Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 66637 

would have to obtain approval of a new 

label. 

Different rules apply if a wine has a 

brand name containing a viticultural 

area name or other viticulturally 

significant term that was used as a 

brand name on a label approved before 

July 7, 1986. See 27 CFR 4.39(i)(2) for 

details. 

Regulatory Flexibility Act 

TTB certifies that this regulation will 

not have a significant economic impact 

on a substantial number of small 

entities. This regulation imposes no new 

reporting, recordkeeping, or other 

administrative requirement. Any benefit 

derived from the use of a viticultural 

area name is the result of a proprietor’s 

efforts and consumer acceptance of 

wines from that area. Therefore, no 

regulatory flexibility analysis is 

required. 

Executive Order 12866 

This rule is not a significant 

regulatory action as defined by 

Executive Order 12866. Therefore, it 

requires no regulatory assessment. 

Drafting Information 

Elisabeth C. Kann of the Regulations 

and Rulings Division drafted this notice. 

List of Subjects in 27 CFR Part 9 

Wine. 

The Regulatory Amendment 

For the reasons discussed in the 

preamble, TTB amends title 27, chapter 

I, part 9, Code of Federal Regulations, as 

follows: 

PART 9—AMERICAN VITICULTURAL 

AREAS 

■ 1. The authority citation for part 9 

continues to read as follows: 

Authority: 27 U.S.C. 205. 

Subpart C—Approved American 

Viticultural Areas 

■ 2. Subpart C is amended by adding 

§ 9.220 to read as follows: 

§ 9.220 Pine Mountain-Cloverdale Peak. 

(a) Name. The name of the viticultural 

area described in this section is ‘‘Pine 

Mountain-Cloverdale Peak’’. For 

purposes of part 4 of this chapter, ‘‘Pine 

Mountain-Cloverdale Peak’’ is a term of 

viticultural significance. 

(b) Approved maps. The three United 

States Geological Survey 1:24,000 scale 

topographic maps used to determine the 

boundary of the Pine MountainCloverdale Peak viticultural area are 

titled: 

(1) Asti Quadrangle—California, 1998; 

(2) Cloverdale Quadrangle— 

California, 1960, photoinspected 1975; 

and 

(3) Highland Springs Quadrangle— 

California, 1959, photorevised 1978. 

(c) Boundary. The Pine MountainCloverdale Peak viticultural area is 

located in Mendocino and Sonoma 

Counties, California. The boundary of 

the Pine Mountain-Cloverdale Peak 

viticultural area is as described below: 

(1) The beginning point is on the Asti 

map at the intersection of Pine 

Mountain Road and the SonomaMendocino County line, section 35, 

T12N, R10W. From the beginning point, 

proceed southwesterly on Pine 

Mountain Road to its intersection with 

a light duty road known locally as Green 

Road, section 33, T12N, R10W; then 

(2) Proceed northerly on Green Road 

approximately 500 feet to its first 

intersection with the 1,600-foot contour 

line, section 33, T12N, R10W; then 

(3) Proceed northwesterly along the 

meandering 1,600-foot contour line, 

crossing onto the Cloverdale map in 

section 32, T12N, R10W, and continue 

to the contour line’s intersection with 

the eastern boundary line of section 31, 

T12N, R10W; then 

(4) Proceed straight north along the 

eastern boundary line of section 31, 

crossing the Sonoma-Mendocino line, to 

the boundary line’s intersection with 

the 1,600-foot contour line on the west 

side of Section 29, T12N, R10W; then 

(5) Proceed northeasterly along the 

meandering 1,600-foot contour line to 

its intersection with the intermittent 

Ash Creek, section 29, T12N, R10W; 

then 

(6) Proceed northeasterly in a straight 

line, crossing onto the Asti map, to the 

unnamed 2,769-foot peak located south 

of Salty Spring Creek, section 20, T12N, 

R10W; then 

(7) Continue northeasterly in a 

straight line, crossing onto the Highland 

Springs map, to the unnamed 2,792-foot 

peak in the northeast quadrant of 

section 21, T12N, R10W; then 

(8) Proceed east-southeasterly in a 

straight line, crossing onto the Asti map, 

to the unnamed 2,198-foot peak in 

section 23, T12N, R10W; and then 

(9) Proceed south-southeasterly in a 

straight line, returning to the beginning 

point. 

Signed: July 12, 2011. 

John J. Manfreda, 

Administrator. 

Approved: September 16, 2011. 

Timothy E. Skud, 

Deputy Assistant Secretary (Tax, Trade, and 

Tariff Policy). 

[FR Doc. 2011–27813 Filed 10–26–11; 8:45 am] 

BILLING CODE 4810–31–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2570 

RIN 1210–AB49 

Prohibited Transaction Exemption 

Procedures; Employee Benefit Plans 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Final rule. 

SUMMARY: This document contains a 

final rule that supersedes the existing 

procedure governing the filing and 

processing of applications for 

administrative exemptions from the 

prohibited transaction provisions of the 

Employee Retirement Income Security 

Act of 1974 (ERISA), the Internal 

Revenue Code of 1986 (the Code), and 

the Federal Employees’ Retirement 

System Act of 1986 (FERSA). The 

Secretary of Labor is authorized to grant 

exemptions from the prohibited 

transaction provisions of ERISA, the 

Code, and FERSA and to establish an 

exemption procedure to provide for 

such relief. This final rule clarifies and 

consolidates the Department of Labor’s 

exemption procedures and provides the 

public with a more comprehensive 

description of the prohibited transaction 

exemption process. 

DATES: Effective Date: This final rule is 

effective December 27, 2011, and 

applies to all exemption applications 

filed on or after that date. 

FOR FURTHER INFORMATION CONTACT: Eric 

A. Raps, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, Room N–5700, 

U.S. Department of Labor, Washington, 

DC 20210, telephone (202) 693–8532. 

This is not a toll-free number. 

SUPPLEMENTARY INFORMATION: 

A. Background 

On August 30, 2010, the Department 

published a Notice of Proposed 

Rulemaking in the Federal Register (75 

FR 53172) that would update the 

existing procedure governing the filing 

and processing of applications for 

administrative exemptions from the 

prohibited transaction provisions of 

ERISA, the Code, and FERSA, and 

invited written comments from the 

public concerning its contents. These 

comments are available for review at 

http://www.regulations.gov and also 

under ‘‘Public Comments’’ on the ‘‘Laws 

& Regulations’’ page of the Department’s 

Employee Benefits Security 

Administration (EBSA) Web site at 

http://www.dol.gov/ebsa. 

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66638 Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 

1See H.R. Rep. No. 1280, 93d Cong., 2d Sess. 310 

(1974), and also section 102 of Presidential 

Reorganization Plan No. 4 of 1978 (3 CFR part 332 

(1978), reprinted in 5 U.S.C. app. at 672 (2006) and 

in 92 Stat. 3790 (1978)), effective December 31, 

1978, which generally transferred the authority of 

the Secretary of the Treasury to issue administrative 

exemptions under section 4975(c)(2) of the Code to 

the Department of Labor. 

The final rule contained in this 

document revises the prohibited 

transaction exemption procedure to 

reflect changes in the Department’s 

exemption practices since the previous 

exemption procedure was issued in 

1990 (the 1990 Exemption Procedure). 

Among other things, key elements of the 

exemption policies and guidance 

previously found in ERISA Technical 

Release 85–1 and the 1995 Exemption 

Publication have been consolidated 

within the text of a unitary, 

comprehensive final regulation. 

Adoption of this updated procedure 

should also promote the prompt and 

efficient consideration of all exemption 

applications by clarifying the types of 

information and documentation 

generally required for a complete filing, 

by affording expanded opportunities for 

the electronic submission of information 

and comments relating to an exemption, 

and by providing plan participants and 

other interested persons with a more 

thorough understanding of the 

exemption under consideration. 

B. Overview of the Final Rule and 

Comments 

The exemption procedure contained 

in this document (and codified at 29 

CFR part 2570, subpart B) consists of 23 

discrete sections (§ 2570.30 through 

§ 2570.52), arranged by topic and 

generally reflecting the chronological 

order of steps involved in processing an 

exemption application. Set forth below 

is a summary of those aspects of the 

proposed rule on which the Department 

received comments, and the 

Department’s response to those 

comments. Individuals interested in 

obtaining information concerning the 

content of the proposed rule not 

discussed herein should refer to the 

Notice of Proposed Rulemaking at 75 FR 

53172. 

Section 2570.30 Scope of the 

Regulation 

Section 2570.30(b) of the proposed 

rule stated that ‘‘the Department may 

conditionally or unconditionally 

exempt any fiduciary or transaction, or 

class of fiduciaries or transactions, from 

all or part of the restrictions imposed by 

section 406 of ERISA and the 

corresponding restrictions of the Code 

and FERSA.’’ One commenter suggested 

that this formulation was too restrictive 

because, under the foregoing statutes, 

the Department has the authority to 

exempt not only fiduciaries engaged in 

prohibited transactions, but parties in 

interest (or disqualified persons under 

the Code) as well. Accordingly, the 

commenter requested that the 

Department broaden the scope of 

section 2570.30(b) to include ‘‘parties in 

interest.’’ 

The Department notes that section 

2570.30(b) of the proposed rule simply 

restated the statutory language found at 

section 408(a) of ERISA concerning the 

scope of the Department’s authority to 

grant administrative exemptions from 

the prohibited transaction provisions of 

ERISA. Because section 408(a) of the 

Act provides the Department with the 

authority to grant exemptions for ‘‘any 

fiduciary or transaction, or class of 

fiduciaries or transactions,’’ the 

Department also has the authority to 

provide exemptive relief to nonfiduciary parties in interest who engage 

in plan transactions. Therefore, it is 

unnecessary to adopt the commenter’s 

suggested amendment. In this regard, 

the Department notes that, consistent 

with the legislative history of the Act,1

the Department has routinely granted 

exemptive relief to non-fiduciary parties 

in interest and disqualified persons, and 

will continue to exercise its authority, 

as appropriate. 

Section 2570.31 Definitions 

Section 2570.31 of the proposed rule 

defines the following terms for purposes 

of the exemption procedure regulation: 

affiliate, class exemption, Department, 

exemption transaction, individual 

exemption, party in interest, pooled 

fund, qualified appraisal report, 

qualified independent appraiser, and 

qualified independent fiduciary. 

Definition of ‘‘Affiliate’’—Section 

2570.31(a) of the proposed rule 

specifically defined the term ‘‘affiliate’’ 

to include any employee or officer of the 

person who is highly compensated or 

‘‘[h]as direct or indirect authority, 

responsibility, or control regarding the 

custody, management, or disposition of 

plan assets * * * ’’ One commenter 

expressed the view that the language of 

this definition should be clarified so 

that the term ‘‘plan assets’’ would refer 

only to those plan assets involved in the 

exemption transaction. The commenter 

stated that, absent such a modification, 

a person could be deemed to be an 

affiliate if he or she had responsibility 

with respect to the assets of any plan, 

without regard to whether the authority 

or control relates to the plan at issue or 

the plan assets at issue. 

In response to the commenter’s 

suggestion, the Department has 

modified the definition of ‘‘affiliate’’ at 

section 2570.31(a) to clarify that the 

term applies to any employee or officer 

of the person who has direct or indirect 

authority, responsibility, or control 

regarding the custody, management, or 

disposition of plan assets involved in 

the subject exemption transaction. In 

addition, the Department, on its own 

motion, has further modified the term 

‘‘affiliate’’ to clarify the scope and 

meaning of the term ‘‘control’’ that is 

contained within that definition. 

Nature and Extent of Independence of 

Qualified Independent Appraisers and 

Fiduciaries—Two commenters objected 

to the definition of a ‘‘qualified 

independent fiduciary’’ (section 

2570.31(j) of the proposed rule), which 

requires that a person serving in such 

capacity be ‘‘independent of and 

unrelated to any party in interest 

engaging in the exemption transaction 

and its affiliates.’’ One of the 

commenters also expressed a similar 

reservation with respect to the 

definition of a ‘‘qualified independent 

appraiser’’ (section 2570.31(i) of the 

proposed rule). One commenter opined 

that the words ‘‘independent of’’ and 

‘‘unrelated to’’ are not defined in the 

proposed rule, particularly with respect 

to employees of the independent 

fiduciary who are related to employees 

of the party in interest (spouses, 

children, in-laws, etc.), and therefore 

should be deleted in the interests of 

clarity. Another commenter took the 

position that, if the Department’s actual 

purpose in utilizing the foregoing 

language was to bar a qualified 

independent fiduciary from being an 

affiliate of the party in interest engaging 

in the transaction, then the Department 

should revise and simplify the text of 

section 2570.31(j) of the final rule 

accordingly. 

As noted previously, the purpose of 

including these definitions in the 

proposed rule was to emphasize that 

any independent fiduciary or appraiser 

retained in connection with an 

exemption transaction must not only be 

‘‘qualified’’ (i.e., knowledgeable as to its 

duties and responsibilities under ERISA 

and knowledgeable as to the subject 

transaction and the markets, if any, 

where such transactions normally 

occur) to serve in that capacity, but also 

free from any relationships with the 

party in interest or its affiliates that 

could improperly affect its judgment. 

Because such relationships may be 

relevant to the Department’s 

determination as to whether an 

appraiser or fiduciary is independent, 

the Department has not adopted the 

suggestions of the commenters for 

modifying these definitions. 

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Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 66639 

Standards for Measuring 

Compensation Received By Qualified 

Independent Appraisers and 

Fiduciaries—Several commenters 

indicated that the Department’s use of 

the word ‘‘income’’ in the definitions in 

sections 2570.31(i) and (j) (and also in 

sections 2570.34(c)(7) and (d)(8)) to 

describe the overall annual 

compensation received by qualified 

independent appraisers and fiduciaries 

is problematic. Two of these 

commenters expressed the view that 

substitution of the word ‘‘revenues’’ for 

income would be less susceptible to 

misinterpretation and more consistent 

with prior Departmental practice. One 

of the commenters also suggested that 

the text of section 2570.34(d)(8) be 

modified to reflect the substitution of 

the word ‘‘revenues’’ in place of the 

word ‘‘income.’’ Another commenter 

agreed with this view, and pointed out 

that the term ‘‘income’’ as a definitional 

term lends itself to a variety of 

interpretations—gross income, taxable 

income, etc. Similarly, another 

commenter suggested the substitution of 

the term ‘‘gross revenue’’ in lieu of the 

term ‘‘income’’ with respect to the 

compensation received by qualified 

independent appraisers. In general, the 

Department concurs, and has modified 

sections 2570.31(i) and (j) and sections 

2570.34(c)(7) and (d)(8) in the final rule 

by substituting, where appropriate, the 

term ‘‘revenue’’ for the term ‘‘income.’’ 

