax deferred investment; (ii) historic differences in rates of return between different asset classes (e.g., equities, bonds, or cash) based on standard market indices; (iii) effects of inflation; (iv) estimating future retirement income needs; (v) determining investment time horizons; and (vi) assessing risk tolerance. The information and materials described above are general financial and investment information that have no direct relationship to investment alternatives available to participants and beneficiaries under a plan or to individual participants or beneficiaries. The furnishing of such information, therefore, would not constitute rendering ‘‘advice’’ or making ‘‘recommendations’’ to a participant or beneficiary within the meaning of 29 CFR 2510.3–21(c)(1)(i). Accordingly, the furnishing of such information would not constitute the rendering of ‘‘investment advice’’ for purposes of section 3(21)(A)(ii) of ERISA. 5 Descriptions of investment alternatives under the plan may include information relating to the generic asset class (e,g., equities, bonds, or cash) of the investment alternatives. 29 CFR 2550.404c– 1(b)(2)(i)(B)(1)(ii). VerDate Sep<11>2014 16:03 Jul 06, 2020 Jkt 250001 (3) Asset Allocation Models. Information and materials (e.g., pie charts, graphs, or case studies) that provide a participant or beneficiary with models, available to all plan participants and beneficiaries, of asset allocation portfolios of hypothetical individuals with different time horizons and risk profiles, where: (i) Such models are based on generally accepted investments theories that take into account the historic returns of different asset classes (e.g., equities, bonds, or cash) over define periods of time; (ii) all material facts and assumptions on which such models are based (e.g., retirement ages, life expectancies, income levels, financial resources, replacement income ratios, inflation rates, and rates of return) accompany the models; (iii) to the extent that an asset allocation model identifies any specific investment alternative available under the plan, the model is accompanied by a statement indicating that other investment alternatives having similar risk and return characteristics may be available under the plan and identifying where information on those investment alternatives may be obtained; and (iv) the asset allocation models are accompanied by a statement indicating that, in applying particular asset allocation models to their individual situations, participants or beneficiaries should consider their other assets, income, and investments (e.g., equity in a home, IRA investments, savings accounts, and interests in other qualified and non-qualified plans) in addition to their interests in the plan. Because the information and materials described above would enable a participant or beneficiary to assess the relevance of an asset allocation model to his or her individual situation, the furnishing of such information would not constitute a ‘‘recommendation’’ within the meaning of 29 CFR 2510.3– 21(c)(1)(i) and, accordingly, would not constitute ‘‘investment advice’’ for purposes of section 3(21)(A)(ii) of ERISA. This result would not, in the view of the Department, be affected by the fact that a plan offers only one investment alternative in a particular asset class identified in an asset allocation model. (4) Interactive Investment Materials. Questionnaires, worksheets, software, and similar materials which provide a participant or beneficiary the means to estimate future retirement income needs and assess the impact of different asset allocations on retirement income, where: (i) Such materials are based on generally accepted investment theories that take into account the historic PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 returns of different asset classes (e.g., equities, bonds, or cash) over defined periods of time; (ii) there is an objective correlation between the asset allocations generated by the materials and the information and data supplied by the participant or beneficiary; (iii) all material facts and assumptions (e.g., retirement ages, life expectancies, income levels, financial resources, replacement income ratios, inflation rates, and rates of return) which may affect a participant’s or beneficiary’s assessment of the different asset allocations accompany the materials or are specified by the participant or beneficiary; (iv) to the extent that an asset allocation generated by the materials identifies any specific investment alternative available under the plan, the asset allocation is accompanied by a statement indicating that other investment alternatives having similar risk and return characteristics may be available under the plan and identifying where information on those investment alternatives may be obtained; and (v) the materials either take into account or are accompanied by a statement indicating that, in applying particular asset allocations to their individual situations, participants or beneficiaries should consider their other assets, income, and investments (e.g., equity in a home, IRA investments, savings accounts, and interests in other qualified and non-qualified plans) in addition to their interests in the plan. The information provided through the use of the above-described materials enables participants and beneficiaries independently to design and assess multiple asset allocation models, but otherwise these materials do not differ from asset allocation models based on hypothetical assumptions. Such information would not constitute a ‘‘recommendation’’ within the meaning of 29 CFR 2510.3–21(c)(1)(i) and, accordingly, would not constitute ‘‘investment advice’’ for purposes of section 3(21)(A)(ii) of ERISA. The Department notes that the information and materials described in subparagraphs (1)–(4) above merely represent examples of the type of information and materials which may be furnished to participants and beneficiaries without such information and materials constituting ‘‘investment advice.’’ In this regard, the Department recognizes that there may be many other examples of information, materials, and educational services which, if furnished to participants and beneficiaries, would not constitute ‘‘investment advice.’’ Accordingly, no inferences should be drawn from subparagraphs (1)–(4), E:\FR\FM\07JYR1.SGM 07JYR1 jbell on DSKJLSW7X2PROD with RULES Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Rules and Regulations above, with respect to whether the furnishing of any information, materials or educational services not described therein may constitute ‘‘investment advice.’’ Determinations as to whether the provision of any information, materials or educational services not described herein constitutes the rendering of ‘‘investment advice’’ must be made by reference to the criteria set forth in 29 CFR 2510. 3–21(c)(1). (e) Selection and Monitoring of Educators and Advisors. As with any designation of a service provider to a plan, the designation of a person(s) to provide investment educational services or investment advice to plan participants and beneficiaries is an exercise of discretionary authority or control with respect to management of the plan; therefore, persons making the designation must act prudently and solely in the interest of the plan participants and beneficiaries, both in making the designation(s) and in continuing such designation(s). See ERISA sections 3(21)(A)(i) and 404(a), 29 U.S.C. 1002 (21)(A)(i) and 1104(a). In addition, the designation of an investment advisor to serve as a fiduciary may give rise to co-fiduciary liability if the person making and continuing such designation in doing so fails to act prudently and solely in the interest of plan participants and beneficiaries; or knowingly participates in, conceals or fails to make reasonable efforts to correct a known breach by the investment advisor. See ERISA section 405(a), 29 U.S.C. 1105(a). The Department notes, however, that, in the context of an ERISA section 404(c) plan, neither the designation of a person to provide education nor the designation of a fiduciary to provide investment advice to participants and beneficiaries would, in itself, give rise to fiduciary liability for loss, or with respect to any breach of part 4 of title I of ERISA, that is the direct and necessary result of a participant’s or beneficiary’s exercise of independent control. 29 CFR 2550.404c–1(d). The Department also notes that a plan sponsor or fiduciary would have no fiduciary responsibility or liability with respect to the actions of a third party selected by a participant or beneficiary to provide education or investment advice where the plan sponsor or fiduciary neither selects nor endorses the educator or advisor, nor otherwise makes arrangements with the educator or advisor to provide such services. VerDate Sep<11>2014 16:03 Jul 06, 2020 Jkt 250001 Subchapter B—Definitions and Coverage under the Employee Retirement Income Security Act of 1974 PART 2510—DEFINITIONS OF TERMS USED IN SUBCHAPTERS C, D, E, F, AND G OF THIS CHAPTER 1. The authority citation for part 2510 continues to read as follows: ■ Authority: 29 U.S.C. 1002(2), 1002(21), 1002(37), 1002(38), 1002(40), 1031, and 1135; Secretary of Labor’s Order 1–2011, 77 FR 1088 (Jan. 9, 2019); Secs. 2510.3–21, 2510.3– 101 and 2510.3–102 also issued under Sec. 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 237 (2012). E.O. 12108, 22 FR 1065 (Jan. 3, 1979) and 29 U.S.C. 1135 note. Section 2510.3–38 is also issued under Pub. L. 105–72, Sec. 1(b), 111 Stat. 1457 (1997). 