57964 Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Notices 

Cite/reference Total respondents Frequency Total responses 

Average time per 

response (hours) Burden (hours) 

Account Summary ................................................................ 53 Annually 53 4 212

RJM 1 through 6 series ....................................................... 53 Annually 53 3 159

Narrative ............................................................................... 53 Annually 53 8 424

Totals ............................................................................ ...................... ...................... 212 33.75 7,155

Total Burden Hours: 7,155. 

Total Annualized Capital/Startup 

Costs: $0. 

Total Annual Costs (Operating/

Maintaining Systems or Purchasing 

Services): $375,000. 

Description: This program would 

replace the current methodologies for 

budget formulation and grant allocation 

to the states for unemployment 

insurance program.

Ira L. Mills, 

Departmental Clearance Officer.

[FR Doc. 04–21657 Filed 9–27–04; 8:45 am] 

BILLING CODE 4510–30–P

DEPARTMENT OF LABOR

Office of the Secretary 

Submission for OMB Review: 

Comment Request 

September 22, 2004. 

The Department of Labor (DOL) has 

submitted the following public 

information collection requests (ICRs) to 

the Office of Management and Budget 

(OMB) for review and approval in 

accordance with the Paperwork 

Reduction Act of 1995 (Pub. L. 104–13, 

44 U.S.C. chapter 35). A copy of each 

ICR, with applicable supporting 

documentation, may be obtained by 

contacting the Department of Labor 

(DOL). To obtain documentation, 

contact Darrin King on 202–693–4129 

(this is not a toll-free number) or email: 

king.darrin@dol.gov. 

Comments should be sent to Office of 

Information and Regulatory Affairs, 

Attn: OMB Desk Officer for the Mine 

Safety and Health Administration 

(MSHA), Office of Management and 

Budget, Room 10235, Washington, DC 

20503, 202–395–7316 (this is not a tollfree number), within 30 days from the 

date of this publication in the Federal 

Register. 

The OMB is particularly interested in 

comments which: 

• Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of 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 

proposed 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 electronic submission of 

responses. 

Agency: Mine Safety and Health 

Administration. 

Type of Review: Extension of 

currently approved collection. 

Title: Record of Results of 

Examinations of Self-Rescuers 

(Underground Coal Mines). 

OMB Number: 1219–0044. 

Frequency: Quarterly. 

Type of Response: Recordkeeping. 

Affected Public: Business or other forprofit. 

Number of Respondents: 773. 

Number of Annual Responses:

143,592. 

Estimated Time Per Response: 30 

minutes to certify and document that an 

examination was conducted and 1 

minute to document why a device was 

taken out of service. 

Total Burden Hours: 71,748. 

Total Annualized capital/startup 

costs: $0. 

Total Annual Costs (operating/

maintaining systems or purchasing 

services): $0. 

Description: Title 30, CFR 75.1714–

3(b), (c), (d), and (e) require that selfrescuers be examined regularly at 

intervals not to exceed 90 days by a 

qualified person who certifies by date 

and signature that the tests were 

conducted. A record must be made 

when a self-rescue device is removed 

from service and when corrective action 

is taken as a result of the examination. 

The records are used as an enforcement 

tool to insure that the devices have been 

examined and are maintained in 

operable and usable condition.

Agency: Mine Safety and Health 

Administration. 

Type of Review: Extension of 

currently approved collection. 

Title: Escape and Evacuation Plans 30 

CFR 57.11053. 

OMB Number: 1219–0046. 

Frequency: On occasion and semiannually. 

Type of Response: Recordkeeping and 

Third party disclosure. 

Affected Public: Business or other forprofit. 

Number of Respondents: 243. 

Number of Annual Responses: 486. 

Estimated Time Per Response: 8.5 

hours. 

Total Burden Hours: 4,131. 

Total Annualized capital/startup 

costs: $0. 

Total Annual Costs (operating/

maintaining systems or purchasing 

services): $0. 

Description: Title 30 CFR 57.11053 

requires the development of an escape 

and evacuation plan specifically 

addressing the unique conditions of 

each underground metal and nonmetal 

mine. Section 57.11053 also requires 

that revisions be made as mining 

progresses. The plan must be available 

to the inspector and conspicuously 

posted at locations convenient to all 

persons on the surface and 

underground. The information is 

prepared by the mine operator for use 

by miners, MSHA, and persons involved 

in rescue operations.

Darrin A. King, 

Acting Departmental Clearance Officer.

[FR Doc. 04–21658 Filed 9–27–04; 8:45 am] 

BILLING CODE 4510–43–P

DEPARTMENT OF LABOR

Employee Benefits Security 

Administration 

[Prohibited Transaction Exemption 2004–

16; Application No. D–11203] 

Class Exemption for the 

Establishment, Investment and 

Maintenance of Certain Individual 

Retirement Plans Pursuant to a 

Mandatory Distribution

AGENCY: Employee Benefits Security 

Administration, Department of Labor.

ACTION: Grant of class exemption.

Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Notices 57965

1As corrected at 69 FR 11043 (March 9, 2004).

