Vol. 77 Wednesday, 

No. 239 December 12, 2012 

Part II 

Department of Labor 

Employee Benefits Security Administration 

29 CFR Parts 2520, 2550, and 2578 

Notice of Proposed Amendment to Prohibited Transaction Exemption 2006– 

06 (PTE 2006–06) for Services Provided in Connection With the 

Termination of Abandoned Individual Account Plans; Amendments to the 

Abandoned Plan Regulations; Notice and Proposed Rule 


emcdonald on DSK67QTVN1PROD with 
74056 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Notices 

1Section 102 of the Reorganization Plan No. 4 of 

1978 (5 U.S.C. app. at 214 (2000) generally 

transferred the authority of the Secretary of the 

Treasury to issue administrative exemptions under 

section 4975 of the Code to the Secretary of Labor. 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application Number D–11657] 

ZRIN EBSA–2012–0015 

Notice of Proposed Amendment to 

Prohibited Transaction Exemption 

2006–06 (PTE 2006–06) for Services 

Provided in Connection With the 

Termination of Abandoned Individual 

Account Plans 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Notice of Proposed Amendment 

to PTE 2006–06. 

SUMMARY: This document contains a 

notice of pendency before the 

Department of Labor (the Department) of 

a proposed amendment to PTE 2006–06, 

a prohibited transaction class exemption 

issued under the Employee Retirement 

Income Security Act of 1974 (ERISA). 

Among other things, PTE 2006–06 

permits a ‘‘qualified termination 

administrator’’ (QTA) of an individual 

account plan that has been abandoned 

by its sponsoring employer to select 

itself to provide services to the plan in 

connection with the plan’s termination, 

and to pay itself fees for those services. 

DATES: Written comments and requests 

for a public hearing must be received by 

the Department on or before February 

11, 2013. 

ADDRESSES: All written comments and 

requests for a public hearing concerning 

the proposed amendment should be sent 

to the Office of Exemption 

Determinations, Employee Benefits 

Security Administration, Room N–5700, 

U.S. Department of Labor, 200 

Constitution Avenue NW., Washington 

DC 20210, Attention: PTE 2006–06 

Amendment. Interested persons are also 

invited to submit comments and hearing 

requests to EBSA via email to: 

moffitt.betty@dol.gov or by fax to 202– 

219–0204 by the end of the scheduled 

comment period. The comments 

received will be available for public 

inspection in the Public Disclosure 

Room of the Employee Benefits Security 

Administration, U.S. Department of 

Labor, Room N–1513, 200 Constitution 

Avenue NW., Washington, DC 20210. 

Comments and hearing requests will 

also be available online at 

www.regulations.gov and www.dol.gov/ 

ebsa, at no charge. 

All comments will be made available 

to the public. Warning: Do not include 

any personally identifiable information 

(such as name, address, or other contact 

information), or confidential business 

information, that you do not want 

publicly disclosed. All comments may 

be posted on the Internet and can be 

retrieved by most Internet search 

engines. 

FOR FURTHER INFORMATION CONTACT: 

Chris Motta, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, (202) 693–8540 

(this is not a toll-free number). 

SUPPLEMENTARY INFORMATION: Notice is 

hereby given of the pendency before the 

Department of a proposed amendment 

to PTE 2006–06. This amendment to 

PTE 2006–06 is being proposed in 

connection with the Department’s 

proposed amendment of regulations 

relating to the Termination of 

Abandoned Individual Account Plans at 

29 CFR 2578.1 (the QTA Regulation), 

the Safe Harbor for Distributions from 

Terminated Individual Account Plans at 

29 CFR 2550.404a–3 (the Safe Harbor 

Regulation), and the Special Terminal 

Report for Abandoned Plans at 29 CFR 

2520.103–13 (collectively, the 

Abandoned Plan Regulations). The 

proposed amendments to the 

Abandoned Plan Regulations are being 

published simultaneously in this issue 

of the Federal Register. PTE 2006–06 

provides an exemption from the 

restrictions of section 406(a)(1)(A) 

through (D), section 406(b)(1) and (b)(2) 

of the Employee Retirement Income 

Security Act of 1974 (ERISA or the Act) 

and from the taxes imposed by section 

4975(a) and (b) of the Internal Revenue 

Code of 1986 (the Code), by reason of 

section 4975(c)(1)(A) through (E) of the 

Code. 

If adopted, this proposed amendment 

to PTE 2006–06 would affect plans, 

participants and beneficiaries of such 

plans, and certain persons engaging in 

the transactions covered by the class 

exemption. 