2. Revise § 2510.3–21 to read as follows: ■ § 2510.3–21 (a)–(b) [Reserved] (c) Investment advice. (1) A person shall be deemed to be rendering ‘‘investment advice’’ to an employee benefit plan, within the meaning of section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 (the Act) and this paragraph, only if: (i) Such person renders advice to the plan as to the value of securities or other property, or makes recommendation as to the advisability of investing in, purchasing, or selling securities or other property; and (ii) Such person either directly or indirectly (e.g., through or together with any affiliate)— (A) Has discretionary authority or control, whether or not pursuant to agreement, arrangement or understanding, with respect to purchasing or selling securities or other property for the plan; or (B) Renders any advice described in paragraph (c)(1)(i) of this section on a regular basis to the plan pursuant to a mutual agreement, arrangement or understanding, written or otherwise, between such person and the plan or a fiduciary with respect to the plan, that such services will serve as a primary basis for investment decisions with respect to plan assets, and that such person will render individualized investment advice to the plan based on the particular needs of the plan regarding such matters as, among other things, investment policies or strategy, overall portfolio composition, or diversification of plan investments. (2) A person who is a fiduciary with respect to a plan by reason of rendering investment advice (as defined in paragraph (c)(1) of this section) for a fee or other compensation, direct or indirect, with respect to any moneys or PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 40593 other property of such plan, or having any authority or responsibility to do so, shall not be deemed to be a fiduciary regarding any assets of the plan with respect to which such person does not have any discretionary authority, discretionary control or discretionary responsibility, does not exercise any authority or control, does not render investment advice (as defined in paragraph (c)(1) of this section) for a fee or other compensation, and does not have any authority or responsibility to render such investment advice, provided that nothing in this paragraph shall be deemed to: (i) Exempt such person from the provisions of section 405(a) of the Act concerning liability for fiduciary breaches by other fiduciaries with respect to any assets of the plan; or (ii) Exclude such person from the definition of the term ‘‘party in interest’’ (as set forth in section 3(14)(B) of the Act) with respect to any assets of the plan. (d) Execution of securities transactions. (1) A person who is a broker or dealer registered under the Securities Exchange Act of 1934, a reporting dealer who makes primary markets in securities of the United States Government or of an agency of the United States Government and reports daily to the Federal Reserve Bank of New York its positions with respect to such securities and borrowings thereon, or a bank supervised by the United States or a State, shall not be deemed to be a fiduciary, within the meaning of section 3(21)(A) of the Act, with respect to an employee benefit plan solely because such person executes transactions for the purchase or sale of securities on behalf of such plan in the ordinary course of its business as a broker, dealer, or bank, pursuant to instructions of a fiduciary with respect to such plan, if: (i) Neither the fiduciary nor any affiliate of such fiduciary is such broker, dealer, or bank; and (ii) The instructions specify (A) the security to be purchased or sold, (B) a price range within which such security is to be purchased or sold, or, if such security is issued by an open-end investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1, et seq.), a price which is determined in accordance with Rule 22c–1 under the Investment Company Act of 1940 (17 CFR 270.22c–1), (C) a time span during which such security may be purchased or sold (not to exceed five business days), and (D) the minimum or maximum quantity of such security which may be purchased or sold within such price range, or, in the E:\FR\FM\07JYR1.SGM 07JYR1 jbell on DSKJLSW7X2PROD with RULES 40594 Federal Register / Vol. 85, No. 130 / Tuesday, July 7, 2020 / Rules and Regulations case of a security issued by an open-end investment company registered under the Investment Company Act of 1940, the minimum or maximum quantity of such security which may be purchased or sold, or the value of such security in dollar amount which may be purchased or sold, at the price referred to in paragraph (d)(1)(ii)(B) of this section. (2) A person who is a broker-dealer, reporting dealer, or bank which is a fiduciary with respect to an employee benefit plan solely by reason of the possession or exercise of discretionary authority or discretionary control in the management of the plan or the management or disposition of plan assets in connection with the execution of a transaction or transactions for the purchase or sale of securities on behalf of such plan which fails to comply with the provisions of paragraph (d)(1) of this section, shall not be deemed to be a fiduciary regarding any assets of the plan with respect to which such brokerdealer, reporting dealer or bank does not have any discretionary authority, discretionary control or discretionary responsibility, does not exercise any authority or control, does not render investment advice (as defined in paragraph (c)(1) of this section) for a fee or other compensation, and does not have any authority or responsibility to render such investment advice, provided that nothing in this paragraph shall be deemed to: (i) Exempt such broker-dealer, reporting dealer, or bank from the provisions of section 405(a) of the Act concerning liability for fiduciary breaches by other fiduciaries with respect to any assets of the plan; or (ii) Exclude such broker-dealer, reporting dealer, or bank from the definition, of the term ‘‘party in interest’’ (as set forth in section 3(14)(B) of the Act) with respect to any assets of the plan. (e) Affiliate and control. (1) For purposes of paragraphs (c) and (d) of this section, an ‘‘affiliate’’ of a person shall include: (i) Any person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with such person; (ii) Any officer, director, partner, employee or relative (as defined in section 3(15) of the Act) of such person; and (iii) Any corporation or partnership of which such person is an officer, director or partner. (2) For purposes of this paragraph, the term ‘‘control’’ means the power to exercise a controlling influence over the VerDate Sep<11>2014 16:03 Jul 06, 2020 Jkt 250001 management or policies of a person other than an individual. Jeanne Klinefelter Wilson, Acting Assistant Secretary, Employee Benefits Security Administration, U.S. Department of Labor. [FR Doc. 2020–14260 Filed 7–2–20; 8:45 am] BILLING CODE 4510–29–P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 63, 260, 261, and 278 [EPA–HQ–OLEM–2018–0830; FRL–10006– 71–OLEM] RIN 2050–AG93 Modernizing Ignitable Liquids Determinations Environmental Protection Agency (EPA). ACTION: Final rule. AGENCY: The Environmental Protection Agency (EPA) is finalizing updates to the regulations for the identification of ignitable hazardous waste under the Resource Conservation and Recovery Act (RCRA) and to modernize the RCRA test methods that currently require the use of mercury thermometers. These revisions provide greater clarity to hazardous waste identification, provide flexibility in testing requirements, improve environmental compliance, and, thereby, enhance protection of human health and the environment. DATES: This final rule is effective on September 8, 2020. The incorporation by reference of certain publications listed in the rule is approved by the Director of the Federal Register as of September 8, 2020. ADDRESSES: The docket for this action, identified by docket identification (ID) number EPA–HQ–OLEM–2018–0830, is available at https://www.regulations.gov or at the Office of Land & Emergency Management Docket (OLEM Docket), Environmental Protection Agency Docket Center (EPA/DC), West William Jefferson Clinton Bldg., Rm. 3334, 1301 Constitution Ave. NW, Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566–1744, and the telephone number for the OLEM Docket is (202) 566–0270. Please review the visitor instructions and additional information about the docket available at https://www.epa.gov/dockets. FOR FURTHER INFORMATION CONTACT: Daniel Fagnant, Materials Recovery and SUMMARY: PO 00000 Frm 00026 Fmt 4700 Sfmt 4700 Waste Management Division, Office of Resource Conservation and Recovery (5304P), Environmental Protection Agency, 1200 Pennsylvania Avenue NW, Washington, DC 20460; telephone number 703–308–0319; email address: fagnant.daniel@epa.gov; or Melissa Kaps, Materials Recovery and Waste Management Division, Office of Resource Conservation and Recovery (5304P), Environmental Protection Agency, 1200 Pennsylvania Avenue NW, Washington, DC 20460; telephone number 703–308–6787; email address: kaps.melissa@epa.gov. SUPPLEMENTARY INFORMATION: Table of Contents The information presented in this preamble is organized as follows: I. General Information A. Does this action apply to me? B. What action is EPA taking? C. What is EPA’s authority for taking this action? D. What are the incremental costs and benefits of this action? II. Background A. What is a hazardous waste? B. What is the hazardous waste characteristic of ignitability? C. What is the regulatory history of the ignitability characteristic? D. Summary of the Proposed Rule III. Discussion of the Final Rule and Public Comments A. Flash Point Test Methods B. Mercury Thermometer Requirements in Air Sampling and Stack Emissions Methods C. Technical Corrections to 40 CFR 261.21 D. Revised Definition of Aqueous and Comments on the Aqueous Alcohol Exclusion E. Sampling of Multiple Phase Wastes F. Pressure Filtration and Ignitable Liquids G. Additional Conforming Amendments IV. Incorporation by Reference V. State Authorization A. Applicability of Final Rule in Authorized States B. Effect on State Authorization VI. Statutory and Executive Order (E.O.) Reviews A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review B. Executive Order 13771: Reducing Regulations and Controlling Regulatory Costs C. Paperwork Reduction Act (PRA) D. Regulatory Flexibility Act (RFA) E. Unfunded Mandates Reform Act (UMRA) F. Executive Order 13132: Federalism G. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments H. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks I. Executive Order 13211: Actions Concerning Regulations That E:\FR\FM\07JYR1.SGM 07JYR1