2Section 102 of Reorganization Plan No. 4 of 

1978 generally transferred the authority of the 

Secretary of the Treasury to issue exemptions under 

section 4975(c)(2) of the Code to the Secretary of 

Labor.

SUMMARY: This document contains a 

final class exemption from certain 

prohibited transaction restrictions of the 

Employee Retirement Income Security 

Act of 1974 (ERISA) and from certain 

taxes imposed by the Internal Revenue 

Code of 1986 (the Code). The exemption 

permits a fiduciary of a plan who is also 

the employer maintaining the plan to 

establish, on behalf of its separated 

employees, an individual retirement 

plan at a financial institution which is 

the employer or an affiliate, in 

connection with a Mandatory 

Distribution, as defined herein. Relief 

also is provided for a plan fiduciary to 

select a proprietary product as the 

initial investment for such individual 

retirement plan. Finally, relief is 

provided for the receipt of certain fees 

by the Individual Retirement Plan 

Provider in connection with the 

establishment or maintenance of the 

individual retirement plan and the 

initial investment of the Mandatory 

Distribution. The class exemption 

affects plan sponsors, plan fiduciaries, 

Individual Retirement Plan Providers 

and individual retirement plan account 

holders.

EFFECTIVE DATE: The exemption is 

effective for Mandatory Distributions 

made on or after March 28, 2005.

FOR FURTHER INFORMATION CONTACT:

Allison Padams Lavigne or Karen Lloyd, 

Office of Exemption Determinations, 

Employee Benefits Security 

Administration, U.S. Department of 

Labor, Washington, DC 20210, at (202) 

693–8540 (this is not a toll-free 

number).

SUPPLEMENTARY INFORMATION: On March 

2, 2004, the Department published a 

notice in the Federal Register (69 FR 

98461) of the pendency before the 

Department of a proposed class 

exemption from the restrictions of 

sections 406(a), 406(b)(1) and 406(b)(2) 

of ERISA and from the taxes imposed by 

section 4975(a) and (b) of the Code, by 

reason of section 4975(c)(1)(A) through 

(E) of the Code. The proposed 

exemption was published concurrently 

with the proposed Fiduciary 

Responsibility under the Employee 

Retirement Income Security Act of 1974 

Automatic Rollover Safe Harbor to be 

promulgated at 29 CFR 2550.404a–2 

(defined herein as ‘‘Automatic Rollover 

Regulation’’), which also was published 

on March 2, 2004 (69 FR 9899).

The Department proposed this class 

exemption on its own motion pursuant 

to section 408(a) of ERISA and section 

4975(c)(2) of the Code, and in 

accordance with the procedures set 

forth in 29 CFR 2570, Subpart B (55 FR 

32836, August 10, 1990).2 The notice 

gave interested persons an opportunity 

to comment or request a public hearing 

on the proposed exemption. Four 

comments were received by the 

Department regarding the proposed 

class exemption. No requests for a 

public hearing were received. Upon 

consideration of the comments received, 

the Department has determined to grant 

the proposed exemption subject to 

certain modifications. These 

modifications and the comments are 

discussed below.

Executive Order 12866 

Under Executive Order 12866, the 

Department must determine whether the 

regulatory action is ‘‘significant’’ and 

therefore subject to the requirements of 

the Executive Order and subject to 

review by the Office of Management and 

Budget (OMB). Under section 3(f), the 

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 $100 million 

or more, or adversely and materially 

affecting a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or tribal governments or 

communities (also referred to as 

‘‘economically significant’’); (2) creating 

serious inconsistency or otherwise 

interfering with an action taken or 

planned by another agency; (3) 

materially altering the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. 

Pursuant to the terms of the Executive 

Order, it has been determined that this 

action is ‘‘significant’’ and therefore 

subject to review by the Office of 

Management and Budget (OMB). 

Accordingly, this action has been 

reviewed by OMB. 

This final prohibited transaction class 

exemption is being published 

concurrently with a final regulation 

titled ‘‘Fiduciary Responsibility under 

the Employee Retirement Income 

Security Act of 1974 Automatic Rollover 

Safe Harbor.’’ The exemption permits 

plan fiduciaries that are also employers 

maintaining a pension plan to establish, 

for separated employees, individual 

retirement plans at financial institutions 

that are the employer or an affiliate, in 

connection with a Mandatory 

Distribution as that term is defined in 

this exemption. The exemption also 

permits plan fiduciaries to select a 

proprietary product as the initial 

investment for an individual retirement 

plan. Finally, the exemption provides 

relief from what would otherwise be a 

prohibited transaction for the receipt of 

certain fees by Individual Retirement 

Plan Providers in connection with the 

establishment or maintenance of the 

individual retirement plan and the 

initial investment of a Mandatory 

Distribution. 

The modifications made to the 

exemption following the Department’s 

consideration of comments received on 

both the proposed exemption and the 

proposed Automatic Rollover 

Regulation are described in detail in the 

discussion that follows this summary of 

costs and benefits. An overview of the 

economic impacts of those 

modifications is presented in this 

section. 

