Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 22021 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2550 

[Application Number D–11327] 

ZRIN 1210–ZA25 

Proposed Amendment to and 

Proposed Partial Revocation of 

Prohibited Transaction Exemption 

(PTE) 86–128 for Securities 

Transactions Involving Employee 

Benefit Plans and Broker-Dealers; 

Proposed Amendment to and 

Proposed Partial Revocation of PTE 

75–1, Exemptions From Prohibitions 

Respecting Certain Classes of 

Transactions Involving Employee 

Benefits Plans and Certain BrokerDealers, Reporting Dealers and Banks 

AGENCY: Employee Benefits Security 

Administration (EBSA), Department of 

Labor. 

ACTION: Notice of proposed amendments 

to and proposed partial revocation of 

PTEs 86–128 and 75–1. 

SUMMARY: This document contains a 

notice of pendency before the 

Department of Labor of proposed 

amendments to Prohibited Transaction 

Exemptions (PTEs) 86–128 and 75–1, 

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 ERISA and Code 

provisions at issue generally prohibit 

fiduciaries with respect to employee 

benefit plans and individual retirement 

accounts (IRAs) from engaging in selfdealing in connection with transactions 

involving plans and IRAs. The 

exemptions allow fiduciaries to receive 

compensation in connection with 

certain securities transactions entered 

into by plans and IRAs. The proposed 

amendments would increase the 

safeguards of the exemptions. This 

document also contains a notice of 

pendency before the Department of the 

proposed revocation of PTE 86–128 

with respect to transactions involving 

investment advice fiduciaries and IRAs, 

and of PTE 75–1, Part II(2), and PTE 75– 

1, Parts I(b) and I(c), as duplicative in 

light of existing or newly proposed 

relief. The amendments and revocations 

would affect participants and 

beneficiaries of plans, IRA owners and 

certain fiduciaries of plans and IRAs. 

DATES:

Comments: Written comments must 

be received by the Department on or 

before July 6, 2015. 

Applicability: The Department 

proposes to make this amendment and 

partial revocation applicable eight 

months after the publication of the final 

amendment and partial revocation in 

the Federal Register. 

ADDRESSES: All written comments 

concerning the proposed amendments 

to the class exemptions should be sent 

to the Office of Exemption 

Determinations by any of the following 

methods, identified by ZRIN: 1210– 

ZA25. 

Federal eRulemaking Portal: http://

www.regulations.gov at Docket ID 

number: EBSA–2014–0016. Follow the 

instructions for submitting comments. 

Email to: e-OED@dol.gov. 

Fax to: (202) 693–8474. 

Mail: Office of Exemption 

Determinations, Employee Benefits 

Security Administration, (Attention: 

D–11327), U.S. Department of Labor, 

200 Constitution Avenue NW., Suite 

400, Washington, DC 20210. 

Hand Delivery/Courier: Office of 

Exemption Determinations, Employee 

Benefits Security Administration, 

(Attention: D–11327), U.S. Department 

of Labor, 122 C St. NW., Suite 400, 

Washington, DC 20001. 

Instructions. All comments must be 

received by the end of the comment 

period. The comments received will be 

available for public inspection in the 

Public Disclosure Room of the 

Employee Benefits Security 

Administration, U.S. Department of 

Labor, Room N–1513, 200 Constitution 

Avenue NW., Washington, DC 20210. 

Comments will also be available online 

at www.regulations.gov, at Docket ID 

number: EBSA–2014–0016 and 

www.dol.gov/ebsa, at no charge. 

Warning: All comments will be made 

available to the public. Do not include 

any personally identifiable information 

(such as Social Security number, name, 

address, or other contact information) or 

confidential business information that 

you do not want publicly disclosed. All 

comments may be posted on the Internet 

and can be retrieved by most Internet 

search engines. 

FOR FURTHER INFORMATION CONTACT: 

Brian Shiker, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Suite 400, Washington, 

DC 20210, (202) 693–8824 (not a tollfree number). 

SUPPLEMENTARY INFORMATION: The 

Department is proposing the 

amendments to and partial revocation of 

PTEs 86–128 and 75–1 on its own 

motion, pursuant to 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)). 

Public Hearing: The Department plans 

to hold an administrative hearing within 

30 days of the close of the comment 

period. The Department will ensure 

ample opportunity for public comment 

by reopening the record following the 

hearing and publication of the hearing 

transcript. Specific information 

regarding the date, location and 

submission of requests to testify will be 

published in a notice in the Federal 

Register. 

Executive Summary 

Purpose of Regulatory Action 

These proposed amendments and 

revocations are being published in the 

same issue of the Federal Register as the 

Department’s proposed regulation that 

would amend the definition of a 

‘‘fiduciary’’ of an employee benefit plan 

or an IRA under ERISA and the Internal 

Revenue Code (Proposed Regulation). 

The Proposed Regulation specifies when 

an entity is a fiduciary by reason of the 

provision of investment advice for a fee 

or other compensation regarding assets 

of a plan or IRA. If adopted, the 

Proposed Regulation would replace an 

existing regulation that was adopted in 

1975. The Proposed Regulation is 

intended to take into account the advent 

of 401(k) plans and IRAs, the dramatic 

increase in rollovers, and other 

developments that have transformed the 

retirement plan landscape and the 

associated investment market over the 

four decades since the existing 

regulation was issued. In light of the 

extensive changes in retirement 

investment practices and relationships, 

the Proposed Regulation would update 

existing rules to distinguish more 

appropriately between the sorts of 

advice relationships that should be 

treated as fiduciary in nature and those 

that should not. 

PTEs 86–128 and 75–1, Part II(2), 

permit fiduciaries to receive fees in 

connection with certain securities 

transactions entered into by plans and 

IRAs in accordance with the fiduciaries’ 

advice. In the absence of an exemption, 

ERISA and the Code generally prohibit 

fiduciaries from using their authority to 

affect or increase their own 

compensation. These proposed 

amendments would affect the scope of 

the exemptions and conditions under 

which fiduciaries may receive such 

compensation. 

The Secretary of Labor may grant and 

amend administrative exemptions from 

the prohibited transaction provisions of 

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22022 Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 

1Regulations at 29 CFR 2570.30 to 2570.52 

describe the procedures for applying for an 

administrative exemption under ERISA. Code 

section 4975(c)(2) authorizes the Secretary of the 

Treasury to grant exemptions from the parallel 

prohibited transaction provisions of the Code. 

Reorganization Plan No. 4 of 1978 (5 U.S.C. app. at 

214 (2000)) generally transferred the authority of 

the Secretary of the Treasury to issue administrative 

exemptions under Code section 4975 to the 

Secretary of Labor. 2ERISA section 404(a). 

ERISA and the Code.1 Before granting 

an amendment to an exemption, the 

Department must find that the amended 

exemption is administratively feasible, 

in the interests of plans, their 

participants and beneficiaries and IRA 

owners, and protective of the rights of 

participants and beneficiaries of such 

plans and IRA owners. Interested parties 

are permitted to submit comments to the 

Department through July 6, 2015. The 

Department plans to hold an 

administrative hearing within 30 days of 

the close of the comment period. 

Summary of the Major Provisions 

PTE 86–128 currently provides an 

exemption for certain fiduciaries and 

their affiliates to receive a fee from a 

plan or IRA for effecting or executing 

securities transactions as an agent on 

behalf of the plan or IRA. It also allows 

a fiduciary to act in an ‘‘agency cross 

transaction’’—as an agent both for the 

plan or IRA and for another party—and 

receive reasonable compensation from 

the other party. The exemption 

generally requires compliance with 

certain conditions such as advance 

disclosures to and approval by an 

independent fiduciary, although such 

conditions are not currently applicable 

to transactions involving IRAs. 

This proposed amendment to PTE 86– 

128 would increase the safeguards of the 

exemption in a number of ways. The 

amendment would require fiduciaries 

relying on the exemption to adhere to 

certain ‘‘Impartial Conduct Standards,’’ 

including acting in the best interest of 

the plans and IRAs when providing 

advice, and would define the types of 

payments that are permitted under the 

exemption. The amendment would 

restrict relief under this exemption to 

IRA fiduciaries that have discretionary 

authority or control over the 

management of the IRA’s assets (i.e., 

investment managers) and would take 

the additional step of imposing the 

exemption’s conditions on investment 

management fiduciaries when they 

engage in transactions with IRAs. The 

proposal would revoke relief for 

fiduciaries who provide investment 

advice to IRAs. A new exemption for 

receipt of compensation by fiduciaries 

who provide investment advice to IRAs, 

plan participants, and certain small 

plans is proposed elsewhere in this 

issue of the Federal Register in the 

‘‘Best Interest Contract Exemption.’’ In 

the Department’s view, the provisions of 

the Best Interest Contract Exemption 

better protect the interests of IRAs with 

respect to investment advice regarding 

securities transactions. 

This proposed amendment also would 

add a new transaction to the exemption 

for certain fiduciaries to act as 

principals (as opposed to agents for 

third parties) in selling mutual fund 

shares to plans and IRAs and to receive 

commissions for doing so. An 

exemption for this transaction is 

currently available in PTE 75–1, Part 

II(2), with few applicable safeguards. 

Several changes are proposed with 

respect to PTE 75–1. The Department is 

proposing to revoke PTE 75–1, Part II(2), 

as that exemption would be 

incorporated within PTE 86–128 subject 

to additional safeguards. Part I(b) and (c) 

of PTE 75–1 also would be revoked. 

These provisions of PTE 75–1 provide 

relief for certain non-fiduciary services 

to plans and IRAs. If these provisions 

are revoked, persons seeking to engage 

in such transactions should look to the 

existing statutory exemptions provided 

in ERISA section 408(b)(2) and Code 

section 4975(d)(2), and the Department’s 

implementing regulations at 29 CFR 

2550.408b-2, for relief. 

Finally, this document proposes to 

amend the remaining exemption of PTE 

75–1, Part II, to revise the recordkeeping 

requirement of that exemption. 

Executive Order 12866 and 13563 

Statement 

Under Executive Orders 12866 and 

13563, the Department must determine 

whether a 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). 

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 both costs and benefits, of 

reducing costs, of harmonizing and 

streamlining rules, and of promoting 

flexibility. It also requires federal 

agencies to develop a plan under which 

the agencies will periodically review 

their existing significant regulations to 

make the agencies’ regulatory programs 

more effective or less burdensome in 

achieving their regulatory objectives. 

Under Executive Order 12866, 

‘‘significant’’ regulatory actions are 

subject to the requirements of the 

Executive Order and review by the 

Office of Management and Budget 

(OMB). Section 3(f) of Executive Order 

12866, 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’’ regulatory 

actions); (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, OMB has determined 

that this action is ‘‘significant’’ within 

the meaning of Section 3(f)(4) of the 

Executive Order. Accordingly, the 

Department has undertaken an 

assessment of the costs and benefits of 

the proposed amendment, and OMB has 

reviewed this regulatory action. 