Agencies

[Federal Register Volume 85, Number 130 (Tuesday, July 7, 2020)]
[Rules and Regulations]
[Pages 40589-40594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14260]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Parts 2509 and 2510

RIN 1210-AB96


Conflict of Interest Rule--Retirement Investment Advice: Notice 
of Court Vacatur

AGENCY: Employee Benefits Security Administration, Department of Labor

ACTION: Final rule; technical amendment.

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SUMMARY: This document implements the vacatur of the Department's 2016 
final rule defining who is a ``fiduciary'' under the Employee 
Retirement Income Security Act of 1974. This document also reflects the 
removal of two prohibited transaction exemptions (PTEs 2016-01 and 
2016-02) published with the 2016 final rule and the return of the 
amended prohibited transaction exemptions (PTEs 75-1, 77-4, 80-83, 83-
1, 84-24, and 86-128) to their pre-amendment form. In addition, this 
document reinstates Interpretive Bulletin 96-1.

DATES: Effective July 7, 2020.

FOR FURTHER INFORMATION CONTACT: Luisa Grillo-Chope, Office of 
Regulations and Interpretations, Employee Benefits Security 
Administration (EBSA) (202) 693-8825; Susan Wilker, Office of Exemption 
Determinations, EBSA (202) 693-8557.