In general, the costs and benefits that 

may accrue to fiduciaries have been 

described and quantified in connection 

with the economic impact of the final 

regulation describing the safe harbor for 

automatic rollovers of mandatory 

distributions also published in today’s 

issue of the Federal Register. Although 

they are not separately identified, the 

fiduciaries of pension plans who are 

also employers maintaining the plan 

who would establish these individual 

retirement plans at a financial 

institution which is the employer or 

affiliate pursuant to this exemption are 

included within the estimates of 

affected plans and separated employees 

presented in the final regulation. 

The estimates presented in the final 

regulation have been revised from the 

proposal to reflect the provision of the 

final rule with respect to the 

applicability of the safe harbor to 

mandatory distributions of $1,000 or 

less described in section 411(a)(11) of 

the Code, provided there is no 

affirmative distribution election by the 

participant and the fiduciary makes a 

rollover distribution into an individual 

retirement plan in accordance with the 

other conditions of the regulation, 

without regard to the fact that such a 

rollover is not described in section 

401(a)(31) of the Code.

When the Department originally 

estimated the costs and benefits of the 

proposed regulation, which included 

the potential impact on the plans of 

financial institutions and affiliates that 

might make use of this exemption, the 

conditions of both the proposed 

regulation and the proposed exemption 

57966 Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Notices 

provided that fees and expenses 

attendant to the individual retirement 

plan, other than establishment fees, 

could be charged only against the 

income earned by the individual 

retirement plan. This condition has not 

been modified in the final exemption. 

Although the condition has been revised 

in the final regulation, the change has 

no impact on the total estimated fees 

and expenses attendant to these 

individual retirement plans, regardless 

of whether they are established in 

accordance with the conditions of the 

regulation or exemption. This difference 

between the regulation and exemption 

with respect to this condition is 

expected to result in a difference in only 

the way in which fees and expenses are 

allocated between the individual 

retirement plan and the Individual 

Retirement Plan Provider. It is likely 

that the fees and expenses attendant to 

the individual retirement plan offered 

by the plan fiduciary or an affiliate will 

be allocated at least in part to the 

Individual Retirement Plan Provider 

due to the limitation on the amount that 

can be charged to the individual 

retirement plan. The likelihood of the 

provider incurring such a limit on the 

recovery of its cost is greater when rates 

of return are low. 

Certain other costs may be allocated 

in connection with the conditions of the 

exemption to plan fiduciaries that select 

the proprietary products of an employer 

or an affiliate for investment of 

individual retirement plans, that would 

not be allocated to plan fiduciaries 

absent the prohibited transaction that 

would otherwise occur. Specifically, in 

connection with the acquisition of an 

Eligible Investment Product, section I(h) 

of the exemption provides that plan 

fiduciaries are not permitted to charge a 

sales commission to the individual 

retirement plans of their separated 

employees. Foregone sales commissions 

may result in costs in the form of a 

reduction in profit margin or an 

operating loss to some Individual 

Retirement Plan Providers. 

The Department has no basis for 

estimating a wide array of factors that 

would affect costs, such as the amount 

of fees or expenses that might not be 

fully charged to the individual 

retirement plans, the extent to which 

plan fiduciaries will use one or more 

proprietary products, the number of 

accounts that could be rolled over into 

such products, or the lost income, if 

any, that may result from unpaid sales 

commissions. Therefore, the Department 

has not estimated a cost for these 

provisions of the exemption. However, 

fiduciaries are in no event required to 

make use of individual retirement plans 

offered by the plan fiduciary or an 

affiliate. In addition, many of the 

proprietary products permitted under 

the exemption generally do not charge 

a sales commission in connection with 

an initial purchase. In any case, it is 

likely that a plan fiduciary will use the 

individual retirement plans of itself or 

an affiliate, or a proprietary product for 

these individual retirement plans only if 

it is financially beneficial to do so, for 

example, as a way to retain deposits and 

increase earnings. 

Paperwork Reduction Act 

The final exemption permits a 

fiduciary of a pension plan that is also 

the employer maintaining the plan to 

establish, on behalf of its separated 

employees, an individual retirement 

plan at a financial institution that is the 

employer or an affiliate, in connection 

with a Mandatory Distribution. Relief is 

also being provided for a plan fiduciary 

to select a proprietary product as the 

initial investment for such an individual 

retirement plan. Finally, relief is 

provided for the receipt of certain fees 

by the Individual Retirement Plan 

Provider. 

The exemption includes notice and 

recordkeeping requirements that are 

meant to inform separated employees 

and allow for verification by interested 

persons that the terms of the exemption 

have been met. Specifically, prior to an 

automatic rollover of a Mandatory 

Distribution, a plan fiduciary is required 

to notify a participant that the 

distribution may be rolled over into a 

proprietary investment selected by the 

plan fiduciary. Notification that a 

proprietary investment may be selected 

is to be provided in connection with a 

written explanation required under 

section 402(f) of the Code or in the 

plan’s summary plan description or 

summary of material modifications 

thereto. 

In the Department’s view, neither 

alternative will result in a measurable 

burden. The additional information 

required to be included to meet this 

condition, though important, would 

require only a minor alteration to an 

existing disclosure. The fiduciary would 

also retain flexibility under the 

exemption as to the most efficient 

method of conveying the required 

information. As such, no burden for 

plan fiduciaries is expected to arise 

from the notice requirement in the 

exemption. 

