Proposed Amendment to Prohibited Transaction Exemptions 75-1, 77-4, 80-83, 83-1, and 86-128, 76032-76045 [2023-23782]
Download as PDF
76032
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
(o) ‘‘Retirement Investor’’ means:
(1) A participant or beneficiary of a
Plan with authority to direct the
investment of assets in their account or
to take a distribution;
(2) The beneficial owner of an IRA
acting on behalf of the IRA; or
(3) A fiduciary acting on behalf of a
Plan or an IRA.
(p) A ‘‘Senior Executive Officer’’ is
any of the following: the chief
compliance officer, the chief executive
officer, president, chief financial officer,
or one of the three most senior officers
of the Insurer.
Signed at Washington, DC, this 24th day of
October, 2023.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits
Security Administration, U.S. Department of
Labor.
[FR Doc. 2023–23781 Filed 11–2–23; 8:45 am]
BILLING CODE 4510–29–P
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2550
[Application No. D–12094]
ZRIN 1210–ZA34
Proposed Amendment to Prohibited
Transaction Exemptions 75–1, 77–4,
80–83, 83–1, and 86–128
Comment Instructions
Employee Benefits Security
Administration (EBSA), U.S.
Department of Labor.
ACTION: Notice of Proposed Amendment
to Prohibited Transaction Exemptions
75–1, 77–4, 80–83, 83–1, and 86–128.
AGENCY:
This document contains a
notice of pendency before the
Department of Labor (the Department) of
proposed amendments to Prohibited
Transaction Exemptions (PTEs) 75–1,
77–4, 80–83, 83–1, and 86–128,
exemptions from certain prohibited
transaction provisions of the Employee
Retirement Income Security Act of 1974
(ERISA) and the Internal Revenue Code
of 1986 (the Code). The amendments
would affect participants and
beneficiaries of plans, IRA owners, and
certain fiduciaries of plans and IRAs.
DATES: Public Comments. Comments are
due on or before January 2, 2024.
Public Hearing. The Department
anticipates holding a public hearing
approximately 45 days following the
date of publication in the Federal
Register. Specific information regarding
the date, location, and submission of
requests to testify will be published in
a notice in the Federal Register.
lotter on DSK11XQN23PROD with PROPOSALS3
SUMMARY:
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
Applicability Date. The Department
proposes to make the final amendment
effective 60 days after it is published in
the Federal Register.
ADDRESSES: All written comments
concerning the proposed amendments
should be sent to the Employee Benefits
Security Administration, Office of
Exemption Determinations, U.S.
Department of Labor through the
Federal eRulemaking Portal and
identified by Application No. D–12094:
Federal eRulemaking Portal: https://
www.regulations.gov. at Follow the
instructions for submitting comments.
Docket: For access to the docket to
read background documents, including
the plain-language summary of the
proposal of not more than 100 words in
length required by the Providing
Accountability Through Transparency
Act of 2023, or comments, go to the
Federal eRulemaking Portal at https://
www.regulations.gov.
See SUPPLEMENTARY INFORMATION
below for additional information
regarding comments.
FOR FURTHER INFORMATION CONTACT:
Susan Wilker, telephone (202) 693–
8540, Office of Exemption
Determinations, Employee Benefits
Security Administration, U.S.
Department of Labor (these are not tollfree numbers).
SUPPLEMENTARY INFORMATION:
Warning: All comments received will
be included in the public record
without change and will be made
available online at https://
www.regulations.gov, including any
personal information provided, unless
the comment includes information
claimed to be confidential or other
information whose disclosure is
restricted by statute. If you submit a
comment, EBSA recommends that you
include your name and other contact
information, but DO NOT submit
information that you consider to be
confidential, or otherwise protected
(such as Social Security number or an
unlisted phone number), or confidential
business information that you do not
want publicly disclosed. However, if
EBSA cannot read your comment due to
technical difficulties and cannot contact
you for clarification, EBSA might not be
able to consider your comment.
Additionally, the https://
www.regulations.gov website is an
‘‘anonymous access’’ system, which
means EBSA will not know your
identity or contact information unless
you provide it. If you send an email
directly to EBSA without going through
https://www.regulations.gov, your email
PO 00000
Frm 00144
Fmt 4701
Sfmt 4702
address will be automatically captured
and included as part of the comment
that is placed in the public record and
made available on the internet.
Background
As described elsewhere in this edition
of the Federal Register, the Department
is proposing to amend the regulation
defining when a person renders
‘‘investment advice for a fee or other
compensation, direct or indirect’’ with
respect to any moneys or other property
of an employee benefit plan, for
purposes of the definition of a
‘‘fiduciary’’ in section 3(21)(A)(ii) of the
Employee Retirement Income Security
Act of 1974 (ERISA or the Act) and in
section 4975(e)(3)(B) of the Internal
Revenue Code (Code). The Department
is also proposing, elsewhere in this
edition of the Federal Register, to
amend prohibited transaction
exemption (PTE) 2020–02 to provide
additional clarity for advice fiduciaries
and additional protections for plans and
investors and PTE 84–24 to address
specific issues that financial institutions
face complying with the conditions of
PTE 2020–02 when distributing
annuities through independent agents.
The Department is hereby proposing
amendments to existing PTEs 75–1, 77–
4, 80–83, 83–1, and 86–128 that
currently provide relief for investment
advice fiduciaries to receive
compensation when plans and IRAs
enter into certain transactions
recommended by the fiduciaries as well
as certain related transactions. The
ERISA and Code provisions at issue
generally prohibit fiduciaries with
respect to employee benefit plans and
individual retirement accounts (IRAs)
from engaging in self-dealing in
connection with transactions involving
these plans and IRAs. The proposed
amendments would remove fiduciary
investment advice, as defined under
ERISA and in a proposed regulation
issued by the Department that is found
elsewhere in this issue of the Federal
Register, from the covered transactions
in each exemption and make certain
other administrative changes. The
Department is proposing these
amendments on its own motion,
pursuant to its authority under ERISA
section 408(a) and Code section
4975(c)(2) and in accordance with
procedures set forth in 29 CFR part
2570, subpart B (76 FR 66637 (October
27, 2011)).1
1 Reorganization Plan No. 4 of 1978 (5 U.S.C.
App. 1 (2018)) generally transferred the authority of
the Secretary of the Treasury to grant administrative
exemptions under Code section 4975 to the
Secretary of Labor.
E:\FR\FM\03NOP3.SGM
03NOP3
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
Current PTEs 75–1, 77–4, 80–83, 83–1,
and 86–128
lotter on DSK11XQN23PROD with PROPOSALS3
PTEs 75–1, 77–4, 80–83, 83–1, and
86–128 currently provide investment
advice fiduciaries with relief for the
following transactions:
PTE 75–1 2 provides an exemption for
broker-dealers, reporting dealers, and
banks to engage in certain classes of
transactions with employee benefit
plans and IRAs. The exemption has five
parts: 3
• Part I provides relief for agency
transactions and services; 4
• Part II(1) permits the purchase or
sale of a security between an employee
benefit plan or IRA and a broker-dealer
registered under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et.
seq.), a reporting dealer who makes
primary markets in securities of the
United States Government or of any
agency of the United States Government
and reports daily to the Federal Reserve
Bank of New York its positions with
respect to Government securities and
borrowings thereon, or a bank
supervised by the United States or a
State. The exemption provided in Part
II(1) does not extend to the fiduciary
self-dealing and conflicts of interest
prohibitions of ERISA and the Code;
• Part II(2) contains a special
exemption for mutual fund purchases
(the mutual fund exemption) between
fiduciaries and plans or IRAs. Although
it does provide relief for fiduciary selfdealing and conflicts of interest, the
mutual fund exemption is only available
if the fiduciary who decides on behalf
of the plan or IRA to enter into the
transaction is not a principal
underwriter for, or affiliated with, the
mutual fund;
• Part III permits a fiduciary to cause
a plan or IRA to purchase securities
from a member of an underwriting
syndicate other than the fiduciary itself
when the fiduciary is also a member of
the syndicate;
• Part IV permits a plan or IRA to
purchase securities in a principal
transaction from a fiduciary that is a
market maker with respect to such
securities; and
• Part V permits the extension of
credit to a plan or IRA by a brokerdealer in connection with the purchase
or sale of securities;
2 Exemptions from Prohibitions Respecting
Certain Classes of Transactions Involving Employee
Benefit Plans and Certain Broker-Dealers, Reporting
Dealers and Banks, 40 FR 50845 (Oct. 31, 1975), as
amended at 71 FR 5883 (Feb. 3, 2006).
3 71 FR 5883 (Feb. 3, 2006).
4 Part I(a) expired on May 1, 1978. It ultimately
was replaced by PTE 86–128 (51 FR 41686 (Nov.
18, 1986)).
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
PTE 77–4 5 provides relief for a plan’s
or IRA’s purchase or sale of open-end
investment company shares where the
investment adviser for the open-end
investment company is also a fiduciary
to the plan or IRA;
PTE 80–83 6 provides relief for a
fiduciary causing a plan or IRA to
purchase a security when the proceeds
of the securities issuance may be used
by the issuer to retire or reduce
indebtedness to the fiduciary or an
affiliate;
PTE 83–1 7 provides relief for the sale
of certificates in an initial issuance of
certificates by the sponsor of a mortgage
pool to a plan or IRA when the sponsor,
trustee, or insurer of the mortgage pool
is a fiduciary with respect to the plan or
IRA assets invested in such certificates;
and
PTE 86–128 8 provides an exemption
for certain types of fiduciaries to use
their authority to cause a plan or IRA to
pay a fee to the fiduciary, or its affiliate,
for effecting or executing securities
transactions as agent for the plan. The
exemption further provides relief for
these types of fiduciaries to act as agent
in an ‘‘agency cross transaction’’ for
both a plan or IRA and one or more
other parties to the transaction, and for
such fiduciaries or their affiliates to
receive fees from the other party(ies) in
connection with the agency cross
transaction. An agency cross transaction
is defined in the exemption as a
securities transaction in which the same
person acts as agent for both any seller
and any buyer for the purchase or sale
of a security.