Background 

As explained more fully in the 

preamble to the Department’s proposed 

regulation on the definition of fiduciary 

under ERISA section 3(21)(A)(ii) and 

Code section 4975(e)(3)(B), also 

published in this issue of the Federal 

Register, ERISA is a comprehensive 

statute designed to protect the interests 

of plan participants and beneficiaries, 

the integrity of employee benefit plans, 

and the security of retirement, health, 

and other critical benefits. The broad 

public interest in ERISA-covered plans 

is reflected in its imposition of stringent 

fiduciary responsibilities on parties 

engaging in important plan activities, as 

well as in the tax-favored status of plan 

assets and investments. One of the chief 

ways in which ERISA protects employee 

benefit plans is by requiring that plan 

fiduciaries comply with fundamental 

obligations rooted in the law of trusts. 

In particular, plan fiduciaries must 

manage plan assets prudently and with 

undivided loyalty to the plans and their 

participants and beneficiaries.2 In 

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Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 22023 

3ERISA section 406. ERISA also prohibits certain 

transactions between a plan and a ‘‘party in 

interest.’’ 

4ERISA section 409; see also ERISA section 405. 

5PTE 86–128, 51 FR 41686 (November 18, 1986), 

replaced PTE 79–1, 44 FR 5963 (January 30, 1979) 

and PTE 84–46, 49 FR 22157 (May 25, 1984). 

6Plan trustees, plan administrators and 

employers were permitted to rely on the exemption 

if they returned or credited to the plan all profits 

(recapture of profits) earned in connection with the 

transactions covered by the exemption. 

7 67 FR 64137 (October 17, 2002). 

8See Advisory Opinion 2011–08A (June 21, 

2011). 

9This proposal would move the definitions from 

Section I to Section VII. The other sections are reordered accordingly. Additionally, within the 

definitions section, the following definitions are 

new or revised: Independent (Section VII(f)), plan 

(Section VII(j)), individual retirement account 

(Section VII(k)), Related Entity (Section VII(l)), Best 

Interest (Section VII(m)), and Commission (VII(n)). 

10These statutory exemptions provide relief for 

making reasonable arrangements between a plan 

and a party in interest (disqualified person) for, 

among other things, services necessary for operation 

of the plan, if no more than reasonable 

compensation is paid therefore. ERISA section 

408(b)(2) and Code section 4975(d)(2) do not 

provide relief from ERISA section 406(b) or Code 

section 4975(c)(1)(E) and (F). 

addition, they must refrain from 

engaging in ‘‘prohibited transactions,’’ 

which ERISA forbids because of the 

dangers posed by the fiduciaries’ 

conflicts of interest with respect to the 

transactions.3 When fiduciaries violate 

ERISA’s fiduciary duties or the 

prohibited transaction rules, they may 

be held personally liable for the breach.4

In addition, violations of the prohibited 

transaction rules are subject to excise 

taxes under the Code. 

The Code also has rules regarding 

fiduciary conduct with respect to taxfavored accounts that are not generally 

covered by ERISA, such as IRAs. 

Although ERISA’s general fiduciary 

obligations of prudence and loyalty do 

not govern the fiduciaries of IRAs, these 

fiduciaries are subject to the prohibited 

transaction rules. In this context 

fiduciaries engaging in the illegal 

transactions are subject to an excise tax 

enforced by the Internal Revenue 

Service. Unlike participants in plans 

covered by Title I of ERISA, under the 

Code, IRA owners cannot bring suit 

against fiduciaries under ERISA for 

violation of the prohibited transaction 

rules and fiduciaries are not personally 

liable to IRA owners for the losses 

caused by their misconduct. Elsewhere 

in this issue of the Federal Register, 

however, the Department is proposing 

two new class exemptions that would 

create contractual obligations for the 

adviser to adhere to certain standards 

(the Impartial Conduct Standards). IRA 

owners would have a right to enforce 

these new contractual rights. 

Under this statutory framework, the 

determination of who is a ‘‘fiduciary’’ is 

of central importance. Many of ERISA’s 

protections, duties, and liabilities hinge 

on fiduciary status. In relevant part, 

section 3(21)(A) of ERISA and section 

4975(e)(3) of the Code provide that a 

person is a fiduciary with respect to a 

plan or IRA to the extent he or she (1) 

exercises any discretionary authority or 

discretionary control with respect to 

management of such plan or IRA, or 

exercises any authority or control with 

respect to management or disposition of 

its assets; (2) renders investment advice 

for a fee or other compensation, direct 

or indirect, with respect to any moneys 

or other property of such plan or IRA, 

or has any authority or responsibility to 

do so; or, (3) has any discretionary 

authority or discretionary responsibility 

in the administration of such plan or 

IRA. 

ERISA section 406(b)(1) and Code 

section 4975(c)(1)(E) prohibit a fiduciary 

from dealing with the income or assets 

of a plan or IRA in his or her own 

interest or his or her own account. 

Parallel regulations issued by the 

Departments of Labor and the Treasury 

explain that these provisions impose on 

fiduciaries of plans and IRAs a duty not 

to act on conflicts of interest that may 

affect the fiduciary’s best judgment on 

behalf of the plan or IRA. Accordingly, 

a fiduciary may not cause a plan or IRA 

to pay an additional fee to such 

fiduciary, or to a person in which such 

fiduciary has an interest that may affect 

the exercise of the fiduciary’s best 

judgment as a fiduciary. 

The Department understands that 

investment professionals are often 

compensated on a commission basis for 

effecting or executing securities 

transactions for plans, plan participants, 

and IRA owners. Because such 

payments vary based on the advice 

provided, the Department views a 

fiduciary that recommends to a plan or 

IRA a securities transaction and then 

receives a commission for itself or a 

related party as violating the prohibited 

transaction provisions of ERISA section 

406(b) and Code section 4975(c)(1)(E). 

PTE 86–128 5 provides an exemption 

from these prohibited transactions 

provisions 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. 

As originally granted, the exemption 

in PTE 86–128 could be used only by 

fiduciaries who were not discretionary 

trustees, plan administrators, or 

employers of any employees covered by 

the plan.6 PTE 86–128 was amended in 

2002 to permit use of the exemption by 

discretionary trustees, and their 

affiliates, without meeting the 

‘‘recapture of profits’’ provisions, 

subject to certain additional 

requirements.7 Additionally, in 2011 the 

Department clarified that PTE 86–128 

provides relief for covered transactions 

engaged in by fiduciaries who provide 

investment advice.8

If granted, this proposed amendment 

would make additional changes, 

discussed below, to PTE 86–128, as well 

as a re-ordering of the sections of the 

exemption.9 The Department notes that 

the relief provided under PTE 86–128 is 

limited to ERISA section 406(b) and 

Code section 4975(c)(1)(E) and (F), for 

self-dealing and other conflict of interest 

transactions involving fiduciaries. Relief 

from the prohibitions of ERISA section 

406(a)(1)(C) or Code section 

4975(c)(1)(C), for the provision of 

services to a plan, would be available 

only by meeting the requirements of the 

statutory exemptions of ERISA section 

408(b)(2) and Code section 4975(d)(2) 

and the Department’s regulations in 29 

CFR 2550.408b–2.10

Description of the Proposed 

Amendments 

I. Impartial Conduct Standards 

This proposal would amend PTE 86– 

128 to require fiduciaries engaging in 

the exempted transactions to adhere to 

certain Impartial Conduct Standards. 

The Impartial Conduct Standards are set 

forth in a new proposed Section II. The 

standards would only be applicable to 

the extent they are applicable to the 

fiduciary’s actions. 

Under the first conduct standard, 

fiduciaries would be required to act in 

the plan’s or IRA’s best interest when 

providing investment advice to the plan 

or IRA, or managing the plan’s or IRA’s 

assets. Best interest is defined as acting 

with the care, skill, prudence, and 

diligence under the circumstances then 

prevailing that a prudent person would 

exercise based on the investment 

objectives, risk tolerance, financial 

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22024 Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 

11See preamble to PTE 79–1, 44 FR 5963, 5964 

(Jan. 30, 1979). 12 40 FR 50845 (Oct. 31, 1975). 

circumstances, and the needs of the 

plan or IRA. Further, under the best 

interest standard, fiduciaries must act 

without regard to their own financial or 

other interests or those of any affiliates 

or other party. Under this standard, 

fiduciaries must put the plan’s or IRA’s 

interests ahead of the fiduciaries’ own 

financial interests or those of any other 

party. 

In this regard, the Department notes 

that while fiduciaries of plans covered 

by ERISA are subject to the ERISA 

section 404 standards of prudence and 

loyalty, the Code contains no provisions 

that hold IRA fiduciaries to those 

standards. However, as a condition of 

relief under the proposed exemption, 

both IRA and plan fiduciaries would 

have to agree to, and uphold, the best 

interest requirement that is set forth in 

Section II(a). The best interest standard 

is defined to effectively mirror the 

ERISA section 404 duties of prudence 

and loyalty, as applied in the context of 

fiduciary investment advice. Failure to 

satisfy the best interest standard would 

render the exemption unavailable to the 

fiduciary with respect to compensation 

received in connection with the 

transaction. 

The second conduct standard requires 

that all compensation received by the 

fiduciary and its affiliates in connection 

with the applicable transaction be 

reasonable in relation to the total 

services provided to the plan or IRA. 

The third conduct standard requires that 

statements about recommended 

investments, fees, material conflicts of 

interest, and any other matters relevant 

to a plan’s or IRA’s investment 

decisions, are not misleading. The 

Department notes in this regard that a 

fiduciary’s failure to disclose a material 

conflict of interest may be considered a 

misleading statement. Transactions that 

violate the requirements are not likely to 

be in the interests of or protective of 

plans, their participants and 

beneficiaries, and IRA owners. 

Unlike the new exemption proposals 

published elsewhere in the Federal 

Register, these proposed amendments 

do not require fiduciaries to 

contractually warrant compliance with 

applicable federal and state laws. 

However, the Department notes that 

significant violations of applicable 

federal or state law could also amount 

to violations of the Impartial Conduct 

Standards, such as the best interest 

standard, in which case, these 

exemptions, as amended, would be 

deemed unavailable for transactions 

occurring in connection with such 

violations. 

II. IRAs 

Currently, Section IV(a) of PTE 86– 

128 contains an exception from the 

conditions of the exemption for covered 

transactions engaged in on behalf of 

individual retirement accounts 

described in 29 CFR 2510.3–2(d) (IRAs), 

and plans, other than training programs, 

that cover no employees within the 

meaning of 29 CFR 2510.3–3. The 

exception was included in response to 

comments received on the original 

proposal of PTE 86–128’s predecessor, 

PTE 79–1, suggesting that such plans 

and IRAs did not need the protection 

provided by the conditions of the 

exemption because the participants of 

such plans and IRAs directly exercise 

control over their accounts. 

Additionally, the comments suggested 

that imposing the conditions on these 

plans and IRAs would result in 

unnecessary costs.11

Upon reconsideration of the issue, 

however, the Department has 

determined that these policy reasons do 

not support a continued exception from 

the conditions of PTE 86–128 for IRAs. 