Similarly, because the records 

required to be maintained to enable 

verification of adherence to the 

conditions of the exemption would 

customarily be maintained as a part of 

usual business practices, this condition 

is not expected to impose a burden on 

Individual Retirement Plan Providers. 

Accordingly, the Department has 

made no submission to OMB for 

approval of an information collection 

request in connection with the proposed 

or final exemption. Although the 

Department requested comments on any 

potential impact within the terms of the 

Paperwork Reduction Act of the notice 

and recordkeeping requirements of the 

exemption, no comments were received. 

Discussion of Comments Received 

The Department received four 

comments in response to the notice of 

proposed exemption. Additionally, the 

Department received a number of 

comments in connection with the 

proposed Automatic Rollover 

Regulation. Interested persons should 

refer to the final Automatic Rollover 

Regulation, published in this issue of 

the Federal Register, for discussion of 

these comments.

With respect to the proposed 

exemption, one commenter stated that 

the definition of Eligible Investment 

Product should not be limited to money 

market funds because such investments 

might not keep pace with inflation. The 

commenter asserted that a better safe 

harbor investment would be any 

diversified fund that invests in a 

substantial number of stocks and/or 

bonds. Another commenter asked that 

the definition of Eligible Investment 

Product be revised to include alternative 

default portfolio allocations for the 

assets, similar to what is permitted by 

the Internal Revenue Service (IRS) for 

automatic enrollments (i.e., balanced 

funds). The same commenter suggested 

that the individual retirement plans 

should replicate the asset allocation that 

workers selected while in active 

employment. Upon consideration of the 

comments, the Department believes that 

given the nature and the amount of the 

automatic rollover, investments should 

be designed to minimize risk, preserve 

assets for retirement and maintain 

liquidity. Further, the Department does 

not believe that an investment strategy 

adopted by a participant while in a 

defined contribution plan would 

necessarily continue to be the 

appropriate strategy for the participant 

in the context of an automatic rollover, 

particularly given the small account 

balances covered under this exemption. 

Accordingly, the Department has 

determined not to modify the definition 

of ‘‘Eligible Investment Product.’’

One commenter on the proposed 

exemption requested that the dollar 

limit on accounts affected by the 

exemption be raised from $5,000 to 

$10,000, and that the $1,000 floor be 

Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Notices 57967

3For a further discussion of this issue, refer to the 

preamble to the final Automatic Rollover 

Regulation, published in this issue of the Federal 

Register.

4The Department notes that the term ‘‘Regulated 

Financial Institution’’ is defined in section IV(f) of 

the exemption and refers to the entity that can 

provide the initial investment product for the 

Mandatory Distribution. This term is separate from 

the term ‘‘Individual Retirement Plan Provider,’’

defined at section IV(d), which refers to the entity 

that may provide the individual retirement plan for 

the Mandatory Distribution.

eliminated. The Department has 

determined to eliminate the $1,000 floor 

but retain the $5,000 limit.3 In this 

regard, the Department has added a new 

section IV(i) to the exemption to define 

the term, ‘‘Mandatory Distribution,’’

which includes both an automatic 

rollover of a mandatory distribution 

described in section 401(a)(31)(B) of the 

Code and a mandatory distribution of 

one thousand dollars ($1,000) or less 

described in section 411(a)(11) of the 

Code.

Finally, a commenter asked that the 

Department address ‘‘whether a credit 

union, or other ‘Regulated Financial 

Institution’ * * * can establish 

[individual retirement plans] at its own 

institution in order to satisfy the 

automatic rollover requirement with 

respect to distributions from qualified 

plans which it maintains for its own 

employees.’’ The commenter also asked 

whether such credit union or 

‘‘Regulated Financial Institution’’ could 

charge fees in connection with the 

establishment and maintenance of such 

individual retirement plans. The 

Department notes that the exemption 

currently permits a fiduciary of a plan 

to designate itself or an affiliate to 

provide an individual retirement plan 

and to receive fees in connection with 

the establishment and maintenance of 

the individual retirement plan, if the 

conditions of the exemption are met. 

Accordingly, a credit union or other 

‘‘Regulated Financial Institution’’ may 

establish individual retirement plans for 

distributions from qualified plans it 

sponsors for its own employees, 

provided the credit union or ‘‘Regulated 

Financial Institution’’ meets the 

definition of Individual Retirement Plan 

Provider.4

The Department did not receive any 

comments on the proposed exemption 

regarding the amount of fees and 

expenses attendant to the individual 

retirement plan, including the 

investment of the assets thereof. 