SUPPLEMENTARY INFORMATION: On April 8, 2016, the Department of Labor 
published a final regulation titled ``Conflict of Interest Rule--
Retirement Investment Advice'' (Fiduciary Rule) defining who is a 
``fiduciary'' of an employee benefit plan under section 3(21)(A)(ii) of 
the Employee Retirement Income Security Act of 1974 (ERISA) as a result 
of giving investment advice to a plan or its participants or 
beneficiaries for a fee or other compensation. The Fiduciary Rule also 
applied to the definition of a ``fiduciary'' of a plan (including an 
individual retirement account (IRA)) under section 4975(e)(3)(B) of the 
Internal Revenue Code of 1986 (Code). On the same date, the Department 
published two new administrative class exemptions from the prohibited 
transaction provisions of ERISA and the Code: The Best Interest 
Contract Exemption (PTE 2016-01) and the Class Exemption for Principal 
Transactions in Certain Assets Between Investment Advice Fiduciaries 
and Employee Benefit Plans and IRAs (PTE 2016-02), as well as 
amendments to the following previously granted exemptions: PTEs 75-1; 
77-4; 80-83; 83-1; 84-24; and 86-128 (collectively, the PTEs).
    On June 21, 2018, the United States Court of Appeals for the Fifth 
Circuit issued a judgment and mandate vacating the Fiduciary Rule, the 
new PTEs, and the amendments to the previously granted PTEs in toto. 
Chamber of Commerce, 885 F.3d 360 (5th Cir. 2018); Mandate at 2, 
Chamber, 885 F.3d 360 (No. 17-10238) (ECF No. 00514522178). The vacatur 
had the effect of reinstating the prior regulatory text, i.e., the 1975 
regulation \1\ (1975 Regulation), reinstating Interpretive Bulletin 96-
1, which had been removed and largely incorporated into the text of the

[[Page 40590]]

Fiduciary Rule, revoking PTEs 2016-01 and 2016-02, and returning the 
previously granted PTEs to their pre-2016 rulemaking form. This 
document takes the administrative steps necessary to conform the 
regulatory text in the CFR and the text of the previously granted PTEs 
to the Fifth Circuit's vacatur mandate. This technical amendment is a 
ministerial action to reflect the court's decision which affects no 
legal rights or obligations and imposes no costs.
---------------------------------------------------------------------------

    \1\ See 40 FR 50842-44 (Oct. 31, 1975).
---------------------------------------------------------------------------

    This final rule reflects the Fifth Circuit's vacatur of the 
Fiduciary Rule under section 3(21)(A)(ii) of ERISA and section 
4975(e)(3)(B) of the Code. Consistent with Federal Register 
requirements, this final rule removes language from the CFR that the 
Fiduciary Rule added and reinstates the 1975 Regulation and 
Interpretive Bulletin 96-1. This amendment also corrects a 
typographical error in the original text of the 1975 Regulation, at 29 
CFR 2510-3.21(e)(1)(ii).
    This document also reflects the Fifth Circuit's vacatur of PTEs 
2016-01 and 2016-02, the two new class exemptions granted in connection 
with the Fiduciary Rule, as well as the vacatur of the amendments to 
the previously granted exemptions, PTEs 75-1, 77-4, 80-83, 83-1, 84-24 
and 86-128.\2\ The Department also withdraws the Proposed Best Interest 
Contract Exemption for Insurance Intermediaries, a related class 
exemption proposal that was not finalized.\3\ EBSA's website will 
reflect all of these changes.\4\
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    \2\ The Federal Register citations for the applicable versions 
of the previously granted PTEs are as follows: PTE 75-1, 40 FR 50845 
(Oct. 31, 1975), as amended at 71 FR 5883 (Feb. 3, 2006); PTE 77-4, 
42 FR 18732 (Apr. 8, 1977); PTE 80-83, 45 FR 73189 (Nov. 4, 1980), 
as amended at 67 FR 9483 (March 1, 2002); PTE 83-1, 48 FR 895 (Jan. 
7, 1983), as amended at 67 FR 9483 (March 1, 2002); PTE 84-24, 49 FR 
13208 (Apr. 3, 1984), as corrected, 49 FR 24819 (June 15, 1984), as 
amended, 71 FR 5887 (Feb. 3, 2006); and PTE 86-128, 51 FR 41686 
(November 18, 1986), as amended, 67 FR 64137 (October 17, 2002).
    \3\ See 82 FR 7336 (January 19, 2017).
    \4\ Available at https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/exemptions/class.
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Procedural and Other Matters

    Section 553 of the Administrative Procedure Act, 5 U.S.C. 
553(b)(3)(B), provides that when an agency for good cause finds that 
notice and public procedures are impracticable, unnecessary or contrary 
to the public interest, the agency may issue a rule without providing 
notice and an opportunity for public comment. The Department has 
determined that there is good cause for dispensing with public 
comments, inasmuch as this rule merely conforms the text in the CFR to 
reflect the mandate of the Fifth Circuit's decision, which vacated the 
Department's 2016 rulemaking in toto. Additionally, the Department 
finds that to provide notice and an opportunity to comment would be 
unnecessary because the Department is simply conducting the ministerial 
task of implementing the mandate issued by the Fifth Circuit.
    In addition, the Department finds that it has good cause to make 
the revisions immediately effective under section 553(d) of the 
Administrative Procedure Act, 5 U.S.C. 553(d). Section 553(d) provides 
that final rules shall not become effective until 30 days after 
publication in the Federal Register, ``except . . . as otherwise 
provided by the agency for good cause,'' among other exceptions. The 
purpose of this provision is to ``give affected parties a reasonable 
time to adjust their behavior before the final rule takes effect.'' 
Omnipoint Corp. v. FCC, 78 F.3d 620, 630 (D.C. Cir. 1996). The 
Department has determined that there is good cause for making this 
final rule effective immediately because it merely implements the court 
order that already vacated certain regulatory provisions, and 
reinstates the prior versions, with one minor typographical correction. 
Accordingly, this final rule is effective immediately upon publication.
    This final rule has been determined to be not significant for 
purposes of Executive Orders 12866 and 13563. Additionally, no analysis 
is required under the Regulatory Flexibility Act \5\ or Sections 202 
and 205 of the Unfunded Mandates Reform Act of 1999,\6\ because, for 
the reasons discussed above, the Department is not required to engage 
in notice and comment under the Administrative Procedure Act. This 
final rule does not have significant Federalism implications under 
Executive Order 13132. This final rule is not a significant regulatory 
action under Executive Order 12866, and is therefore not subject to 
Executive Order 13771, entitled Reducing Regulations and Controlling 
Regulatory Costs. The final rule is not subject to the requirements of 
the Paperwork Reduction Act of 1995 (PRA 95) (44 U.S.C. 3501 et seq.), 
because it does not contain a collection of information as defined in 
44 U.S.C. 3502(3).
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    \5\ See 5 U.S.C. 601(2) (limiting ``rules'' under the Regulatory 
Flexibility Act, to rules for which a general notice of proposed 
rulemaking is published).
    \6\ Public Law 104-4.
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    The Congressional Review Act, 5 U.S.C. 801 et seq., generally 
provides that before certain actions may take effect, the agency 
promulgating the action must submit a report, which includes a copy of 
the action, to each House of the Congress and to the Comptroller 
General of the United States. This final action is administrative and 
only implements the Fifth Circuit vacatur. Accordingly, the Department 
has determined that good cause exists, and that this technical 
amendment is not subject to the timing requirements of the 
Congressional Review Act.