In defining the terms ‘‘qualified 

independent appraiser’’ (section 

2570.31(i)) and ‘‘qualified independent 

fiduciary’’ (section 2570.31(j)), the 

proposed rule provided that, in each 

instance, the determination as to the 

independence of the appraiser or 

fiduciary would be made ‘‘on the basis 

of all relevant facts and circumstances.’’ 

The definition of a ‘‘qualified 

independent fiduciary’’ further 

provided that, ‘‘[a]s a general matter, an 

independent fiduciary retained in 

connection with an exemption 

transaction must not receive more than 

a de minimis amount of compensation 

(including amounts received for 

preparing fiduciary reports and other 

related duties) from the parties in 

interest to the transaction or their 

affiliates. For purposes of determining 

whether the compensation received by 

the fiduciary is de minimis, all 

compensation received by the fiduciary 

is taken into account. Such de minimis 

amount will ordinarily constitute 1% or 

less of the annual income of the 

qualified independent fiduciary. In all 

events, the burden is on the applicant to 

demonstrate the independence of the 

fiduciary.’’ The definition of a 

‘‘qualified independent appraiser’’ 

under the proposed rule described the 

compensation to be received by such 

appraisers in virtually identical terms. 

The Department received a number of 

comments objecting to the content of the 

foregoing definitions under the 

proposed rule. Two commenters 

suggested that a de minimis or 

percentage test bears, at best, a narrow 

relationship to any duty or commitment 

to impartially perform independent 

fiduciary responsibilities under ERISA, 

and does not take into account the 

complexity, risk, expertise, or 

expenditure of time that such a 

commitment may entail. One 

commenter expressed the view that 

inserting the proposed de minimis and 

1% standards in the text of a final 

regulation would mean that any firm 

that provides independent fiduciary 

services and whose compensation 

exceeds such thresholds is 

presumptively subject to improper 

influence from a party in interest to the 

exemption transaction. Two 

commenters further expressed the view 

that, if the 1% and de minimis aspects 

of the proposed rule were ultimately 

adopted, plan fiduciaries and officials 

required to retain independent 

fiduciaries and appraisers in connection 

with complex exemption transactions 

would inevitably limit their selections 

to a handful of large banking, fiduciary, 

or valuation firms whose compensation 

would satisfy the foregoing standards, 

thus reducing the overall level of 

competition for such services. By way of 

example, one commenter posited a 

complex exemption transaction which 

could reasonably be expected to 

command an independent fiduciary fee 

of $150,000 in a given year to be paid 

by a party in interest to the exemption 

transaction; the commenter concluded 

that, under the proposed rule, only 

firms with annual revenues of 

$15,000,000 or more would be 

presumptively independent of the party 

in interest. 

One commenter emphasized the 

negative effect that the de minimis 

standard would have upon smaller 

fiduciary and valuation firms, opining 

that smaller firms often possess greater 

expertise and objectivity with respect to 

evaluating exemption transactions than 

their larger institutional counterparts, 

and often provide their services to plans 

at less expense as a result of lower 

overhead costs. Two commenters 

expressed the view that the reduced 

competition resulting from the adoption 

of a 1% benchmark would likely have 

the undesirable effect of driving up the 

costs of engaging an independent 

fiduciary for exemption transactions; 

one of these commenters also ventured 

that such a provision might cause plans, 

rather than parties in interest, to pay the 

fees of such a fiduciary. Another 

commenter opined that the proposed 

compensation limitations in the 

proposed rule would make it especially 

difficult for newly-established 

independent fiduciary firms with few, if 

any, conflict of interest or affiliation 

problems to compete for significant 

assignments with respect to exemption 

transactions. This commenter further 

stated that this market access problem 

for new firms would persist even if the 

Department had specified a higher 

compensation threshold (e.g., 5%) in 

connection with the proposed de 

minimis standard. 

Several commenters stated that the 

1% compensation threshold for 

independent fiduciaries contained in 

the proposed rule is substantially lower 

than the percentage guidelines often 

utilized by the Department in past 

administrative exemptions (and in other 

ERISA contexts) for evaluating whether 

fiduciaries have a relationship with a 

party in interest that renders them 

susceptible to inappropriate influences 

or pressures. Two commenters 

specifically noted that the Department 

has, in past individual exemptions, 

permitted independent fiduciaries to 

derive as much as 5% of their 

compensation from parties in interest 

involved in the exemption transaction. 

Several commenters stated that there are 

currently only a small number of firms 

that perform an independent fiduciary 

role in connection with complex 

exemption transactions, and that the 

restrictions on compensation contained 

in the proposed rule would tend to deter 

such firms from accepting these types of 

engagements in the future. One 

commenter also stated that the proposed 

de minimis /1% benchmark does not 

account for the fact that an independent 

fiduciary’s fee arrangement often 

requires that a significant portion of the 

fiduciary’s compensation is used to pay 

outside lawyers, actuaries, and other 

consultants for services that enable the 

fiduciary to meet its duties to the plan. 

Accordingly, several commenters 

expressed the opinion that the 

Department should consider alternatives 

in the final rule to the 1% and de 

minimis compensation standards for 

defining and evaluating the 

independence of fiduciaries and 

appraisers retained in connection with 

exemption transactions. In this 

connection, one commenter suggested 

that the Department should consider its 

proposed regulation relating to the 

definition of ‘‘adequate consideration’’ 

under section 3(18) of ERISA (see 53 FR 

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66640 Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 

2Specifically, the commenter suggested 

modifications to the language of sections 

2570.35(a)(7) and 2570.35(b) to make allowances for 

the confidentiality of information submitted to the 

Department in connection with an exemption 

application. Section 2570.35(a)(7) requires that an 

application for an individual exemption include a 

brief statement to the Department disclosing 

whether, within the last five years, any plan 

affected by the exemption transaction or any party 

in interest involved in the exemption transaction 

has been under investigation or examination by, or 

has been engaged in litigation or a continuing 

controversy with, the Department, the Internal 

Revenue Service, the Justice Department, the 

Pension Benefit Guaranty Corporation, or the 

Federal Retirement Thrift Investment Board 

involving compliance with provisions of ERISA, 

provisions of the Code relating to employee benefit 

plans, or provisions of FERSA relating to the 

Federal Thrift Savings Fund. Section 2570.37(b) 

states that if, at any time during the pendency of 

an exemption application, the applicant or any 

other party in interest who would participate in the 

exemption transaction becomes the subject of an 

investigative or enforcement action by the foregoing 

agencies, the applicant must promptly notify the 

Department of such a fact. In considering this 

comment, the Department determined that it was 

appropriate to address the issue of information 

designated as confidential by an applicant under 

section 2570.33 of the final rule. 

16732, proposed May 17, 1988), which 

enumerated various criteria for 

determining whether a plan fiduciary 

has made a good faith determination of 

the fair market value of an asset (other 

than a security for which there is a 

generally recognized market). One of the 

proposed criteria would require that the 

relevant fiduciary be independent of all 

parties to the transaction (other than the 

plan) and that the assessment of the 

independence of the fiduciary should be 

made in light of all relevant facts and 

circumstances. In this regard, the 

commenter noted that none of the 

proposed criteria made any references to 

amounts or percentages of 

compensation received by a fiduciary 

from a party in interest. 

While expressing various concerns 

about the possible effects of an express 

limitation on qualified independent 

fiduciary compensation, another 

commenter nevertheless acknowledged 

that a fiduciary whose compensation 

from parties in interest with respect to 

a proposed transaction represents a 

significant portion of the fiduciary’s 

revenues can be, or can be perceived to 

be, susceptible to improper influence in 

carrying out its fiduciary duties. 

Accordingly, this commenter suggested 

the deletion of the Department’s 

language at section 2570.31(j) in the 

proposed rule concerning de minimis 

amounts and the 1% compensation 

standard, and substituting a number of 

factors that the Department would 

utilize in evaluating the independence 

of a fiduciary. These factors would 

include the complexity of the 

exemption transaction, the amount of 

plan assets involved in the exemption 

transaction (expressed in both absolute 

terms and as a percentage of the plan’s 

total assets), and the expected duration 

of the fiduciary’s engagement. 

In response to these comments, the 

Department wishes to point out that, in 

defining the terms ‘‘qualified 

independent appraiser’’ and ‘‘qualified 

independent fiduciary’’, the proposed 

rule provided that, in each instance, the 

final determination as to the 

independence of the appraiser or 

fiduciary is made ‘‘on the basis of all 

relevant facts and circumstances.’’ The 

Department also notes that the 

references to the one percent standard 

for compensation received by appraisers 

and fiduciaries in connection with an 

exemption transaction was not intended 

as an absolute limit with respect to 

compensation received by such persons 

from parties in interest. 

Thus, the Department concurs that 

this provision should be clarified. In 

this regard, the Department notes that 

the percentage of an appraiser’s or 

fiduciary’s annual revenue derived from 

a party in interest (or its affiliates) to an 

exemption transaction is an important 

factor in determining whether such 

person is, in fact, independent of the 

party in interest engaging in the covered 

transaction. The Department also 

continues to believe that the percentage 

of an appraiser’s or fiduciary’s annual 

revenue that is attributable to a party in 

interest should be a de minimis amount. 

Accordingly, absent facts and 

circumstances demonstrating a lack of 

independence, the Department will 

operate according to the presumption 

that such appraiser or fiduciary will be 

independent if the revenues it receives 

or is projected to receive, within the 

current federal income tax year, from 

parties in interest (and their affiliates) to 

the transaction are not more than 2% of 

such appraiser’s or fiduciary’s annual 

revenues based upon its prior income 

tax year. Although the presumption 

does not apply when the 

aforementioned percentage exceeds 2%, 

an appraiser or fiduciary nonetheless 

may be considered independent based 

upon other facts and circumstances 

provided that the appraiser or fiduciary 

receives or is projected to receive 

revenues that are not more than 5% 

within the current federal income tax 

year, from parties in interest (and their 

affiliates) to the transaction based upon 

its prior income tax year. 

Accordingly, it is the Department’s 

view that the language contained in 

sections 2570.31(i) and (j) in the final 

rule provides the Department with 

sufficient flexibility to take into account 

any and all relevant facts and 

circumstances that may have a bearing 

on its assessment of the qualifications 

and independence of appraisers and 

fiduciaries. In this connection, the 

Department further notes that the 

previously referenced factors cited by 

the commenter may be taken into 

account under this ‘‘facts and 

circumstances’’ standard. 

Section 2570.33 Applications the 

Department Will Not Ordinarily 

Consider 

Section 2570.33 describes exemption 

applications that the Department will 

not ordinarily consider, such as 

applications involving a transaction or 

transactions that are the subject of an 

investigation under the reporting, 

disclosure and fiduciary responsibility 

provisions in parts 1 or 4 of subtitle B 

of Title I of ERISA. In connection with 

the application content provisions of the 

exemption regulation, one commenter 

suggested that the Department modify 

the language of the final rule to ensure 

the confidentiality of information 

disclosed in an application (or in any 

amendments or supplements thereto).2

In support of its view, the commenter 

stated that investigations by EBSA are 

confidential, and that the EBSA 

Enforcement Manual makes information 

about current enforcement proceedings 

subject to strict confidentiality (except 

with respect to other governmental 

agencies). The commenter also argued 

that, absent an amendment excluding 

this information from public access, 

certain applicants affected by the 

application content requirements could 

be stigmatized or might be deterred from 

applying for exemptive relief from the 

Department. 

The Department does not concur that 

the final rule should be modified to 

address the commenter’s concerns with 

respect to preserving the confidentiality 

of certain information submitted as part 

of an exemption application. Because 

such information comprises part of the 

record in support of an exemption, it 

enables the public to understand the 

basis for the Department’s decision. 

Section 2570.51(a) of both the 1990 

Exemption Procedure and the proposed 

rule stipulates that ‘‘[t]he administrative 

record of each exemption application 

will be open to public inspection and 

copying.’’ Thus, the Department will not 

process exemption applications 

containing such designations unless the 

claim of confidentiality and privilege is 

withdrawn or the Department 

determines that the designated 

information is not material to the 

exemption request. Accordingly, in 

order to provide further clarity, the 

Department has redesignated paragraph 

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Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 66641 

(c) of section 2570.33 as paragraph (d), 

and a new paragraph (c) describing the 

Department’s policy on claims of 

confidentiality has been inserted. 

Section 2570.34 Information To Be 

Included in Every Exemption 

Application 

Disclosure of Compensation Received 

by Qualified Independent Appraisers 

and Fiduciaries—Section 2570.34(d)(8) 

of the proposed rule would have 

required that any statement provided by 

a qualified independent fiduciary in 

support of an exemption application 

include, among other things, a 

representation ‘‘disclosing the 

percentage of such fiduciary’s current 

income that was derived from any party 

in interest involved in the transaction or 

its affiliates; in general, such percentage 

shall be computed by comparing, in 

fractional form: (i) The amount of the 

fiduciary’s projected personal or 

business income for the current federal 

income tax year that will be derived 

from the party in interest or its affiliates 

(expressed as a numerator); and (ii) The 

fiduciary’s gross personal or business 

income (excluding fixed, nondiscretionary retirement income) for the 

prior federal income tax year (expressed 

as a denominator).’’ Section 

2570.34(c)(7) of the proposed rule 

contained similar requirements for the 

content of statements submitted by a 

qualified independent appraiser in 

support of an exemption application. 