However, the Department notes that 

such comments were received in 

connection with the parallel provisions 

of the proposed Automatic Rollover 

Regulation, and that the fee provisions 

of the final Automatic Rollover 

Regulation were revised in response to 

the commenters. Unlike the Automatic 

Rollover Regulation, the Department has 

determined to retain the condition of 

the exemption (section II(j)(2)) that 

limits fees and expenses other than 

establishment charges to the income 

earned by the individual retirement 

plan. The Department believes that the 

removal or modification of this 

requirement would increase the 

potential for self dealing. This situation 

presents potential violations of section 

406(b) of the Act for which the 

Department is not prepared to provide 

additional relief. However, in 

accordance with the modifications made 

to the Automatic Rollover Regulation, 

the Department has revised the language 

of section II(j)(1). In the proposal, this 

condition stated that the fees and 

expenses attendant to the individual 

retirement plan could not exceed fees 

and expenses charged by the Individual 

Retirement Plan Provider for 

comparable individual retirement plans 

established for eligible rollover 

distributions that are not subject to the 

automatic rollover provisions of section 

401(a)(31)(B) of the Code. As revised, 

the condition requires an Individual 

Retirement Plan Provider to charge fees 

and expenses that do not exceed the fees 

and expenses it charges to comparable 

individual retirement plans established 

for reasons other than the receipt of a 

Mandatory Distribution made pursuant 

to section 401(a)(31)(B) of the Code. The 

Department has made the same revision 

to similar language in conditions II(e) 

and II(g).

Description of the Exemption 

Section I of the exemption describes 

the transactions that are covered by the 

exemption. The plan fiduciary who 

provides the notice in section II(a) and 

meets the additional requirements 

described below would be able to be the 

Individual Retirement Plan Provider for 

its separated employees and to make an 

initial decision to invest the Mandatory 

Distribution in an investment product in 

which such plan fiduciary or its affiliate 

has an interest. Additionally, relief is 

provided for the receipt of fees by the 

Individual Retirement Plan Provider in 

connection with the establishment or 

maintenance of the individual 

retirement plan, and as a result of the 

investment of the Mandatory 

Distribution in an investment product in 

which the plan fiduciary or its affiliate 

has an interest. 

Under the exemption, a plan fiduciary 

must, in connection with the written 

explanation provided pursuant to 

section 402(f) of the Code or in the 

plan’s summary plan description or 

summary of material modifications 

thereto, notify the participant prior to 

the Mandatory Distribution that, absent 

his or her election, the Mandatory 

Distribution will be rolled over to an 

individual retirement plan provided by 

the plan fiduciary or an affiliate, and 

that the plan fiduciary may select its 

own proprietary investment as the 

initial investment of the Mandatory 

Distribution. In any case, the plan’s 

summary plan description or summary 

of material modifications thereto will 

describe the plan’s rollover provisions 

effectuating the requirements of sections 

401(a)(31)(B) and 411(a)(11) of the Code. 

The plan fiduciary must comply with 

the requirements of the Automatic 

Rollover Regulation. The term 

‘‘Automatic Rollover Regulation’’ refers 

to the regulation promulgated by the 

Department at 29 CFR 2550.404a–2, 

which is published elsewhere in this 

issue of the Federal Register. 

The plan fiduciary must be the 

employer, any of whose employees are 

covered by the plan from which the 

Mandatory Distribution is made, or an 

affiliate. 

Under the exemption, the individual 

retirement plan must be established and 

maintained for the exclusive benefit of 

the account holder of the individual 

retirement plan, his or her spouse or 

their beneficiaries. Under section IV(a) 

of the exemption, the term individual 

retirement plan is defined in section 

7701(a)(37) of the Code. Section 

7701(a)(37) defines individual 

retirement plan as an individual 

retirement account described in section 

408(a) of the Code and an individual 

retirement annuity described in section 

408(b) of the Code. For purposes of this 

exemption, the term individual 

retirement plan shall not include an 

individual retirement plan which is an 

employee benefit plan covered by Title 

I of ERISA. See 29 CFR 2510.3–2(d). 

The exemption requires that the terms 

of the individual retirement plan, 

including the fees and expenses for 

establishing and maintaining the 

individual retirement plan, be no less 

favorable than those available to 

comparable individual retirement plans 

established for reasons other than the 

receipt of a Mandatory Distribution 

made pursuant to section 401(a)(31)(B) 

of the Code. The exemption further 

requires that all fees and expenses not 

be in excess of reasonable compensation 

within the meaning of section 

4975(d)(2) of the Code. Corresponding 

service provider regulations under the 

Code provide guidance on the meaning 

of reasonable compensation under 

section 4975(d)(2). See 26 CFR 54.4975–

6.

57968 Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Notices 

Under the exemption, the individual 

retirement plan must be invested in an 

‘‘Eligible Investment Product.’’ Section 

IV(e) defines the term ‘‘Eligible 

Investment Product’’ to mean an 

investment product designed to 

preserve principal and provide a 

reasonable rate of return, whether or not 

such return is guaranteed, consistent 

with liquidity. For this purpose, the 

product must be offered by a Regulated 

Financial Institution and shall seek to 

maintain, over the term of the 

investment, the dollar value that is 

equal to the amount invested in the 

product by the individual retirement 

plan. Such term includes money market 

funds maintained by registered 

investment companies, and interestbearing savings accounts and certificates 

of deposit of a bank or a similar 

financial institution. In addition, the 

term includes ‘‘stable value products’’

issued by a financial institution that are 

fully benefit-responsive to the 

individual retirement plan account 

holder, i.e., that provide a liquidity 

guarantee by a financially responsible 

third party of principal and previously 

accrued interest for liquidations or 

transfers initiated by the individual 

retirement plan account holder 

exercising his or her right to withdraw 

or transfer funds under the terms of an 

arrangement that does not include 

substantial restrictions to the account 

holder’s access to the assets of the 

individual retirement plan. 