Statutory Authority

    This regulation is issued pursuant to the authority in section 505 
of ERISA (Pub. L. 93-406, 88 Stat. 894; 29 U.S.C. 1135) and section 102 
of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 237, and under 
Secretary of Labor's Order No. 1-2011, 77 FR 1088 (Jan. 9, 2012).

List of Subjects in 29 CFR Parts 2509 and 2510

    Employee benefit plans, Pensions.
    For the reasons stated in the preamble, the Department is amending 
parts 2509 and 2510 of subchapters A and B of chapter XXV of title 29 
of the Code of Federal Regulations as follows:

Subchapter A--General

PART 2509--INTERPRETIVE BULLETINS RELATING TO THE EMPLOYEE 
RETIREMENT INCOME SECURITY ACT OF 1974

0
1. The authority citation for part 2509 continues to read as follows:

    Authority:  29 U.S.C. 1135. Secretary of Labor's Order 1-2011, 
77 FR 1088 (Jan. 9, 2012). Sections 2509.75-10 and 2509.75-2 issued 
under 29 U.S.C. 1052, 1053, 1054. Sec. 2509.75-5 also issued under 
29 U.S.C. 1002. Sec. 2509.95-1 also issued under sec. 625, Pub. L. 
109-280, 120 Stat. 780.


0
2. Add Sec.  2509.96-1 to read as follows:


Sec.  2509.96-1  Interpretive Bulletin Relating to Participant 
Investment Education.

    (a) Scope. This interpretive bulletin sets forth the Department of 
Labor's interpretation of section 3(21)(A)(ii) of the Employee 
Retirement Income Security Act of 1974, as amended (ERISA), and 29 CFR 
2510.3-21(c) as applied to the provision of investment-related 
educational information to participants and beneficiaries in 
participant-directed individual account pension plans (i.e., pension 
plans that permit participants and beneficiaries to direct the 
investment of assets in their individual accounts, including plans that 
meet the requirements of the Department's regulations at 29 CFR 
2550.404c-1).

[[Page 40591]]