One commenter suggested that this 

provision be amended in the final rule 

to expressly state that, in instances 

where a qualified independent fiduciary 

provides its services to a plan through 

a specialized unit which is the 

subsidiary or affiliate of a larger 

business organization, the fiduciary’s 

revenues (the denominator of the 

fraction described in this subsection) 

should be based solely upon the 

revenues of the specialized unit and not 

the larger organization. The commenter 

stated that, because the purpose of 

examining the proportion of the 

independent fiduciary’s compensation 

derived from parties in interest is to 

determine the fiduciary’s lack of 

susceptibility from undue influence, the 

revenues of the specialized unit should 

be the proper focus of such an inquiry. 

In addition, the commenter offered 

the view that the time frames contained 

in the foregoing denominator should 

reflect the greater of (i) The prior federal 

income tax year’s income or (ii) the 

qualified independent fiduciary’s good 

faith estimate of the current year’s 

income. In the commenter’s view, the 

relationship between the compensation 

in connection with the transaction in 

question and the current financial state 

of the business is as least as relevant as 

data that may be as much as a year old 

when the calculation is made. 

Because, as previously noted, the 

focus of this provision is on the 

revenues generated by the independent 

fiduciary, the Department believes no 

further changes to the language of this 

provision are necessary. Further, the 

Department declines to adopt the 

commenter’s suggested modification of 

the content of the denominator (as 

described at section 2570.34(d)(8)) with 

respect to the relevant time frame for 

computing the revenues received by an 

independent fiduciary from all sources. 

The Department is of the view that the 

formula described in the final rule 

affords greater objectivity and certainty 

in determining such amounts. 

Specialized Statements—Section 

2570.34(c) requires that a qualified 

independent appraiser act solely on 

behalf of the plan in preparing 

statements submitted in support of an 

application for exemption. In the 

Department’s view, any appraiser 

retained to perform an asset valuation 

on behalf of a plan must discharge its 

responsibilities in an independent and 

impartial manner. In this regard, the 

Department expects the qualified 

independent appraiser’s determination 

to be unbiased, fair, and objective, and 

to be made in good faith and based on 

a detailed analysis of the prevailing 

circumstances then known to the 

appraiser. The same general standards 

of professional conduct also apply, as 

appropriate, to statements prepared by 

other third party experts under section 

2570.34(e). 

Section 2570.35 Information To Be 

Included in Applications for Individual 

Exemptions Only 

Disclosure of party in interest 

investments—Under section 

2570.35(a)(16), as it appeared in the 

1990 Exemption Procedure, the extent 

of applicant disclosure of plan 

investments with a party in interest was 

limited to whether or not the assets of 

the affected plans(s) were invested in 

loans to any party in interest involved 

in the exemption transaction, property 

leased to any such party in interest, or 

securities issued by any party in interest 

involved in the exemption transaction. 

Where such investments existed, the 

applicant was required to include an 

additional statement detailing the 

nature and extent of these investments, 

and whether a statutory or 

administrative exemption covered such 

investments. 

In the proposed rule, the Department 

proposed an amendment to this 

provision that would have required an 

applicant to disclose whether or not the 

assets of the affected plan(s) had been 

invested directly or indirectly in any 

other transactions (e.g., securities 

lending or extensions of credit), whether 

exempt or non-exempt, with the party in 

interest involved in the exemption 

transaction. Accordingly, such 

disclosure would not have been limited 

to plan investments in loans or leases 

involving the party in interest, or 

securities issued by the party in interest. 

In cases where any such investments 

existed, the applicant would have been 

required to provide the Department with 

additional information describing, 

among other things: (1) The type of 

investment to which the statement 

pertains; (2) The aggregate fair market 

value of all investments of this type as 

reflected in the plan’s most recent 

annual report; (3) The approximate 

percentage of the fair market value of 

the plan’s total assets as shown in such 

annual report that is represented by all 

investments of this type; and (4) The 

applicable statutory or administrative 

exemption covering these investments 

(if any). 

One commenter expressed the view 

that this proposed revision, which 

requires an exemption applicant to 

disclose all direct or indirect 

investments of a plan with the party in 

interest (regardless of whether such 

investments were exempt or nonexempt under the terms of ERISA) was 

‘‘overbroad’’ and would be 

‘‘extraordinarily burdensome’’ for 

applicants. The commenter stated that, 

for a plan with $10 billion in assets, 

there could be literally thousands of 

transactions with or through a party in 

interest that would be required to be 

disclosed under this revised provision, 

regardless of how relevant these 

transactions might be to the exemption 

under consideration. The commenter 

questioned whether the disclosure of 

these transactions (and the costs 

associated with such disclosure) would 

result in a more efficient exemption 

process, and added that it desired to see 

a continuation of the Department’s 

existing practice of inquiring during the 

pendency of the exemption application 

about other relationships and 

transactions concerning a plan’s 

investments with a party in interest. 

After consideration of the comment, 

the Department generally concurs with 

the concerns expressed by the 

commenter that compliance with the 

disclosure requirements described in 

the proposed revision to section 

2570.35(a)(16) may pose practical 

difficulties for some prohibited 

transaction exemption applicants. The 

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purpose of this disclosure provision (as 

explained in the preamble of the 1990 

Exemption Procedure) is to enable the 

Department to determine whether the 

exemption transaction, in conjunction 

with other plan investments involving 

parties in interest, would unduly 

concentrate the plan’s assets in certain 

investments and parties so as to raise 

questions under the fiduciary 

responsibility provisions of ERISA. 

Accordingly, the Department has 

determined to modify the language in 

the final rule by reverting to the existing 

requirement, contained in the 1990 

Exemption Procedure, which requires 

an applicant for an individual 

exemption to disclose information 

regarding any plan investments in loans 

to, property leased to, or securities 

issued by, any party in interest involved 

in the exemption transaction. In 

addition, it is noted that section 

2570.35(a)(16) of the final rule does not 

preclude the Department from 

requesting, during the pendency of the 

exemption application, additional 

information from the applicant. 

Retroactive exemptions—In the 

proposed rule, the Department added a 

new section 2570.35(d) to provide 

guidance to applicants who are seeking 

retroactive relief for past prohibited 

transactions. This new subsection 

incorporates the standards for 

retroactive exemptions that were 

described by the Department in ERISA 

Technical Release 85–1 (January 22, 

1985). The Department believes that the 

inclusion of these standards as part of 

an updated and comprehensive 

exemption procedure regulation will 

provide greater clarity to applicants for 

retroactive relief, thereby facilitating the 

prompt evaluation of such applications. 

Among other things, the new subsection 

reaffirms that, as a general matter, the 

Department will consider granting 

retroactive relief for transactions already 

consummated only if the safeguards 

necessary for the grant of a prospective 

exemption were in place at the time of 

the consummated transaction. In this 

regard, an applicant should provide 

evidence that it acted in good faith at 

the time of the subject transaction by 

taking reasonable and appropriate steps 

to protect the plan from abuse and 

unnecessary risk. The new subsection 

also enumerates a variety of objective 

factors that the Department ordinarily 

takes into account when evaluating 

whether the conduct of the applicant at 

the time of a previously consummated 

transaction satisfies the good faith 

standard. 

One commenter expressed concern 

about the practical effect of one of these 

factors (section 2570.35(d)(2)(v)), under 

which the Department would take into 

account whether ‘‘the applicant has 

submitted evidence that the plan 

fiduciary did not engage in an act or 

transaction knowing that such act or 

transaction was prohibited under 

section 406 of ERISA and/or section 

4975 of the Code. In this regard, the 

Department will accord appropriate 

weight to the submission of a 

contemporaneous, reasoned legal 

opinion of counsel, upon which the 

plan fiduciary relied in good faith before 

entering the act or transaction * * *.’’ 

The commenter posited a situation in 

which, during the pendency of an 

application for prospective exemptive 

relief, certain exigencies (such as a 

change in the tax laws) create an 

incentive for a party in interest to 

immediately consummate the proposed 

transaction, despite the absence of 

administrative relief from the 

Department at that point in time. The 

commenter expressed the view that in 

such circumstances, where an applicant 

subsequently amends its application to 

obtain retroactive relief for a past 

prohibited transaction, the Department 

should adopt an accommodating 

posture with respect to those exigent 

circumstances that might induce a party 

in interest to a transaction to engage in 

that transaction prior to receiving a final 

grant of exemption. 

The Department notes that the good 

faith factors enumerated under section 

2570.35(d) do not constitute an 

exclusive or an exhaustive list of the 

criteria that the Department may 

consider in evaluating an application for 

a retroactive exemption. The 

determination of whether a fiduciary 

has acted in good faith will be based 

upon a review of the totality of facts and 

circumstances surrounding a past 

prohibited transaction (including the 

exigencies of the transaction) before 

determining whether a retroactive 

exemption is warranted. In this 

connection, the applicant for a 

retroactive exemption must demonstrate 

that the safeguards necessary for the 

grant of a prospective transaction were 

in place at the time that the transaction 

was consummated. Accordingly, the 

Department has determined that no 

modifications to section 2570.35(d)(2)(v) 

are warranted. 

Section 2570.37 Duty To Amend and 

Supplement Exemption Applications 

Section 2570.37(a) of the proposed 

rule required that an exemption 

applicant promptly notify the 

Department if, during the pendency of 

an exemption application, any material 

fact or representation contained in the 

application changes or is inaccurate. 

This section also required that, during 

the pendency of the exemption 

application, the applicant promptly 

notify the Department concerning any 

material fact or representation that had 

been omitted from the application. The 

determination whether, under the 

totality of the facts and circumstances, 

a particular statement contained in (or 

omitted from) an exemption application 

constitutes a material fact or 

representation is made by the 

Department. 

One commenter interpreted the 

phrase ‘‘during the pendency of the 

application’’ contained in paragraph (a) 

of section 2570.37 to mean the period 

‘‘under which the application/ 

exemption is in force.’’ With this 

interpretation in mind, the commenter 

expressed the view that changes to the 

facts underlying the original grant of an 

exemption (such as the size of a 

company, its business affiliations, lines 

of business, etc.) occur all of the time. 

As a consequence, the commenter 

opined that if a party in interest to a 

covered transaction fails to report any 

changes at all to the facts and 

representations underlying a granted 

exemption, such exemption may 

automatically become invalid. 

Accordingly, the commenter proposed 

that the Department should limit the 

changes that need to be reported to the 

Department to those occurring prior to 

the granting of an exemption. 

The Department does not concur with 

the commenter’s interpretation of the 

words ‘‘during the pendency of the 

application’’. The applicable timeframe 

covered by section 2570.37(a) is the 

period between the submission of an 

exemption application and the point at 

which final administrative action is 

taken by the Department with respect to 

the application. In the case of a granted 

exemption involving a one-time 

transaction that has been consummated 

in accordance with the terms and 

conditions of the exemption, subsequent 

events do not affect the validity of the 

exemptive relief granted by the 

Department. In instances where the 

Department has granted an exemption 

for a transaction which is continuing in 

nature (e.g., a lease), section 2570.49(d) 

of the procedure would apply. This 

provision stipulates that ‘‘[f]or 

transactions that are continuing in 

nature, an exemption ceases to be 

effective if, during the continuation of 

the transaction, there are material 

[emphasis added] changes to the 

original facts and representations 

underlying such exemption or if one or 

more of the exemption’s conditions 

cease to be met.’’ The materiality of 

such changes is determined by the 

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3Where applicants are in doubt as to the 

continued validity of exemptive relief that has been 

granted, such applicants may seek guidance from 

EBSA’s Office of Exemption Determinations. 

Department in light of the totality of the 

surrounding facts and circumstances.3

Accordingly, after considering this 

comment, the Department has 

determined not to modify the language 

of section 2570.37(a) in the final rule. 

However, in the interests of clarity, the 

Department has, on its own motion, 

deleted paragraph (d) of section 2570.37 

in the final rule. 

Sections 2570.40 and 2570.41 

Conferences and Final Denial Letters 

The 1990 Exemption Procedure 

stipulated that the Department would 

attempt to schedule a conference 

concerning a tentative denial letter at a 

mutually convenient date and time 

during the 45-day period following the 

later of (1) The date the Department 

received the applicant’s request for a 

conference, or (2) the date the 

Department notified the applicant, after 

reviewing additional information 

submitted pursuant to section 2570.39, 

that it was not prepared to propose the 

requested exemption. The Department’s 

proposal (at section 2570.40) would 

have replaced this 1990 rule by 

substituting a simplified procedure in 

order to facilitate the prompt and 

efficient scheduling of such 

conferences. The Department has largely 

retained the proposed language of this 

conference provision in the final rule, 

except for certain technical 

clarifications. In instances where the 

applicant has requested a conference 

and stated an intent to submit 

additional information in support of the 

application, the Department generally 

will schedule a conference for a date 

and time that occurs within 20 days 

after the date on which the Department 

has provided notification to the 

applicant that it remains unprepared to 

propose the requested exemption based 

upon the additional information 

submitted by the applicant. 

Alternatively, in instances where the 

applicant requests a conference without 

expressing an intent to submit 

additional information pursuant to 

section 2570.39, the Department 

generally will schedule a conference for 

a date and time that occurs within 40 

days after the date of the issuance of the 

tentative denial letter. 

The Department, on its own motion, 

has made technical corrections to 

section 2570.40 in the final rule to 

clarify how the rule would apply where 

an exemption applicant, within 20 days 

of receiving a tentative denial letter, 

requests a conference and expresses an 

intent to submit additional written 

information, but fails to provide such 

information within 40 days from receipt 

of the tentative denial letter. 

To address this situation, the 

Department has inserted a new 

paragraph (f) in section 2570.40. This 

new paragraph specifies that, where an 

applicant has requested a conference 

and expressed an intent to submit 

additional information pursuant to 

section 2570.39(b), but has failed to 

furnish such information within 40 days 

from the date of the tentative denial 

letter, the Department will generally 

schedule a conference for a date and 

time occurring within 60 days after the 

date of the issuance of the tentative 

denial letter. As part of this technical 

correction, the Department also has 

redesignated sections 2570.40(f) and (g) 

of the proposed rule, respectively, as 

sections 2570.40(g) and (h) of the final 

rule. 

In addition, the Department has made 

an additional technical correction to the 

text of section 2570.41 of the final rule 

by deleting the reference in paragraph 

(b) to ‘‘section 2570.40(e)’’ and 

substituting ‘‘section 2570.40.’’ 