The exemption would not apply to 

the initial investment transaction 

entered into by an individual retirement 

plan unless the Eligible Investment 

Product is offered by a Regulated 

Financial Institution. A Regulated 

Financial Institution is defined under 

the exemption as an entity that: (i) Is 

subject to state or federal regulation, and 

(ii) is a bank or savings association, the 

deposits of which are insured by the 

Federal Deposit Insurance Corporation; 

a credit union, the member accounts of 

which are insured within the meaning 

of section 101(7) of the Federal Credit 

Union Act; an insurance company, the 

products of which are protected by state 

guaranty associations; or an investment 

company registered under the 

Investment Company Act of 1940. 

In addition, the exemption requires 

that the rate of return or the investment 

performance of the individual 

retirement plan investment(s) be no less 

favorable than the rate of return or 

investment performance of an identical 

investment that could have been made 

at the same time by a comparable 

individual retirement plan established 

for reasons other than the receipt of a 

Mandatory Distribution made pursuant 

to section 401(a)(31)(B) of the Code.

The exemption does not permit the 

individual retirement plan to pay a sales 

commission in connection with the 

acquisition of an Eligible Investment 

Product. 

Under the exemption, the individual 

retirement plan account holder must be 

able to, within a reasonable time after 

request and without penalty to the 

principal amount of the investment, 

transfer his individual retirement plan 

balance to a different investment offered 

by the Individual Retirement Plan 

Provider, or transfer his or her 

individual retirement plan balance to 

another individual retirement plan 

sponsored at a different financial 

institution. The Department wants to 

ensure that, once the account holder 

discovers that an individual retirement 

plan has been established on his or her 

behalf, he or she is able to make 

appropriate investment decisions with 

respect to the assets of the individual 

retirement plan or to change Individual 

Retirement Plan Providers without 

penalty. 

Section II(j) of the exemption limits 

the fees that may be paid by the 

individual retirement plan, as follows: 

(1) The fees and expenses attendant to 

the individual retirement plan, 

including the investment of the assets of 

such plan, (e.g., establishment charges, 

maintenance fees, investment expenses, 

termination costs, and surrender 

charges) shall not exceed the fees and 

expenses charged by the Individual 

Retirement Plan Provider for 

comparable individual retirement plans 

established for reasons other than the 

receipt of a Mandatory Distribution 

made pursuant to section 401(a)(31)(B) 

of the Code; (2) the fees and expenses, 

other than establishment charges, 

attendant to the individual retirement 

plan, may be charged only against the 

income earned by the individual 

retirement plan; and (3) the fees and 

expenses shall not exceed reasonable 

compensation within the meaning of 

section 4975(d)(2) of the Code. In this 

regard, an Individual Retirement Plan 

Provider who has not previously offered 

comparable individual retirement plans 

will not be able to satisfy condition 

II(j)(1) of the exemption. 

Lastly, the exemption contains a 

recordkeeping requirement. The 

Individual Retirement Plan Provider 

must maintain records to enable certain 

persons to determine whether the 

applicable conditions of the exemption 

have been met. The records must be 

available for examination by the IRS, the 

Department, and account holders and 

their beneficiaries for at least six years 

from the date of each automatic rollover. 

General Information

The attention of interested persons is 

directed to the following: 

(1) In accordance with section 408(a) 

of ERISA and section 4975(c)(2) of the 

Code, the Department finds that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries and 

protective of the rights of participants 

and beneficiaries of such plan; 

(2) The exemption is supplemental to, 

and not in derogation of, any other 

provisions of ERISA and the Code 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; 

(3) The exemption does not extend to 

transactions prohibited under section 

406(b)(3) of ERISA and section 

4975(c)(1)(F) of the Code; and 

(4) The class exemption is applicable 

to a particular transaction only if the 

transaction satisfies the conditions 

specified in the exemption. 

Exemption 

Accordingly, the following exemption 

is granted under the authority of section 

408(a) of ERISA and section 4975(c)(2) 

of the Code, and in accordance with the 

procedures set forth in 29 CFR part 

2570, subpart B (55 FR 32836, 32847, 

August 10, 1990). 

I. Transactions 

The restrictions of sections 

406(a)(1)(A) through (D), 406(b)(1) and 

406(b)(2) of the Act, and the taxes 

imposed by section 4975(a) and (b) of 

the Code, by reason of section 

4975(c)(1)(A) through (E) of the Code, 

shall not apply to (i) the fiduciary of an 

Employee Pension Benefit Plan (plan) 

using its authority to designate itself or 

an affiliate as Individual Retirement 

Plan Provider to receive a Mandatory 

Distribution, (ii) the initial investment 

of the Mandatory Distribution by the 

plan fiduciary in an investment product 

in which the plan fiduciary or its 

affiliate has an interest, (iii) the receipt 

of fees by the Individual Retirement 

Plan Provider in connection with the 

establishment or maintenance of the 

individual retirement plan, and (iv) the 

receipt of investment fees by the 

Individual Retirement Plan Provider or 

an affiliate as a result of the initial 

investment of the Mandatory 

Distribution in an investment product in 

which the plan fiduciary or an affiliate 

Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Notices 57969

has an interest, provided that the 

conditions set forth in sections II and III 

are satisfied. 