Since PTE 86–128 was granted, the 

amount of assets held in IRAs has grown 

dramatically. The financial services 

marketplace has become more complex, 

and compensation structures and the 

types of products offered have changed 

significantly beyond what the 

Department contemplated at the time. 

The fact that IRA owners generally do 

not benefit from the protections afforded 

by the fiduciary duties owed by plan 

sponsors to their employee benefit plans 

makes it all the more critical that 

appropriate safeguards in an exemption 

apply to IRAs. 

The Department therefore is 

proposing to revise the exemption in 

several ways with respect to 

transactions involving IRAs. First, if the 

amendment is adopted, fiduciaries that 

exercise discretionary authority or 

control with respect to IRAs as 

described in Code section 4975(e)(3)(A) 

(i.e., investment managers) will be 

required, among other things, to make 

the disclosures and receive approvals 

that are currently required by the 

exemption with respect to other types of 

plans. The Department believes that 

compliance with these conditions will 

enhance the ability of the authorizing 

fiduciary, which, in the case of an IRA 

would be the IRA owner, to monitor fees 

and compensation paid in connection 

with their accounts. 

Further, if the amendment is adopted, 

the exemption will no longer provide 

relief to IRA fiduciaries engaging in the 

covered transactions if they are 

fiduciaries due to the provision of 

investment advice for a fee as described 

in Code section 4975(e)(3)(B). This 

change is reflected in a proposed new 

Section I(c), setting forth the scope of 

the exemption, which will apply on a 

prospective basis. Elsewhere in this 

issue of the Federal Register, the 

Department has proposed a new 

exemption that specifically provides 

relief for the receipt by such fiduciaries 

of a broad range of types of 

compensation (Best Interest Contract 

Exemption). The Best Interest Contract 

Exemption was crafted to protect the 

interests of retail retirement investors— 

plan participants and beneficiaries, IRA 

owners and small plan sponsors—that 

rely on fiduciary investment advisers to 

engage in securities transactions, and it 

contains safeguards specifically crafted 

for these investors. The exemption 

requires the investment advice fiduciary 

to contractually acknowledge fiduciary 

status, commit to adhere to basic 

standards of impartial conduct, adopt 

policies and procedures reasonably 

designed to minimize the harmful 

impact of conflicts of interest, and 

disclose basic information on their 

conflicts of interest and on the cost of 

their advice. As a result, the exemption 

ensures that IRA owners have a 

contract-based claim to hold their 

fiduciary investment advisers 

accountable if they violate basic 

obligations of prudence and loyalty. 

The proposed definition of IRA in 

Section I(c) is ‘‘any trust, 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.’’ The Department notes that this 

is not identical to the definition 

currently in Section IV(a), the exception 

for IRAs, which is ‘‘individual 

retirement accounts meeting the 

conditions of 29 CFR 2510.3–2(d), or 

plans, other than training programs, that 

cover no employees within the meaning 

of 29 CFR 2510.3–3.’’ However, this new 

definition is identical to the definition 

of IRA used in the proposed Best 

Interest Contract Exemption. 

Accordingly, the Best Interest Contract 

Exemption will be available for 

transactions involving IRAs that are 

excluded from this exemption. 

III. The Mutual Fund Exemption of PTE 

75–1, Part II 

PTE 75–1, granted October 31, 1975,12

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Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 22025 

13 71 FR 5883 (Feb. 3, 2006). 

14 69 FR 23216 (April 28, 2004). 

15Although PTE 75–1, Part II, is silent on the 

payment of commissions, the commenters point to 

the preamble to the proposal of PTE 77–9 (41 FR 

56760, December 29, 1976)(final exemption 

superseded by PTE 84–24, 49 FR 13208, April 3, 

1984, as amended, 71 FR 5887, February 3, 2006) 

which states that PTE 75–1, Part II, covers ‘‘the 

purchase and sale of mutual fund shares by a plan 

from or to a broker-dealer which is a plan fiduciary, 

provided that such broker-dealer is not a principal 

underwriter for, or affiliated with, such mutual 

fund, and the receipt of commissions by such 

fiduciary/broker-dealer in connection with the 

purchase of mutual fund shares by plans.’’ 

16 71 FR 5883, 5885 (Feb. 3, 2006). 

17Section I(b) would provide relief from the 

restrictions of ERISA section 406(a)(1)(A) and (D) 

and 406(b) and the taxes imposed by Code section 

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

4975(c)(1)(A), (D), (E) and (F). The proposed new 

covered transaction, as a principal transaction, 

involves the purchase and sale of shares between 

a plan and a party in interest, and the transfer of 

a plan asset to a party in interest, which would 

violate the cited provisions of ERISA section 406(a) 

and Code section 4975(c)(1)(A) and (D) in the 

absence of an exemption. 

dealers, reporting dealers and banks to 

engage in certain classes of transactions 

with employee benefit plans and IRAs. 

The exemption has five parts, two of 

which (Part II and Part V) were 

amended in 2006.13

Part II of PTE 75–1 is captioned 

‘‘Principal transactions.’’ Part II(1) of the 

exemption 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. 

PTE 75–1, 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 

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. 

In 2004, when proposing to amend 

Part II of PTE 75–1,14 the Department 

sought public comments on the current 

utility of the mutual fund exemption. 

The Department was uncertain if the 

mutual fund exemption continued to 

provide meaningful relief to fiduciaries, 

insofar as many sales of mutual fund 

shares are made to and from the mutual 

fund itself. It was the Department’s 

understanding that any broker-dealer 

involvement in these mutual fund 

transactions was as agent on behalf of a 

plan or IRA. Under such circumstances, 

the transactions would not appear to be 

properly characterized as ‘‘principal’’ 

transactions. 

The Department received three 

comments on the continuing utility of 

the mutual fund exemption. The 

commenters stated that the mutual fund 

exemption continued to be widely used 

by the public. As background, the 

commenters noted that mutual fund 

transactions had some characteristics of 

principal transactions as well as agency 

transactions. In 1975, when the mutual 

fund exemption was originally granted, 

mutual funds typically entered into 

distribution agreements with principal 

underwriters, and the underwriters in 

turn entered into selling agreements 

designated as ‘‘dealer’’ agreements, with 

retail broker-dealers. However, sales of 

mutual funds under these dealer 

agreements exhibited many of the 

economic characteristics of agency 

transactions. For example, commenters 

stated that the selling broker-dealer was 

not at risk because it could not 

inventory mutual fund shares. 

Additionally, as mutual funds were 

required to be sold at net asset value 

(NAV), the broker-dealer usually 

received a fixed sales commission for 

effecting the transaction, rather than a 

negotiable dealer mark-up. 

These commenters indicated that 

these features were still commonplace 

in mutual fund transactions. 

Additionally, the commenters indicated 

that this exemption was commonly 

understood to provide relief for the 

receipt of commissions by such brokerdealer fiduciaries in connection with 

the transactions.15 In issuing the final 

amendment to PTE 75–1, Part II, the 

Department acknowledged these 

comments and stated that additional 

time was needed to fully consider the 

issues raised in these comments. 

Pending further action by the 

Department, the mutual fund exemption 

has remained in effect.16

After further consideration of these 

comments, the Department concurs that 

the relief provided by the mutual fund 

exemption remains relevant to brokerdealer fiduciaries that use their 

authority to cause plans and IRAs to 

purchase mutual fund shares. The 

Department believes that the transaction 

described in PTE 75–1, Part II(2), is 

most accurately described as a ‘‘riskless 

principal’’ transaction, in which the 

fiduciary that is providing investment 

advice purchases shares on its own 

account for the purpose of covering a 

purchase order previously received from 

a plan or IRA, and then sells the shares 

to the plan or IRA to satisfy the order. 

However, the existing mutual fund 

exemption needs to be revised in a 

manner that would make it consistent 

with more recent exemptions that 

similarly provide broad relief from 

fiduciary self-dealing and conflicts of 

interest. PTE 86–128 covers transactions 

that are the most similar to those 

covered in the mutual fund exemption 

in that the relief it provides permits a 

fiduciary to use its authority to receive 

a commission for effecting or executing 

a plan’s or IRA’s securities transactions 

as agent for the plan or IRA, subject to 

a number of specific requirements 

designed to protect the interests of plan 

participants and beneficiaries and IRA 

owners. 

The Department is therefore 

proposing a new Section I(b) of PTE 86– 

128 that would provide relief for the 

transaction currently covered in PTE 

75–1, Part II(2). New Section I(b) would 

permit a broker-dealer fiduciary to use 

its authority to cause a plan (or IRA, as 

applicable) to purchase shares of a 

mutual fund from the broker-dealer 

fiduciary, acting as principal, where the 

shares were acquired solely to cover the 

plan’s prior order, and for the receipt of 

a commission by such fiduciary in 

connection with the transaction.17

Consistent with the exemption 

originally provided for this transaction 

in PTE 75–1, Part II(2), relief is not 

available if such fiduciary is a principal 

underwriter for, or affiliated with, such 

investment company. The Department 

intends that, with respect to this new 

proposed transaction, the compensation 

to the broker-dealer will be limited to 

the commission (i.e., sales load) 

disclosed by the mutual fund, but may 

be paid either by the plan or the mutual 

fund. 

To provide certainty with respect to 

the payments permitted by the 

exemption in both Section I(a) and 

newly proposed Section I(b), the 

Department is proposing a new defined 

term ‘‘Commission.’’ This term, used in 

Section I(b), will also replace the 

language currently in the exemption 

that permits a fiduciary to cause a plan 

or IRA to pay a ‘‘fee for effecting or 

executing securities transactions.’’ The 

term ‘‘Commission’’ is defined to mean 

a brokerage commission or sales load 

paid for the service of effecting or 

executing the transaction, but not a 12b– 

1 fee, revenue sharing payment, 

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22026 Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 

18Section I(a)(2) of the proposed amended 

exemption clarifies that relief for plan fiduciaries 

acting as agents in agency cross transactions is 

limited to compensation paid in the form of 

Commissions, although the Commission may be 

paid by the other party to the transaction. 

19The condition set forth in Section V(c)(1)(B) of 

the exemption requires the disclosure of 

information that the person seeking authorization 

‘‘reasonably believes to be necessary’’ for the 

authorizing fiduciary to determine whether the 

authorization should be made. This condition is 

followed by a list of required items. To improve 

objectivity of the exemption, the Department is 

proposing to delete the language ‘‘reasonably 

believes to be necessary’’ from Section V(c)(1)(B) 

but leave the list of specified items in place. 

20ERISA section 406(b); Code section 

4975(c)(1)(E). 

21See re-ordered Section VII(m). 

22Special rules apply under Section III(h) for 

pooled funds and groups of plans maintained by a 

single employer or controlled group of employers. 

marketing fee, administrative fee, subTA fee, or sub-accounting fee. Further, 

based on the language of Section I(a)(1), 

the term ‘‘Commission’’ as used in that 

section is limited to payments directly 

from the plan or IRA.18 On the other 

hand, the Commission payment 

described in Section I(b) is not limited 

to payments directly from the plan or 

IRA and includes payments from the 

mutual fund. The Department 

understands that sales load payments in 

connection with mutual fund 

transactions are commonly made by the 

mutual fund. 