Other Advice Exemptions
PTE 2020–02
PTE 2020–02 9 permits investment
advice fiduciaries to receive
compensation as a result of their advice,
including as a result of advice to roll
over assets from an employee benefit
plan to an IRA, and to engage in certain
principal transactions and was designed
to promote investment advice that is in
5 Class Exemption for Certain Transactions
Between Investment Companies and Employee
Benefit Plans, 42 FR 18732 (Apr. 8, 1977).
6 Class Exemption for Certain Transactions
Involving Purchase of Securities Where Issuer May
Use Proceeds to Reduce or Retire Indebtedness to
Parties in Interest, 45 FR 73189 (Nov. 4, 1980), as
amended at 67 FR 9483 (March 1, 2002).
7 Class Exemption for Certain Transactions
Involving Mortgage Pool Investment Trusts, 48 FR
895 (Jan. 7, 1984), as amended at 67 FR 9483
(March 1, 2002).
8 Class Exemption for Securities Transactions
Involving Employee Benefit Plans and BrokerDealers, 51 FR 41686 (November 18, 1986), as
amended at 67 FR 64137 (October 17, 2002).
9 Prohibited Transaction Exemption 2020–02,
Improving Investment Advice for Workers &
Retirees 85 FR 82798 (Dec. 18, 2020).
PO 00000
Frm 00145
Fmt 4701
Sfmt 4702
76033
the best interest of retirement investors
(e.g., plan participants and beneficiaries,
and IRA owners). The exemption’s
conditions emphasize mitigating
conflicts of interest and ensuring that
retirement investors receive advice that
is prudent and loyal. An important
objective of the exemption is to require
fiduciary investment advice providers to
adhere to stringent standards that are
designed to ensure that their investment
recommendations reflect the best
interest of plan and IRA investors.
Accordingly, financial institutions and
investment professionals relying on PTE
2020–02 must: (i) acknowledge their
fiduciary status in writing; (ii) disclose
their services and material conflicts of
interest; and adhere to impartial
conduct standards; (iii) adopt policies
and procedures prudently designed to
ensure compliance with the impartial
conduct standards and mitigate conflicts
of interest that could otherwise cause
violations of those standards; (iii)
document and disclose the specific
reasons that any rollover
recommendations are in the retirement
investor’s best interest; (iv) and conduct
an annual retrospective compliance
review.
The Department is proposing an
amendment to PTE 2020–02 that is
published separately in this edition of
the Federal Register. The proposed
amendment to PTE 2020–02 would
build on these existing conditions to
provide more protections for retirement
investors receiving advice and more
certainty for financial institutions and
investment professionals complying
with the exemption’s conditions. In this
regard, among other things, the
Department is proposing additional
disclosures to ensure that retirement
investors have sufficient information to
make informed decisions about the costs
of the investment advice transaction and
about the significance and severity of
the investment advice fiduciary
conflicts of interest. The proposed
amendment also would provide more
guidance for financial institutions and
investment professionals complying
with the impartial conduct standards
and implementing the policies and
procedures requirement. As discussed
in detail in the preamble to the
amendment, these additional conditions
would provide important protections to
retirement investors by enhancing the
existing protections of PTE 2020–02.
E:\FR\FM\03NOP3.SGM
03NOP3
76034
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
lotter on DSK11XQN23PROD with PROPOSALS3
PTE 84–24
PTE 84–24 10 provides exemptive
relief for certain prohibited transactions
that occur when plans or IRAs purchase
insurance and annuity contracts and
shares in an investment company
registered under the Investment
Company Act of 1940 (a mutual fund).
The exemption permits insurance
agents, insurance brokers and pension
consultants that are parties in interest or
fiduciaries with respect to plans and
IRAs to effect the purchase of the
insurance or annuity contracts for the
plans or IRAs and receive a commission
on the sale. The exemption also is
available for the prohibited transaction
that occurs when the insurance
company selling the insurance or
annuity contract is a party in interest or
disqualified person with respect to the
plan or IRA. Likewise, with respect to
mutual fund transactions, PTE 84–24
permits mutual fund principal
underwriters that are parties in interest
or fiduciaries to effect the sale of mutual
fund shares to plans or IRAs and receive
a commission on the transaction.
The Department is proposing an
amendment to PTE 84–24 that is
published separately in this edition of
the Federal Register that would provide
an alternative exemption for
independent insurance agents to receive
insurance commissions in connection
with recommendations of annuity
products if certain conditions are met
that are similar to the conditions
contained in PTE 2020–02. These
conditions are tailored to protect
retirement investors from the specific
conflicts of interest that arise when
independent insurance agents are
compensated through insurance
commissions. Additionally, the
amendment would exclude investment
advice fiduciaries from the existing
relief provided in the current Section II
of PTE 84–24, add a new eligibility
provision for investment advice
transactions, and amend the current
recordkeeping condition to be similar to
the recordkeeping provision in PTE
2020–02.
Description of Proposed Amendments
to PTEs 75–1, 77–4, 80–83, 83–1, and
86–128
Providing for a single standard of care
(which is currently found in PTE 2020–
02) that would apply universally to all
fiduciary investment advice, regardless
of the specific type of product or advice
provider, will provide greater protection
for retirement investors and create a
level playing field among investment
10 49 FR 13208 (April 3, 1983), as amended at 71
FR 5887 (Feb. 3, 2006).
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
advice providers. Therefore, to ensure a
universal standard of care for the
provision of investment advice that is
based on the conditions of PTE 2020–
02, the Department is proposing to
amend PTEs 75–1 Parts III & IV, 77–4,
80–83, 83–1, and 86–128 to include the
following statement: ‘‘Exception. No
relief from the restrictions of ERISA
section 406(b) and the taxes imposed by
Code section 4975(a) and (b) by reason
of Code sections 4975(c)(1)(E) and (F) is
available for fiduciaries providing
investment advice within the meaning
of ERISA section 3(21)(A)(ii) or Code
section 4975(e)(3)(B) and regulations
thereunder.’’
As a result of this amendment,
investment advice fiduciaries would
instead rely on the amended PTE 2020–
02 for exemptive relief for covered
investment advice transactions. By
providing exemptive relief for fiduciary
investment advice transactions under
one exemption, PTE 2020–02,
retirement investors would receive
consistent protections when receiving
investment advice from investment
professionals such that a level playing
regulatory playing field would apply
regardless of the investment product the
advisor recommends. The Department
requests comment on this proposed
change.
In addition to removing exemptive
relief for investment advice
transactions, the Department also is
proposing certain administrative
amendments to these exemptions,
which are discussed below.
Amendments to PTE 75–1
The Department is proposing to
revoke parts of PTE 75–1, which was
granted shortly after ERISA’s passage to
provide certainty to the securities
industry over the nature and extent to
which ordinary and customary
transactions between broker-dealers and
plans or IRAs would be subject to
ERISA’s prohibited transaction rules.
PTE 75–1 Part I
PTE 75–1, Part I, paragraphs (b) and
(c) provide exemptive relief for certain
non-fiduciary services provided by
broker-dealers in securities transactions.
Code section 4975(d)(2), ERISA section
408(b)(2) and regulations thereunder,
have clarified the scope of relief for
service providers to plans and IRAs.11
The Department believes that the relief
provided in Parts I(b) and I(c) of PTE
75–1 duplicates the relief available
under the statutory exemptions at Code
11 See 29 CFR 2550.408b–2; 42 FR 32390 (June 24,
1977); Reasonable Contract or Arrangement under
Section 408(b)(2)—Fee Disclosure, Final Rule, 77
FR 5632 (Feb. 3, 2012).
PO 00000
Frm 00146
Fmt 4701
Sfmt 4702
section 4975(d)(2) and ERISA section
408(b)(2). Therefore, the Department is
proposing to revoke paragraphs (b) and
(c) of Part I, and requests comments on
this proposed revocation.
PTE 75–1, Part II
PTE 75–1, Part II(2), contains a special
exemption for mutual fund purchases
(the mutual fund exemption) between
fiduciaries and plans or IRAs subject to
minimal safeguards for retirement
investors. The conditions of the
exemption require a fiduciary to
customarily purchase and sell securities
for its own account in the ordinary
course of its business, the transaction to
occur on terms at least as favorable to
the plan as an arm’s length transaction
with an unrelated party, and records to
be maintained.
The Department is proposing to
revoke PTE 75–1, Part II(2), because it
has determined that it is not protective
of retirement investors and has been
broadly interpreted beyond the
Department’s intention when it was
issued.12 The transactions that have
been covered by PTE 75–1 Part II(2) are
largely now covered by newer, more
protective exemptions, and fiduciaries
providing investment advice on the
purchase or sale of a mutual fund
security can rely on PTE 2020–02.
Moreover, fiduciaries providing
investment management on the
purchase or sale of a mutual fund
security can receive non-commission
compensation under PTE 77–4. The
Department requests comment on this
proposed revocation, and also on how
the remaining parts of PTE 75–1 Part II
will be used.
The Department is further proposing
to revise the recordkeeping provisions
of Section (e) of PTE 75–1, Part II.
Section (e) currently provides that
records demonstrating compliance with
the exemption must be maintained by
the plan or IRA involved in the
transaction. The proposed amendment
would place the responsibility for
maintaining such records on the brokerdealer, reporting dealer, or bank
engaging in the transaction with such
plan or IRA. The proposed amendment
also would provide that parties relying
on the exemption do not have to
disclose trade secrets or other
confidential information to members of
the public (i.e., plan fiduciaries,
contributing employers or employee
organizations whose members are
covered by the plan, participants and
beneficiaries and IRA owners), but that
in the event a party refuses to disclose
information on this basis, it must
12 81
E:\FR\FM\03NOP3.SGM
FR 21181, 21199 (Apr. 8, 2016).
03NOP3
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
exclusion from the conditions of the
exemption for certain plans not covering
employees, including IRAs, to increase
the safeguards available to these
retirement investors. Therefore,
investment advice fiduciaries to IRAs
would have to rely on another
exemption, such as PTE 2020–02.
Fiduciaries that exercise full
discretionary authority or control with
respect to IRAs could continue to rely
on PTE 86–128, as long as they comply
with all of the exemption’s conditions.