II. Conditions 

(a) In connection with the written 

explanation provided to the separating 

participant pursuant to section 402(f) of 

the Code, or in the plan’s summary plan 

description or summary of material 

modifications thereto, the plan fiduciary 

notifies the participant that, absent his 

or her election, the Mandatory 

Distribution will be rolled over to an 

individual retirement plan offered by 

the plan fiduciary or an affiliate, and 

that the plan fiduciary may select its 

own proprietary investment for the 

initial investment of the Mandatory 

Distribution. 

(b) The requirements of the Automatic 

Rollover Regulation are met. 

(c) The plan fiduciary is the employer 

any of whose employees are covered by 

the plan from which the Mandatory 

Distribution is made, or an affiliate.

(d) The individual retirement plan is 

established and maintained for the 

exclusive benefit of the individual 

retirement plan account holder, his or 

her spouse or their beneficiaries. 

(e) The terms of the individual 

retirement plan, including the fees and 

expenses for establishing and 

maintaining the individual retirement 

plan, are no less favorable than those 

available to comparable individual 

retirement plans established for reasons 

other than the receipt of a Mandatory 

Distribution made pursuant to section 

401(a)(31)(B) of the Code. 

(f) The Mandatory Distribution is 

invested in an Eligible Investment 

Product(s), as defined in section IV(e). 

(g) The rate of return or the 

investment performance of the 

individual retirement plan 

investment(s) is no less favorable than 

the rate of return or investment 

performance of an identical 

investment(s) that could have been 

made at the same time by comparable 

individual retirement plans established 

for reasons other than the receipt of a 

Mandatory Distribution made pursuant 

to section 401(a)(31)(B) of the Code. 

(h) The individual retirement plan 

does not pay a sales commission in 

connection with the acquisition of an 

Eligible Investment Product. 

(i) The individual retirement plan 

account holder may, within a reasonable 

period of time after his or her request 

and without penalty to the principal 

amount of the investment, transfer his 

individual retirement plan balance to a 

different investment offered by the 

Individual Retirement Plan Provider, or 

transfer his individual retirement plan 

balance to an individual retirement plan 

sponsored at a different financial 

institution. 

(j)(1) Fees and expenses attendant to 

the individual retirement plan, 

including the investment of the assets of 

such plan, (e.g., establishment charges, 

maintenance fees, investment expenses, 

termination costs, and surrender 

charges) shall not exceed the fees and 

expenses charged by the Individual 

Retirement Plan Provider for 

comparable individual retirement plans 

established for reasons other than the 

receipt of a Mandatory Distribution 

made pursuant to section 401(a)(31)(B) 

of the Code; 

(2) Fees and expenses attendant to the 

individual retirement plan, with the 

exception of establishment charges, may 

be charged only against the income 

earned by the individual retirement 

plan; and 

(3) Fees and expenses are not in 

excess of reasonable compensation 

within the meaning of section 

4975(d)(2) of the Code. 

(k) The present value of the 

nonforfeitable accrued benefit, as 

determined under section 411(a)(11) of 

the Code, does not exceed the maximum 

amount required to be rolled over under 

section 401(a)(31)(B) of the Code. 

III. Recordkeeping 

(a) The Individual Retirement Plan 

Provider maintains or causes to be 

maintained for a period of six (6) years 

from the date of each Mandatory 

Distribution the records necessary to 

enable the persons described in 

paragraph (b) of this section to 

determine whether the applicable 

conditions of this exemption have been 

met. Such records must be readily 

available to assure accessibility by the 

persons identified in paragraph (b) of 

this section.

(b) Notwithstanding any provisions of 

section 504(a)(2) and (b) of the Act, the 

records referred to in paragraph (a) of 

this section are unconditionally 

available at their customary location for 

examination during normal business 

hours by—

(1) Any duly authorized employee or 

representative of the Department of 

Labor or the Internal Revenue Service; 

and 

(2) Any account holder of an 

individual retirement plan established 

pursuant to this exemption, or any duly 

authorized representative of such 

account holder. 

(c) A prohibited transaction will not 

be considered to have occurred if, due 

to circumstances beyond the control of 

the Individual Retirement Plan 

Provider, the records are lost or 

destroyed prior to the end of the sixyear period, and no party in interest 

other than the Individual Retirement 

Plan Provider shall be subject to the 

civil penalty that may be assessed under 

section 502(i) of ERISA or to the taxes 

imposed by sections 4975(a) and (b) of 

the Code if the records are not 

maintained or are not available for 

examination as required by paragraph 

(b). 