The proposed new covered 

transaction in Section I(b) would be 

subject to the general prohibition in PTE 

86–128 on churning, and the new 

proposed Impartial Conduct Standards 

in Section II. In addition, the 

Department is also proposing a new 

Section IV to PTE 86–128 which sets 

forth conditions applicable solely to the 

proposed new covered transaction. The 

proposed new Section IV incorporates 

conditions currently applicable to PTE 

75–1, Part II(2). 

Specifically, the conditions applicable 

to the proposed new covered transaction 

in Section I(b), as set forth in proposed 

Section IV, are: (1) The fiduciary 

customarily sells securities for its own 

account in the ordinary course of its 

business as a broker-dealer; (2) the 

transaction is at least as favorable to the 

plan or IRA as an arm’s length 

transaction with an unrelated party 

would be; and (3) unless rendered 

inapplicable by Section V of the 

exemption, the requirements of Sections 

III(a) through III(f), III(h) and III(i) (if 

applicable), and III(j) are satisfied with 

respect to the transaction. The 

Department seeks comments as to 

whether any of the conditions described 

in Section IV(c) should be revised as 

applied to the proposed new covered 

transaction. The exceptions contained 

in Section V would be applicable to this 

proposed new covered transaction as 

well.19

Relief is not proposed in the new 

Section I(b) for sales by a plan or IRA 

to a fiduciary due to the Department’s 

belief that it is not necessary for a plan 

or IRA to sell a mutual fund share to a 

fiduciary that is acting as a principal. 

The Department requests comment on 

this limitation, as well as on its 

understanding of this transaction and 

the related fee payments. 

Additionally, in connection with the 

proposed new covered transaction, the 

Department is proposing to revoke the 

mutual fund exemption provisions from 

PTE 75–1, Part II(2). 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 broker-dealer, reporting 

dealer, or bank engaging in the 

transaction with such plan or IRA. 

IV. Relief for Related Entities 

Currently, PTE 86–128 provides relief 

for a fiduciary to use its authority to 

cause a plan or IRA to pay a fee to that 

person for effecting or executing 

securities transactions. The term 

‘‘person’’ is defined to include the 

person’s affiliates, which are: (1) Any 

person directly or indirectly, through 

one or more intermediaries, controlling, 

controlled by, or under common control 

with, the person; (2) any officer, 

director, partner, employee, relative (as 

defined in ERISA section 3(15)), brother, 

sister, or spouse of a brother or sister, 

of the person; and (3) any corporation or 

partnership of which the person is an 

officer, director or employee or in which 

such person is a partner. 

The Department understands that in 

some cases, fiduciaries are concerned 

that the relief provided by the 

exemption to persons (including their 

affiliates) is too narrow. In this regard, 

it is a prohibited transaction for a 

fiduciary to use the ‘‘authority, control, 

or responsibility which makes such a 

person a fiduciary to cause a plan to pay 

an additional fee to such fiduciary (or to 

a person in which such fiduciary has an 

interest which may affect the exercise of 

such fiduciary’s best judgment as a 

fiduciary) to provide a service.’’ 20 The 

concern expressed to the Department is 

that the definition of affiliate is not 

broad enough to cover all persons in 

whom a fiduciary has an interest that 

may affect its best judgment. 

Specifically, it is not necessary for a 

fiduciary to have control over or be 

under control by an entity in order for 

the fiduciary to have an interest in the 

entity that may affect the exercise of the 

fiduciary’s best judgment as a fiduciary. 

To address this concern, the 

amendment would add relief for 

covered transactions when fees are paid 

to a ‘‘related entity.’’ 21 The term 

‘‘related entity’’ is defined as an entity, 

other than an affiliate, in which a 

fiduciary has an interest that may affect 

the exercise of its best judgment as a 

fiduciary. Additionally, Section II(b) of 

the exemption would reflect this 

additional relief to related entities. 

Section II(b) would require that all 

compensation received by the person 

(i.e., the fiduciary and its affiliates) and 

any related entity in connection with 

the transaction is reasonable in relation 

to the total services the person provides 

to the plan or IRA. 

The Department requests comment on 

the necessity of incorporating relief for 

related entities in PTE 86–128, and the 

approach taken in this proposal to do 

so. 

V. The 2002 Amendment and 

Clarification of Recapture of Profits 

Exception of PTE 86–128 

As explained above, discretionary 

trustees were first permitted to rely on 

PTE 86–128 without meeting the 

‘‘recapture of profits’’ provision 

pursuant to an amendment in 2002 

(2002 Amendment). To effect this 

change, the 2002 Amendment revised 

Section III(a), which had provided that 

‘‘[t]he person engaging in the covered 

transaction [may not be] a trustee (other 

than a nondiscretionary trustee), or an 

administrator of the plan, or an 

employer any of whose employees are 

covered by the plan.’’ Under the 

amendment, the reference to ‘‘trustee 

(other than a nondiscretionary trustee)’’ 

was deleted from Section III(a). Further, 

under the amendment, discretionary 

trustees had to satisfy certain additional 

conditions, set forth in Section III(h) 

and (i), in order to rely on the 

exemption. Section III(h) provides that 

discretionary trustees may engage in the 

covered transactions only with plans or 

IRAs with total net assets of at least $50 

million.22 Section III(i) requires 

discretionary trustees to provide 

additional disclosures. 

The Department understands that 

subsequent to the 2002 Amendment, 

questions were raised as to whether 

discretionary trustees were permitted to 

rely on the ‘‘recapture of profits’’ 

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Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 22027 

23See 29 CFR 2550.408b-2, 42 FR 32390 (June 24, 

1977) and Reasonable Contract or Arrangement 

under Section 408(b)(2)—Fee Disclosure, Final 

Rule, 77 FR 5632 (Feb. 3, 2012). 

provision of the exemption 

(redesignated in this proposal as Section 

V(b)) as an alternative to complying 

with Sections III(h) and (i). This 

provision allows persons identified in 

Section III(a) to engage the covered 

transactions if they return or credit to 

the plan or IRA all profits. 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). 

As this result was not intended, the 

Department proposes to modify the 

exemption to permit all trustees, 

regardless of associated plan or IRA 

size, to utilize the exception as 

originally permitted in PTE 86–128 for 

the recapture of profits. 

In order to achieve this result, the 

Department has proposed amendments 

to several different conditions of PTE 

86–128. Section V(c), which is redesignated as Section V(b) in this 

proposal, provides 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, a 

sentence has been added 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. 

VI. Recordkeeping Requirements 

A proposed new Section VI to PTE 

86–128 would require the fiduciary 

engaging in a transaction covered by the 

exemption to maintain records 

necessary to enable certain persons 

(described in proposed Section VI(b)) to 

determine whether the conditions of 

this exemption have been met. The 

proposed recordkeeping requirement is 

consistent with other existing class 

exemptions as well as the recordkeeping 

provisions of the other notices of 

proposed exemption published in this 

issue of the Federal Register. 

Description of the Proposed Revocation 

of PTE 75–1, Part I(b) and (c), and II(2), 

and Proposed Amendment to and 

Restatement of PTE 75–1, Part II 

Lastly, the Department proposes to 

revoke Part I(b) and I(c) of PTE 75–1, 

and Part II(2) of PTE 75–1. Part I(b) of 

PTE 75–1 provides relief from ERISA 

section 406 and the taxes imposed by 

Code section 4975(a) and (b), for the 

effecting of securities transactions, 

including clearance, settlement or 

custodial functions incidental to 

effecting the transactions, by parties in 

interest or disqualified persons other 

than fiduciaries. Part I(c) of PTE 75–1 

provides relief from ERISA section 406 

and Code section 4975(a) and (b) for the 

furnishing of advice regarding securities 

or other property to a plan or IRA by a 

party in interest or disqualified person 

under circumstances which do not make 

the party in interest or disqualified 

person a fiduciary with respect to the 

plan or IRA. 

PTE 75–1 was granted shortly after 

ERISA’s passage in order 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 the ERISA prohibited 

transaction rules. Paragraphs (b) and (c) 

in Part I of PTE 75–1, specifically, 

served to 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.23 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. Therefore, the Department 

is proposing the revocation of these 

parts. 

As noted earlier, the exemption in 

PTE 75–1, Part II(2), would, under this 

proposal, be incorporated into PTE 86– 

128. Accordingly, the Department is 

proposing herein the revocation of PTE 

75–1, Part II(2). In connection with the 

proposed revocation of PTE 75–1, Part 

II(2), the Department is proposing to 

amend Section (e) of the remaining 

exemption in PTE 75–1, Part II, the 

recordkeeping provisions of the 

exemption, to place the recordkeeping 

responsibility on the broker-dealer, 

reporting dealer, or bank engaging in 

transactions with the plan or IRA, as 

opposed to the plan or IRA itself. 

Applicability Date 

The Department is proposing that 

compliance with the final regulation 

defining a fiduciary under ERISA 

section 3(21)(A)(ii) and Code section 

4975(e)(3)(B) will begin eight months 

after the final regulation is published in 

the Federal Register (Applicability 

Date). The Department proposes to make 

the amendments to and partial 

revocation of this exemption, if granted, 

applicable on the Applicability Date as 

well. 

Paperwork Reduction Act Statement 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department of Labor 

conducts a preclearance consultation 

program to provide the general public 

and Federal agencies with an 

opportunity to comment on proposed 

and continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 (PRA) 

(44 U.S.C. 3506(c)(2)(A)). 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 proposed 

information collection request (ICR) 

included in the Proposed Amendment 

to and Proposed Partial Revocation of 

Prohibited Transaction Exemption (PTE) 

86–128 for Securities Transactions 

Involving Employee Benefit Plans and 

Broker-Dealers; Proposed Amendment 

to and Partial Revocation of PTE 75–1, 

Exemptions From Prohibitions 

Respecting Certain Classes of 

Transactions Involving Employee 

Benefits Plans and Certain BrokerDealers, Reporting Dealers and Banks as 

part of its proposal to amend its 1975 

rule that defines when a person who 

provides investment advice to an 

employee benefit plan or IRA becomes 

a fiduciary. A copy of the ICR may be 

obtained by contacting the PRA 

addressee shown below or at http://

www.RegInfo.gov. 

The Department has submitted a copy 

of the proposed amendments to and 

partial revocation of PTEs 86–128 and 

75–1 to the Office of Management and 

Budget (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: 

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22028 Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 

24The Department’s estimated 2015 hourly labor 

rates include wages, other benefits, and overhead, 

and are calculated as follows: Mean wage from the 

2013 National Occupational Employment Survey 

(April 2014, Bureau of Labor Statistics http://

www.bls.gov/news.release/pdf/ocwage.pdf); wages 

as a percent of total compensation from the 

Employer Cost for Employee Compensation (June 

2014, Bureau of Labor Statistics http://www.bls.gov/ 

news.release/ecec.t02.htm); overhead as a multiple 

of compensation is assumed to be 25 percent of 

total compensation for paraprofessionals, 20 

percent of compensation for clerical, and 35 percent 

of compensation for professional; annual inflation 

assumed to be 2.3 percent annual growth of total 

labor cost since 2013 (Employment Costs Index data 

for private industry, September 2014 http://

www.bls.gov/news.release/eci.nr0.htm). 