The Department is also proposing
certain technical changes to the
Part 75–1, Part V
exemption, including deleting
PTE 75–1, Part V permits a brokersubsection IV(b)(1), and redesignating
dealer to extend credit to a plan or IRA
remaining sections as needed. The
in connection with the purchase or sale
language currently in Section IV(b)(1)
of securities. It originally did not permit excludes investment advice providers;
the receipt of compensation for an
however, investment advice providers
extension of credit by broker-dealers
would be excluded from the exemption
that are fiduciaries with respect to the
as a whole; therefore, the exclusion does
assets involved in the transaction. In
not need to be repeated in Section IV.
2016, the Department amended this
As a result of the deletion of Section
exemption to allow investment advice
IV(a) and IV(b)(1), the Department is
fiduciaries to receive compensation
redesignating subsections IV(b)(2) and
when they extend credit to plans and
(3) as subsections IV(a)(1) and (2),
IRAs to avoid a failed securities
respectively, and Section IV(c) as
transaction. As a condition of the
Section IV(b).
The Department is proposing to revise
amendment, the failure of the purchase
the new Section IV(b) to read:
or sale of the securities could not have
‘‘Recapture of profits. Sections III(a) and
been caused by the fiduciary or an
III(i) of this exemption do not apply in
affiliate. The Department also added a
cases where the person engaging in a
definition of the term ‘‘IRA’’ as any
covered transaction returns or credits to
account or annuity described in Code
the plan all profits earned by that
section 4975(e)(1)(B) through (F),
person in connection with the securities
including, for example, an individual
transactions associated with the covered
retirement account described in section
transaction.’’ Discretionary trustees
408(a) of the Code and a health savings
were first permitted to rely on PTE 86–
account described in section 223(d) of
the Code.13 The amendment also revised 128 without meeting the ‘‘recapture of
the recordkeeping provisions of PTE 75– profits’’ provision pursuant to an
amendment made in 2002 (2002
1, Part V, to require the broker-dealer
Amendment). To effect this change, the
engaging in the covered transaction, as
opposed to the plan or IRA, to maintain 2002 Amendment revised Section III(a),
which had provided that ‘‘[t]he person
the records. The Department is
proposing to make these amendments to engaging in the covered transaction
[may not be] a trustee (other than a
PTE 75–1 Part V as it did in 2016.
nondiscretionary trustee), or an
PTE 86–128
administrator of the plan, or an
The Department is proposing certain
employer any of whose employees are
administrative changes to PTE 86–128,
covered by the plan.’’ Under the
which are not directly related to the
amendment, the reference to ‘‘trustee
provision of fiduciary investment
(other than a nondiscretionary trustee)’’
advice. As it did in 2016, the
was deleted from Section III(a), and
Department is proposing to delete
discretionary trustees had to satisfy
Section IV(a), which provides an
certain additional conditions set forth in
Section III(h) and (i) to rely on the
13 The Department has previously determined,
exemption. Section III(h) provides that
after consulting with the Internal Revenue Service
discretionary trustees may engage in the
(the IRS), that plans described in 4975(e)(1) of the
covered transactions only with plans or
Code are included within the scope of relief
provided by PTE 75–1 because it was issued jointly
IRAs with total net assets of at least $50
by the Department and the IRS. See PTE 2002–13,
million,14 and Section III(i) requires
67 FR 9483 (Mar. 1, 2002) (preamble discussion).
discretionary trustees to provide
For simplicity and consistency with the other new
lotter on DSK11XQN23PROD with PROPOSALS3
provide a written notice to the requester
advising it of the reasons for the refusal
and that the Department may request
such information on the requester’s
behalf.
The Department requests comment
regarding whether fiduciaries providing
discretionary investment management
services on the purchase or sale of a
mutual fund security in a principal
transaction need the relief that is
provided by PTE 75–1, Part II(2), and, if
so, what conditions would be
appropriate.
exemptions and amendments to other existing
exemptions published elsewhere in this issue of the
Federal Register, the Department has adopted this
specific definition of IRA.
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
14 Special rules apply under Section III(h) for
pooled funds and groups of plans maintained by a
single employer or controlled group of employers.
PO 00000
Frm 00147
Fmt 4701
Sfmt 4702
76035
additional disclosures. The Department
understands that after the 2002
Amendment, practitioners had
questions regarding whether
discretionary trustees were permitted to
rely on the ‘‘recapture of profits’’
provision, which allows persons
identified in Section III(a) to engage in
the covered transactions if they return
or credit to the plan or IRA all profits,
as an alternative to complying with
Sections III(h) and (i). By deleting the
reference to discretionary trustees from
Section III(a), the Department believes
that the 2002 Amendment inadvertently
may have prevented trustees of plans or
IRAs from using the recapture of profits
approach, and instead, has limited the
exemption to trustees that satisfy
Section III(h) and (i). This result was not
intended, therefore, the Department is
proposing to modify the exemption to
permit all trustees, regardless of
associated plan or IRA size, to utilize
the recapture of profits exception as
they originally were permitted to do in
PTE 86–128.
In order to achieve this result, the
Department has proposed an
amendment to section IV(c) providing
that Sections III(a) and III(i) do not
apply in any case where the person
engaging in the covered transaction
returns or credits to the plan or IRA all
profits earned by that person in
connection with the securities
transaction associated with the covered
transaction. In addition, the Department
proposes to reinsert a reference to
trustees (other than nondiscretionary
trustees) in Section III(a) along with the
existing references to plan
administrators and employers. Finally,
the Department is proposing to add a
sentence to the end of Section III(a)
stating: ‘‘Notwithstanding the foregoing,
this condition does not apply to a
trustee that satisfies Section III(h) and
(i).’’ The purpose of these proposed
amendments is to clarify that trustees
may engage in covered transactions
subject to the recapture of profits
limitations in Section V(b) of the
exemption.
The Department is not proposing to
amend PTE 86–128 to include mutual
fund principal transactions that are
currently covered in PTE 75–1 Part II(2).
The Department previously made such
a change in 2016 to allow both
investment advice and investment
discretion mutual fund principal fund
transactions to rely on an amended PTE
86–128. However, the Department now
believes other exemptions, including
PTE 2020–02, provide sufficient relief
for these types of transactions and
enhanced protection for retirement
investors.
E:\FR\FM\03NOP3.SGM
03NOP3
76036
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
lotter on DSK11XQN23PROD with PROPOSALS3
Lastly, the Department is proposing to
add a new Section VII to PTE 86–128
that would require the fiduciary
engaging in a transaction covered by the
exemption to maintain records
necessary to enable certain persons
(described in proposed Section VII(b)) to
determine whether the conditions of
this exemption have been met. The
proposed recordkeeping requirement is
consistent with the recordkeeping
provisions contained in other existing
class exemptions as well as the
recordkeeping provisions of proposed
amendments to PTEs 84–24 and 2020–
02, which are published separately in
this issue of the Federal Register.
Executive Order 12866 and 13563
Statement
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects; distributive impacts; and
equity). Executive Order 13563
emphasizes the importance of
quantifying costs and benefits, reducing
costs, harmonizing rules, and promoting
flexibility.
Under Executive Order 12866, as
amended by Executive Order 14094,
‘‘significant’’ regulatory actions are
subject to review by the Office of
Management and Budget (OMB).
Section 3(f) of the Executive order
defines a ‘‘significant regulatory action’’
as an action that is likely to result in a
rule (1) having an annual effect on the
economy of $200 million or more, or
adversely and materially affecting a
sector of the economy, productivity,
competition, jobs, the environment,
public health or safety, or state, local, or
tribal governments or communities; (2)
creating a serious inconsistency or
otherwise interfering with an action
taken or planned by another agency; (3)
materially altering the budgetary
impacts of entitlement grants, user fees,
or loan programs or the rights and
obligations of recipients thereof; or (4)
raising legal or policy issues for which
centralized review would meaningfully
further the President’s priorities or the
principles set forth in the Executive
order. It has been determined that this
proposal is ‘‘significant regulatory
action’’ within the scope of section
3(f)(1) of the Executive order. Therefore,
the Department has provided an
assessment of the proposal’s potential
costs, benefits, and transfers, and OMB
has reviewed this proposed amendment
pursuant to the Executive order.
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
Paperwork Reduction Act Statements
As part of its continuing effort to
reduce paperwork and respondent
burden, the Department conducts a
preclearance consultation program to
allow the general public and Federal
agencies to comment on proposed and
continuing collections of information in
accordance with the Paperwork
Reduction Act of 1995 (PRA). This helps
to ensure that the public understands
the Department’s collection
instructions, respondents can provide
the requested data in the desired format,
reporting burden (time and financial
resources) is minimized, collection
instruments are clearly understood, and
the Department can properly assess the
impact of collection requirements on
respondents.
Currently, the Department is soliciting
comments concerning the information
collection requests (ICRs) included in
the proposed amendments to Prohibited
Transaction Exemptions 75–1, 77–4, 80–
83, 83–1, and 86–128. To obtain a copy
of the ICRs, contact the PRA addressee
shown below or go to https://
www.RegInfo.gov. The Department has
submitted a copy of the amendments to
the OMB in accordance with 44 U.S.C.
3507(d) for review of its information
collections. The Department and OMB
are particularly interested in comments
that:
• Evaluate whether the collection of
information is necessary for the
functions of the agency, including
whether the information will have
practical utility;
• Evaluate the accuracy of the
agency’s estimate of the burden of the
collection of information, including the
validity of the methodology and
assumptions used;
• Enhance the quality, utility, and
clarity of the information to be
collected; and
• Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology
(e.g., permitting electronically delivered
responses).
Commenters may send their views on
the Department’s PRA analysis in the
same way they send comments in
response to these proposed rules (for
example, through the
www.regulations.gov website), including
as part of a comment responding to the
broader proposal. Comments are due by
January 2, 2024 to ensure their
consideration.
PRA Addressee: Address requests for
copies of the ICR to James Butikofer,
PO 00000
Frm 00148
Fmt 4701
Sfmt 4702
Office of Research and Analysis, U.S.
Department of Labor, Employee Benefits
Security Administration, 200
Constitution Avenue NW, Room N–
5718, Washington, DC 20210, or
ebsa.opr@dol.gov. ICRs also are
available at https://www.RegInfo.gov
(https://www.reginfo.gov/public/do/
PRAMain).