The Department is proposing the 

amendment on its own motion pursuant 

to section 408(a) of ERISA and section 

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

accordance with the procedures set 

forth in 29 CFR Part 2570, Subpart B (55 

FR 32836, 32847, August 10, 1990).1

Executive Order 12866 

Under Executive Order 12866 (58 FR 

51735), ‘‘significant’’ regulatory actions 

are subject to the requirements of the 

Executive Order and review by the 

Office of Management and Budget 

(OMB). Section 3(f) of 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. It has 

been determined that that this proposed 

amendment is not ‘‘significant’’ under 

section 3(f) of the executive order. 

Accordingly, OMB has not reviewed the 

proposed amendment. 

PTE 2006–06 permits a QTA of an 

individual account plan that has been 

abandoned by its sponsoring employer 

to select itself or an affiliate to provide 

services to the plan in connection with 

the termination of the plan, and to pay 

itself or an affiliate fees for those 

services, provided that such fees are 

consistent with the conditions of the 

proposed exemption. The exemption 

also permits a QTA to: Designate itself 

or an affiliate as a provider of an 

individual retirement plan or other 

account; select a proprietary investment 

product as the initial investment for the 

rollover distribution of benefits for a 

participant or beneficiary who fails to 

make an election regarding the 

disposition of such benefits; and, pay 

itself or its affiliate in connection with 

the rollover. 

The proposed amendment to PTE 

2006–06 would expand the definition of 

QTA to include Bankruptcy Trustees 

(described below) and certain persons 

designated by such trustees to act as 

QTAs. The Department is proposing the 

amendment because it has determined 

that, in certain instances, it may be 

appropriate for a Bankruptcy Trustee to 

provide termination services to a plan. 

Currently, PTE 2006–06 and the 

accompanying QTA regulations do not 

cover plans of sponsors involved in 

chapter 7 bankruptcy proceedings, 

because such plans are not considered 

to be abandoned due to the fact that the 

Bankruptcy Trustee assumes the role of 

the plan administrator under the 

Bankruptcy Code. Moreover, 

Bankruptcy Trustees cannot serve as 


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Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Notices 74057 

2See the Termination of Abandoned Individual 

Account Plans at 29 CFR 2578.1 (77 FR 20820 at 

20838); the Safe Harbor for Distributions from 

Terminated Individual Account Plans at 29 CFR 

2550.404a-3 (77 FR 20820 at 20850); and Special 

Terminal Report for Abandoned Plans at 29 CFR 

2520.103–13 (77 FR 20820 at 20853). 

3 77 FR 20820 at id. 

4 71 FR 20856 (Apr. 21, 2006) as amended infra. 

5See 73 FR 58459 at 58462 and 58465. 

6See 73 FR 58629 (October 7, 2008). 

7Section I(a) of PTE 2006–06 incorrectly cites the 

QTA Regulation as Reg. Sec. 2550.404a–3. Section 

I(a) of this proposed amendment properly cites the 

QTA Regulation as Reg. Sec. 2578.1. 

QTAs under the current regulation and 

PTE 2006–06 because they are unable to 

meet the QTA definition. 

Accordingly, as addressed more fully 

elsewhere in this preamble, the 

Department is proposing to expand the 

definition of QTA to include 

Bankruptcy Trustees and certain 

persons designated by them to act as 

QTAs in terminating and winding up 

the affairs of abandoned plans. As noted 

above, this proposed amendment to the 

class exemption is being published 

concurrently with proposed 

amendments to the Abandoned Plan 

Regulations. Because compliance with 

the QTA Regulation is required under 

the proposed amendment, the costs and 

benefits that would be associated with 

complying with the proposed 

amendment to the class exemption have 

been described and quantified in 

connection with the economic impact of 

the proposed amendment to the QTA 

Regulation. 

The Department believes that the 

proposed amendments to the 

Abandoned Plan Regulations and PTE 

2006–06 will incentivize many 

bankruptcy trustees to carryout plan 

terminations consistent with ERISA, 

which the Department expects 

ultimately would benefit participants 

and beneficiaries of such plans by 

ensuring abandoned plans are 

terminated in an orderly and costeffective manner. 

Paperwork Reduction Act 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department of Labor 

conducts a preclearance consultation 

program to provide the general public 

and Federal agencies with an 

opportunity to comment on proposed 

and continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 (PRA 

95) (44 U.S.C. 3506(c)(2)(A)). This helps 

to ensure that requested data will be 

provided in the desired format, 

reporting burden (time and financial 

resources) is minimized, collection 

instruments are clearly understood, and 

the impact of collection requirements on 

respondents can be properly assessed. 