25As described in the regulatory impact analysis 

for the accompanying rule, the Department 

estimates that approximately 2,619 broker dealers 

service the retirement market. The Department 

anticipates that the exemption will be used 

primarily, but not exclusively, by broker-dealers. 

Further, the Department assumes that all brokerdealers servicing the retirement market will use the 

exemption. Beyond the 2,619 broker-dealers, the 

Department estimates that almost 200 other 

financial institutions will use the exemption. 

26This is a weighted average of the Department’s 

estimates of the share of DB plans and DC plans 

with broker-dealer relationships. The Department 

welcomes comment on this estimate. 

• Evaluate whether the 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 

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. 

Comments should be sent to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 20503; 

Attention: Desk Officer for the 

Employee Benefits Security 

Administration. OMB requests that 

comments be received within 30 days of 

publication of the Proposed 

Amendments to ensure their 

consideration. 

PRA Addressee: Address requests for 

copies of the ICR to G. Christopher 

Cosby, Office of Policy and Research, 

U.S. Department of Labor, Employee 

Benefits Security Administration, 200 

Constitution Avenue NW., Room N– 

5718, Washington, DC 20210. 

Telephone (202) 693–8410; Fax: (202) 

219–5333. These are not toll-free 

numbers. ICRs submitted to OMB also 

are available at http://www.RegInfo.gov. 

As discussed in detail below, as 

amended, PTE 86–128 would require 

financial firms to make certain 

disclosures to plan fiduciaries in order 

to receive relief from ERISA’s and the 

Code’s prohibited transaction rules for 

the receipt of commissions and to 

engage in riskless principal transactions 

involving mutual fund shares. Financial 

firms relying on either PTE 86–128 or 

PTE 75–1, as amended, would be 

required to maintain records necessary 

to prove that the conditions of these 

exemptions have been met. These 

requirements are information collection 

requests (ICRs) subject to the Paperwork 

Reduction Act. 

The Department has made the 

following assumptions in order to 

establish a reasonable estimate of the 

paperwork burden associated with these 

ICRs: 

• 38% of disclosures will be 

distributed electronically via means 

already used by respondents in the 

normal course of business and the costs 

arising from electronic distribution will 

be negligible; 

• Financial institutions will use 

existing in-house resources to prepare 

the legal authorizations and disclosures, 

and maintain the recordkeeping systems 

necessary to meet the requirements of 

the exemption; 

• A combination of personnel will 

perform the tasks associated with the 

ICRs at an hourly wage rate of $125.95 

for a financial manager, $30.42 for 

clerical personnel, and $129.94 for a 

legal professional; and 24

• Approximately 2,800 financial 

institutions 25 will take advantage of this 

exemption and they will use this 

exemption in conjunction with 

transactions involving 25.6 percent of 

their client plans.26

Disclosures and Consent Forms 

In order to receive commissions in 

conjunction with the purchase of 

mutual fund shares or securities 

products, sections III(b) and III(d) of 

PTE 86–128 as amended require 

financial institutions to obtain advance 

written authorization from a plan 

fiduciary independent of the financial 

institutions (the authorizing fiduciary) 

and furnish 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 financial institution’s 

brokerage placement practices, and any 

other reasonably available information 

regarding the matter that the authorizing 

fiduciary requests. 

Section III(c) requires financial 

institutions to obtain annual written 

reauthorization or provide the 

authorizing fiduciary with an annual 

termination form 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 

financial institution to engage in 

covered transactions on behalf of the 

plan. Furthermore, Section III(e) 

requires the financial institution to 

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 transaction-related 

charges incurred by the plan. The 

Department assumes that financial 

institutions will meet this requirement 

for 40 percent of plans through the 

provision of a confirmation slip, which 

already is provided to their clients in 

the normal course of business, while 

financial institutions will meet this 

requirement for 60 percent of plans 

through provision of the quarterly 

report. 

Finally, Section III(f) requires the 

financial institution to provide the 

authorizing fiduciary with an annual 

summary of the confirmation slips or 

quarterly reports. The summary must 

contain the following information: The 

total of all securities transaction-related 

charges incurred by the plan during the 

period in connection with the covered 

securities transactions, the amount of 

the securities transaction-related 

charges retained by the authorized 

person and the amount of these charges 

paid to other persons for execution or 

other services; a description of the 

financial institution’s brokerage 

placement practices if such practices 

have materially changed during the 

period covered by the summary; and a 

portfolio turnover ratio calculated in a 

manner reasonable designed to provide 

the authorizing fiduciary the 

information needed to assist in 

discharging its duty of prudence. 

Section III(i) states that a financial 

institution that is a discretionary plan 

trustee who qualifies to use the 

exemption 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. 

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Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 22029 

Legal Costs 

According to the 2012 Form 5500, 

approximately 677,000 plans exist in 

the United States that could enter into 

relationships with financial institutions. 

Of these plans, the Department assumes 

that 6.5 percent are new plans or plans 

entering into relationships with new 

financial institutions and, as stated 

previously, 25.6 percent of these plans 

will engage in transactions covered 

under this PTE. The Department 

estimates that granting written 

authorization to the financial 

institutions will require one hour of 

legal time for each of the approximately 

11,000 plans entering into new 

relationships with financial institutions 

each year. The Department also 

estimates that it will take one hour of 

legal time for each of the approximately 

2,800 financial institutions to produce 

the annual termination form. This legal 

work results in a total of approximately 

14,000 hours annually at an equivalent 

cost of $1.8 million. 

Production and Distribution of Required 

Disclosures 

The Department estimates that 

approximately 173,000 plans have 

relationships with financial institutions 

and are likely to engage in transactions 

covered under this exemption. Of these 

173,000 plans, approximately 11,000 are 

new clients to the financial institutions 

each year. 

The Department estimates that 11,000 

plans will send financial institutions a 

two page authorization letter each year. 

Prior to obtaining authorization, 

financial institutions will send the same 

11,000 plans a seven page preauthorization disclosure. Paper copies 

of the authorization letter and the preauthorization disclosure will be mailed 

for 62 percent of the plans and 

distributed electronically for the 

remaining 38 percent. The Department 

estimates that electronic distribution 

will result in a de minimis cost, while 

paper distribution will cost 

approximately $10,000. Paper 

distribution of the letter and disclosure 

will also require two minutes of clerical 

preparation time resulting in a total of 

500 hours at an equivalent cost of 

approximately $14,000. 

The Department estimates that all of 

the 173,000 plans will receive a twopage annual termination form from 

financial institutions; 38 percent will be 

distributed electronically and 62 

percent will be mailed. The Department 

estimates that electronic distribution 

will result in a de minimis cost, while 

the paper distribution will cost $63,000. 

Paper distribution will also require two 

minutes of clerical preparation time 

resulting in a total of 4,000 hours at an 

equivalent cost of $109,000. 

The Department estimates that 60 

percent of plans (approximately 

104,000) will receive quarterly two-page 

transaction reports from financial 

institutions four times per year; 38 

percent will be distributed 

electronically and 62 percent will be 

mailed. The Department estimates that 

electronic distribution will result in a de 

minimis cost, while paper distribution 

will cost $152,000. Paper distribution 

will also require two minutes of clerical 

preparation time resulting in a total of 

9,000 hours at an equivalent cost of 

$261,000. 

The Department estimates that all of 

the 173,000 plans will receive a fivepage annual statement with a two-page 

summary of commissions paid from 

financial institutions; 38 percent will be 

distributed electronically and 62 

percent will be mailed. The Department 

assumes that these disclosures will be 

distributed with the annual termination 

form, resulting in no further hour 

burden or postage cost. Electronic 

distribution will result in a de minimis 

cost, while the paper distribution will 

cost $38,000 in materials costs. 

Finally, the Department estimates that 

it will cost financial institutions $3 per 

plan, for each of the 173,000 plans, to 

track all the transactions data necessary 

to populate the quarterly transaction 

reports, the annual statements, and the 

report of commissions paid. This results 

in an IT tracking cost of $520,000. 

Recordkeeping Requirement 

Section VI of PTE 86–128, as 

amended, and condition (e) of PTE 75– 

1, Part II, as amended, would require 

financial institutions to maintain or 

cause to be maintained for six years and 

disclosed upon request the records 

necessary for the Department, Internal 

Revenue Service, plan fiduciary, 

contributing employer or employee 

organization whose members are 

covered by the plan, participants and 

beneficiaries and IRA owners to 

determine whether the conditions of 

this exemption have been met. 

The Department assumes that each 

financial institution 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 onehalf hour, on average, annually for a 

financial manager to organize and 

collate the documents or else draft a 

notice explaining that the information is 

exempt from disclosure, and an 

additional 15 minutes of clerical time to 

make the documents available for 

inspection during normal business 

hours or prepare the paper notice 

explaining that the information is 

exempt from disclosure. Thus, the 

Department estimates that a total of 45 

minutes of professional time per 

financial institution per year would be 

required for a total hour burden of 2,100 

hours at an equivalent cost of $198,000. 

In connection with this recordkeeping 

and disclosure requirements discussed 

above, Section VI(b) of PTE 86–128 and 

Section (f) of PTE 75–1, Part II, 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 provide a written notice to the 

requester advising of the reasons for the 

refusal and advising that the 

Department may request such 

information. The Department’s 

experience indicates that this provision 

is not commonly invoked, and therefore, 

the written notice is rarely, if ever, 

generated. Therefore, the Department 

believes the cost burden associated with 

this clause is de minimis. No other cost 

burden exists with respect to 

recordkeeping. 

Overall Summary 

Overall, the Department estimates that 

in order to meet the conditions of this 

amended class exemption, over 14,000 

financial institutions and plans will 

produce 958,000 disclosures and notices 

annually. These disclosures and notices 

will result in almost 29,000 burden 

hours annually, at an equivalent cost of 

$2.4 million. This exemption will also 

result in a total annual cost burden of 

almost $783,000. 

These paperwork burden estimates 

are summarized as follows: 

Type of Review: Revision of a 

Currently Approved Information 

Collection. 

Agency: Employee Benefits Security 

Administration, Department of Labor. 

Titles: (1) Proposed Amendment to 

and Partial Revocation of Prohibited 

Transaction Exemption (PTE) 86–128 

for Securities Transactions Involving 

Employee Benefit Plans and BrokerDealers; Proposed Amendment to and 

Partial Revocation of PTE 75–1, and (2) 

Proposed Investment Advice 

Regulation. 

OMB Control Number: 1210–0059. 

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22030 Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 

Affected Public: Business or other forprofit. 

Estimated Number of Respondents: 

14.059. 

Estimated Number of Annual 

Responses: 957,880. 

Frequency of Response: Initially, 

Annually, When engaging in exempted 

transaction. 

