Conflict of Interest Rule-Retirement Investment Advice: Notice of Court Vacatur, 40589-40594 [2020-14260]
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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.
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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:
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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
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40 FR 50842–44 (Oct. 31, 1975).
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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
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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
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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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.
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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).
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(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).
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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).
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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.
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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).
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(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
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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),
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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.
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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
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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
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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:
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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
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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]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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).
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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