Amendments to PTE 75–1
The Department proposes to amend
PTE 75–1, Part V, to include a new
disclosure requirement requiring the
plan or IRA to receive a written
disclosure of certain terms before the
extension of credit. The disclosure must
include the rate of interest or other fees
that will be charged on such extension
of credit, and the method of determining
the balance upon which interest will be
charged. The plan or IRA must
additionally be provided with prior
written disclosure of any changes to
these terms. The Department believes
that it is a usual and customary business
practice to maintain records required to
demonstrate compliance with disclosure
distribution regulations mandated by
the Securities and Exchange
Commission (SEC). The Department
believes that this new disclosure
requirement is consistent with the
disclosure requirement mandated by the
SEC in 17 CFR 240.10b–16(1) for margin
transactions. Therefore, the Department
concludes that this requirement
produces no additional burden to the
public.
The Department is also amending PTE
75–1, Parts II and V to adjust the
recordkeeping requirement to shift the
burden from plans and IRAs to financial
institutions. The amended class
exemption requires as a condition for
relief that financial institutions engaging
in the exempted transactions (rather
than the plans or IRAs) to retain or
cause to be maintained all records
pertaining to such transactions for six
years and provide access to the records
upon request to the specified parties.
Finally, the Department is proposing
to amend PTE 75–1 Parts III and IV,
which currently provide relief for
investment advice fiduciaries, by
removing fiduciary investment advice
from the covered transactions.
Investment advice providers would
instead have to rely on the amended
PTE 2020–02 for exemptive relief
covering investment advice
transactions.
Broker-dealers registered under the
Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.), reporting dealers,
and banks are eligible to rely on the
exemption. According to the SEC,
approximately 3,508 broker-dealers
E:\FR\FM\03NOP3.SGM
03NOP3
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
were SEC-registered as of December
2021.15 Not all broker-dealers perform
services for employee benefit plans. In
2021, 54 percent of registered
investment advisers provided employersponsored retirement benefits
consulting.16 Assuming the percentage
of broker-dealers provide advice to
retirement plans is the same as the
percent of investment advisers
providing services to plans, the
Department estimates 54 percent, or
1,894 broker-dealers, would be affected
by PTE 75–1.
According to the Federal Deposit
Insurance Corporation, there are 4,096
commercial banks as of March 31,
2023.17 If one-half of these banks (about
2,048) and 54 percent of broker-dealers
(about 1,894 broker-dealers) relied on
this exemption, there would be
approximately 3,942 respondents.18
76037
assumed that the records required by
this class exemption are the same
records kept in the normal course of
business, or in compliance with other
requirements. The Department requests
comment on this assumption.
The Department has estimated that
the additional time needed to maintain
records for the financial institutions to
be consistent with the exemption will
be four hours per entity annually at a
wage rate of $190.63 per hour.19 Thus,
the Department estimates it would take
15,768 hours at an equivalent cost of
$3,005,854 to maintain the records and
make the records available for
inspection.20
Recordkeeping Requirements
The Department has assumed that
financial service providers that transact
with employee benefit plans will
maintain these records on behalf of their
client plans. Because of the
sophisticated nature of financial service
providers and the regulation of the
securities industry by State and federal
government, and by self-regulatory
organizations, the Department has
TABLE 1—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH RECORDKEEPING
Year 1
Activity
Burden hours
Equivalent
burden cost
Burden hours
Equivalent
burden cost
Financial Manager ...........................................................................................
15,768
$3,005,854
15,768
$3,005,854
Total ..........................................................................................................
15,768
3,005,854
15,768
3,005,854
Summary
In sum, the Department estimates the
total burden hours for the amended PTE
1975–1 is 15,768 hours at a total
equivalent burden cost of $3,005,854.
The total cost burden is estimated to be
de minimis. The Department assumes
that required records are maintained by
the relevant affected entities, the brokerdealers and banks. Thus, there are no
additional tasks performed outside of
those performed by the brokerage firms/
banks.
The paperwork burden estimates are
summarized as follows:
Type of Review: Revision of an
existing collection.
Agency: Employee Benefits Security
Administration, Department of Labor.
Titles: Prohibited Transaction
Exemption 75–1 (Security Transactions
with Broker-Dealers, Reporting Dealers
and Banks).
OMB Control Number: 1210–0092.
Affected Public: Businesses or other
for-profits; not for profit institutions.
Estimated Number of Respondents:
3,942.
lotter on DSK11XQN23PROD with PROPOSALS3
Subsequent years
15 Estimates based on SEC’s FOCUS filings and
SEC’s Form ADV filings.
16 Cerulli Associates, U.S. RIA Marketplace 2022,
Exhibit 5.10, Part 1, The Cerulli Report.
17 Federal Insurance Deposit Corporation,
Quarterly Banking Profile, Statistics at a Glance- as
of March 31, 2023, https://www.fdic.gov/analysis/
quarterly-banking-profile/statistics-at-a-glance/
2023mar/industry.pdf.
18 Reporting dealers covered by the exemption are
not accounted for separately because they are banks
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
Amendments to PTE 86–128
The Department is proposing to
amend Section VI of PTE 86–128 to
require financial institutions to
maintain or cause to be maintained for
six years the records necessary for the
Department, IRS, plan fiduciary,
contributing employer or employee
organization whose members are
covered by the plan, participants and
beneficiaries and IRA owners to
determine whether conditions of this
exemption have been met.
In addition, the amendment would
impose conditions on IRAs. Section III
of the class exemption imposes the
following requirements on fiduciaries of
employee benefit plans that effect or
execute securities transactions and the
independent plan fiduciaries
authorizing the plan or IRA to engage in
the transactions with the investment
advice provider (‘‘authorizing
fiduciary’’) under the conditions
contained in the exemption:
(1) The authorizing fiduciary must
provide the investment advice provider
with an advance written authorization
for the transactions;
(2) The investment advice provider
must provide the authorizing fiduciary
with information necessary to determine
whether an authorization should be
made, including a copy of the
exemption, a form for termination, a
description of the investment advice
provider’s brokerage placement
practices, and any other reasonably
available information regarding the
matter that the authorizing fiduciary
requests;
(3) The investment advice provider
must provide the authorizing fiduciary
with a termination form, at least
annually, explaining that the
authorization is terminable at will,
without penalty to the plan, and that
failure to return the form will result in
continued authorization for the
and security brokerages that trade in U.S.
Government Securities; thus, reporting dealers are
already accounted for in the number of brokerdealer firms and banks. The New York Federal
Reserve Bank reported 21 primary dealers on March
21, 2013. https://www.newyorkfed.org/markets/
pridealers_current.html.
19 Internal Department calculation based on 2023
labor cost data. For a description of the
Department’s methodology for calculating wage
rates, see https://www.dol.gov/sites/dolgov/files/
EBSA/laws-and-regulations/rules-and-regulations/
technical-appendices/labor-cost-inputs-used-inebsa-opr-ria-and-pra-burden-calculations-june2019.pdf.
20 The burden is estimated as follows: (3,942
financial institutions × 4 hours) = 15,768 hours. A
labor rate of $190.63 is used for a financial manager.
The labor rate is applied in the following
calculation: (3,942 × 4 hours) × $190.63 =
$3,005,854.
Estimated Number of Annual
Responses: 3,942.
Frequency of Response: Initially,
Annually, When engaging in exempted
transaction.
Estimated Total Annual Burden
Hours: 15,768 hours.
Estimated Total Annual Burden Cost:
$0.
PO 00000
Frm 00149
Fmt 4701
Sfmt 4702
E:\FR\FM\03NOP3.SGM
03NOP3
lotter on DSK11XQN23PROD with PROPOSALS3
76038
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
investment advice provider to engage in
securities transactions on behalf of the
plan or IRA;
(4) The investment advice provider
must provide the authorizing fiduciary
with either (a) a confirmation slip for
each individual securities transaction
within 10 days of the transaction
containing the information described in
Rule 10b–10(a)(1–7) under the
Securities Exchange Act of 1934, 17 CFR
240.10b–10 or (b) a quarterly report
containing certain financial information
including the total of all transactionrelated charges incurred by the plan or
IRA;
(5) The investment advice provider
must provide the authorizing fiduciary
with an annual summary of the
confirmation slips or quarterly reports,
containing all security transactionrelated charges, the brokerage placement
practices (if changed), and a portfolio
turnover ratio;
(6) An investment advice provider
who is a discretionary trustee must
provide the authorizing fiduciary with
an annual report showing separately the
commissions paid to affiliated brokers
and non-affiliated brokers, on both a
total dollar basis and a cents-per-share
basis.
Using data from 2021 Form 5500, the
Department estimates that 1,257 unique
plans hired service providers denoting
on the Schedule C that they were a
discretionary trustee. Further, among
these plans, 801 also reported that they
provided investment management
services or received investment
management fees paid directly or
indirectly by the plan.21 Based on these
values, the Department estimates on
average, 1,000 plans have discretionary
fiduciaries with full discretionary
control. As small plans do not file the
Schedule C, this estimate may be an
underestimate. The Department requests
comment on how many plans have
discretionary fiduciaries with full
discretionary control and how many
would continue to rely on PTE 1986–
128 under the proposed amendments.
The Department estimates that of the
estimated 1,000 plans discussed above,
7.5 percent are new accounts or new
financial advice relationships.22 Based
on these assumptions, the Department
estimates that 75 plans would be
affected by the proposed amendments to
PTE 1986–128.23
21 Estimates
based on 2021 Form 5500 data.
identified 57,575 new plans in its 2021
Form 5500 filings, or 7.5 percent of all Form 5500
pension plan filings.
23 The number of new plans is estimated as: 1,000
plans × 7.5 percent of plans are new = 75 new
plans.