Estimated Total Annual Burden 

Hours: 28,795 hours. 

Estimated Total Annual Burden Cost: 

$782,647. 

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 discharge his or her duties 

respecting a 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 an exemption may be 

granted under ERISA section 408(a) and 

Code section 4975(c)(2), the Department 

must find that the exemption is 

administratively feasible, in the 

interests of plans and their participants 

and beneficiaries and IRA owners, and 

protective of the rights of plan 

participants and beneficiaries and IRA 

owners; 

(3) If granted, an exemption is 

applicable to a particular transaction 

only if the transaction satisfies the 

conditions specified in the exemption; 

and 

(4) These amended exemptions, if 

granted, will be 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. 

Written Comments 

The Department invites all interested 

persons to submit written comments on 

the proposed amendments and 

proposed revocations to the address and 

within the time period set forth above. 

All comments received will be made a 

part of the public record for this 

proceeding and will be available for 

examination on the Department’s 

Internet Web site. Comments should 

state the reasons for the writer’s interest 

in the proposed amendment and 

revocation. Comments received will be 

available for public inspection at the 

above address. 

Proposed Amendment to PTE 86–128 

Under section 408(a) of the Employee 

Retirement Income Security Act of 1974, 

as amended (ERISA) and section 

4975(c)(2) of the Internal Revenue Code 

of 1986, as amended (the Code), and in 

accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (76 

FR 66637, 66644 (October 27, 2011)), 

the Department proposes to amend and 

restate PTE 86–128 as set forth below: 

Section I. Covered Transactions 

(a) Securities Transactions 

Exemptions. If each of the conditions of 

Sections II and III of this exemption is 

either satisfied or not applicable under 

Section V, the restrictions of ERISA 

section 406(b) and the taxes imposed by 

Code section 4975(a) and (b) by reason 

of Code section 4975(c)(1)(E) or (F) shall 

not apply to—(1) A plan fiduciary’s 

using its authority to cause a plan to pay 

a Commission to that person or a 

Related Entity as agent for the plan, but 

only to the extent that such transactions 

are not excessive, under the 

circumstances, in either amount or 

frequency; and (2) A plan fiduciary’s 

acting as the agent in an agency cross 

transaction for both the plan and one or 

more other parties to the transaction and 

the receipt by such person of a 

Commission from one or more other 

parties to the transaction. 

(b) Mutual Fund Transactions 

Exemption. If each condition of Sections 

II and IV is either satisfied or not 

applicable under Section V, the 

restrictions of ERISA sections 

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

the taxes imposed by Code section 

4975(a) and (b), by reason of Code 

section 4975(c)(1)(A), (D), (E) and (F), 

shall not apply to a plan fiduciary’s 

using its authority to cause the plan to 

purchase shares of an open end 

investment company registered under 

the Investment Company Act of 1940 

(15 U.S.C. 80a–1 et seq.) (Mutual Fund) 

from such fiduciary, acting as principal, 

and to the receipt of a Commission by 

such person in connection with such 

transaction, but only to the extent that 

such transactions are not excessive, 

under the circumstances, in either 

amount or frequency; provided that, the 

fiduciary (1) is a broker-dealer registered 

under the Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.), and (2) is 

not a principal underwriter for, or 

affiliated with, such Mutual Fund, 

within the meaning of sections 2(a)(29) 

and 2(a)(3) of the Investment Company 

Act of 1940. 

(c) Scope of these Exemptions. The 

exemptions set forth in Section I(a) and 

(b) do not apply to a transaction if (1) 

the plan is an Individual Retirement 

Account and (2) the fiduciary engaging 

in the transaction is a fiduciary by 

reason of the provision of investment 

advice for a fee, described in Code 

section 4975(e)(3)(B) and the applicable 

regulations. 

Section II. Impartial Conduct 

Standards 

If the fiduciary engaging in the 

covered transaction is a fiduciary within 

the meaning of ERISA section 

3(21)(A)(i) or (ii), or Code section 

4975(e)(3)(A) or (B), with respect to the 

assets involved in the transaction, the 

following conditions must be satisfied 

with respect to such transaction to the 

extent they are applicable to the 

fiduciary’s actions: 

(a) When exercising fiduciary 

authority described in ERISA section 

3(21)(A)(i) or (ii), or Code section 

4975(e)(3)(A) or (B), with respect to the 

assets involved in the transaction, the 

fiduciary acts in the Best Interest of the 

plan. 

(b) All compensation received by the 

person and any Related Entity in 

connection with the transaction is 

reasonable in relation to the total 

services the person and any Related 

Entity provide to the plan. 

(c) The fiduciary’s statements about 

recommended investments, fees, 

material conflicts of interest, and any 

other matters relevant to a plan’s 

investment decisions, are not 

misleading. For this purpose, a 

fiduciary’s failure to disclose a Material 

Conflict of Interest relevant to the 

services the fiduciary is providing or 

other actions it is taking in relation to 

a plan’s investment decisions is deemed 

to be a misleading statement 

III. Conditions Applicable to 

Transactions Described in Section I(a) 

Except to the extent otherwise 

provided in Section V of this 

exemption, Section I of this exemption 

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Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 22031 

applies only if the following conditions 

are satisfied: 

(a) The person engaging in the 

covered transaction is not a trustee 

(other than a nondiscretionary trustee), 

an administrator of the plan, or an 

employer any of whose employees are 

covered by the plan. Notwithstanding 

the foregoing, this condition does not 

apply to a trustee that satisfies Section 

III(h) and (i). 

(b) The covered transaction is 

performed under a written authorization 

executed in advance by a fiduciary of 

each plan whose assets are involved in 

the transaction, which plan fiduciary is 

independent of the person engaging in 

the covered transaction. The 

authorization is terminable at will by 

the plan, without penalty to the plan, 

upon receipt by the authorized person 

of written notice of termination. 

(c) The authorized person obtains 

annual reauthorization to engage in 

transactions pursuant to the exemption 

in the method set forth in Section III(b). 

Alternatively, the authorized person 

may supply a form expressly providing 

an election to terminate the 

authorization described in Section III(b) 

with instructions on the use of the form 

to the authorizing fiduciary no less than 

annually. The instructions for such form 

must include the following information: 

(1) The authorization is terminable at 

will by the plan, without penalty to the 

plan, when the authorized person 

receives (via first class mail, personal 

delivery, or email) from the authorizing 

fiduciary or other plan official having 

authority to terminate the authorization, 

a written notice of the intent of the plan 

to terminate authorization; and 

(2) Failure to return the form or some 

other written notification of the plan’s 

intent to terminate the authorization 

within thirty (30) days from the date the 

termination form is sent to the 

authorizing fiduciary will result in the 

continued authorization of the 

authorized person to engage in the 

covered transactions on behalf of the 

plan. 

(d) Within three months before an 

initial authorization is made pursuant to 

Section III(b), the authorizing fiduciary 

is furnished with a copy of this 

exemption, the form for termination of 

authorization described in Section III(c), 

a description of the person’s brokerage 

placement practices, and any other 

reasonably available information 

regarding the matter that the authorizing 

fiduciary requests. 

(e) The person engaging in a covered 

transaction furnishes the authorizing 

fiduciary with either: 

(1) A confirmation slip for each 

securities transaction underlying a 

covered transaction within ten business 

days of the securities transaction 

containing the information described in 

Rule 10b–10(a)(1–7) under the 

Securities Exchange Act of 1934; or 

(2) at least once every three months 

and not later than 45 days following the 

period to which it relates, a report 

disclosing: 

(A) A compilation of the information 

that would be provided to the plan 

pursuant to Section III(e)(1) during the 

three-month period covered by the 

report; 

(B) the total of all securities 

transaction-related charges incurred by 

the plan during such period in 

connection with such covered 

transactions; and 

(C) the amount of the securities 

transaction-related charges retained by 

such person, and the amount of such 

charges paid to other persons for 

execution or other services. For 

purposes of this paragraph (e), the 

words ‘‘incurred by the plan’’ shall be 

construed to mean ‘‘incurred by the 

pooled fund’’ when such person engages 

in covered transactions on behalf of a 

pooled fund in which the plan 

participates. 

(f) The authorizing fiduciary is 

furnished with a summary of the 

information required under Section 

III(e)(1) at least once per year. The 

summary must be furnished within 45 

days after the end of the period to which 

it relates, and must contain the 

following: 

(1) The total of all securities 

transaction-related charges incurred by 

the plan during the period in 

connection with covered securities 

transactions. 

(2) The amount of the securities 

transaction-related charges retained by 

the authorized person and the amount 

of these charges paid to other persons 

for execution or other services. 

(3) A description of the brokerage 

placement practices of the person that is 

engaging in the covered transaction, if 

such practices have materially changed 

during the period covered by the 

summary. 

(4)(A) A portfolio turnover ratio, 

calculated in a manner which is 

reasonably designed to provide the 

authorizing fiduciary with the 

information needed to assist in making 

a prudent determination regarding the 

amount of turnover in the portfolio. The 

requirements of this paragraph (f)(4)(A) 

will be met if the ‘‘annualized portfolio 

turnover ratio,’’ calculated in the 

manner described in paragraph (f)(4)(B), 

is contained in the summary. 

(B) The ‘‘annualized portfolio 

turnover ratio’’ shall be calculated as a 

percentage of the plan assets consisting 

of securities or cash over which the 

authorized person had discretionary 

investment authority, or with respect to 

which such person rendered, or had any 

responsibility to render, investment 

advice within the meaning of ERISA 

section 3(21)(A)(ii), (the portfolio) at any 

time or times (management period(s)) 

during the period covered by the report. 

First, the ‘‘portfolio turnover ratio’’ (not 

annualized) is obtained by dividing (i) 

the lesser of the aggregate dollar 

amounts of purchases or sales of 

portfolio securities during the 

management period(s) by (ii) the 

monthly average of the market value of 

the portfolio securities during all 

management period(s). Such monthly 

average is calculated by totaling the 

market values of the portfolio securities 

as of the beginning and end of each 

management period and as of the end of 

each month that ends within such 

period(s), and dividing the sum by the 

number of valuation dates so used. For 

purposes of this calculation, all debt 

securities whose maturities at the time 

of acquisition were one year or less are 

excluded from both the numerator and 

the denominator. The ‘‘annualized 

portfolio turnover ratio’’ is then derived 

by multiplying the ‘‘portfolio turnover 

ratio’’ by an annualizing factor. The 

annualizing factor is obtained by 

dividing (iii) the number twelve by (iv) 

the aggregate duration of the 

management period(s) expressed in 

months (and fractions thereof). 

Examples of the use of this formula are 

provided in Section VII. 

(C) The information described in this 

paragraph (f)(4) is not required to be 

furnished in any case where the 

authorized person has not exercised 

discretionary authority over trading in 

the plan’s account, nor provided 

investment advice within the meaning 

of ERISA section 3(21)(A)(ii), during the 

period covered by the report. 