IV. Definitions 

(a) The term ‘‘individual retirement 

plan’’ means an individual retirement 

plan described in section 7701(a)(37) of 

the Code. For purposes of this 

exemption, the term individual 

retirement plan shall not include an 

individual retirement plan which is an 

employee benefit plan covered by Title 

I of ERISA. 

(b) The term ‘‘Employee Pension 

Benefit Plan’’ refers to an employee 

pension benefit plan defined in ERISA 

section 3(2)(A). 

(c) The term ‘‘Automatic Rollover 

Regulation’’ refers to the regulation 

promulgated by the Department at 29 

CFR 2550.404a–2. 

(d) The term ‘‘Individual Retirement 

Plan Provider’’ means an entity that is 

eligible to serve as an individual 

retirement account trustee under section 

408(a)(2) of the Code, or for purposes of 

an individual retirement annuity 

described in section 408(b) of the Code, 

an insurance company which is 

qualified to do business under the law 

of the jurisdiction in which the annuity 

contract, or endowment contract 

(described in 26 CFR 1.408–3(e)), is 

sold. 

(e) The term ‘‘Eligible Investment 

Product’’ means an investment product 

designed to preserve principal and 

provide a reasonable rate of return, 

whether or not such return is 

guaranteed, consistent with liquidity. 

For this purpose, the product must be 

offered by a Regulated Financial 

Institution and shall seek to maintain, 

over the term of the investment, the 

dollar value that is equal to the amount 

invested in the product by the 

individual retirement plan. Such term 

includes money market funds 

maintained by registered investment 

companies, and interest-bearing savings 

accounts and certificates of deposit of a 

bank or similar financial institution. In 

addition, the term includes ‘‘stable 

value products’’ issued by a financial 

institution that are fully benefitresponsive to the individual retirement 

plan account holder, i.e., that provide a 

liquidity guarantee by a financially 

responsible third party of principal and 

previously accrued interest for 

57970 Federal Register / Vol. 69, No. 187 / Tuesday, September 28, 2004 / Notices 

liquidations or transfers initiated by the 

individual retirement plan account 

holder exercising his or her right to 

withdraw or transfer funds under the 

terms of an arrangement that does not 

include substantial restrictions to the 

account holder’s access to the 

individual retirement plan’s assets. 

(f) The term ‘‘Regulated Financial 

Institution’’ means an entity that: (i) Is 

subject to state or federal regulation, and 

(ii) is a bank or savings association, the 

deposits of which are insured by the 

Federal Deposit Insurance Corporation; 

a credit union, the member accounts of 

which are insured within the meaning 

of section 101(7) of the Federal Credit 

Union Act; an insurance company, the 

products of which are protected by state 

guaranty associations; or an investment 

company registered under the 

Investment Company Act of 1940.

(g) An ‘‘affiliate’’ of a person includes: 

(1) Any person directly or indirectly 

controlling, controlled by, or under 

common control with, the person; or 

(2) Any officer, director, partner or 

employee of the person; 

(h) The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(i) The term ‘‘Mandatory Distribution’’

means the automatic rollover of a 

mandatory distribution described in 

section 401(a)(31)(B) of the Code, or a 

mandatory distribution of one thousand 

dollars ($1,000) or less described in 

section 411(a)(11) of the Code provided 

there is no affirmative distribution 

election by the participant.

Signed at Washington, DC, this 20th day of 

September, 2004. 

Ivan L. Strasfeld, 

Director, Office of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor.

[FR Doc. 04–21592 Filed 9–27–04; 8:45 am] 

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Employment and Training 

Administration 

Solicitation for Grant Applications 

(SGA); High-Growth Job Training 

Initiative Grants Correction

AGENCY: Employment and Training 

Administration (ETA), Labor.

ACTION: Notice; correction.

SUMMARY: The Employment and 

Training Administration published a 

document in the Federal Register of 

September 17, 2004, concerning the 

availability of grant funds for address 

labor shortages, innovative training 

strategies, and other workforce 

challenges in the healthcare and 

biotechnology industries. The document 

contained incorrect application 

requirements.

FOR FURTHER INFORMATION CONTACT:

Kevin Brumback, Grants Management 

Specialist, Division of Federal 

Assistance, Fax (202) 693–2879. 

Corrections 

In the Federal Register of September 

17, 2004, in FR Volume 69, Number 

180: 

• On page 56087, in the third column, 

remove ‘‘• Assurances and 

Certifications Signature Page (Appendix 

C).’’

• On page 56091, in the third column, 

add ‘‘Appendix E: OMB N. 0348–0046: 

Disclosure of Lobbying Activities. This 

form will be required upon selection for 

award.’’

• On page 56087, in the second 

column, is corrected to add: The Budget 

Information Form (Appendix B): ‘‘If 

applying through grants.gov the Budget 

information Form is to be added as an 

attachment to the application. This form 

can be found on http://www.doleta.gov/

sga/sga.cfm.’’

Dated: September 22, 2004.

Signed at Washington, DC, this 22nd day 

of September, 2004. 

Eric D. Luetkenhaus, 

Grant Officer.

BILLING CODE 4510–30–P