22 EBSA
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
The Department lacks reliable data on
the number of managed IRAs that would
experience such a transaction in a given
year. The Department estimates that
there are 10,000 managed IRAs. The
Department also does not have data on
the number of new IRA accounts that
are opened each year. However, in 2022,
of the 67.8 million IRA owners, 1.4
million, or approximately 2.1 percent,
opened an IRA for the first time.24
Inferring from this statistic, the
Department estimates that 2.1 percent of
IRA accounts are new each year. The
Department acknowledges that some
IRA owners may have multiple IRAs,
and as such, this statistic may
underestimate the percentage of new
IRAs opened.25 This results in an
estimate of 210 IRAs that are new
accounts or new financial advice
relationships.26
The Department lacks reliable data on
the number of investment advice
providers who are discretionary
fiduciaries that would rely on the
amended exemption. For the purposes
of this analysis, the Department assumes
that the number of discretionary
fiduciaries relying on the exemption is
equal to the estimated number of brokerdealers estimated to be affected by the
amendments to PTE 2020–02, or 1,894
investment advice providers.27
The Department requests comment on
this assumption, particularly with
regard to what types of entities would
be likely to rely on the amended
exemption, as well as any underlying
data.
The following wage rates are
assumed: an in-house rate of $159.34 for
legal professionals and $63.45 for
clerical staff.28 In addition, the
Department assumes that 100 percent of
plans will use electronic means to
24 Cerulli Associates, U.S. Retirement EndInvestor 2023: Fostering Comprehensive
Relationships, The Cerulli Report.
25 The Department lacks data on the number of
IRA owners that own multiple IRAs. To provide
scope of magnitude, one source reported that in
2019, 19 percent of IRA owners contributed to both
a traditional IRA and Roth IRA. (See Investment
Company Institute, The Role of IRAs in U.S.
Households’ Saving for Retirement, 2020, 27(1) ICI
Research Perspective, (2021).) This statistic does
not account for individuals who own multiple IRAs
of each type or those who did not contribute in
2019, but it provides a lower bound.
26 (10,000 managed IRAs × 2.1 percent of IRAs are
new) = 210 IRAs.
27 Estimates are based on the SEC’s FOCUS filings
and Form ADV filings for broker-dealers.
28 Internal Department calculation based on 2023
labor cost data. For a description of the
Department’s methodology for calculating wage
rates, see https://www.dol.gov/sites/dolgov/files/
EBSA/laws-and-regulations/rules-and-regulations/
technical-appendices/labor-cost-inputs-used-inebsa-opr-ria-and-pra-burden-calculations-june2019.pdf.
PO 00000
Frm 00150
Fmt 4701
Sfmt 4702
deliver the required information with no
associated cost burden. The Department
also assumes that 94.2 percent of IRAs
and financial institutions will use
electronic means to deliver the required
information with no associated cost
burden.29 The Department assumes that
is similar to the percent receiving
electronically under the Department’s
2020 electronic disclosure safe harbor.30
The Department requests comments on
these assumptions.
Recordkeeping Requirement
The Department is proposing to
amend Section VI to require financial
institutions to maintain or cause to be
maintained for six years the records
necessary for the Department, IRS, plan
fiduciary, contributing employer or
employee organization whose members
are covered by the plan, participants
and beneficiaries and IRA owners to
determine whether conditions of this
exemption have been met.
Each of the 1,894 investment advice
providers will maintain these records on
behalf of their client plans in their
normal course of business. Therefore,
the Department has estimated that the
additional time needed to maintain
records consistent with the exemption
will only require about one-half hour,
on average annually for a financial
manager at an hourly rate of $190.63 to
organize and collate the documents.
This results in 947 hours of burden at
an equivalent cost of $180,527.31 The
recordkeeping requirement will also
require 15 minutes of clerical time at an
hourly rate of $63.45 to prepare and
send the documents for inspection,
resulting in 474 hours of burden at an
equivalent cost of $30,044.32
In total, the recordkeeping
requirement is expected to impose an
hour burden of 1,421 hours with an
equivalent cost of $210,571.
29 The Department estimates approximately 94.2
percent of retirement investors receive disclosures
electronically. This is the sum of the estimated
share of retirement investors receiving electronic
disclosures under the 2002 electronic disclosure
safe harbor (58.2 percent) and the estimated share
of retirement investors receiving electronic
disclosures under the 2020 electronic disclosure
safe harbor (36 percent).
30 85 FR 31884 (May 27, 2020).
31 The burden is estimated as follows: [(1,894
investment advice providers × 30 minutes) ÷ 60
minutes] = 947 hours. A labor rate of $190.63 is
used for a financial manager. The labor rate is
applied in the following calculation: [(1,894
investment advice providers × 30 minutes) ÷ 60
minutes] × $190.63 per hour = $180,527.
32 The burden is estimated as follows: 1,894
investment advice providers × 15 minutes = 474
hours. A labor rate of $63.45 is used for a clerical
worker. The labor rate is applied in the following
calculation: [(1,894 investment advice providers ×
15 minutes) ÷ 60 minutes] × $63.45 per hour =
$30,044.
E:\FR\FM\03NOP3.SGM
03NOP3
76039
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
TABLE 2—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH RECORDKEEPING
Year 1
Activity
Subsequent years
Equivalent
burden cost
Burden hours
Burden hours
Equivalent
burden cost
Financial Manager ...........................................................................................
Clerical .............................................................................................................
947
474
$180,527
30,044
947
474
$180,527
30,044
Total ..........................................................................................................
1,421
210,571
1,421
210,571
Written Authorization From the
Authorizing Fiduciary to the BrokerDealer
Authorizing fiduciaries of new plans
and IRAs entering into a relationship
with an investment advice provider are
required to provide the investment
advice provider with an advance written
authorization to perform transactions for
the plan or IRA. The Department
estimates that there are approximately
285 plans and IRAs that are new or that
enter new arrangements each year.33
Therefore, the Department estimates
of IRAs will be mailed. The Department
assumes that clerical staff will spend 5
minutes preparing and sending the
authorization, resulting in an hour
burden of approximately 24 hours with
an equivalent cost of $1,507.35 It is
assumed that the authorization will be
two pages and paper authorizations will
cost $0.76 each, which results in a cost
burden of $9.36
In total, the written authorization
requirement is expected to result in a
total hour burden of 95 hours with an
equivalent cost of $12,860 and a total
cost burden of $9.
that approximately 285 authorizing
fiduciaries are expected to send an
advance written authorization. It is
assumed that a legal professional will
spend 15 minutes per plan reviewing
the disclosures and preparing an
authorization form. This results in an
hour burden of 71 hours with an
equivalent cost of $11,353.34
To produce and distribute the
authorization, the Department assumes
that 100 percent of plans and 94.2
percent of IRAs will use traditional
electronic methods at no additional
burden, and the remaining 5.8 percent
TABLE 3—HOUR BURDEN, EQUIVALENT COST, POSTAGE AND MATERIAL COST ASSOCIATED WITH THE WRITTEN
AUTHORIZATION
Year 1
lotter on DSK11XQN23PROD with PROPOSALS3
Activity
Burden hours
Equivalent
burden cost
Subsequent years
Pages
Material cost
Burden hours
Equivalent
burden cost
Pages
Material cost
Legal ................
Clerical .............
71
24
$11,353
1,507
0
2
$0
9
71
24
$11,353
1,507
0
2
$0
9
Total ..........
95
12,860
2
9
95
12,860
2
9
Provision of Materials for Evaluation of
Authorization of Transaction
Prior to a written authorization being
made, the authorizing fiduciary must be
provided by the financial institution
with a copy of the exemption, a form for
termination of authorization, a
description of broker’s placement
practices, and any other reasonably
available information. This information
is assumed to be readily available.
To produce and distribute the
materials, the Department assumes that
94.2 percent of financial institutions
will use traditional electronic methods
at no additional burden, while the
remaining 5.8 percent of financial
institutions will mail the materials. The
Department estimates that a clerical staff
member will spend five minutes to
prepare and distribute the required
information to the authorizing fiduciary.
This information will be sent to the 285
plans and IRAs entering into an
agreement with a financial institution,
and based on the above, the Department
estimates that this requirement results
in an hour burden of 24 hours with an
equivalent cost of $1,507.37 It is
assumed that this information will be
seven pages and paper distribution will
cost $1.01 each, which results in a cost
burden of about $17.38
In total, the written authorization
requirement is expected to result in a
total hour burden of 24 hours with an
equivalent cost of $1,507 and a total cost
burden of $17.
33 75 plans + 210 IRAs = 285 plans and IRAs that
are new or that enter new arrangements each year.
34 The burden is estimated as follows: [(285 plans
and IRAs × 15 minutes per plan or IRA) ÷ 60
minutes] = 71 hours. A labor rate of $159.34 is used
for a legal professional. The labor rate is applied in
the following calculation: [(285 plans and IRAs × 15
minutes per plan or IRA) ÷ 60 minutes] × $159.34
per hour = $11,353.
35 The burden is estimated as follows: [(285 plans
or IRAs × 5 minutes per plan or IRA) ÷ 60 minutes]
= 24 hours; A labor rate of $63.45 is used for a
clerical worker. The labor rate is applied in the
following calculation: [(285 plans or IRAs × 5
minutes per IRA) ÷ 60] × $63.45 = $1,507.
36 The burden is estimated as follows: (2 pages ×
$0.05 per page) + $0.66 for postage = $0.76; The
mailing rate is applied in the following calculation:
(210 authorizations for IRAs × 5.8 percent paper) ×
$0.76 = $9.
37 The burden is estimated as follows: [[(75 plans
× 5 minutes per plan) ÷ 60 minutes] + [(210 IRAs
× 5 minutes per IRA) ÷ 60 minutes] = 24 hours; A
labor rate of $63.45 is used for a clerical worker.
The labor rate is applied in the following
calculation: {[(75 plans × 5 minutes per plan) ÷ 60
minutes] × $63.45} + [{(210 IRAs × 5 minutes per
IRA) ÷ 60 minutes] × $63.45} = $1,507.
38 The burden is estimated as follows: 7 pages ×
$0.05 per page + $0.66 for postage = $1.01; The
mailing rate is applied in the following calculation:
(75 plans × 5.8 percent paper × $1.01) + (210
materials packages for IRAs × 5.8 percent paper ×
$1.01) = $17.
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
PO 00000
Frm 00151
Fmt 4701
Sfmt 4702
E:\FR\FM\03NOP3.SGM
03NOP3
76040
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
TABLE 4—HOUR BURDEN, EQUIVALENT COST, POSTAGE AND MATERIAL COST ASSOCIATED WITH PROVISION OF
MATERIALS FOR TRANSACTION AUTHORIZATION
Year 1
Activity
Burden hours
Equivalent
burden cost
Subsequent years
Pages
Material cost
Burden hours
Equivalent
burden cost
Pages
Material cost
Clerical .............