For purposes of this paragraph (f), the 

words ‘‘incurred by the plan’’ shall be 

construed to mean ‘‘incurred by the 

pooled fund’’ when such person engages 

in covered transactions on behalf of a 

pooled fund in which the plan 

participates. 

(g) If an agency cross transaction to 

which Section V(a) does not apply is 

involved, the following conditions must 

also be satisfied: 

(1) The information required under 

Section III(d) or Section V(c)(1)(B) of 

this exemption includes a statement to 

the effect that with respect to agency 

cross transactions, the person effecting 

or executing the transactions will have 

a potentially conflicting division of 

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22032 Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 

loyalties and responsibilities regarding 

the parties to the transactions; 

(2) The summary required under 

Section III(f) of this exemption includes 

a statement identifying the total number 

of agency cross transactions during the 

period covered by the summary and the 

total amount of all commissions or other 

remuneration received or to be received 

from all sources by the person engaging 

in the transactions in connection with 

the transactions during the period; 

(3) The person effecting or executing 

the agency cross transaction has the 

discretionary authority to act on behalf 

of, and/or provide investment advice to, 

either (A) one or more sellers or (B) one 

or more buyers with respect to the 

transaction, but not both. 

(4) The agency cross transaction is a 

purchase or sale, for no consideration 

other than cash payment against prompt 

delivery of a security for which market 

quotations are readily available; and 

(5) The agency cross transaction is 

executed or effected at a price that is at 

or between the independent bid and 

independent ask prices for the security 

prevailing at the time of the transaction. 

(h) Except pursuant to Section V(b), a 

trustee (other than a non-discretionary 

trustee) may engage in a covered 

transaction only with a plan that has 

total net assets with a value of at least 

$50 million and in the case of a pooled 

fund, the $50 million requirement will 

be met if 50 percent or more of the units 

of beneficial interest in such pooled 

fund are held by plans having total net 

assets with a value of at least $50 

million. 

For purposes of the net asset tests 

described above, where a group of plans 

is maintained by a single employer or 

controlled group of employers, as 

defined in ERISA section 407(d)(7), the 

$50 million net asset requirement may 

be met by aggregating the assets of such 

plans, if the assets are pooled for 

investment purposes in a single master 

trust. 

(i) The trustee described in Section 

III(h) engaging in a covered transaction 

furnishes, at least annually, to the 

authorizing fiduciary of each plan the 

following: 

(1) The aggregate brokerage 

commissions, expressed in dollars, paid 

by the plan to brokerage firms affiliated 

with the trustee; 

(2) the aggregate brokerage 

commissions, expressed in dollars, paid 

by the plan to brokerage firms 

unaffiliated with the trustee; 

(3) the average brokerage 

commissions, expressed as cents per 

share, paid by the plan to brokerage 

firms affiliated with the trustee; and 

(4) the average brokerage 

commissions, expressed as cents per 

share, paid by the plan (to brokerage 

firms unaffiliated with the trustee. 

For purposes of this paragraph (i), the 

words ‘‘paid by the plan’’ shall be 

construed to mean ‘‘paid by the pooled 

fund’’ when the trustee engages in 

covered transactions on behalf of a 

pooled fund in which the plan 

participates. 

(j) In the case of securities 

transactions involving shares of Mutual 

Funds, other than exchange traded 

funds, at the time of the transaction, the 

shares are purchased or sold at net asset 

value (NAV) plus a commission, in 

accordance with applicable securities 

laws and regulations. 

Section IV. Conditions Applicable to 

Transactions Described in Section I(b) 

Section I(b) of this exemption applies 

only if the following conditions are 

satisfied: 

(a) The fiduciary engaging in the 

covered transaction customarily 

purchases and sells securities for its 

own account in the ordinary course of 

its business as a broker-dealer. 

(b) At the time the transaction is 

entered into, the terms are at least as 

favorable to the plan as the terms 

generally available in an arm’s length 

transaction with an unrelated party. 

(c) Except to the extent otherwise 

provided in Section V, the requirements 

of Section III(a) through III(f), III(h) and 

III(i) (if applicable), and III(j) are 

satisfied with respect to the transaction. 

Section V. Exceptions From Conditions 

(a) Certain agency cross transactions. 

Section III of this exemption does not 

apply in the case of an agency cross 

transaction, provided that the person 

effecting or executing the transaction: 

(1) Does not render investment advice 

to any plan for a fee within the meaning 

of ERISA section 3(21)(A)(ii) with 

respect to the transaction; 

(2) is not otherwise a fiduciary who 

has investment discretion with respect 

to any plan assets involved in the 

transaction, see 29 CFR 2510.3–21(d); 

and 

(3) does not have the authority to 

engage, retain or discharge any person 

who is or is proposed to be a fiduciary 

regarding any such plan assets. 

(b) Recapture of profits. Sections III(a) 

and III(i) do not apply in any case where 

the person who is engaging in a covered 

transaction returns or credits to the plan 

all profits earned by that person and any 

Related Entity in connection with the 

securities transactions associated with 

the covered transaction. 

(c) Special rules for pooled funds. In 

the case of a person engaging in a 

covered transaction on behalf of an 

account or fund for the collective 

investment of the assets of more than 

one plan (a pooled fund): 

(1) Sections III(b), (c) and (d) of this 

exemption do not apply if— 

(A) the arrangement under which the 

covered transaction is performed is 

subject to the prior and continuing 

authorization, in the manner described 

in this paragraph (c)(1), of a plan 

fiduciary with respect to each plan 

whose assets are invested in the pooled 

fund who is independent of the person. 

The requirement that the authorizing 

fiduciary be independent of the person 

shall not apply in the case of a plan 

covering only employees of the person, 

if the requirements of Section V(c)(2)(A) 

and (B) are met. 

(B) The authorizing fiduciary is 

furnished with any information that is 

reasonably necessary to determine 

whether the authorization should be 

given or continued, not less than 30 

days prior to implementation of the 

arrangement or material change thereto, 

including (but not limited to) a 

description of the person’s brokerage 

placement practices, and, where 

requested any other reasonably available 

information regarding the matter upon 

the reasonable request of the authorizing 

fiduciary at any time. 

(C) In the event an authorizing 

fiduciary submits a notice in writing to 

the person engaging in or proposing to 

engage in the covered transaction 

objecting to the implementation of, 

material change in, or continuation of, 

the arrangement, the plan on whose 

behalf the objection was tendered is 

given the opportunity to terminate its 

investment in the pooled fund, without 

penalty to the plan, within such time as 

may be necessary to effect the 

withdrawal in an orderly manner that is 

equitable to all withdrawing plans and 

to the nonwithdrawing plans. In the 

case of a plan that elects to withdraw 

under this subparagraph (c)(1)(C), the 

withdrawal shall be effected prior to the 

implementation of, or material change 

in, the arrangement; but an existing 

arrangement need not be discontinued 

by reason of a plan electing to 

withdraw. 

(D) In the case of a plan whose assets 

are proposed to be invested in the 

pooled fund subsequent to the 

implementation of the arrangement and 

that has not authorized the arrangement 

in the manner described in Section 

V(c)(1)(B) and (C), the plan’s investment 

in the pooled fund is subject to the prior 

written authorization of an authorizing 

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Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 22033 

fiduciary who satisfies the requirements 

of subparagraph (c)(1)(A). 

(2) Section III(a) of this exemption, to 

the extent that it prohibits the person 

from being the employer of employees 

covered by a plan investing in a pool 

managed by the person, does not apply 

if— 

(A) The person is an ‘‘investment 

manager’’ as defined in section 3(38) of 

ERISA, and 

(B) Either (i) the person returns or 

credits to the pooled fund all profits 

earned by the person and any Related 

Entity in connection with all covered 

transactions engaged in by the fund, or 

(ii) the pooled fund satisfies the 

requirements of paragraph V(c)(3). 

(3) A pooled fund satisfies the 

requirements of this paragraph for a 

fiscal year of the fund if— 

(A) On the first day of such fiscal 

year, and immediately following each 

acquisition of an interest in the pooled 

fund during the fiscal year by any plan 

covering employees of the person, the 

aggregate fair market value of the 

interests in such fund of all plans 

covering employees of the person does 

not exceed twenty percent of the fair 

market value of the total assets of the 

fund; and 

(B) The aggregate brokerage 

commissions received by the person and 

any Related Entity, in connection with 

covered transactions engaged in by the 

person on behalf of all pooled funds in 

which a plan covering employees of the 

person participates, do not exceed five 

percent of the total brokerage 

commissions received by the person and 

any Related Entity from all sources in 

such fiscal year. 

Section VI. Recordkeeping 

Requirements 

(a) The plan fiduciary engaging in the 

covered transactions maintains or 

causes to be maintained for a period of 

six years, in a manner that is accessible 

for audit and 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 the records necessary to enable 

the persons described in Section VI(b) 

below to determine whether the 

conditions of the exemption have been 

met are lost or destroyed, due to 

circumstances beyond the control of the 

such 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 record-keeping, shall 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 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) and notwithstanding 

any provisions of ERISA section 

504(a)(2) and (b), the records referred to 

in the above paragraph are 

unconditionally 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 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 

such fiduciary which is privileged or 

confidential. 

(3) Should such plan fiduciary refuse 

to disclose information on the basis that 

such information is exempt from 

disclosure, such plan fiduciary 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. 

Section VII. Definitions 

The following definitions apply to 

this exemption: 

(a) The term ‘‘person’’ includes the 

person and affiliates of the person. 

(b) An ‘‘affiliate’’ of a person includes 

the following: 

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with, the person; 

(2) Any officer, director, partner, 

employee, relative (as defined in ERISA 

section 3(15)), brother, sister, or spouse 

of a brother or sister, of the person; and 

(3) Any corporation or partnership of 

which the person is an officer, director 

or employee or in which such person is 

a partner. 

A person is not an affiliate of another 

person solely because one of them has 

investment discretion over the other’s 

assets. The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(c) An ‘‘agency cross transaction’’ is 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. 

(d) The term ‘‘covered transaction’’ 

means an action described in Section I 

of this exemption. 

(e) The term ‘‘effecting or executing a 

securities transaction’’ means the 

execution of a securities transaction as 

agent for another person and/or the 

performance of clearance, settlement, 

custodial or other functions ancillary 

thereto. 

(f) A plan fiduciary is ‘‘independent’’ 

of a person if it (1) is not the person, (2) 

does not receive compensation or other 

consideration for his or her own account 

from the person, and (3) does not have 

a relationship to or an interest in the 

person that might affect the exercise of 

the person’s best judgment in 

connection with transactions described 

in this exemption. Notwithstanding the 

foregoing, if the plan is an individual 

retirement account not subject to title I 

of ERISA, and is beneficially owned by 

an employee, officer, director or partner 

of the person engaging in covered 

transactions with the IRA pursuant to 

this exemption, such beneficial owner is 

deemed ‘‘independent’’ for purposes of 

this definition. 

(g) The term ‘‘profit’’ includes all 

charges relating to effecting or executing 

securities transactions, less reasonable 

and necessary expenses including 

reasonable indirect expenses (such as 

overhead costs) properly allocated to the 

performance of these transactions under 

generally accepted accounting 

principles. 