    (b) General. Fiduciaries of an employee benefit plan are charged 
with carrying out their duties prudently and solely in the interest of 
participants and beneficiaries of the plan, and are subject to personal 
liability to, among other things, make good any losses to the plan 
resulting from a breach of their fiduciary duties. ERISA sections 403, 
404 and 409, 29 U.S.C. 1103, 1104, and 1109. Section 404(c) of ERISA 
provides a limited exception to these rules for a pension plan that 
permits a participant or beneficiary to exercise control over the 
assets in his or her individual account. The Department of Labor's 
regulation, at 29 CFR 2550.404c-1, describes the kinds of plans to 
which section 404(c) applies, the circumstances under which a 
participant or beneficiary will be considered to have exercised 
independent control over the assets in his or her account, and the 
consequences of a participant's or beneficiary's exercise of such 
control.\1\
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    \1\ The section 404(c) regulation conditions relief from 
fiduciary liability on, among other things, the participant or 
beneficiary being provided or having the opportunity to obtain 
sufficient investment information regarding the investment 
alternatives available under the plan in order to make informed 
investment decisions. Compliance with this condition, however, does 
not require that participants and beneficiaries be offered or 
provided either investment advice or investment education, e.g. 
regarding general investment principles and strategies, to assist 
them in making investment decisions. 29 CFR 2550.404c-1(c)(4).
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    With both an increase in the number of participant-directed 
individual account plans and the number of investment options available 
to participants and beneficiaries under such plans, there has been an 
increasing recognition of the importance of providing participants and 
beneficiaries whose investment decisions will directly affect their 
income at retirement, with information designed to assist them in 
making investment and retirement-related decisions appropriate to their 
particular situations. Concerns have been raised, however, that the 
provision of such information may in some situations be viewed as 
rendering ``investment advice for a fee or other compensation,'' within 
the meaning of ERISA section 3(21)(A)(ii), thereby giving rise to 
fiduciary status and potential liability under ERISA for investment 
decisions of plan participants and beneficiaries.
    In response to these concerns, the Department of Labor is 
clarifying herein the applicability of ERISA section 3(21)(A)(ii) and 
29 CFR 2510.3-21(c) to the provision of investment-related educational 
information to participants and beneficiaries in participant directed 
individual account plans.\2\ In providing this clarification, the 
Department does not address the ``fee or other compensation, direct or 
indirect,'' which is a necessary element of fiduciary status under 
ERISA section 3(21)(A)(ii).\3\
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    \2\ Issues relating to the circumstances under which information 
provided to participants and beneficiaries may affect a 
participant's or beneficiary's ability to exercise independent 
control over the assets in his or her account for purposes of relief 
from fiduciary liability under ERISA section 404(c) are beyond the 
scope of this interpretive bulletin. Accordingly, no inferences 
should be drawn regarding such issues. See 29 CFR 2550.404c-1(c)(2). 
It is the view of the Department, however, that the provision of 
investment-related information and material to participants and 
beneficiaries in accordance with paragraph (d) of this interpretive 
bulletin will not, in and of itself, affect the availability of 
relief under section 404(c).
    \3\ The Department has expressed the view that, for purposes of 
section 3(21)(A)(ii), such fees or other compensation need not come 
from the plan and should be deemed to include all fees or other 
compensation incident to the transaction in which the investment 
advise has been or will be rendered. See A.O. 83-60A (Nov. 21, 
1983); Reich v. McManus, 883 F. Supp. 1144 (N.D. Ill. 1995).
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    (c) Investment Advice. Under ERISA section 3(21)(A)(ii), a person 
is considered a fiduciary with respect to an employee benefit plan to 
the extent that person ``renders investment advice for a fee or other 
compensation, direct or indirect, with respect to any moneys or other 
property of such plan, or has any authority to do so . . . .'' The 
Department issued a regulation, at 29 CFR 2510.3-21(c), describing the 
circumstances under which a person will be considered to be rendering 
``investment advice'' within the meaning of section 3(21)(A)(ii). 
Because section 3(21)(A)(ii) applies to advice with respect to ``any 
moneys or other property'' of a plan and 29 CFR 2510.3-21(c) is 
intended to clarify the application of that section, it is the view of 
the Department of Labor that the criteria set forth in the regulation 
apply to determine whether a person renders ``investment advice'' to a 
pension plan participant or beneficiary who is permitted to direct the 
investment of assets in his or her individual account.
    Applying 29 CFR 2510.3-21(c) in the context of providing 
investment-related information to participants and beneficiaries of 
participant-directed individual account pension plans, a person will be 
considered to be rendering ``investment advice,'' within the meaning of 
ERISA section 3(21)(A)(ii), to a participant or beneficiary only if:
    (i) The person renders advice to the participant or beneficiary as 
to the value of securities or other property, or makes recommendations 
as to the advisability of investing in, purchasing, or selling 
securities or other property (2510.3-21(c)(1)(i); and
    (ii) the person, either directly or indirectly,
    (A) has discretionary authority or control with respect to 
purchasing or selling securities or other property for the participant 
or beneficiary (2510.3-21(c)(1)(ii)(A)), or (B) renders the advice on a 
regular basis to the participant or beneficiary, pursuant to a mutual 
agreement, arrangement or understanding (written or otherwise) with the 
participant or beneficiary that the advice will serve as a primary 
basis for the participant's or beneficiary's investment decisions with 
respect to plan assets and that such person will render individualized 
advice based on the particular needs of the participant or beneficiary 
(2510.3-21(c)(1)(ii)(B)).\4\
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    \4\ This IB does not address the application of 29 CFR 2510.3-
21(c) to communications with fiduciaries of participant-directed 
individual account pension plan plans.
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    Whether the provision of particular investment-related information 
or materials to a participant or beneficiary constitutes the rendering 
of ``investment advice,'' within the meaning of 29 CFR 2510.3-21(c)(1), 
generally can be determined only by reference to the facts and 
circumstances of the particular case with respect to the individual 
plan participant or beneficiary. To facilitate such determinations, 
however, the Department of Labor has identified, in paragraph (d), 
below, examples of investment-related information and materials which 
if provided to plan participants and beneficiaries would not, in the 
view of the Department, result in the rendering of ``investment 
advice'' under ERISA section 3(21)(A)(ii) and 29 CFR 2510.3-21(c).
    (d) Investment Education. For purposes of ERISA section 
3(21)(A)(ii) and 29 CFR 2510.3-21(c), the Department of Labor has 
determined that the furnishing of the following categories of 
information and materials to a participant or beneficiary in a 
participant-directed individual account pension plan will not 
constitute the rendering of ``investment advice,'' irrespective of who 
provides the information (e.g., plan sponsor, fiduciary or service 
provider), the frequency with which the information is shared, the form 
in which the information and materials are provided (e.g., on an 
individual or group basis, in writing or orally, or via video or 
computer software), or whether an identified category of information 
and materials is furnished alone or in combination with other 
identified categories of information and materials.

[[Page 40592]]

    (1) Plan Information. (i) Information and materials that inform a 
participant or beneficiary about the benefits of plan participation, 
the benefits of increasing plan contributions, the impact of 
preretirement withdrawals on retirement income, the terms of the plan, 
or the operation of the plan; or
    (ii) information such as that described in 29 CFR 2550.404c-
1(b)(2)(i) on investment alternatives under the plan (e.g., 
descriptions of investment objectives and philosophies, risk and return 
characteristics, historical return information, or related 
prospectuses).\5\
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    \5\ Descriptions of investment alternatives under the plan may 
include information relating to the generic asset class (e,g., 
equities, bonds, or cash) of the investment alternatives. 29 CFR 
2550.404c-1(b)(2)(i)(B)(1)(ii).
---------------------------------------------------------------------------