24
$1,507
7
$17
24
$1,507
7
$17
Total ..........
24
1,507
7
17
24
1,507
7
17
Provision of an Annual Termination
Form
Each authorizing fiduciary must be
supplied annually with a form expressly
providing an election to terminate the
written authorization. It is assumed that
legal professionals with each of the
1,894 investment advice providers will
spend on average 15 minutes preparing
the termination forms, which results in
an hour burden of 474 hours with an
equivalent cost of $75,447.39
To produce and distribute the
termination form to the 10,000 IRAs and
1,000 plans, the Department assumes
that 94.2 percent of financial
institutions will use traditional
electronic methods at no additional
burden, while the remaining 5.8 percent
of financial institutions will mail the
termination forms. The Department
estimates that clerical staff will spend
five minutes per plan or IRA preparing
and distributing the termination forms
resulting in an hour burden of 917 hours
with an equivalent cost of $58,163.40 It
is assumed that the form will be two
pages, so paper copies will cost $0.76
each, which results in a cost burden of
approximately $485.41
In total, providing the annual
termination form is expected to impose
an hour burden of 1,391 hours with an
equivalent cost of $133,610 and a total
cost burden of $485.
TABLE 5—HOUR BURDEN, EQUIVALENT COST, POSTAGE AND MATERIAL COST ASSOCIATED WITH PROVISION OF THE
ANNUAL TERMINATION FORM
Year 1
Activity
Burden hours
Equivalent
burden cost
Pages
Material cost
Burden hours
Equivalent
burden cost
Pages
Material cost
Legal ................
Clerical .............
474
917
$75,447
58,163
0
2
$0
485
474
917
$75,447
58,163
0
2
$0
485
Total ..........
1,391
133,610
2
485
1,391
133,610
2
485
Annual Statement
In addition to the transaction
reporting requirement, investment
advice providers are required to send an
annual report to each of the 11,000
authorizing fiduciaries 42 containing the
same information as the quarterly report
and also containing all security
transaction-related charges, the
brokerage placement practices, and a
portfolio turnover ratio. Collecting and
generating the information required for
the annual report is reported as a cost
burden. Postage cost is not included
here as it is assumed that the annual
statement will be sent with the annual
termination form and postage costs are
accounted for there. It is assumed that
the annual statement will be five pages,
and the paper and print costs are $0.25
each.43 Therefore, the overall cost
burden for the paper and print costs are
about $160.44
In addition, it is assumed that the
information that must be sent annually
could be sent together; therefore, the
clerical staff hours required to prepare
and distribute the report has been
included with the provision of annual
termination form requirement.
Therefore, no additional hour burden
has been reported.
In total, providing the annual
statement is expected to impose a total
cost burden of $160.
39 The burden is estimated as follows: [(1,894
investment advice providers × 15 minutes per
financial institution) ÷ 60 minutes] = 474 hours; A
labor rate of $159.34 is used for a legal professional.
The labor rate is applied in the following
calculation: [(1,894 investment advice providers ×
15 minutes per financial institution) ÷ 60 minutes]
× $159.34 per hour = $75,447.
40 The burden is estimated as follows: [(1,000
plans × 5 minutes per plan) ÷ 60 minutes] + [(10,000
IRAs × 5 minutes per IRA) ÷ 60 minutes] = 917
hours. A labor rate of $63.45 is used for a clerical
worker. The labor rate is applied in the following
calculation: {[(1,000 plans × 5 minutes per plan) ÷
60 minutes] × $63.45} + {[(10,000 IRAs × 5 minutes
per IRA) ÷ 60 minutes] × $63.45} = $58,163.
41 The burden is estimated as follows: 2 pages ×
$0.05 per page + $0.66 for postage = $0.76. The
mailing rate is applied in the following calculation:
(1,000 plans × 5.8 percent paper × $0.76) + (10,000
IRAs × 5.8 percent paper × $0.76) = $485.
42 1,000 plans + 10,000 IRAs = 11,000 plans and
IRAs.
43 5 pages × $0.05 per page = $0.25.
44 (11,000 plans and IRAs × 5.8 percent paper ×
$0.25) = $160.
Transaction Reporting
The investment advice provider
engaging in a covered transaction must
furnish the authorizing fiduciary with
either a conformation slip for each
securities transaction or a quarterly
report containing specified information.
As discussed above, the provision of the
confirmation already is required under
SEC regulations. Therefore, if the
transaction reporting requirement is
satisfied by sending conformation slips,
no additional hour and cost burden will
occur.
lotter on DSK11XQN23PROD with PROPOSALS3
Subsequent years
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
PO 00000
Frm 00152
Fmt 4701
Sfmt 4702
E:\FR\FM\03NOP3.SGM
03NOP3
76041
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
TABLE 6—HOUR BURDEN, EQUIVALENT COST, POSTAGE AND MATERIAL COST ASSOCIATED WITH THE ANNUAL
STATEMENT
Year 1
Activity
Burden hours
Equivalent
burden cost
Subsequent years
Pages
Material cost
Burden hours
Equivalent
burden cost
Pages
Material cost
Clerical .............
0
$0
5
$160
0
$0
5
$160
Total ..........
0
0
5
160
0
0
5
160
Report of Commissions Paid
A discretionary trustee must provide
an authorizing fiduciary with an annual
report showing separately the
commissions paid to affiliated brokers
and non-affiliated brokers, on both a
total dollar basis and a cents-per-share
basis. The collecting and generation of
the information for the quarterly report
is reported as a cost burden. The clerical
hour burden to prepare and distribute
the report is included with the
provision of annual termination form
requirement, because both items are
required to be sent annually.
A financial institution who is a
discretionary trustee must provide each
of the 11,000 authorizing fiduciaries
with an annual report showing
commissions paid to affiliated and nonaffiliated brokers, on both a total dollar
and a cents-per-share basis. As the
report is sent annually, it is assumed
that it could be sent with the transaction
report, therefore postage costs are not
counted here. The Department estimates
that 94.2 percent of financial
institutions will use traditional
electronic methods at no additional
burden, while the remaining 5.8 percent
of financial institutions will mail the
annual reports. It is assumed that the
report will be two pages, and the paper
and print costs are $0.10 each.45
Therefore, the overall cost burden of the
paper and print costs is $64.46
Financial institutions are required to
report specific transaction fees and
information to the plan fiduciaries. The
information must be tracked, assigned to
specific plans, and reported. It is
assumed that it costs the financial
institution $3.30 per plan or IRA to
track this information.47 With
approximately 11,000 affected plans and
IRAs, this results in a cost burden of
approximately $36,300 annually.48
In total, providing the report is
expected to impose a total cost burden
of $36,364.49
TABLE 7—HOUR BURDEN, EQUIVALENT COST, POSTAGE AND MATERIAL COST ASSOCIATED WITH THE REPORT OF
COMMISSIONS PAID
Year 1
Activity
Burden hours
Equivalent
burden cost
Pages
Material cost
Burden hours
Equivalent
burden cost
Pages
Material cost
Clerical .............
0
$0
2
$36,364
0
$0
2
$36,364
Total ..........
0
0
2
36,364
0
0
2
36,364
Summary
In total, the conditions of this
exemption will result in the production
of 33,570 disclosures.50 The Department
assumes that 100 percent of plans will
use electronic methods to distribute the
required information, at de minimis
burden. The Department also assumes
that 94.2 percent of IRAs and financial
institutions will use electronic methods
to distribute the required information, at
de minimis burden, while 1,943 51
disclosures will be on paper. Production
and distribution of disclosures will
result in an overall hour burden of 2,929
hours with an equivalent cost of
lotter on DSK11XQN23PROD with PROPOSALS3
Subsequent years
pages × $0.05 per page = $0.10.
plans and IRAs × 5.8 percent paper ×
$0.10) = $64.
47 This estimate is based on information from a
Request for Information and from industry sources.
48 (11,000 plans and IRAs × $3.30) = $36,300.
49 This estimate is calculated as: $64 + $36,300 =
$36,364.
45 2
46 (11,000
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
$358,548 and an overall cost burden of
$37,034.
The paperwork burden estimates are
summarized as follows:
Type of Review: Revision to an
existing collection.
Agency: Employee Benefits Security
Administration, Department of Labor.
Titles: PTE 86–128 (Securities BrokerDealers).
OMB Control Number: 1210–0059.
Affected Public: Businesses or other
for-profits; not for profit institutions.
Estimated Number of Respondents:
2,179.
Estimated Number of Annual
Responses: 33,570.
Frequency of Response: Initially,
Annually, When engaging in exempted
transaction.
Estimated Total Annual Burden
Hours: 2,929 hours.
Estimated Total Annual Burden Cost:
$37,034.
50 The total number of disclosures is calculated in
the following manner: 285 (Written authorization
disclosures) + 285 (Provision of materials for
evaluation of authorization of transaction) + 11,000
(Annual termination form) + 11,000 (Annual
Statement) + 11,000 (Report of Commissions Paid)
= 33,570 disclosures.
51 The total number of paper disclosures is
calculated in the following manner: (210 Written
authorization disclosures for IRAs × 5.8 percent
paper) + (285 Provision of materials for evaluation
of authorization of transaction × 5.8 percent paper)
+ (11,000 Annual termination form × 5.8 percent
paper) + (11,000 Annual Statement × 5.8 percent
paper) + (11,000 Report of Commissions Paid × 5.8
percent paper) = 1,943 disclosures.
PO 00000
Frm 00153
Fmt 4701
Sfmt 4702
Amendments to PTE 77–4, 80–83 and
PTE 83–1
The Department has determined that
PTE 77–4 and PTE 80–83 do not have
information collections impacted by the
removal of advice from the exemption.
There is no paperwork burden related to
PTE 83–1.