Section 2570.49 Limits on the Effect of 

Exemptions 

The Department, on its own motion, 

has made a technical refinement to this 

section of the final rule by adding a new 

paragraph (e), which clarifies that the 

Department possesses the sole 

discretion to determine the materiality 

of any fact or representation which 

underlies an administrative exemption. 

C. Regulatory Impact Analysis 

Executive Order 12866 

Under Executive Order 12866 (58 FR 

51735), the Department must determine 

whether a regulatory action is 

‘‘significant’’ and therefore subject to 

review by the Office of Management and 

Budget (OMB). Section 3(f) of the 

Executive Order defines a ‘‘significant 

regulatory action’’ as an action that is 

likely to result in a rule (1) Having an 

annual effect on the economy of $100 

million or more, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. Pursuant to the terms of the 

Executive Order, it has been determined 

that this action is not ‘‘significant’’ 

within the meaning of section 3(f) of the 

Executive Order and therefore is not 

subject to review by OMB. 

Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501– 

3520) (PRA 95), the Department 

submitted the information collection 

request (ICR) included in the Notice of 

Proposed Rulemaking to OMB for 

review and clearance at the time the 

proposed rule was published in the 

Federal Register on August 30, 2010 (75 

FR 53172). OMB approved the final 

amendment under OMB control number 

1210–0160, on October 17, 2011. The 

approval will expire on October 31, 

2014. 

The Department solicited comments 

concerning the ICR in connection with 

the Notice of Proposed Rulemaking. The 

Department received no comments 

addressing its burden estimates; 

therefore, no substantive changes have 

been made in the final rule that would 

affect the Department’s earlier burden 

estimates. 

The paperwork burden estimates are 

summarized as follows: 

Type of Review: New collection. 

Agency: Employee Benefits Security 

Administration, Department of Labor. 

Title: Final Rule for Prohibited 

Transaction Exemption Procedures. 

OMB Number: 1210–0060. 

Affected Public: Business or other forprofit; not-for-profit institutions. 

Respondents: 56. 

Responses: 22,995. 

Frequency of Response: Occasionally. 

Estimated Total Annual Burden 

Hours: 2,564. 

Estimated Total Annual Burden Cost: 

$1,547,013. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

which are likely to have a significant 

economic impact on a substantial 

number of small entities. Unless the 

head of an agency certifies that a final 

rule is not likely to have a significant 

economic impact on a substantial 

number of small entities, section 603 of 

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66644 Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 

4The basis for this definition is found in section 

104(a)(2) of the Act, which permits the Secretary of 

Labor to prescribe simplified annual reports for 

pension plans that cover fewer than 100 

participants. Pursuant to the authority of section 

104(a)(3), the Department has previously issued at 

29 CFR 2520.104–20, 2520.104–21, 2520.104–41, 

2520.104–46 and 2520.104b–10 certain simplified 

reporting provisions and limited exemptions from 

reporting and disclosure requirements for small 

plans, including unfunded or insured welfare plans 

covering fewer than 100 participants and satisfying 

certain other requirements. 

the RFA requires that the agency present 

an initial regulatory flexibility analysis 

at the time of the publication of the 

notice of proposed rulemaking 

describing the impact of the rule on 

small entities and seeking public 

comment on such impact. 

For purposes of the RFA, the 

Department continues to consider a 

small entity to be an employee benefit 

plan with fewer than 100 participants.4

Further, while some large employers 

may have small plans, in general small 

employers maintain most small plans. 

Thus, the Department believes that 

assessing the impact of this final rule on 

small plans is an appropriate substitute 

for evaluating the effect on small 

entities. The definition of small entity 

considered appropriate for this purpose 

differs, however, from a definition of 

small business that is based on size 

standards promulgated by the Small 

Business Administration (SBA) (13 CFR 

121.201) pursuant to the Small Business 

Act (15 U.S.C. 631 et seq.). The 

Department requested comments on the 

appropriateness of the size standard 

used in evaluating the impact of the rule 

on small entities but did not receive any 

comments. 

By this standard, the Department 

estimates that nearly half the requests 

for exemptions are from small plans. 

Thus, of the approximately 613,000 

ERISA-covered small plans, the 

Department estimates that 28 small 

plans (.000046% of small plans) file 

prohibited transaction exemption 

applications each year. The Department 

does not consider this to be a substantial 

number of small entities. Therefore, 

based on the foregoing, pursuant to 

section 605(b) of RFA, the Assistant 

Secretary of the Employee Benefits 

Security Administration hereby certifies 

that the final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The Department invited public 

comments on its certification and the 

potential impact of the rule on small 

entities at the proposed rule stage and 

did not receive any comments. 

Congressional Review Act 

The final rule being issued here is 

subject to the provisions of the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.) and will be 

transmitted to Congress and the 

Comptroller General for review. 

Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), the final rule does not include 

any federal mandate that may result in 

expenditures by State, local, or tribal 

governments, or impose an annual 

burden exceeding $100 million or more, 

adjusted for inflation, on the private 

sector. 

Federalism Statement 

Executive Order 13132 (August 4, 

1999) outlines fundamental principles 

of federalism and requires federal 

agencies to adhere to specific criteria in 

the process of their formulation and 

implementation of policies that have 

substantial direct effects on the States, 

or the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. This final rule 

does not have federalism implications, 

because it has no substantial direct 

effect on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. Section 

514 of ERISA provides, with certain 

exceptions specifically enumerated, that 

the provisions of Titles I and IV of 

ERISA supersede any and all laws of the 

States as they relate to any employee 

benefit plan covered under ERISA. The 

requirements implemented in the rule 

do not alter the fundamental provisions 

of the statute with respect to employee 

benefit plans, and as such would have 

no implications for the States or the 

relationship or distribution of power 

between the national government and 

the States. 

List of Subjects in 29 CFR Part 2570 

Administrative practice and 

procedure, Employee benefit plans, 

Employee Retirement Income Security 

Act, Federal Employees’ Retirement 

System Act, Exemptions, Fiduciaries, 

Party in interest, Pensions, Prohibited 

transactions, Trusts and trustees. 

For the reasons set forth in the 

preamble, the Department amends 

subchapter G, part 2570 of chapter XXV 

of title 29 of the Code of Federal 

Regulations as follows: 

PART 2570—PROCEDURAL 

REGULATIONS UNDER THE 

EMPLOYEE RETIREMENT INCOME 

SECURITY ACT 

■ 1. Revise the authority citation for part 

2570 to read as follows: 

Authority: 5 U.S.C. 8477; 29 U.S.C. 

1002(40), 1021, 1108, 1132, and 1135; sec. 

102, Reorganization Plan No. 4 of 1978, 5 

U.S.C. App at 672 (2006); Secretary of Labor’s 

Order 3–2010, 75 FR 55354 (September 10, 

2010). 

■ 2. Revise subpart B to part 2570 to 

read as follows: 

Subpart B—Procedures Governing the 

Filing and Processing of Prohibited 

Transaction Exemption Applications 

Sec. 

2570.30 Scope of rules. 

2570.31 Definitions. 

2570.32 Persons who may apply for 

exemptions. 

2570.33 Applications the Department will 

not ordinarily consider. 

2570.34 Information to be included in every 

exemption application. 

2570.35 Information to be included in 

applications for individual exemptions 

only. 

2570.36 Where to file an application. 

2570.37 Duty to amend and supplement 

exemption applications. 

2570.38 Tentative denial letters. 

2570.39 Opportunities to submit additional 

information. 

2570.40 Conferences. 

2570.41 Final denial letters. 

2570.42 Notice of proposed exemption. 

2570.43 Notification of interested persons 

by applicant. 

2570.44 Withdrawal of exemption 

applications. 

2570.45 Requests for reconsideration. 

2570.46 Hearings in opposition to 

exemptions from restrictions on 

fiduciary self-dealing. 

2570.47 Other hearings. 

2570.48 Decision to grant exemptions. 

2570.49 Limits on the effect of exemptions. 

2570.50 Revocation or modification of 

exemptions. 

2570.51 Public inspection and copies. 

2570.52 Effective date. 

Subpart B—Procedures Governing the 

Filing and Processing of Prohibited 

Transaction Exemption Applications 

§ 2570.30 Scope of rules. 

(a) The rules of procedure set forth in 

this subpart apply to prohibited 

transaction exemptions issued by the 

Department under the authority of: 

(1) Section 408(a) of the Employee 

Retirement Income Security Act of 1974 

(ERISA); 

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1Section 102 of Presidential Reorganization Plan 

No. 4 of 1978 (3 CFR part 332 (1978), reprinted in 

5 U.S.C. app. at 672 (2006), and in 92 Stat. 3790 

(1978)), effective December 31, 1978, generally 

transferred the authority of the Secretary of the 

Treasury to issue administrative exemptions under 

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

Labor. 

(2) Section 4975(c)(2) of the Internal 

Revenue Code of 1986 (the Code); 1 or 

(3) The Federal Employees’ 

Retirement System Act of 1986 (FERSA) 

(5 U.S.C. 8477(c)(3)). 

(b) Under these rules of procedure, 

the Department may conditionally or 

unconditionally exempt any fiduciary or 

transaction, or class of fiduciaries or 

transactions, from all or part of the 

restrictions imposed by section 406 of 

ERISA and the corresponding 

restrictions of the Code and FERSA. 

While administrative exemptions 

granted under these rules are ordinarily 

prospective in nature, an applicant may 

also obtain retroactive relief for past 

prohibited transactions if certain 

safeguards described in this subpart 

were in place at the time the transaction 

was consummated. 

(c) These rules govern the filing and 

processing of applications for both 

individual and class exemptions that 

the Department may propose and grant 

pursuant to the authorities cited in 

paragraph (a) of this section. The 

Department may also propose and grant 

exemptions on its own motion, in which 

case the procedures relating to 

publication of notices, hearings, 

evaluation and public inspection of the 

administrative record, and modification 

or revocation of previously granted 

exemptions will apply. 

(d) The issuance of an administrative 

exemption by the Department under 

these procedural rules does not relieve 

a fiduciary or other party in interest or 

disqualified person with respect to a 

plan from the obligation to comply with 

certain other provisions of ERISA, the 

Code, or FERSA, including any 

prohibited transaction provisions to 

which the exemption does not apply, 

and the general fiduciary responsibility 

provisions of ERISA which require, 

among other things, that a fiduciary 

discharge his or her duties respecting 

the plan solely in the interests of the 

participants and beneficiaries of the 

plan and in a prudent fashion; nor does 

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries. 

(e) The Department will not propose 

or issue exemptions upon oral request 

alone, nor will the Department grant 

exemptions orally. An applicant for an 

administrative exemption may request 

and receive oral advice from 

Department employees in preparing an 

exemption application. However, such 

advice does not constitute part of the 

administrative record and is not binding 

on the Department in its processing of 

an exemption application or in its 

examination or audit of a plan. 

(f) The Department will generally treat 

any exemption application that is filed 

solely under section 408(a) of ERISA or 

solely under section 4975(c)(2) of the 

Code as an exemption request filed 

under both section 408(a) and section 

4975(c)(2) if it relates to a transaction 

that would be prohibited both by ERISA 

and the corresponding provisions of the 

Code. 

§ 2570.31 Definitions. 

For purposes of these procedures, the 

following definitions apply: 

(a) An affiliate of a person means— 

(1) Any person directly or indirectly 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the person. For 

purposes of this paragraph, the term 

‘‘control’’ means the power to exercise 

a controlling influence over the 

management or policies of a person 

other than an individual; 

(2) Any director of, relative of, or 

partner in, any such person; 

(3) Any corporation, partnership, 

trust, or unincorporated enterprise of 

which such person is an officer, 

director, or a 5 percent or more partner 

or owner; or 

(4) Any employee or officer of the 

person who— 

(i) Is highly compensated (as defined 

in section 4975(e)(2)(H) of the Code), or 

(ii) Has direct or indirect authority, 

responsibility, or control regarding the 

custody, management, or disposition of 

plan assets involved in the subject 

exemption transaction. 

(b) A class exemption is an 

administrative exemption, granted 

under section 408(a) of ERISA, section 

4975(c)(2) of the Code, and/or 5 U.S.C. 

8477(c)(3), which applies to any 

transaction and party in interest within 

the class of transactions and parties in 

interest specified in the exemption 

when the conditions of the exemption 

are satisfied. 

(c) Department means the U.S. 

Department of Labor and includes the 

Secretary of Labor or his or her delegate 

exercising authority with respect to 

prohibited transaction exemptions to 

which this subpart applies. 

(d) Exemption transaction means the 

transaction or transactions for which an 

exemption is requested. 

(e) An individual exemption is an 

administrative exemption, granted 

under section 408(a) of ERISA, section 

4975(c)(2) of the Code, and/or 5 U.S.C. 

8477(c)(3), which applies only to the 

specific parties in interest and 

transactions named or otherwise 

defined in the exemption. 

(f) A party in interest means a person 

described in section 3(14) of ERISA or 

5 U.S.C. 8477(a)(4) and includes a 

disqualified person, as defined in 

section 4975(e)(2) of the Code. 

(g) Pooled fund means an account or 

fund for the collective investment of the 

assets of two or more unrelated plans, 

including (but not limited to) a pooled 

separate account maintained by an 

insurance company and a common or 

collective trust fund maintained by a 

bank or similar financial institution. 

(h) A qualified appraisal report is any 

appraisal report that satisfies all of the 

requirements set forth in this subpart at 

§ 2570.34(c)(4). 