    The information and materials described above relate to the plan 
and plan participation, without reference to the appropriateness of any 
individual investment option for a particular participant or 
beneficiary under the plan. The information, therefore, does not 
contain either ``advice'' or ``recommendations'' within the meaning of 
29 CFR 2510.3-21(c)(1)(i). Accordingly, the furnishing of such 
information would not constitute the rendering of ``investment advice'' 
for purposes of section 3(21)(A)(ii) of ERISA.
    (2) General Financial and Investment Information. Information and 
materials that inform a participant or beneficiary about: (i) General 
financial and investment concepts, such as risk and return, 
diversification, dollar cost averaging, compounded return, and tax 
deferred investment; (ii) historic differences in rates of return 
between different asset classes (e.g., equities, bonds, or cash) based 
on standard market indices; (iii) effects of inflation; (iv) estimating 
future retirement income needs; (v) determining investment time 
horizons; and (vi) assessing risk tolerance.
    The information and materials described above are general financial 
and investment information that have no direct relationship to 
investment alternatives available to participants and beneficiaries 
under a plan or to individual participants or beneficiaries. The 
furnishing of such information, therefore, would not constitute 
rendering ``advice'' or making ``recommendations'' to a participant or 
beneficiary within the meaning of 29 CFR 2510.3-21(c)(1)(i). 
Accordingly, the furnishing of such information would not constitute 
the rendering of ``investment advice'' for purposes of section 
3(21)(A)(ii) of ERISA.
    (3) Asset Allocation Models. Information and materials (e.g., pie 
charts, graphs, or case studies) that provide a participant or 
beneficiary with models, available to all plan participants and 
beneficiaries, of asset allocation portfolios of hypothetical 
individuals with different time horizons and risk profiles, where: (i) 
Such models are based on generally accepted investments theories that 
take into account the historic returns of different asset classes 
(e.g., equities, bonds, or cash) over define periods of time; (ii) all 
material facts and assumptions on which such models are based (e.g., 
retirement ages, life expectancies, income levels, financial resources, 
replacement income ratios, inflation rates, and rates of return) 
accompany the models; (iii) to the extent that an asset allocation 
model identifies any specific investment alternative available under 
the plan, the model is accompanied by a statement indicating that other 
investment alternatives having similar risk and return characteristics 
may be available under the plan and identifying where information on 
those investment alternatives may be obtained; and (iv) the asset 
allocation models are accompanied by a statement indicating that, in 
applying particular asset allocation models to their individual 
situations, participants or beneficiaries should consider their other 
assets, income, and investments (e.g., equity in a home, IRA 
investments, savings accounts, and interests in other qualified and 
non-qualified plans) in addition to their interests in the plan.
    Because the information and materials described above would enable 
a participant or beneficiary to assess the relevance of an asset 
allocation model to his or her individual situation, the furnishing of 
such information would not constitute a ``recommendation'' within the 
meaning of 29 CFR 2510.3-21(c)(1)(i) and, accordingly, would not 
constitute ``investment advice'' for purposes of section 3(21)(A)(ii) 
of ERISA. This result would not, in the view of the Department, be 
affected by the fact that a plan offers only one investment alternative 
in a particular asset class identified in an asset allocation model.
    (4) Interactive Investment Materials. Questionnaires, worksheets, 
software, and similar materials which provide a participant or 
beneficiary the means to estimate future retirement income needs and 
assess the impact of different asset allocations on retirement income, 
where: (i) Such materials are based on generally accepted investment 
theories that take into account the historic returns of different asset 
classes (e.g., equities, bonds, or cash) over defined periods of time; 
(ii) there is an objective correlation between the asset allocations 
generated by the materials and the information and data supplied by the 
participant or beneficiary; (iii) all material facts and assumptions 
(e.g., retirement ages, life expectancies, income levels, financial 
resources, replacement income ratios, inflation rates, and rates of 
return) which may affect a participant's or beneficiary's assessment of 
the different asset allocations accompany the materials or are 
specified by the participant or beneficiary; (iv) to the extent that an 
asset allocation generated by the materials identifies any specific 
investment alternative available under the plan, the asset allocation 
is accompanied by a statement indicating that other investment 
alternatives having similar risk and return characteristics may be 
available under the plan and identifying where information on those 
investment alternatives may be obtained; and (v) the materials either 
take into account or are accompanied by a statement indicating that, in 
applying particular asset allocations to their individual situations, 
participants or beneficiaries should consider their other assets, 
income, and investments (e.g., equity in a home, IRA investments, 
savings accounts, and interests in other qualified and non-qualified 
plans) in addition to their interests in the plan.
    The information provided through the use of the above-described 
materials enables participants and beneficiaries independently to 
design and assess multiple asset allocation models, but otherwise these 
materials do not differ from asset allocation models based on 
hypothetical assumptions. Such information would not constitute a 
``recommendation'' within the meaning of 29 CFR 2510.3-21(c)(1)(i) and, 
accordingly, would not constitute ``investment advice'' for purposes of 
section 3(21)(A)(ii) of ERISA.
    The Department notes that the information and materials described 
in subparagraphs (1)-(4) above merely represent examples of the type of 
information and materials which may be furnished to participants and 
beneficiaries without such information and materials constituting 
``investment advice.'' In this regard, the Department recognizes that 
there may be many other examples of information, materials, and 
educational services which, if furnished to participants and 
beneficiaries, would not constitute ``investment advice.'' Accordingly, 
no inferences should be drawn from subparagraphs (1)-(4),

[[Page 40593]]

above, with respect to whether the furnishing of any information, 
materials or educational services not described therein may constitute 
``investment advice.'' Determinations as to whether the provision of 
any information, materials or educational services not described herein 
constitutes the rendering of ``investment advice'' must be made by 
reference to the criteria set forth in 29 CFR 2510. 3-21(c)(1).
    (e) Selection and Monitoring of Educators and Advisors. As with any 
designation of a service provider to a plan, the designation of a 
person(s) to provide investment educational services or investment 
advice to plan participants and beneficiaries is an exercise of 
discretionary authority or control with respect to management of the 
plan; therefore, persons making the designation must act prudently and 
solely in the interest of the plan participants and beneficiaries, both 
in making the designation(s) and in continuing such designation(s). See 
ERISA sections 3(21)(A)(i) and 404(a), 29 U.S.C. 1002 (21)(A)(i) and 
1104(a). In addition, the designation of an investment advisor to serve 
as a fiduciary may give rise to co-fiduciary liability if the person 
making and continuing such designation in doing so fails to act 
prudently and solely in the interest of plan participants and 
beneficiaries; or knowingly participates in, conceals or fails to make 
reasonable efforts to correct a known breach by the investment advisor. 
See ERISA section 405(a), 29 U.S.C. 1105(a). The Department notes, 
however, that, in the context of an ERISA section 404(c) plan, neither 
the designation of a person to provide education nor the designation of 
a fiduciary to provide investment advice to participants and 
beneficiaries would, in itself, give rise to fiduciary liability for 
loss, or with respect to any breach of part 4 of title I of ERISA, that 
is the direct and necessary result of a participant's or beneficiary's 
exercise of independent control. 29 CFR 2550.404c-1(d). The Department 
also notes that a plan sponsor or fiduciary would have no fiduciary 
responsibility or liability with respect to the actions of a third 
party selected by a participant or beneficiary to provide education or 
investment advice where the plan sponsor or fiduciary neither selects 
nor endorses the educator or advisor, nor otherwise makes arrangements 
with the educator or advisor to provide such services.

Subchapter B--Definitions and Coverage under the Employee Retirement 
Income Security Act of 1974

PART 2510--DEFINITIONS OF TERMS USED IN SUBCHAPTERS C, D, E, F, AND 
G OF THIS CHAPTER

0
1. The authority citation for part 2510 continues to read as follows:

    Authority:  29 U.S.C. 1002(2), 1002(21), 1002(37), 1002(38), 
1002(40), 1031, and 1135; Secretary of Labor's Order 1-2011, 77 FR 
1088 (Jan. 9, 2019); Secs. 2510.3-21, 2510.3-101 and 2510.3-102 also 
issued under Sec. 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. 
App. 237 (2012). E.O. 12108, 22 FR 1065 (Jan. 3, 1979) and 29 U.S.C. 
1135 note. Section 2510.3-38 is also issued under Pub. L. 105-72, 
Sec. 1(b), 111 Stat. 1457 (1997).