E:\FR\FM\03NOP3.SGM
03NOP3
76042
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
Regulatory Flexibility Act
The Regulatory Flexibility Act
(RFA) 52 imposes certain requirements
on rules subject to the notice and
comment requirements of section 553(b)
of the Administrative Procedure Act or
any other law.53 Under section 603 of
the RFA, agencies must submit an initial
regulatory flexibility analysis (IRFA) of
a proposal that is likely to have a
significant economic impact on a
substantial number of small entities,
such as small businesses, organizations,
and governmental jurisdictions. This
proposed amended exemption, along
with related amended exemptions and a
proposed rule amendment published
elsewhere in this issue of the Federal
Register, is part of a rulemaking
regarding the definition of fiduciary
investment advice, which the
Department has determined likely will
have a significant economic impact on
a substantial number of small entities.
The impact of this proposed amendment
on small entities is included in the IRFA
for the entire project, which can be
found in the related notice of proposed
rulemaking found elsewhere in this
edition of the Federal Register.
lotter on DSK11XQN23PROD with PROPOSALS3
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 54 requires each
federal agency to prepare a written
statement assessing the effects of any
federal mandate in a proposed or final
rule that may result in an expenditure
of $100 million or more (adjusted
annually for inflation with the base year
1995) in any 1 year by state, local, and
tribal governments, in the aggregate, or
by the private sector. For purposes of
the Unfunded Mandates Reform Act, as
well as Executive Order 12875, this
proposed amended exemption does not
include any Federal mandate that will
result in such expenditures.
Federalism Statement
Executive Order 13132 outlines
fundamental principles of federalism. It
also requires Federal agencies to adhere
to specific criteria in formulating and
implementing policies that have
‘‘substantial direct effects’’ on the states,
the relationship between the national
government and states, or on the
distribution of power and
responsibilities among the various
levels of government. Federal agencies
promulgating regulations that have
these federalism implications must
consult with State and local officials,
and describe the extent of their
52 5
U.S.C. 601 et seq.
U.S.C. 601(2), 603(a); see also 5 U.S.C. 551.
54 Public Law 104–4, 109 Stat. 48 (Mar. 22, 1995).
53 5
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
consultation and the nature of the
concerns of State and local officials in
the preamble to the final regulation.
Notwithstanding this, Section 514 of
ERISA provides, with certain exceptions
specifically enumerated, that the
provisions of Titles I and IV of ERISA
supersede any and all laws of the States
as they relate to any employee benefit
plan covered under ERISA.
The Department does not intend this
exemption to change the scope or effect
of ERISA section 514, including the
savings clause in ERISA section
514(b)(2)(A) for State regulation of
securities, banking, or insurance laws.
Ultimately, the Department does not
believe this proposed class exemption
has federalism implications because it
has no substantial direct effect on the
States, on the relationship between the
National Government and the States, or
on the distribution of power and
responsibilities among the various
levels of Government.
General Information
The attention of interested persons is
directed to the following: (1) The fact
that a transaction is the subject of an
exemption under ERISA section 408(a)
and Code section 4975(c)(2) does not
relieve a fiduciary, or other party in
interest or disqualified person with
respect to a Plan, from certain other
provisions of ERISA and the Code,
including any prohibited transaction
provisions to which the exemption does
not apply and the general fiduciary
responsibility provisions of ERISA
section 404 which require, among other
things, that a fiduciary act prudently
and discharge his or her duties
respecting the Plan solely in the
interests of the participants and
beneficiaries of the Plan. Additionally,
the fact that a transaction is the subject
of an exemption does not affect the
requirement of Code section 401(a) that
the Plan must operate for the exclusive
benefit of the employees of the
employer maintaining the Plan and their
beneficiaries; (2) Before the proposed
exemption may be granted under ERISA
section 408(a) and Code section
4975(c)(2), the Department must find
that it is administratively feasible, in the
interests of Plans and their participants
and beneficiaries and IRA owners, and
protective of the rights of participants
and beneficiaries of the Plan and IRA
owners; (3) If granted, the proposed
exemption is applicable to a particular
transaction only if the transaction
satisfies the conditions specified in the
exemption; and (4) The proposed
exemption, if granted, is supplemental
to, and not in derogation of, any other
provisions of ERISA and the Code,
PO 00000
Frm 00154
Fmt 4701
Sfmt 4702
including statutory or administrative
exemptions and transitional rules.
Furthermore, the fact that a transaction
is subject to an administrative or
statutory exemption is not dispositive of
whether the transaction is in fact a
prohibited transaction.
Proposed Amendments to Class
Exemptions Prohibited Transaction
Exemption 75–1, Exemptions From
Prohibitions Respecting Certain Classes
of Transactions Involving Employee
Benefit Plans and Certain BrokerDealers, Reporting Dealers and Banks
The Department proposes to amend
Prohibited Transaction Exemption 75–1
under the authority of ERISA section
408(a) and Code section 4975(c)(2), and
in accordance with the procedures set
forth in 29 CFR part 2570, subpart B (76
FR 66637, October 27, 2011).
I. PTE 75–1, Part I, Agency
transactions and services, subparts (b)
and (c), are revoked in their entirety.
II. Part II, Principal transactions, the
first sentence of subpart (2) is revoked;
the sentence beginning ‘‘The
exemptions set forth in (1) and (2) is
designated as Part II(2) and amended to
read, ‘‘The exemption set forth in (1)
above is subject to the following
conditions:’’ and new section II(2)(d) is
revised to delete the phrase ‘‘Except
with respect to transactions described in
section (2) above,’’.
III. Part II, Principal transactions,
sections (e) and (f) are revised to read as
follows: (e) The broker-dealer, reporting
dealer, or bank engaging in the covered
transaction maintains or causes to be
maintained for a period of six years
from the date of such transaction such
records as are necessary to enable the
persons described in paragraph (f) of
this exemption to determine whether
the conditions of this exemption have
been met, except that:
(1) No party in interest other than the
broker-dealer, reporting dealer, or bank
engaging in the covered transaction,
shall be subject to the civil penalty,
which may be assessed under section
502(i) of the Act, or to the taxes imposed
by section 4975(a) and (b) of the Code,
if such records are not maintained, or
are not available for examination as
required by paragraph (f) below; and
(2) A prohibited transaction will not
be deemed to have occurred if, due to
circumstances beyond the control of the
broker-dealer, reporting dealer, or bank,
such records are lost or destroyed prior
to the end of such six-year period.
(f)(1) Notwithstanding anything to the
contrary in subsections (a)(2) and (b) of
section 504 of the Act, the records
referred to in paragraph (e) are
E:\FR\FM\03NOP3.SGM
03NOP3
lotter on DSK11XQN23PROD with PROPOSALS3
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
reasonably available for examination
during normal business hours by:
(A) Any duly authorized employee or
representative of the Department or the
Internal Revenue Service;
(B) Any fiduciary of the plan or any
duly authorized employee or
representative of such fiduciary;
(C) Any contributing employer and
any employee organization whose
members are covered by the plan, or any
authorized employee or representative
of these entities; or
(D) Any participant or beneficiary of
the plan, or IRA owner, or the duly
authorized representative of such
participant or beneficiary; and
(2) None of the persons described in
subparagraph (1)(B)-(D) above shall be
authorized to examine trade secrets or
commercial or financial information of
the broker-dealer, reporting dealer, or
bank which is privileged or
confidential, or records regarding a plan
or IRA other than the plan or IRA with
respect to which they are the fiduciary,
contributing employer, employee
organization, participant, beneficiary, or
IRA owner.
(3) Should such broker-dealer,
reporting dealer, or bank refuse to
disclose information on the basis that
such information is exempt from
disclosure, the broker-dealer, reporting
dealer, or bank shall, by the close of the
thirtieth (30th) day following the
request, provide a written notice
advising that person of the reasons for
the refusal and that the Department may
request such information.
(4) Failure to maintain the required
records necessary to determine whether
the conditions of this exemption have
been met will result in the loss of the
exemption only for the transaction or
transactions for which records are
missing or have not been maintained. It
does not affect the relief for other
transactions.
For purposes of this exemption, the
terms ‘‘broker-dealer,’’ ‘‘reporting
dealer’’ and ‘‘bank’’ shall include such
persons and any affiliates thereof, and
the term ‘‘affiliate’’ shall be defined in
the same manner as that term is defined
in 29 CFR 2510.3–21(e) and 26 CFR
54.4975–9(e).
IV. Part III, Underwritings, is amended
by inserting a new section III(h) to read
as follows:
Exception. No relief from the
restrictions of ERISA section 406(b) and
the taxes imposed by Code section
4975(a) and (b) by reason of Code
sections 4975(c)(1)(E) and (F) is
available for fiduciaries providing
investment advice within the meaning
of ERISA section 3(21)(A)(ii) or Code
section and regulations thereunder.
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
V. Part IV, Market-making, is
amended by inserting a new section
IV(g) to read as follows:
Exception. No relief from the
restrictions of ERISA section 406(b) and
the taxes imposed by Code section
4975(a) and (b) by reason of Code
sections 4975(c)(1)(E) and (F) is
available for fiduciaries providing
investment advice within the meaning
of ERISA section 3(21)(A)(ii) or Code
section 4975(e)(3)(B) and regulations
thereunder.
VI. Part V, Extension of Credit, is
amended by replacing Sections (c) and
(d) with the following: (c)
Notwithstanding section (a)(2), a
fiduciary under ERISA section
3(21)(A)(ii) or Code section
4975(e)(3)(B) may receive reasonable
compensation for extending credit to a
plan or IRA to avoid a failed purchase
or sale of securities involving the plan
or IRA if:
(1) The potential failure of the
purchase or sale of the securities is not
caused by such fiduciary or an affiliate;
(2) The terms of the extension of
credit are at least as favorable to the
plan or IRA as the terms available in an
arm’s length transaction between
unaffiliated parties;
(3) Prior to the extension of credit, the
plan or IRA receives written disclosure
of (i) the rate of interest (or other fees)
that will apply and (ii) the method of
determining the balance upon which
interest will be charged, in the event
that the fiduciary extends credit to
avoid a failed purchase or sale of
securities, as well as prior written
disclosure of any changes to these
terms. This section (e)(3) will be
considered satisfied if the plan or IRA
receives the disclosure described in
Securities Exchange Act Rule 10b–16; 55
(d) The broker-dealer engaging in the
covered transaction maintains or causes
to be maintained for a period of six
years from the date of such transaction
in a manner that is reasonably
accessible for examination, such records
as are necessary to enable the persons
described in paragraph (e) of this
exemption to determine whether the
conditions of this exemption have been
met with respect to a transaction, except
that:
(1) No party other than the brokerdealer engaging in the covered
transaction shall be subject to the civil
penalty which may be assessed under
section 502(i) of the Act, or to the taxes
imposed by section 4975(a) and (b) of
the Code, if such records are not
maintained, or are not available for
55 17
PO 00000
CFR 240.10b–16.