(i) A qualified independent appraiser 

is any individual or entity with 

appropriate training, experience, and 

facilities to provide a qualified appraisal 

report on behalf of the plan regarding 

the particular asset or property 

appraised in the report, that is 

independent of and unrelated to any 

party in interest engaging in the 

exemption transaction and its affiliates; 

in general, the determination as to the 

independence of the appraiser is made 

by the Department on the basis of all 

relevant facts and circumstances. In 

making this determination, the 

Department generally will take into 

account the amount of both the 

appraiser’s revenues and projected 

revenues for the current federal income 

tax year (including amounts received for 

preparing the appraisal report) that will 

be derived from the party in interest or 

its affiliates relative to the appraiser’s 

revenues from all sources for the prior 

federal income tax year. Absent facts 

and circumstances demonstrating a lack 

of independence, the Department will 

operate according to the presumption 

that such appraiser will be independent 

if the revenues it receives or is projected 

to receive, within the current federal 

income tax year, from parties in interest 

(and their affiliates) to the transaction 

are not more than 2% of such 

appraiser’s annual revenues based upon 

its prior income tax year. Although the 

presumption does not apply when the 

aforementioned percentage exceeds 2%, 

an appraiser nonetheless may be 

considered independent based upon 

other facts and circumstances provided 

that it receives or is projected to receive 

revenues that are not more than 5% 

within the current federal income tax 

year from parties in interest (and their 

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66646 Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 

affiliates) to the transaction based upon 

its prior income tax year. 

(j) A qualified independent fiduciary 

is any individual or entity with 

appropriate training, experience, and 

facilities to act on behalf of the plan 

regarding the exemption transaction in 

accordance with the fiduciary duties 

and responsibilities prescribed by 

ERISA, that is independent of and 

unrelated to any party in interest 

engaging in the exemption transaction 

and its affiliates; in general, the 

determination as to the independence of 

a fiduciary is made by the Department 

on the basis of all relevant facts and 

circumstances. In making this 

determination, the Department generally 

will take into account the amount of 

both the fiduciary’s revenues and 

projected revenues for the current 

federal income tax year (including 

amounts received for preparing 

fiduciary reports) that will be derived 

from the party in interest or its affiliates 

relative to the fiduciary’s revenues from 

all sources for the prior federal income 

tax year. Absent facts and circumstances 

demonstrating a lack of independence, 

the Department will operate according 

to the presumption that such fiduciary 

will be independent if the revenues it 

receives or is projected to receive, 

within the current federal income tax 

year, from parties in interest (and their 

affiliates) to the transaction are not more 

than 2% of such fiduciary’s annual 

revenues based upon its prior income 

tax year. Although the presumption 

does not apply when the 

aforementioned percentage exceeds 2%, 

a fiduciary nonetheless may be 

considered independent based upon 

other facts and circumstances provided 

that it receives or is projected to receive 

revenues that are not more than 5% 

within the current federal income tax 

year from parties in interest (and their 

affiliates) to the transaction based upon 

its prior income tax year. 

§ 2570.32 Persons who may apply for 

exemptions. 

(a) The Department will initiate 

exemption proceedings upon the 

application of: 

(1) Any party in interest to a plan who 

is or may be a party to the exemption 

transaction; 

(2) Any plan which is a party to the 

exemption transaction; or 

(3) In the case of an application for an 

exemption covering a class of parties in 

interest or a class of transactions, in 

addition to any person described in 

paragraphs (a)(1) and (2) of this section, 

an association or organization 

representing parties in interest who may 

be parties to the exemption transaction. 

(b) An application by or for a person 

described in paragraph (a) of this 

section, may be submitted by the 

applicant or by an authorized 

representative. An application 

submitted by a representative of the 

applicant must include proof of 

authority in the form of: 

(1) A power of attorney; or 

(2) A written certification from the 

applicant that the representative is 

authorized to file the application. 

(c) If the authorized representative of 

an applicant submits an application for 

an exemption to the Department 

together with proof of authority to file 

the application as required by paragraph 

(b) of this section, the Department will 

direct all correspondence and inquiries 

concerning the application to the 

representative unless requested to do 

otherwise by the applicant. 

§ 2570.33 Applications the Department will 

not ordinarily consider. 

(a) The Department ordinarily will not 

consider: 

(1) An application that fails to include 

all the information required by 

§§ 2570.34 and 2570.35 of this subpart 

or otherwise fails to conform to the 

requirements of these procedures; or 

(2) An application involving a 

transaction or transactions which are 

the subject of an investigation for 

possible violations of part 1 or 4 of 

subtitle B of Title I of ERISA or section 

8477 or 8478 of FERSA or an 

application involving a party in interest 

who is the subject of such an 

investigation or who is a defendant in 

an action by the Department or the 

Internal Revenue Service to enforce the 

above-mentioned provisions of ERISA 

or FERSA. 

(b) An application for an individual 

exemption relating to a specific 

transaction or transactions ordinarily 

will not be considered if the Department 

has under consideration a class 

exemption relating to the same type of 

transaction or transactions. 

Notwithstanding the foregoing, the 

Department may consider such an 

application if the issuance of the final 

class exemption may not be imminent, 

and the Department determines that 

time constraints necessitate 

consideration of the transaction on an 

individual basis. 

(c) The administrative record of an 

exemption application includes the 

initial exemption application and any 

supporting information provided by the 

applicant (as well as any comments and 

testimony received by the Department 

in connection with an application). If an 

applicant designates as confidential any 

information required by these 

regulations or requested by the 

Department, the Department will 

determine whether the information is 

material to the exemption 

determination. If it determines the 

information to be material, the 

Department will not process the 

application unless the applicant 

withdraws the claim of confidentiality. 

(d) If for any reason the Department 

decides not to consider an exemption 

application, it will inform the applicant 

in writing of that decision and of the 

reasons therefore. 

§ 2570.34 Information to be included in 

every exemption application. 

(a) All applications for exemptions 

must contain the following information: 

(1) The name(s) of the applicant(s); 

(2) A detailed description of the 

exemption transaction including 

identification of all the parties in 

interest involved, a description of any 

larger integrated transaction of which 

the exemption transaction is a part, and 

a chronology of the events leading up to 

the transaction; 

(3) The identity of any representatives 

for the affected plan(s) and parties in 

interest and what individuals or entities 

they represent; 

(4) The reasons a plan would have for 

entering into the exemption transaction; 

(5) The prohibited transaction 

provisions from which exemptive relief 

is requested and the reason why the 

transaction would violate each such 

provision; 

(6) Whether the exemption 

transaction is customary for the industry 

or class involved; 

(7) Whether the exemption 

transaction is or has been the subject of 

an investigation or enforcement action 

by the Department or by the Internal 

Revenue Service; and 

(8) The hardship or economic loss, if 

any, which would result to the person 

or persons on behalf of whom the 

exemption is sought, to affected plans, 

and to their participants and 

beneficiaries from denial of the 

exemption. 

(b) All applications for exemption 

must also contain the following: 

(1) A statement explaining why the 

requested exemption would be— 

(i) Administratively feasible; 

(ii) In the interests of affected plans 

and their participants and beneficiaries; 

and 

(iii) Protective of the rights of 

participants and beneficiaries of affected 

plans. 

(2) With respect to the notification of 

interested persons required by 

§ 2570.43: 

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Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 66647 

(i) A description of the interested 

persons to whom the applicant intends 

to provide notice; 

(ii) The manner in which the 

applicant will provide such notice; and 

(iii) An estimate of the time the 

applicant will need to furnish notice to 

all interested persons following 

publication of a notice of the proposed 

exemption in the Federal Register. 

(3) If an advisory opinion has been 

requested by any party to the exemption 

transaction from the Department with 

respect to any issue relating to the 

exemption transaction— 

(i) A copy of the letter concluding the 

Department’s action on the advisory 

opinion request; or 

(ii) If the Department has not yet 

concluded its action on the request: 

(A) A copy of the request or the date 

on which it was submitted together with 

the Department’s correspondence 

control number as indicated in the 

acknowledgment letter; and 

(B) An explanation of the effect of the 

issuance of an advisory opinion upon 

the exemption transaction. 

(4) If the application is to be signed 

by anyone other than an individual 

party in interest seeking exemptive 

relief on his or her own behalf, a 

statement which— 

(i) Identifies the individual signing 

the application and his or her position 

or title; and 

(ii) Explains briefly the basis of his or 

her familiarity with the matters 

discussed in the application. 

(5)(i) A declaration in the following 

form: 

Under penalty of perjury, I declare that I 

am familiar with the matters discussed in 

this application and, to the best of my 

knowledge and belief, the representations 

made in this application are true and correct. 

(ii) This declaration must be dated 

and signed by: 

(A) The applicant, in its individual 

capacity, in the case of an individual 

party in interest seeking exemptive 

relief on his or her own behalf; 

(B) A corporate officer or partner 

where the applicant is a corporation or 

partnership; 

(C) A designated officer or official 

where the applicant is an association, 

organization or other unincorporated 

enterprise; or 

(D) The plan fiduciary that has the 

authority, responsibility, and control 

with respect to the exemption 

transaction where the applicant is a 

plan. 

(c) Specialized statements, as 

applicable, from a qualified 

independent appraiser acting solely on 

behalf of the plan, such as appraisal 

reports or analyses of market conditions, 

submitted to support an application for 

exemption must be accompanied by a 

statement of consent from such 

appraiser acknowledging that the 

statement is being submitted to the 

Department as part of an application for 

exemption. Such statements must also 

contain the following written 

information: 

(1) A copy of the qualified 

independent appraiser’s engagement 

letter with the plan describing the 

specific duties the appraiser shall 

undertake; 

(2) A summary of the qualified 

independent appraiser’s qualifications 

to serve in such capacity; 

(3) A detailed description of any 

relationship that the qualified 

independent appraiser has had or may 

have with any party in interest engaging 

in the transaction with the plan, or its 

affiliates, that may influence the 

appraiser; 

(4) A written appraisal report 

prepared by the qualified independent 

appraiser, acting solely on behalf of the 

plan, rather than, for example, on behalf 

of the plan sponsor, which satisfies the 

following requirements: 

(i) The report must describe the 

method(s) used in determining the fair 

market value of the subject asset(s) and 

an explanation of why such method best 

reflects the fair market value of the 

asset(s); 

(ii) The report must take into account 

any special benefit that the party in 

interest or its affiliate(s) may derive 

from control of the asset(s), such as from 

owning an adjacent parcel of real 

property or gaining voting control over 

a company; and 

(iii) The report must be current and 

not more than one year old from the 

date of the transaction, and there must 

be a written update by the qualified 

independent appraiser affirming the 

accuracy of the appraisal as of the date 

of the transaction. If the appraisal report 

is a year old or more, a new appraisal 

shall be submitted to the Department by 

the applicant. 

(5) If the subject of the appraisal 

report is real property, the qualified 

independent appraiser shall submit a 

written representation that he or she is 

a member of a professional organization 

of appraisers that can sanction its 

members for misconduct; 

(6) If the subject of the appraisal 

report is an asset other than real 

property, the qualified independent 

appraiser shall submit a written 

representation describing the appraiser’s 

prior experience in valuing assets of the 

same type; and 

(7) The qualified independent 

appraiser shall submit a written 

representation disclosing the percentage 

of its current revenue that is derived 

from any party in interest involved in 

the transaction or its affiliates; in 

general, such percentage shall be 

computed by comparing, in fractional 

form: 

(i) The amount of the appraiser’s 

projected revenues from the current 

federal income tax year (including 

amounts received from preparing the 

appraisal report) that will be derived 

from the party in interest or its affiliates 

(expressed as a numerator); and 

(ii) The appraiser’s revenues from all 

sources for the prior federal income tax 

year (expressed as a denominator). 

(d) For those exemption transactions 

requiring the retention of a qualified 

independent fiduciary to represent the 

interests of the plan, a statement must 

be submitted by such fiduciary that 

contains the following written 

information: 

(1) A signed and dated declaration 

under penalty of perjury that, to the best 

of the qualified independent fiduciary’s 

knowledge and belief, all of the 

representations made in such statement 

are true and correct; 

(2) A copy of the qualified 

independent fiduciary’s engagement 

letter with the plan describing the 

fiduciary’s specific duties; 

(3) An explanation for the conclusion 

that the fiduciary is a qualified 

independent fiduciary, which also must 

include a summary of that person’s 

qualifications to serve in such capacity, 

as well as a description of any prior 

experience by that person or other 

demonstrated characteristics of the 

fiduciary (such as special areas of 

expertise) that render that person or 

entity suitable to perform its duties on 

behalf of the plan with respect to the 

exemption transaction; 

(4) A detailed description of any 

relationship that the qualified 

independent fiduciary has had or may 

have with the party in interest engaging 

in the transaction with the plan or its 

affiliates; 

(5) An acknowledgement by the 

qualified independent fiduciary that it 

understands its duties and 

responsibilities under ERISA in acting 

as a fiduciary on behalf of the plan 

rather than, for example, acting on 

behalf of the plan sponsor; 

(6) The qualified independent 

fiduciary’s opinion on whether the 

proposed transaction would be in the 

interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of such plan, along 

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66648 Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 

with a statement of the reasons on 

which the opinion is based; 

(7) Where the proposed transaction is 

continuing in nature, a declaration by 

the qualified independent fiduciary that 

it is authorized to take all appropriate 

actions to safeguard the interests of the 

plan, and shall, during the pendency of 

the transaction: 

(i) Monitor the transaction on behalf 

of the plan on a continuing basis; 

(ii) Ensure that the transaction 

remains in the interests of the plan and, 

if not, take any appropriate actions 

available under the particular 

circumstances; and 

(iii) Enforce compliance with all 

conditions and obligations imposed on 

any party dealing with the plan with 

respect to the transaction; and 

(8) The qualified independent 

fiduciary shall submit a written 

representation disclosing the percentage 

of such fiduciary’s current revenue that 

is derived from any party in interest 

involved in the transaction or its 

affiliates; in general, such percentage 

shall be computed by comparing, in 

fractional form: 

(i) The amount of the fiduciary’s 

projected revenues from the current 

federal income tax year that will be 

derived from the party in interest or its 

affiliates (expressed as a numerator); 

and 

(ii) The fiduciary’s revenues from all 

sources (excluding fixed, nondiscretionary retirement income) for the 

prior federal income tax year (expressed 

as a denominator). 