(h) The term ‘‘securities transaction’’ 

means the purchase or sale of securities. 

(i) The term ‘‘nondiscretionary 

trustee’’ of a plan means a trustee or 

custodian whose powers and duties 

with respect to any assets of the plan are 

limited to (1) the provision of 

nondiscretionary trust services to the 

plan, and (2) duties imposed on the 

trustee by any provision or provisions of 

ERISA or the Code. The term 

‘‘nondiscretionary trust services’’ means 

custodial services and services ancillary 

to custodial services, none of which 

services are discretionary. For purposes 

of this exemption, a person does not fail 

to be a nondiscretionary trustee solely 

by reason of having been delegated, by 

the sponsor of a master or prototype 

plan, the power to amend such plan. 

(j) The term ‘‘plan’’ means an 

employee benefit plan described in 

ERISA section 3(3) and any plan 

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22034 Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 

described in Code section 4975(e)(1) 

(including an Individual Retirement 

Account as defined in VII(k)). 

(k) The terms ‘‘Individual Retirement 

Account’’ or ‘‘IRA’’ mean any trust, 

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. 

(l) The term ‘‘Related Entity’’ means 

an entity, other than an affiliate, in 

which a person has an interest which 

may affect the person’s exercise of its 

best judgment as a fiduciary. 

(m) A fiduciary acts in the ‘‘Best 

Interest’’ of the plan when the fiduciary 

acts with the care, skill, prudence, and 

diligence under the circumstances then 

prevailing that a prudent person would 

exercise based on the investment 

objectives, risk tolerance, financial 

circumstances, and needs of the plan, 

without regard to the financial or other 

interests of the fiduciary, its affiliate, a 

Related Entity or any other party. 

(n) The term ‘‘Commission’’ means a 

brokerage commission or sales load paid 

for the service of effecting or executing 

the transaction, but not a 12b–1 fee, 

revenue sharing payment, marketing fee, 

administrative fee, sub-TA fee or subaccounting fee. 

(o) A ‘‘Material Conflict of Interest’’ 

exists when person has a financial 

interest that could affect the exercise of 

its best judgment as a fiduciary in 

rendering advice to a Plan or IRA. 

Section VIII. Examples Illustrating the 

Use of the Annualized Portfolio 

Turnover Ratio Described in Section 

III(f)(4)(B) 

(a) M, an investment manager 

affiliated with a broker dealer that M 

uses to effect securities transactions for 

the accounts that it manages, exercises 

investment discretion over the account 

of plan P for the period January 1, 2014, 

though June 30, 2014, after which the 

relationship between M and P ceases. 

The market values of P’s account with 

A at the relevant times (excluding debt 

securities having a maturity of one year 

or less at the time of acquisition) are: 

Date Market value 

($ millions) 

January 1, 2014 .............. 10.4 

January 31, 2014 ............ 10.2 

February 28, 2014 .......... 9.9 

March 31, 2014 .............. 10.0 

April 30, 2014 ................. 10.6 

May 31, 2014 .................. 11.5 

June 30, 2014 ................. 12.0 

Sum of market value ...... 74.6 

Aggregate purchases during the 6- 

month period were $850,000; aggregate 

sales were $1,000,000, excluding in 

each case debt securities having a 

maturity of one year or less at the time 

of acquisition. 

For purposes of Section III(f)(4) of this 

exemption, M computes the annualized 

portfolio turnover as follows: 

A = $850,000 (lesser of purchases or 

sales) 

B = $10,657,143 ($74.6 million 

divided by 7, i.e., number of valuation 

dates) 

Annualizing factor = C/D = 12/6 = 2 

Annualized portfolio turnover ratio = 

2 × (850,000/10,657,143) = 0.160 = 16.0 

percent 

(b) Same facts as (a), except that M 

manages the portfolio through July 15, 

2014, and, in addition, resumes 

management of the portfolio on 

November 10, 2014, through the end of 

the year. The additional relevant 

valuation dates and portfolio values are: 

Dates Market value 

($ millions) 

July 15, 2014 .................. 12.2 

November 10, 2014 ........ 9.4 

November 30, 2014 ........ 9.6 

December 31, 2014 ........ 9.8 

Sum of market values .... 41.0 

During the periods July 1, 2014, 

through July 15, 2014, and November 

10, 2014, through December 31, 2014, 

there were an additional $650,000 of 

purchases and $400,000 of sales. Thus, 

total purchases were $1,500,000 (i.e., 

$850,000 + $650,000) and total sales 

were $1,400,000 (i.e., $1,000,000 + 

$400,000) for the management periods. 

M now computes the annualized 

portfolio turnover as follows: 

A = $1,400,000 (lesser of aggregate 

purchases or sales) 

B = $10,509,091 ($10,509,091 ($115.6 

million divided by 11) 

Annualizing factor = C/D = 12/ (6.5 + 

1.67) = 1.47 

Annualized portfolio turnover ratio = 

1.47 × (1,400,000/10,509,091) = 0.196 = 

19.6 percent. 

Proposed Revocation of Parts I(b), I(c) 

and II(2) of PTE 75–1 and Restatement 

of PTE 75–1 

The Department is proposing to 

revoke Parts I(b), I(c) and II(2) of PTE 

75–1. In connection with the proposed 

revocation of Part II(2), the Department 

is republishing Part II of PTE 75–1. Part 

II of PTE 75–1 shall read as follows: 

The restrictions of section 406(a) of 

the Employee Retirement Income 

Security Act of 1974 (the Act) and the 

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

of the Internal Revenue Code of 1986 

(the Code), by reason of section 

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

shall not apply to any purchase or sale 

of a security between an employee 

benefit plan 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 

(Government securities) 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 if the following 

conditions are met: 

(a) In the case of such broker-dealer, 

it customarily purchases and sells 

securities for its own account in the 

ordinary course of its business as a 

broker-dealer. 

(b) In the case of such reporting dealer 

or bank, it customarily purchases and 

sells Government securities for its own 

account in the ordinary course of its 

business and such purchase or sale 

between the plan and such reporting 

dealer or bank is a purchase or sale of 

Government securities. 

(c) Such transaction is at least as 

favorable to the plan as an arm’s length 

transaction with an unrelated party 

would be, and it was not, at the time of 

such transaction, a prohibited 

transaction within the meaning of 

section 503(b) of the Code. 

(d) Neither the broker-dealer, 

reporting dealer, bank, nor any affiliate 

thereof has or exercises any 

discretionary authority or control 

(except as a directed trustee) with 

respect to the investment of the plan 

assets involved in the transaction, or 

renders investment advice (within the 

meaning of 29 CFR 2510.3–21(c)) with 

respect to those assets. 

(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 

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Federal Register / Vol. 80, No. 75 / Monday, April 20, 2015 / Proposed Rules 22035 

(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 

unconditionally 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 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. 

(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. 

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). 

Signed at Washington, DC, this 14th day of 

April, 2015. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. 2015–08838 Filed 4–15–15; 11:15 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2550 

[Application Number D–11820] 

ZRIN 1210–ZA25 

Proposed Amendments to Class 

Exemptions 75–1, 77–4, 80–83 and 83– 

1 

AGENCY: Employee Benefits Security 

Administration (EBSA), U.S. 

Department of Labor. 

ACTION: Notice of proposed amendments 

to class exemptions. 

SUMMARY: This document contains a 

notice of pendency before the 

Department of Labor of proposed 

amendments to prohibited transaction 

exemptions (PTEs) 75–1, 77–4, 80–83 

and 83–1. Generally, the Employee 

Retirement Income Security Act of 1974 

(ERISA) and the Internal Revenue Code 

(the Code) prohibit fiduciaries with 

respect to employee benefit plans and 

individual retirement accounts (IRAs) 

from engaging in self-dealing, including 

using their authority, control or 

responsibility to affect or increase their 

own compensation. These existing 

exemptions generally permit fiduciaries 

to receive compensation or other 

benefits as a result of the use of their 

fiduciary authority, control or 

responsibility in connection with 

investment transactions involving plans 

or IRAs. The proposed amendments 

would require the fiduciaries to satisfy 

uniform Impartial Conduct Standards in 

order to obtain the relief available under 

each exemption. The proposed 

amendments would affect participants 

and beneficiaries of plans, IRA owners, 

and fiduciaries with respect to such 

plans and IRAs. 

DATES: Comments: Written comments 

must be received by the Department on 

or before July 6, 2015. 

Applicability: The Department 

proposes to make these amendments 

applicable eight months after 

publication of the final exemption in the 

Federal Register. 

ADDRESSES: All written comments 

concerning the proposed amendments 

to the class exemptions should be sent 

to the Office of Exemption 

Determinations by any of the following 

methods, identified by ZRIN: 1210– 

ZA25: 

Federal eRulemaking Portal: http:// 

www.regulations.gov at Docket ID 

number: EBSA–2014–0016. Follow the 

instructions for submitting comments. 

Email to: e-OED@ dol.gov. 

Fax to: (202) 693–8474. 

Mail: Office of Exemption 

Determinations, Employee Benefits 

Security Administration, (Attention: D– 

11820), U.S. Department of Labor, 200 

Constitution Avenue NW., Suite 400, 

Washington, DC 20210. 

Hand Delivery/Courier: Office of 

Exemption Determinations, Employee 

Benefits Security Administration, 

(Attention: D–11820), U.S. Department 

of Labor, 122 C St. NW., Suite 400, 

Washington, DC 20001. Instructions. All 

comments must be received by the end 

of the comment period. The comments 

received will be available for public 

inspection in the Public Disclosure 

Room of the Employee Benefits Security 

Administration, U.S. Department of 

Labor, Room N–1513, 200 Constitution 

Avenue NW., Washington, DC 20210. 

Comments will also be available online 

at www.regulations.gov, at Docket ID 

number: EBSA–2014–0016 and 

www.dol.gov/ebsa, at no charge. 

Warning: All comments will be made 

available to the public. Do not include 

any personally identifiable information 

(such as Social Security number, name, 

address, or other contact information) or 

confidential business information that 

you do not want publicly disclosed. All 

comments may be posted on the Internet 

and can be retrieved by most Internet 

search engines. 

FOR FURTHER INFORMATION CONTACT: 

Brian Shiker, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, (202) 693–8854 

(this is not a toll-free number). 

SUPPLEMENTARY INFORMATION: The 

Department is proposing the 

amendments to the class exemptions on 

its own motion, pursuant to 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)). 

Executive Summary 

Purpose of Regulatory Action 

The Department is proposing these 

amendments to existing class 

exemptions in connection with its 

proposed regulation defining a fiduciary 

under ERISA section 3(21)(A)(ii) and 

Code section 4975(e)(3)(B) (Proposed 

Regulation), published elsewhere in this 

issue of the Federal Register. The 

Proposed Regulation specifies when an 

entity is a fiduciary by reason of the 

provision of investment advice for a fee 

or other compensation regarding assets 

of a plan or IRA. If adopted, the 

Proposed Regulation would replace an 

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