Frm 00155
Fmt 4701
Sfmt 4702
76043
examination as required by paragraph
(e) below; and
(2) A prohibited transaction will not
be deemed to have occurred if, due to
circumstances beyond the control of the
broker-dealer, such records are lost or
destroyed prior to the end of such sixyear period.
(e)(1) Except as provided in paragraph
(e)(2) of this exemption, and
notwithstanding anything to the
contrary in subsections (a)(2) and (b) of
section 504 of the Act, the records
referred to in paragraph (d) are
reasonably available at their customary
location for examination during normal
business hours by:
(A) An authorized employee or
representative of the Department of
Labor or the Internal Revenue Service,
(B) Any fiduciary of a plan that
engaged in a transaction pursuant to this
exemption, or any authorized employee
or representative of such fiduciary;
(C) Any contributing employer and
any employee organization whose
members are covered by a plan
described in paragraph (e)(1)(B), or any
authorized employee or representative
of these entities; or
(D) Any participant or beneficiary of
a plan described in paragraph (e)(1)(B),
IRA owner or the authorized
representative of such participant,
beneficiary or owner.
(2) None of the persons described in
paragraph (e)(1)(B)–(D) of this
exemption are authorized to examine
records regarding a recommended
transaction involving another investor,
or privileged trade secrets or privileged
commercial or financial information, of
the broker-dealer engaging in the
covered transaction, or information
identifying other individuals.
(3) Should the broker-dealer engaging
in the covered transaction refuse to
disclose information on the basis that
the information is exempt from
disclosure, the broker-dealer must, by
the close of the thirtieth (30th) day
following the request, provide a written
notice advising the requestor of the
reasons for the refusal and that the
Department may request such
information.
(4) Failure to maintain the required
records necessary to determine whether
the conditions of this exemption have
been met will result in the loss of the
exemption only for the transaction or
transactions for which records are
missing or have not been maintained. It
does not affect the relief for other
transactions.
For purposes of this exemption, the
terms ‘‘party in interest,’’ ‘‘disqualified
person’’ and ‘‘fiduciary’’ shall include
such party in interest, disqualified
E:\FR\FM\03NOP3.SGM
03NOP3
76044
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
person, or fiduciary, and any affiliates
thereof, and the term ‘‘affiliate’’ shall be
defined in the same manner as that term
is defined in 29 CFR 2510.3–21 and 26
CFR 54.4975–9. Also, for the purposes
of this exemption, the term ‘‘IRA’’
means any account or annuity described
in Code section 4975(e)(1)(B) through
(F), including, for example, an
individual retirement account described
in section 408(a) of the Code and a
health savings account described in
section 223(d) of the Code.
lotter on DSK11XQN23PROD with PROPOSALS3
Prohibited Transaction Exemption 77–
4, Class Exemption for Certain
Transactions Between Investment
Companies and Employee Benefit Plans
The Department proposes to amend
Prohibited Transaction Exemption 77–4
under the authority of ERISA section
408(a) and Code section 4975(c)(2), and
in accordance with the procedures set
forth in 29 CFR part 2570, subpart B (76
FR 66637, October 27, 2011).
I. A new section II(g) is inserted to
read as follows:
Exception. No relief from the
restrictions of 406(b) and the taxes
imposed by section 4975(a) and (b) by
reason of sections 4975(c)(1)(E) and (F)
is available for fiduciaries providing
investment advice within the meaning
of section 3(21)(A)(ii) of ERISA or
4975(e)(3)(B) of the Code and
regulations thereunder.
Prohibited Transaction Exemption 80–
83, Class Exemption for Certain
Transactions Involving Purchase of
Securities Where Issuer May Use
Proceeds To Reduce or Retire
Indebtedness to Parties in Interest
The Department proposes to amend
Prohibited Transaction Exemption 80–
83 under the authority of ERISA section
408(a) and Code section 4975(c)(2), and
in accordance with the procedures set
forth in 29 CFR part 2570, subpart B (76
FR 66637, October 27, 2011).
I. A new section I.E. is inserted to
read as follows:
Exception. No relief from the
restrictions of 406(b) and the taxes
imposed by section 4975(a) and (b) by
reason of sections 4975(c)(1)(E) and (F)
is available for fiduciaries providing
investment advice within the meaning
of section 3(21)(A)(ii) of ERISA or
4975(e)(3)(B) of the Code and
regulations thereunder.
Prohibited Transaction Exemption 83–
1, Exemption for Certain Transactions
Involving Mortgage Pool Investment
Trusts
The Department proposes to amend
Prohibited Transaction Exemption 83–1
under the authority of ERISA section
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
408(a) and Code section 4975(c)(2), and
in accordance with the procedures set
forth in 29 CFR part 2570, subpart B (76
FR 66637, October 27, 2011).
I. A new section I.E. is inserted to
read as follows:
Exception. No relief from the
restrictions of 406(b) and the taxes
imposed by section 4975(a) and (b) by
reason of sections 4975(c)(1)(E) and (F)
is available for fiduciaries providing
investment advice within the meaning
of section 3(21)(A)(ii) of ERISA or
4975(e)(3)(B) of the Code and
regulations thereunder.
Prohibited Transaction Exemption 86–
128, Class Exemption for Securities
Transactions Involving Employee
Benefit Plans and Broker-Dealers
The Department proposes to amend
Prohibited Transaction Exemption 86–
128 under the authority of ERISA
section 408(a) and Code section
4975(c)(2), and in accordance with the
procedures set forth in 29 CFR part
2570, subpart B (76 FR 66637, October
27, 2011).
I. New sections II(d) is inserted as
follows:
(d) Exception. No relief from the
restrictions of ERISA 406(b) and the
taxes imposed by Code section 4975(a)
and (b) by reason of Code sections
4975(c)(1)(E) and (F) is available for
fiduciaries providing investment advice
within the meaning of ERISA section
3(21)(A)(ii) or Code section
4975(e)(3)(B) and regulations
thereunder.
II. Section IV(a) is deleted.
III. Section IV(b) is redesignated as
Section IV(a), and IV(a)(1) is deleted and
Sections IV(b)(2) and (3) are
redesignated as Sections IV(b)(1) and
(2).
IV. Section IV(c) is redesignated as
Section IV(b) and is amended to read:
(c) Recapture of profits. Sections III(a)
and III(i) of this exemption do not apply
in any case where the person engaging
in a covered transaction returns or
credits to the plan all profits earned by
that person in connection with the
securities transactions associated with
the covered transaction.
V. The following is added to the end
of Section III(a)
‘‘Notwithstanding the foregoing, this
condition does not apply to a trustee
that satisfies Section III(h) and (i).’’
VI. New Section VII is inserted as
follows:
Section VII. Recordkeeping
Requirements
(a) The plan fiduciary engaging in a
covered transaction maintains or causes
to be maintained for a period of six
years, in a manner that is reasonably
PO 00000
Frm 00156
Fmt 4701
Sfmt 4702
accessible for examination, the records
necessary to enable the persons
described in Section VI(b) to determine
whether the conditions of this
exemption have been met, except that:
(1) If such records are lost or
destroyed, due to circumstances beyond
the control of the plan fiduciary, then
no prohibited transaction will be
considered to have occurred solely on
the basis of the unavailability of those
records; and
(2) No party in interest, other than
such plan fiduciary who is responsible
for complying with this paragraph (a),
will be subject to the civil penalty that
may be assessed under ERISA section
502(i) or the taxes imposed by Code
section 4975(a) and (b), if applicable, if
the records are not maintained or are
not available for examination as
required by paragraph (b) below; and
(b)(1) Except as provided below in
subparagraph (2), or as precluded by 12
U.S.C. 484, and notwithstanding any
provisions of ERISA section 504(a)(2)
and (b), the records referred to in the
above paragraph are reasonably
available at their customary location for
examination during normal business
hours by—
(A) Any duly authorized employee or
representative of the Department or the
Internal Revenue Service;
(B) Any fiduciary of the plan or any
duly authorized employee or
representative of such fiduciary;
(C) Any contributing employer and
any employee organization whose
members are covered by the plan, or any
authorized employee or representative
of these entities; or
(D) Any participant or beneficiary of
the plan or the authorized
representative of such participant or
beneficiary.
(2) None of the persons described in
subparagraph (1)(B)–(D) above are
authorized to examine privileged trade
secrets or privileged commercial or
financial information of such fiduciary
or are authorized to examine records
regarding a plan or IRA other than the
plan or IRA with which they are the
fiduciary, contributing employer,
employee organization, participant,
beneficiary or IRA owner.
(3) Should such plan fiduciary refuse
to disclose information on the basis that
such information is exempt from
disclosure, such plan fiduciary must, by
the close of the thirtieth (30th) day
following the request, provide a written
notice advising the requestor of the
reasons for the refusal and that the
Department may request such
information.
(4) Failure to maintain the required
records necessary to determine whether
E:\FR\FM\03NOP3.SGM
03NOP3
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules
the conditions of this exemption have
been met will result in the loss of the
exemption only for the transaction or
transactions for which records are
missing or have not been maintained. It
does not affect the relief for other
transactions.
76045
Signed at Washington, DC, this 24th day of
October, 2023.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits
Security Administration, U.S. Department of
Labor.
[FR Doc. 2023–23782 Filed 11–2–23; 8:45 am]
lotter on DSK11XQN23PROD with PROPOSALS3
BILLING CODE 4510–29–P
VerDate Sep<11>2014
21:24 Nov 02, 2023
Jkt 262001
PO 00000
Frm 00157
Fmt 4701
Sfmt 9990
E:\FR\FM\03NOP3.SGM
03NOP3
Provide the following information to help us resolve this problem: the URL of the page you were trying to access, the steps you followed to produce the error, specific search or browse terms, and/or a screenshot of the page where the error occurred.
© 2024 Justia