(e) Specialized statements, as 

applicable, from other third-party 

experts, including but not limited to 

economists or market specialists, 

submitted on behalf of the plan to 

support an application for exemption 

must be accompanied by a statement of 

consent from such expert 

acknowledging that the statement 

prepared on behalf of the plan is being 

submitted to the Department as part of 

an application for exemption. Such 

statements must also contain the 

following written information: 

(1) A copy of the expert’s engagement 

letter with the plan describing the 

specific duties the expert will 

undertake; 

(2) A summary of the expert’s 

qualifications to serve in such capacity; 

and 

(3) A detailed description of any 

relationship that the expert has had or 

may have with any party in interest 

engaging in the transaction with the 

plan, or its affiliates, that may influence 

the actions of the expert. 

(f) An application for exemption may 

also include a draft of the requested 

exemption which describes the 

transaction and parties in interest for 

which exemptive relief is sought and 

the specific conditions under which the 

exemption would apply. 

§ 2570.35 Information to be included in 

applications for individual exemptions only. 

(a) Except as provided in paragraph 

(c) of this section, every application for 

an individual exemption must include, 

in addition to the information specified 

in § 2570.34 of this subpart, the 

following information: 

(1) The name, address, telephone 

number, and type of plan or plans to 

which the requested exemption applies; 

(2) The Employer Identification 

Number (EIN) and the plan number (PN) 

used by such plan or plans in all 

reporting and disclosure required by the 

Department; 

(3) Whether any plan or trust affected 

by the requested exemption has ever 

been found by the Department, the 

Internal Revenue Service, or by a court 

to have violated the exclusive benefit 

rule of section 401(a) of the Code, 

section 4975(c)(1) of the Code, section 

406 or 407(a) of ERISA, or 5 U.S.C. 

8477(c)(3), including a description of 

the circumstances surrounding such 

violation; 

(4) Whether any relief under section 

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

the Code, or 5 U.S.C. 8477(c)(3) has 

been requested by, or provided to, the 

applicant or any of the parties on behalf 

of whom the exemption is sought and, 

if so, the exemption application number 

or the prohibited transaction exemption 

number; 

(5) Whether the applicant or any of 

the parties in interest involved in the 

exemption transaction is currently, or 

has been within the last five years, a 

defendant in any lawsuit or criminal 

action concerning such person’s 

conduct as a fiduciary or party in 

interest with respect to any plan (other 

than a lawsuit with respect to a routine 

claim for benefits), and a description of 

the circumstances of such lawsuit or 

criminal action; 

(6) Whether the applicant (including 

any person described in 

§ 2570.34(b)(5)(ii)) or any of the parties 

in interest involved in the exemption 

transaction has, within the last 13 years, 

been either convicted or released from 

imprisonment, whichever is later, as a 

result of: any felony involving abuse or 

misuse of such person’s position or 

employment with an employee benefit 

plan or a labor organization; any felony 

arising out of the conduct of the 

business of a broker, dealer, investment 

adviser, bank, insurance company or 

fiduciary; income tax evasion; any 

felony involving the larceny, theft, 

robbery, extortion, forgery, 

counterfeiting, fraudulent concealment, 

embezzlement, fraudulent conversion, 

or misappropriation of funds or 

securities; conspiracy or attempt to 

commit any such crimes or a crime of 

which any of the foregoing crimes is an 

element; or any other crime described in 

section 411 of ERISA, and a description 

of the circumstances of any such 

conviction. For purposes of this section, 

a person shall be deemed to have been 

‘‘convicted’’ from the date of the 

judgment of the trial court, regardless of 

whether that judgment remains under 

appeal; 

(7) Whether, within the last five years, 

any plan affected by the exemption 

transaction, or any party in interest 

involved in the exemption transaction, 

has been under investigation or 

examination by, or has been engaged in 

litigation or a continuing controversy 

with, the Department, the Internal 

Revenue Service, the Justice 

Department, the Pension Benefit 

Guaranty Corporation, or the Federal 

Retirement Thrift Investment Board 

involving compliance with provisions of 

ERISA, provisions of the Code relating 

to employee benefit plans, or provisions 

of FERSA relating to the Federal Thrift 

Savings Fund. If so, the applicant must 

provide a brief statement describing the 

investigation, examination, litigation or 

controversy. The Department reserves 

the right to require the production of 

additional information or 

documentation concerning any of the 

above matters. In this regard, a denial of 

the exemption application will result 

from a failure to provide additional 

information requested by the 

Department. 

(8) Whether any plan affected by the 

requested exemption has experienced a 

reportable event under section 4043 of 

ERISA, and, if so, a description of the 

circumstances of any such reportable 

event; 

(9) Whether a notice of intent to 

terminate has been filed under section 

4041 of ERISA respecting any plan 

affected by the requested exemption, 

and, if so, a description of the 

circumstances for the issuance of such 

notice; 

(10) Names, addresses, and taxpayer 

identifying numbers of all parties in 

interest involved in the subject 

transaction; 

(11) The estimated number of 

participants and beneficiaries in each 

plan affected by the requested 

exemption as of the date of the 

application; 

(12) The percentage of the fair market 

value of the total assets of each affected 

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Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 66649 

plan that is involved in the exemption 

transaction; 

(13) Whether the exemption 

transaction has been consummated or 

will be consummated only if the 

exemption is granted; 

(14) If the exemption transaction has 

already been consummated: 

(i) The circumstances which resulted 

in plan fiduciaries causing the plan(s) to 

engage in the transaction before 

obtaining an exemption from the 

Department; 

(ii) Whether the transaction has been 

terminated; 

(iii) Whether the transaction has been 

corrected as defined in Code section 

4975(f)(5); 

(iv) Whether Form 5330, Return of 

Excise Taxes Related to Employee 

Benefit Plans, has been filed with the 

Internal Revenue Service with respect to 

the transaction; and 

(v) Whether any excise taxes due 

under section 4975(a) and (b) of the 

Code, or any civil penalties due under 

section 502(i) or (l) of ERISA by reason 

of the transaction have been paid. If so, 

the applicant should submit 

documentation (e.g., a canceled check) 

demonstrating that the excise taxes or 

civil penalties were paid. 

(15) The name of every person who 

has investment discretion over any plan 

assets involved in the exemption 

transaction and the relationship of each 

such person to the parties in interest 

involved in the exemption transaction 

and the affiliates of such parties in 

interest; 

(16) Whether or not the assets of the 

affected plan(s) are invested in loans to 

any party in interest involved in the 

exemption transaction, in property 

leased to any such party in interest, or 

in securities issued by any such party in 

interest, and, if such investments exist, 

a statement for each of these three types 

of investments which indicates: 

(i) The type of investment to which 

the statement pertains; 

(ii) The aggregate fair market value of 

all investments of this type as reflected 

in the plan’s most recent annual report; 

(iii) The approximate percentage of 

the fair market value of the plan’s total 

assets as shown in such annual report 

that is represented by all investments of 

this type; and 

(iv) The statutory or administrative 

exemption covering these investments, 

if any. 

(17) The approximate aggregate fair 

market value of the total assets of each 

affected plan; 

(18) The person(s) who will bear the 

costs of the exemption application and 

of notifying interested persons; and 

(19) Whether an independent 

fiduciary is or will be involved in the 

exemption transaction and, if so, the 

names of the persons who will bear the 

cost of the fee payable to such fiduciary. 

(b) Each application for an individual 

exemption must also include: 

(1) True copies of all contracts, deeds, 

agreements, and instruments, as well as 

relevant portions of plan documents, 

trust agreements, and any other 

documents bearing on the exemption 

transaction; 

(2) A discussion of the facts relevant 

to the exemption transaction that are 

reflected in these documents and an 

analysis of their bearing on the 

requested exemption; 

(3) A copy of the most recent financial 

statements of each plan affected by the 

requested exemption; and 

(4) A net worth statement with respect 

to any party in interest that is providing 

a personal guarantee with respect to the 

exemption transaction. 

(c) Special rule for applications for 

individual exemption involving pooled 

funds: 

(1) The information required by 

paragraphs (a)(8) through (12) of this 

section is not required to be furnished 

in an application for individual 

exemption involving one or more 

pooled funds; 

(2) The information required by 

paragraphs (a)(1) through (7) and (a)(13) 

through (19) of this section and by 

paragraphs (b)(1) through (3) of this 

section must be furnished in reference 

to the pooled fund, rather than to the 

plans participating therein. (For 

purposes of this paragraph, the 

information required by paragraph 

(a)(16) of this section relates solely to 

other pooled fund transactions with, 

and investments in, parties in interest 

involved in the exemption transaction 

which are also sponsors of plans which 

invest in the pooled fund.); 

(3) The following information must 

also be furnished— 

(i) The estimated number of plans that 

are participating (or will participate) in 

the pooled fund; and 

(ii) The minimum and maximum 

limits imposed by the pooled fund (if 

any) on the portion of the total assets of 

each plan that may be invested in the 

pooled fund. 

(4) Additional requirements for 

applications for individual exemption 

involving pooled funds in which certain 

plans participate. 

(i) This paragraph applies to any 

application for an individual exemption 

involving one or more pooled funds in 

which any plan participating therein— 

(A) Invests an amount which exceeds 

20% of the total assets of the pooled 

fund, or 

(B) Covers employees of: 

(1) The party sponsoring or 

maintaining the pooled fund, or any 

affiliate of such party, or 

(2) Any fiduciary with investment 

discretion over the pooled fund’s assets, 

or any affiliate of such fiduciary. 

(ii) The exemption application must 

include, with respect to each plan 

described in paragraph (c)(4)(i) of this 

section, the information required by 

paragraphs (a)(1) through (3), (a)(5) 

through (7), (a)(10), (a)(12) through (16), 

and (a)(18) and (19), of this section. The 

information required by this paragraph 

must be furnished in reference to the 

plan’s investment in the pooled fund 

(e.g., the names, addresses and taxpayer 

identifying numbers of all fiduciaries 

responsible for the plan’s investment in 

the pooled fund (§ 2570.35(a) (10)), the 

percentage of the assets of the plan 

invested in the pooled fund 

(§ 2570.35(a)(12)), whether the plan’s 

investment in the pooled fund has been 

consummated or will be consummated 

only if the exemption is granted 

(§ 2570.35(a)(13)), etc.). 

(iii) The information required by 

paragraph (c)(4) of this section is in 

addition to the information required by 

paragraphs (c)(2) and (3) of this section 

relating to information furnished by 

reference to the pooled fund. 

(5) The special rule and the additional 

requirements described in paragraphs 

(c)(1) through (4) of this section do not 

apply to an individual exemption 

request solely for the investment by a 

plan in a pooled fund. Such an 

application must provide the 

information required by paragraphs (a) 

and (b) of this section. 

(d) Retroactive exemptions: 

(1) Generally, the Department will 

favorably consider requests for 

retroactive relief, in all exemption 

applications, only where the safeguards 

necessary for the grant of a prospective 

exemption were in place at the time at 

which the parties entered into the 

transaction. An applicant for a 

retroactive exemption must have acted 

in good faith by taking reasonable and 

appropriate steps to protect the plan 

from abuse and unnecessary risk at the 

time of the transaction. 

(2) Among the factors that the 

Department would take into account in 

making a finding that an applicant acted 

in good faith include the following: 

(i) The participation of an 

independent fiduciary acting on behalf 

of the plan who is qualified to negotiate, 

approve and monitor the transaction; 

(ii) The existence of a 

contemporaneous appraisal by a 

qualified independent appraiser or 

reference to an objective third party 

source, such as a stock or bond index; 

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(iii) The existence of a bidding 

process or evidence of comparable fair 

market transactions with unrelated third 

parties; 

(iv) That the applicant has submitted 

an accurate and complete application 

for exemption containing 

documentation of all necessary and 

relevant facts and representations upon 

which the applicant relied. In this 

regard, additional weight will be given 

to facts and representations which are 

prepared and certified by a source 

independent of the applicant; 

(v) That the applicant has submitted 

evidence that the plan fiduciary did not 

engage in an act or transaction knowing 

that such act or transaction was 

prohibited under section 406 of ERISA 

and/or section 4975 of the Code. In this 

regard, the Department will accord 

appropriate weight to the submission of 

a contemporaneous, reasoned legal 

opinion of counsel, upon which the 

plan fiduciary relied in good faith before 

entering the act or transaction; 

(vi) That the applicant has submitted 

a statement of the circumstances which 

prompted the submission of the 

application for exemption and the steps 

taken by the applicant with regard to the 

transaction upon discovery of the 

violation; 

(vii) That the applicant has submitted 

a statement, prepared and certified by 

an independent person familiar with the 

types of transactions for which relief is 

requested, demonstrating that the terms 

and conditions of the transaction 

(including, in the case of an investment, 

the return in fact realized by the plan) 

were at least as favorable to the plan as 

that obtainable in a similar transaction 

with an unrelated party; and 

(viii) Such other undertakings and 

assurances with respect to the plan and 

its participants that may be offered by 

the applicant which are relevant to the 

criteria under section 408(a) of ERISA 

and section 4975(c)(2) of the Code. 

(3) The Department, as a general 

matter, will not favorably consider 

requests for retroactive exemptions 

where transactions or conduct with 

respect to which an exemption is 

requested resulted in a loss to the plan. 

In addition, the Department will not 

favorably consider requests for 

exemptions where the transactions are 

inconsistent with the general fiduciary 

responsibility provisions of sections 403 

or 404 of ERISA or the exclusive benefit 

requirements of section 401(a) of the 

Code. 

§ 2570.36 Where to file an application. 

The Department’s prohibited 

transaction exemption program is 

administered by the Employee Benefits 

Security Administration (EBSA). Any 

exemption application governed by 

these procedures may be mailed via 

first-class mail to: Employee Benefits 

Security Administration, Office of 

Exemption Determinations, U.S. 

Department of Labor, Room N–5700, 

200 Constitution Avenue NW., 

Washington, DC 20210. Alternatively, 

applications may be emailed to the 

Department at e-OED@dol.gov or 

transmitted via facsimile at (202) 219– 

0204. Notwithstanding the foregoing 

methods of transmission, applicants are 

also required to submit one paper copy 

of the exemption application for the 

Department’s file. 

§ 2570.37 Duty to amend and supplement 

exemption applications. 