0
2. Revise Sec.  2510.3-21 to read as follows:


Sec.  2510.3-21  

    (a)-(b) [Reserved]
    (c) Investment advice. (1) A person shall be deemed to be rendering 
``investment advice'' to an employee benefit plan, within the meaning 
of section 3(21)(A)(ii) of the Employee Retirement Income Security Act 
of 1974 (the Act) and this paragraph, only if:
    (i) Such person renders advice to the plan as to the value of 
securities or other property, or makes recommendation as to the 
advisability of investing in, purchasing, or selling securities or 
other property; and
    (ii) Such person either directly or indirectly (e.g., through or 
together with any affiliate)--
    (A) Has discretionary authority or control, whether or not pursuant 
to agreement, arrangement or understanding, with respect to purchasing 
or selling securities or other property for the plan; or
    (B) Renders any advice described in paragraph (c)(1)(i) of this 
section on a regular basis to the plan pursuant to a mutual agreement, 
arrangement or understanding, written or otherwise, between such person 
and the plan or a fiduciary with respect to the plan, that such 
services will serve as a primary basis for investment decisions with 
respect to plan assets, and that such person will render individualized 
investment advice to the plan based on the particular needs of the plan 
regarding such matters as, among other things, investment policies or 
strategy, overall portfolio composition, or diversification of plan 
investments.
    (2) A person who is a fiduciary with respect to a plan by reason of 
rendering investment advice (as defined in paragraph (c)(1) of this 
section) for a fee or other compensation, direct or indirect, with 
respect to any moneys or other property of such plan, or having any 
authority or responsibility to do so, shall not be deemed to be a 
fiduciary regarding any assets of the plan with respect to which such 
person does not have any discretionary authority, discretionary control 
or discretionary responsibility, does not exercise any authority or 
control, does not render investment advice (as defined in paragraph 
(c)(1) of this section) for a fee or other compensation, and does not 
have any authority or responsibility to render such investment advice, 
provided that nothing in this paragraph shall be deemed to:
    (i) Exempt such person from the provisions of section 405(a) of the 
Act concerning liability for fiduciary breaches by other fiduciaries 
with respect to any assets of the plan; or
    (ii) Exclude such person from the definition of the term ``party in 
interest'' (as set forth in section 3(14)(B) of the Act) with respect 
to any assets of the plan.
    (d) Execution of securities transactions. (1) A person who is a 
broker or dealer registered under the Securities Exchange Act of 1934, 
a reporting dealer who makes primary markets in securities of the 
United States Government or of an agency of the United States 
Government and reports daily to the Federal Reserve Bank of New York 
its positions with respect to such securities and borrowings thereon, 
or a bank supervised by the United States or a State, shall not be 
deemed to be a fiduciary, within the meaning of section 3(21)(A) of the 
Act, with respect to an employee benefit plan solely because such 
person executes transactions for the purchase or sale of securities on 
behalf of such plan in the ordinary course of its business as a broker, 
dealer, or bank, pursuant to instructions of a fiduciary with respect 
to such plan, if:
    (i) Neither the fiduciary nor any affiliate of such fiduciary is 
such broker, dealer, or bank; and
    (ii) The instructions specify (A) the security to be purchased or 
sold, (B) a price range within which such security is to be purchased 
or sold, or, if such security is issued by an open-end investment 
company registered under the Investment Company Act of 1940 (15 U.S.C. 
80a-1, et seq.), a price which is determined in accordance with Rule 
22c-1 under the Investment Company Act of 1940 (17 CFR 270.22c-1), (C) 
a time span during which such security may be purchased or sold (not to 
exceed five business days), and (D) the minimum or maximum quantity of 
such security which may be purchased or sold within such price range, 
or, in the

[[Page 40594]]

case of a security issued by an open-end investment company registered 
under the Investment Company Act of 1940, the minimum or maximum 
quantity of such security which may be purchased or sold, or the value 
of such security in dollar amount which may be purchased or sold, at 
the price referred to in paragraph (d)(1)(ii)(B) of this section.
    (2) A person who is a broker-dealer, reporting dealer, or bank 
which is a fiduciary with respect to an employee benefit plan solely by 
reason of the possession or exercise of discretionary authority or 
discretionary control in the management of the plan or the management 
or disposition of plan assets in connection with the execution of a 
transaction or transactions for the purchase or sale of securities on 
behalf of such plan which fails to comply with the provisions of 
paragraph (d)(1) of this section, shall not be deemed to be a fiduciary 
regarding any assets of the plan with respect to which such broker-
dealer, reporting dealer or bank does not have any discretionary 
authority, discretionary control or discretionary responsibility, does 
not exercise any authority or control, does not render investment 
advice (as defined in paragraph (c)(1) of this section) for a fee or 
other compensation, and does not have any authority or responsibility 
to render such investment advice, provided that nothing in this 
paragraph shall be deemed to:
    (i) Exempt such broker-dealer, reporting dealer, or bank from the 
provisions of section 405(a) of the Act concerning liability for 
fiduciary breaches by other fiduciaries with respect to any assets of 
the plan; or
    (ii) Exclude such broker-dealer, reporting dealer, or bank from the 
definition, of the term ``party in interest'' (as set forth in section 
3(14)(B) of the Act) with respect to any assets of the plan.
    (e) Affiliate and control. (1) For purposes of paragraphs (c) and 
(d) of this section, an ``affiliate'' of a person shall include:
    (i) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such person;
    (ii) Any officer, director, partner, employee or relative (as 
defined in section 3(15) of the Act) of such person; and
    (iii) Any corporation or partnership of which such person is an 
officer, director or partner.
    (2) For purposes of this paragraph, the term ``control'' means the 
power to exercise a controlling influence over the management or 
policies of a person other than an individual.

Jeanne Klinefelter Wilson,
Acting Assistant Secretary, Employee Benefits Security Administration, 
U.S. Department of Labor.
[FR Doc. 2020-14260 Filed 7-2-20; 8:45 am]
BILLING CODE 4510-29-P