(a) While an exemption application is 

pending final action with the 

Department, an applicant must 

promptly notify the Department in 

writing if he or she discovers that any 

material fact or representation contained 

in the application or in any documents 

or testimony provided in support of the 

application is inaccurate, if any such 

fact or representation changes during 

this period, or if, during the pendency 

of the application, anything occurs that 

may affect the continuing accuracy of 

any such fact or representation. In 

addition, an applicant must promptly 

notify the Department in writing if it 

learns that a material fact or 

representation has been omitted from 

the exemption application. 

(b) If, at any time during the pendency 

of an exemption application, the 

applicant or any other party in interest 

who would participate in the exemption 

transaction becomes the subject of an 

investigation or enforcement action by 

the Department, the Internal Revenue 

Service, the Justice Department, the 

Pension Benefit Guaranty Corporation, 

or the Federal Retirement Thrift 

Investment Board involving compliance 

with provisions of ERISA, provisions of 

the Code relating to employee benefit 

plans, or provisions of FERSA relating 

to the Federal Thrift Savings Fund, the 

applicant must promptly notify the 

Department. 

(c) The Department may require an 

applicant to provide documentation it 

considers necessary to verify any 

statements contained in the application 

or in supporting materials or 

documents. 

§ 2570.38 Tentative denial letters. 

(a) If, after reviewing an exemption 

file, the Department tentatively 

concludes that it will not propose or 

grant the exemption, it will notify the 

applicant in writing. At the same time, 

the Department will provide a brief 

statement of the reasons for its tentative 

denial. 

(b) An applicant will have 20 days 

from the date of a tentative denial letter 

to request a conference under § 2570.40 

of this subpart and/or to notify the 

Department of its intent to submit 

additional information under § 2570.39 

of this subpart. If the Department does 

not receive a request for a conference or 

a notification of intent to submit 

additional information within that time, 

it will issue a final denial letter 

pursuant to § 2570.41. 

(c) The Department need not issue a 

tentative denial letter to an applicant 

before issuing a final denial letter where 

the Department has conducted a hearing 

on the exemption pursuant to either 

§ 2570.46 or § 2570.47. 

§ 2570.39 Opportunities to submit 

additional information. 

(a) An applicant may notify the 

Department of its intent to submit 

additional information supporting an 

exemption application either by 

telephone or by letter sent to the address 

furnished in the applicant’s tentative 

denial letter, or electronically to the 

email address provided in the tentative 

denial letter. At the same time, the 

applicant should indicate generally the 

type of information that will be 

submitted. 

(b) The additional information an 

applicant intends to provide in support 

of the application must be in writing 

and be received by the Department 

within 40 days from the date of the 

tentative denial letter. All such 

information must be accompanied by a 

declaration under penalty of perjury 

attesting to the truth and correctness of 

the information provided, which is 

dated and signed by a person qualified 

under § 2570.34(b)(5) of this subpart to 

sign such a declaration. 

(c) If, for reasons beyond its control, 

an applicant is unable to submit all the 

additional information he or she intends 

to provide in support of his application 

within the 40-day period described in 

paragraph (b) of this section, he or she 

may request an extension of time to 

furnish the information. Such requests 

must be made before the expiration of 

the 40-day period and will be granted 

only in unusual circumstances and for 

a limited period as determined, 

respectively, by the Department in its 

sole discretion. 

(d) If an applicant is unable to submit 

all of the additional information he or 

she intends to provide within the 40- 

day period specified in paragraph (b) of 

this section, or within any additional 

period granted pursuant to paragraph (c) 

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of this section, the applicant may 

withdraw the exemption application 

before expiration of the applicable time 

period and reinstate it later pursuant to 

§ 2570.44. 

(e) The Department will issue, 

without further notice, a final denial 

letter denying the requested exemption 

pursuant to § 2570.41 where— 

(1) The Department has not received 

the additional information that the 

applicant stated his or her intention to 

submit within the 40-day period 

described in paragraph (b) of this 

section, or within any additional period 

granted pursuant to paragraph (c) of this 

section; 

(2) The applicant did not request a 

conference pursuant to § 2570.38(b) of 

this subpart; and 

(3) The applicant has not withdrawn 

the application as permitted by 

paragraph (d) of this section. 

§ 2570.40 Conferences. 

(a) Any conference between the 

Department and an applicant pertaining 

to a requested exemption will be held in 

Washington, DC, except that a telephone 

conference will be held at the 

applicant’s request. 

(b) An applicant is entitled to only 

one conference with respect to any 

exemption application. An applicant 

will not be entitled to a conference, 

however, where the Department has 

held a hearing on the exemption under 

either § 2570.46 or § 2570.47 of this 

subpart. 

(c) Insofar as possible, conferences 

will be scheduled as joint conferences 

with all applicants present where: 

(1) More than one applicant has 

requested an exemption with respect to 

the same or similar types of 

transactions; 

(2) The Department is considering the 

applications together as a request for a 

class exemption; 

(3) The Department contemplates not 

granting the exemption; and 

(4) More than one applicant has 

requested a conference. 

(d) In instances where the applicant 

has requested a conference pursuant to 

§ 2570.38(b) and also has submitted 

additional information pursuant to 

§ 2570.39, the Department will schedule 

a conference under this section for a 

date and time that occurs within 20 

days after the date on which the 

Department has provided either oral or 

written notification to the applicant 

that, after reviewing the additional 

information, it is still not prepared to 

propose the requested exemption. If, for 

reasons beyond its control, the applicant 

cannot attend a conference within the 

20-day limit described in this 

paragraph, the applicant may request an 

extension of time for the scheduling of 

a conference, provided that such request 

is made before the expiration of the 20- 

day limit. The Department will only 

grant such an extension in unusual 

circumstances and for a brief period as 

determined, respectively, by the 

Department in its sole discretion. 

(e) In instances where the applicant 

has requested a conference pursuant to 

§ 2570.38(b) but has not expressed an 

intent to submit additional information 

in support of the exemption application 

as provided in § 2570.39, the 

Department will schedule a conference 

under this section for a date and time 

that occurs within 40 days after the date 

of the issuance of the tentative denial 

letter described in § 2570.38(a). If, for 

reasons beyond its control, the applicant 

cannot attend a conference within the 

40-day limit described in this 

paragraph, the applicant may request an 

extension of time for the scheduling of 

a conference, provided that such request 

is made before the expiration of the 40- 

day limit. The Department will only 

grant such an extension in unusual 

circumstances and for a brief period as 

determined, respectively, by the 

Department in its sole discretion. 

(f) In instances where the applicant 

has requested a conference pursuant to 

§ 2570.38(b) of this subpart, has notified 

the Department of its intent to submit 

additional information pursuant to 

§ 2570.39, and has failed to furnish such 

information within 40 days from the 

date of the tentative denial letter, the 

Department will schedule a conference 

under this section for a date and time 

that occurs within 60 days after the date 

of the issuance of the tentative denial 

letter described in § 2570.38(a). If, for 

reasons beyond its control, the applicant 

cannot attend a conference within the 

60-day limit described in this 

paragraph, the applicant may request an 

extension of time for the scheduling of 

a conference, provided that such request 

is made before the expiration of the 60- 

day limit. The Department will only 

grant such an extension in unusual 

circumstances and for a brief period as 

determined, respectively, by the 

Department in its sole discretion. 

(g) If the applicant fails to either 

timely schedule or appear for a 

conference agreed to by the Department 

pursuant to this section, the applicant 

will be deemed to have waived its right 

to a conference. 

(h) Within 20 days after the date of 

any conference held under this section, 

the applicant may submit to the 

Department (electronically or in paper 

form) any additional written data, 

arguments, or precedents discussed at 

the conference but not previously or 

adequately presented in writing. If, for 

reasons beyond its control, the applicant 

is unable to submit the additional 

information within this 20-day limit, the 

applicant may request an extension of 

time to furnish the information, 

provided that such request is made 

before the expiration of the 20-day limit 

described in this paragraph. The 

Department will only grant such an 

extension in unusual circumstances and 

for a brief period as determined, 

respectively, by the Department in its 

sole discretion. 

§ 2570.41 Final denial letters. 

The Department will issue a final 

denial letter denying a requested 

exemption where: 

(a) The conditions for issuing a final 

denial letter specified in § 2570.38(b) or 

§ 2570.39(e) of this subpart are satisfied; 

(b) After issuing a tentative denial 

letter under § 2570.38 of this subpart 

and considering the entire record in the 

case, including all written information 

submitted pursuant to §§ 2570.39 and 

2570.40 of this subpart, the Department 

decides not to propose an exemption or 

to withdraw an exemption already 

proposed; or 

(c) After proposing an exemption and 

conducting a hearing on the exemption 

under either § 2570.46 or § 2570.47 of 

this subpart and after considering the 

entire record in the case, including the 

record of the hearing, the Department 

decides to withdraw the proposed 

exemption. 

§ 2570.42 Notice of proposed exemption. 

If the Department tentatively decides 

that an administrative exemption is 

warranted, it will publish a notice of a 

proposed exemption in the Federal 

Register. In addition to providing notice 

of the pendency of the exemption before 

the Department, the notice will: 

(a) Explain the exemption transaction 

and summarize the information and 

reasons in support of proposing the 

exemption; 

(b) Describe the scope of relief and 

any conditions of the proposed 

exemption; 

(c) Inform interested persons of their 

right to submit comments to the 

Department (either electronically or in 

writing) relating to the proposed 

exemption and establish a deadline for 

receipt of such comments; and 

(d) Where the proposed exemption 

includes relief from the prohibitions of 

section 406(b) of ERISA, section 

4975(c)(1)(E) or (F) of the Code, or 

section 8477(c)(2) of FERSA, inform 

interested persons of their right to 

request a hearing under § 2570.46 of this 

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2To be added in instances where the Department 

requires the applicant to furnish a Summary of 

Proposed Exemption to interested persons as 

described in § 2570.43(d). 

3The applicant will write in this space the date 

of the last day of the time period specified in the 

notice of proposed exemption. 

4To be added in the case of an exemption that 

provides relief from section 406(b) of ERISA or 

corresponding sections of the Code or FERSA. 

5The applicant will fill in the room number of 

the Office of Exemptions Determinations. As of the 

date of this final regulation, the room number of the 

Office of Exemption Determinations is N–5700. 

6The applicant will fill in the exemption 

application number, which is stated in the notice 

of proposed exemption, as well as in all 

correspondence from the Department to the 

applicant regarding the application. 

subpart and establish a deadline for 

receipt of requests for such hearings. 

§ 2570.43 Notification of interested 

persons by applicant. 

(a) If a notice of proposed exemption 

is published in the Federal Register in 

accordance with § 2570.42 of this 

subpart, the applicant must notify 

interested persons of the pendency of 

the exemption in the manner and within 

the time period specified in the 

application. If the Department 

determines that this notification would 

be inadequate, the applicant must 

obtain the Department’s consent as to 

the manner and time period of 

providing the notice to interested 

persons. Any such notification must 

include: 

(1) A copy of the notice of proposed 

exemption as published in the Federal 

Register; and 

(2) A supplemental statement in the 

following form: 

You are hereby notified that the United 

States Department of Labor is considering 

granting an exemption from the prohibited 

transaction restrictions of the Employee 

Retirement Income Security Act of 1974, the 

Internal Revenue Code of 1986, or the 

Federal Employees’ Retirement System Act of 

1986. The exemption under consideration is 

summarized in the enclosed [Summary of 

Proposed Exemption, and described in 

greater detail in the accompanying] 2 Notice 

of Proposed Exemption. As a person who 

may be affected by this exemption, you have 

the right to comment on the proposed 

exemption by [date].3 [If you may be 

adversely affected by the grant of the 

exemption, you also have the right to request 

a hearing on the exemption by [date].] 4

All comments and/or requests for a hearing 

should be addressed to the Office of 

Exemption Determinations, Employee 

Benefits Security Administration, Room ___,5

U.S. Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, 

ATTENTION: Application No.___.6

Comments and hearing requests may also be 

transmitted to the Department electronically 

at e-oed@dol.gov or at http:// 

www.regulations.gov (follow instructions for 

submission), and should prominently 

reference the application number listed 

above. In addition, comments and hearing 

requests may be transmitted to the 

Department via facsimile at (202) 219–0204. 

Individuals submitting comments or requests 

for a hearing on this matter are advised not 

to disclose sensitive personal data, such as 

social security numbers. 

The Department will make no final 

decision on the proposed exemption until it 

reviews the comments received in response 

to the enclosed notice. If the Department 

decides to hold a hearing on the exemption 

request before making its final decision, you 

will be notified of the time and place of the 

hearing. 

(b) The method used by an applicant 

to furnish notice to interested persons 

must be reasonably calculated to ensure 

that interested persons actually receive 

the notice. In all cases, personal 

delivery and delivery by first-class mail 

will be considered reasonable methods 

of furnishing notice. If the applicant 

elects to furnish notice electronically, 

he or she must provide satisfactory 

proof of electronic delivery to the entire 

class of interested persons. 

(c) After furnishing the notification 

described in paragraph (a) of this 

section, an applicant must provide the 

Department with a written statement 

confirming that notice was furnished in 

accordance with the foregoing 

requirements of this section. This 

statement must be accompanied by a 

declaration under penalty of perjury 

attesting to the truth of the information 

provided in the statement and signed by 

a person qualified under § 2570.34(b)(5) 

of this subpart to sign such a 

declaration. No exemption will be 

granted until such a statement and its 

accompanying declaration have been 

furnished to the Department. 

(d) In addition to the provision of 

notification required by paragraph (a) of 

this section, the Department, in its 

discretion, may also require an 

applicant to furnish interested persons 

with a brief summary of the proposed 

exemption (Summary of Proposed 

Exemption), written in a manner 

calculated to be understood by the 

average recipient, which objectively 

describes: 

(1) The exemption transaction and the 

parties in interest thereto; 

(2) Why such transaction would 

violate the prohibited transaction 

provisions of ERISA, the Code, and/or 

FERSA from which relief is sought; 

(3) The reasons why the plan seeks to 

engage in the transaction; and 

(4) The conditions and safeguards 

proposed to protect the plan and its 

participants and beneficiaries from 

potential abuse or unnecessary risk of 

loss in the event the Department grants 

the exemption. 

(e) Applicants who are required to 

provide interested persons with the 

Summary of Proposed Exemption 

described in paragraph (d) of this 

section shall furnish the Department 

with a copy of such summary for review 

and approval prior to its distribution to 

interested persons. Such applicants 

shall also provide confirmation to the 

Department that the Summary of 

Proposed Exemption was furnished to 

interested persons as part of the written 

statement and declaration required of 

exemption applicants by paragraph (c) 

of this section. 

§ 2570.44 Withdrawal of exemption 

applications. 

(a) An applicant may withdraw an 

application for an exemption at any 

time by oral or written (including 

electronic) notice to the Department. A 

withdrawn application generally shall 

not prejudice any subsequent 

applications for an exemption submitted 

by an applicant. 

(b) Upon receiving an applicant’s 

notice of withdrawal regarding an 

application for an individual 

exemption, the Department will confirm 

by letter the applicant’s withdrawal of 

the application and will terminate all 

proceedings relating to the application. 

If a notice of proposed exemption has 

been published in the Federal Register, 

the Department will publish a notice 

withdrawing the proposed exemption. 

(c) Upon receiving an applicant’s 

notice of withdrawal regarding an 

application for a class exemption or for 

an individual exemption that is being 

considered with other applications as a 

request for a class exemption, the 

Department will inform any other 

applicants for the exemption of the 

withdrawal. The Department will 

continue to process other applications 

for the same exemption. If all applicants 

for a particular class exemption 

withdraw their applications, the 

Department may either terminate all 

proceedings relating to the exemption or 

propose the exemption on its own 

motion. 

(d) If, following the withdrawal of an 

exemption application, an applicant 

decides to reapply for the same 

exemption, he or she may contact the 

Department in writing (including 

electronically) to request that the 

application be reinstated. The applicant 

should refer to the application number 

assigned to the original application. If, 

at the time the original application was 

withdrawn, any additional information 

to be submitted to the Department under 

§ 2570.39 was outstanding, that 

information must accompany the 

request for reinstatement of the 

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application. However, the applicant 

need not resubmit information 

previously furnished to the Department 

in connection with a withdrawn 

application unless reinstatement of the 

application is requested more than two 

years after the date of its withdrawal. 

(e) Any request for reinstatement of a 

withdrawn application submitted, in 

accordance with paragraph (d) of this 

section, will be granted by the 

Department, and the Department will 

take whatever steps remained at the 

time the application was withdrawn to 

process the application. 

§ 2570.45 Requests for reconsideration. 

(a) The Department will entertain one 

request for reconsideration of an 

exemption application that has been 

finally denied pursuant to § 2570.41 if 

the applicant presents in support of the 

application significant new facts or 

arguments, which, for good reason, 

could not have been submitted for the 

Department’s consideration during its 

initial review of the exemption 

application. 

(b) A request for reconsideration of a 

previously denied application must be 

made within 180 days after the issuance 

of the final denial letter and must be 

accompanied by a copy of the 

Department’s final letter denying the 

exemption and a statement setting forth 

the new information and/or arguments 

that provide the basis for 

reconsideration. 

(c) A request for reconsideration must 

also be accompanied by a declaration 

under penalty of perjury attesting to the 

truth of the new information provided, 

which is signed by a person qualified 

under § 2570.34(b)(5) to sign such a 

declaration. 

(d) If, after reviewing a request for 

reconsideration, the Department decides 

that the facts and arguments presented 

do not warrant reversal of its original 

decision to deny the exemption, it will 

send a letter to the applicant reaffirming 

that decision. 

(e) If, after reviewing a request for 

reconsideration, the Department 

decides, based on the new facts and 

arguments submitted, to reconsider its 

final denial letter, it will notify the 

applicant of its intent to reconsider the 

application in light of the new 

information presented. The Department 

will then take whatever steps remained 

at the time it issued its final denial letter 

to process the exemption application. 

(f) If, at any point during its 

subsequent processing of the 

application, the Department decides 

again that the exemption is 

unwarranted, it will issue a letter 

affirming its final denial. 

§ 2570.46 Hearings in opposition to 

exemptions from restrictions on fiduciary 

self-dealing. 

(a) Any interested person who may be 

adversely affected by an exemption 

which the Department proposes to grant 

from the restrictions of section 406(b) of 

ERISA, section 4975(c)(1)(E) or (F) of the 

Code, or section 8477(c)(2) of FERSA 

may request a hearing before the 

Department within the period of time 

specified in the Federal Register notice 

of the proposed exemption. Any such 

request must state: 

(1) The name, address, telephone 

number, and email address of the 

person making the request; 

(2) The nature of the person’s interest 

in the exemption and the manner in 

which the person would be adversely 

affected by the exemption; and 

(3) A statement of the issues to be 

addressed and a general description of 

the evidence to be presented at the 

hearing. 

(b) The Department will grant a 

request for a hearing made in 

accordance with paragraph (a) of this 

section where a hearing is necessary to 

fully explore material factual issues 

identified by the person requesting the 

hearing. A notice of such hearing shall 

be published by the Department in the 

Federal Register. The Department may 

decline to hold a hearing where: 

(1) The request for the hearing does 

not meet the requirements of paragraph 

(a) of this section; 

(2) The only issues identified for 

exploration at the hearing are matters of 

law; or 

(3) The factual issues identified can 

be fully explored through the 

submission of evidence in written 

(including electronic) form. 

(c) An applicant for an exemption 

must notify interested persons in the 

event that the Department schedules a 

hearing on the exemption. Such 

notification must be given in the form, 

time, and manner prescribed by the 

Department. Ordinarily, however, 

adequate notification can be given by 

providing to interested persons a copy 

of the notice of hearing published by the 

Department in the Federal Register 

within 10 days of its publication, using 

any of the methods approved in 

§ 2570.43(b). 

(d) After furnishing the notice 

required by paragraph (c) of this section, 

an applicant must submit a statement 

confirming that notice was given in the 

form, manner, and time prescribed. This 

statement must be accompanied by a 

declaration under penalty of perjury 

attesting to the truth of the information 

provided in the statement, which is 

signed by a person qualified under 

§ 2570.34(b)(5) to sign such a 

declaration. 

§ 2570.47 Other hearings. 

(a) In its discretion, the Department 

may schedule a hearing on its own 

motion where it determines that issues 

relevant to the exemption can be most 

fully or expeditiously explored at a 

hearing. A notice of such hearing shall 

be published by the Department in the 

Federal Register. 

(b) An applicant for an exemption 

must notify interested persons of any 

hearing on an exemption scheduled by 

the Department in the manner described 

in § 2570.46(c). In addition, the 

applicant must submit a statement 

subscribed as true under penalty of 

perjury like that required in 

§ 2570.46(d). 

§ 2570.48 Decision to grant exemptions. 

(a) The Department may not grant an 

exemption under section 408(a) of 

ERISA, section 4975(c)(2) of the Code, 

or 5 U.S.C. 8477(c)(3) unless, following 

evaluation of the facts and 

representations comprising the 

administrative record of the proposed 

exemption (including any comments 

received in response to a notice of 

proposed exemption and the record of 

any hearing held in connection with the 

proposed exemption), it finds that the 

exemption is: 

(1) Administratively feasible; 

(2) In the interests of the plan (or the 

Thrift Savings Fund in the case of 

FERSA) and of its participants and 

beneficiaries; and 

(3) Protective of the rights of 

participants and beneficiaries of such 

plan (or the Thrift Savings Fund in the 

case of FERSA). 

(b) In each instance where the 

Department determines to grant an 

exemption, it shall publish a notice in 

the Federal Register which summarizes 

the transaction or transactions for which 

exemptive relief has been granted and 

specifies the conditions under which 

such exemptive relief is available. 

§ 2570.49 Limits on the effect of 

exemptions. 

(a) An exemption does not take effect 

with respect to the exemption 

transaction unless the material facts and 

representations contained in the 

application and in any materials and 

documents submitted in support of the 

application were true and complete. 

(b) An exemption is effective only for 

the period of time specified and only 

under the conditions set forth in the 

exemption. 

(c) Only the specific parties to whom 

an exemption grants relief may rely on 

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66654 Federal Register / Vol. 76, No. 208 / Thursday, October 27, 2011 / Rules and Regulations 

the exemption. If the notice granting an 

exemption does not limit exemptive 

relief to specific parties, all parties to 

the exemption transaction may rely on 

the exemption. 

(d) For transactions that are 

continuing in nature, an exemption 

ceases to be effective if, during the 

continuation of the transaction, there 

are material changes to the original facts 

and representations underlying such 

exemption or if one or more of the 

exemption’s conditions cease to be met. 

(e) The determination as to whether, 

under the totality of the facts and 

circumstances, a particular statement 

contained in (or omitted from) an 

exemption application constitutes a 

material fact or representation is made 

by the Department. 

§ 2570.50 Revocation or modification of 

exemptions. 

(a) If, after an exemption takes effect, 

changes in circumstances, including 

changes in law or policy, occur which 

call into question the continuing 

validity of the Department’s original 

findings concerning the exemption, the 

Department may take steps to revoke or 

modify the exemption. 

(b) Before revoking or modifying an 

exemption, the Department will publish 

a notice of its proposed action in the 

Federal Register and provide interested 

persons with an opportunity to 

comment on the proposed revocation or 

modification. Prior to the publication of 

such notice, the applicant will be 

notified of the Department’s proposed 

action and the reasons therefore. 

Subsequent to the publication of the 

notice, the applicant will have the 

opportunity to comment on the 

proposed revocation or modification. 

(c) Ordinarily the revocation or 

modification of an exemption will have 

prospective effect only. 

§ 2570.51 Public inspection and copies. 

(a) The administrative record of each 

exemption will be open to public 

inspection and copying at the EBSA 

Public Disclosure Room, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210. 

(b) Upon request, the staff of the 

Public Disclosure Room will furnish 

photocopies of an administrative record, 

or any specified portion of that record, 

for a specified charge per page. 

§ 2570.52 Effective date. 

This subpart B is effective with 

respect to all exemptions filed with or 

initiated by the Department under 

section 408(a) of ERISA, section 

4975(c)(2) of the Code, and/or 5 U.S.C. 

8477(c)(3) at any time on or after 

December 27, 2011. Applications for 

exemptions under section 408(a) of 

ERISA, section 4975(c)(2) of the Code, 

and/or 5 U.S.C. 8477(c)(3) filed on or 

after September 10, 1990, but before 

December 27, 2011 are governed by part 

2570 of chapter XXV of title 29 of the 

Code of Federal Regulations (title 29 

CFR part 2570 as revised July 1, 1991). 

* * * * * 

Signed at Washington, DC, this 18th day of 

October, 2011. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. 2011–27312 Filed 10–26–11; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 648 

[Docket No. 0907301205–0289–02] 

RIN 0648- XA764 

Fisheries of the Northeastern United 

States; Atlantic Herring Fishery; SubACL (Annual Catch Limit) Harvested 

for Management Area 1A 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Temporary rule; closure. 

SUMMARY: NMFS is closing the directed 

herring fishery in management area 1A, 

because 95 percent of the catch limit for 

that area has been caught. Effective 0001 

hr, October 27, 2011, federally 

permitted vessels may not fish for, 

catch, possess, transfer, or land more 

than 2,000 lb (907.2 kg) of Atlantic 

herring (herring) in or from Management 

Area 1A (Area 1A) per calendar day 

until January 1, 2012, when the 2012 

allocation for Area 1A becomes 

available. 

DATES: Effective 0001 hr local time, 

October 27, 2011, through December 31, 

2011. 

FOR FURTHER INFORMATION CONTACT: 

Lindsey Feldman, Fishery Management 

Specialist, (978) 675–2179. 

SUPPLEMENTARY INFORMATION: 

Regulations governing the herring 

fishery are found at 50 CFR part 648. 

The regulations require annual 

specification of the overfishing limit, 

acceptable biological catch, annual 

catch limit (ACL), optimum yield, 

domestic harvest and processing, U.S. 

at-sea processing, border transfer, and 

sub-ACLs for each management area. 

The 2011 Domestic Annual Harvest is 

91,200 metric tons (mt); the 2011 subACL allocated to Area 1A is 26,546 mt, 

and 0 mt of the sub-ACL is set aside for 

research (75 FR 48874, August 12, 

2010). 

Section § 648.201 requires the 

Administrator, Northeast Region, NMFS 

(Regional Administrator), to monitor the 

herring fishery in each of the four 

management areas designated in the 

Fishery Management Plan for the 

herring fishery and, based on dealer 

reports, state data, and other available 

information, to determine when the 

harvest of herring is projected to reach 

95 percent of the management area subACL. When such a determination is 

made, NMFS must publish notification 

in the Federal Register and prohibit 

herring vessel permit holders from 

fishing for, catching, possessing, 

transferring, or landing more than 2,000 

lb (907.2 kg) of herring per calendar day 

in or from the specified management 

area for the remainder of the closure 

period. Transiting of Area 1A with more 

than 2,000 lb (907.2 kg) of herring on 

board is allowed under the conditions 

described below. 

The Regional Administrator has 

determined, based upon dealer reports 

and other available information that 95 

percent of the total herring sub-ACL 

allocated to Area 1A for 2011 is 

projected to be harvested. This 

projection takes into consideration an 

additional 3,000 mt that will be 

allocated to Area 1A, effective 

November 1, 2011 from an underharvest in the New Brunswick weir 

fishery. Therefore, effective 0001 hr 

local time, October 27, 2011, federally 

permitted vessels may not fish for, 

catch, possess, transfer, or land more 

than 2,000 lb (907.2 kg) of herring in or 

from Area 1A per calendar day through 

December 31, 2011. Vessels may transit 

through Area 1A with more than 2,000 

lb (907.2 kg) of herring on board, 

provided such herring was not caught in 

Area 1A and provided all fishing gear 

aboard is stowed and not available for 

immediate use as required by 

§ 648.23(b). Effective 0001 hr, October 

27, 2011, federally permitted dealers are 

also advised that they may not purchase 

herring from federally permitted herring 

vessels that harvest more than 2,000 lb 

(907.2 kg) of herring from Area 1A 

through 2400 hr local time, December 

31, 2011. 

Classification 

This action is required by 50 CFR part 

648 and is exempt from review under 

Executive Order 12866. 

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