The proposed amendment to PTE 

2006–06 would only be used by QTAs 

that also take advantage of the proposed 

amendment to the QTA Regulation, 

which is published elsewhere in this 

issue of the Federal Register. The 

Department has combined the hour and 

cost burdens associated with the 

proposed amendment to the class 

exemption with the hour and cost 

burden associated with the amended 

proposed regulation, under one 

Information Collection Request (ICR) 

that will be filed with OMB. By 

combining the two ICRs, the Department 

believes that the regulated community 

will gain a better understanding of the 

overall burden impact of terminating 

abandoned plans pursuant to the 

proposed amendments. The specific 

burden for the proposed amendment to 

the class exemption includes a 

recordkeeping requirement for a 

Bankruptcy Trustee that terminates an 

abandoned plan and chooses to roll over 

the account balances of missing or 

nonresponsive participants into 

individual retirement plans offered by it 

or an affiliate. The hour and cost burden 

for the ICR are described more fully in 

the preamble to the proposed 

amendment to the regulation under the 

Paperwork Reduction Act section. 

I. Background 

On April 21, 2006, the Department 

issued the Abandoned Plan 

Regulations.2 These Regulations 

facilitate the orderly, efficient 

termination of abandoned individual 

account plans by a QTA (described 

below) in order to give participants and 

beneficiaries of those plans access to the 

amounts held in their individual 

accounts, which are frequently 

unavailable to them because of the 

abandonment.3 Specifically, the 

Termination of Abandoned Individual 

Account Plans regulation establishes 

standards for financial institutions 

holding the assets of an abandoned 

individual account plan to terminate the 

plan and distribute benefits to the plan’s 

participants and beneficiaries, with 

limited liability. The Safe Harbor for 

Distributions from Terminated 

Individual Account Plans regulation 

provides a fiduciary safe harbor for 

making distributions from terminated 

individual account plans on behalf of 

participants and beneficiaries who fail 

to make an election regarding the form 

of benefit distribution after the 

furnishing of notice. The Special 

Terminal Report for Abandoned Plans 

regulation establishes a simplified 

method for filing a terminal report for 

abandoned individual account plans. 

On that same date, the Department 

granted PTE 2006–06.4 This class 

exemption facilitates the goal of the 

Abandoned Plan Regulations by 

permitting a QTA, under the conditions 

of the exemption, to, among other 

things, select itself or an affiliate to 

provide services to the plan, to pay itself 

or an affiliate fees for those services, and 

to pay itself fees for services provided 

prior to the plan’s deemed termination, 

in connection with terminating the 

abandoned plan. 

On October 7, 2008, the Department 

issued final rules amending the QTA 

Regulation and the Safe Harbor 

Regulation.5 These amendments were 

made in response to changes to the 

Internal Revenue Code of 1986 (the 

Code) enacted as part of the Pension 

Protection Act of 2006. On that same 

date, and for the same purpose, PTE 

2006–06 was also amended.6 In this 

regard, as amended, the class exemption 

requires that benefits for a missing, 

designated nonspouse beneficiary be 

directly rolled over into an inherited 

individual retirement plan that fully 

complies with Code requirements. 

As noted above, proposed 

amendments to the Abandoned Plan 

Regulations are being published 

simultaneously in this issue of the 

Federal Register. If adopted, these 

amendments, among other things, 

would permit a Bankruptcy Trustee to 

qualify as a QTA under the Abandoned 

Plan Regulations or to appoint an 

‘‘eligible designee’’ to act as a QTA 

under the Abandoned Plan Regulations. 

Thereafter, the Bankruptcy Trustee or 

the ‘‘eligible designee’’ may provide 

certain services, pursuant to the 

requirements set forth in the Abandoned 

Plan Regulations, in connection with 

the termination of one or more 

individual account plans sponsored by 

the entity that is the subject of the 

proceeding. 

II. Description of the Class Exemption 

PTE 2006–06 is comprised of five 

sections. Section I describes the 

transactions covered by the exemption. 

These transactions are divided into two 

categories. The first category of 

transactions (hereinafter, Covered 

Termination Transactions) involve the 

use by a QTA (described below) of its 

authority in connection with the 

termination of an abandoned individual 

account plan pursuant to the QTA 

Regulation,7 to: Select itself or an 

affiliate to provide services to the plan; 

receive fees for the services performed 

as a QTA; and pay itself fees for services 

provided to the plan prior to the 


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74058 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Notices 

8The Department notes that the ‘‘distribution’’ 

services referenced in section II of PTE 2006–06 are 

distinguishable from the Distribution Transactions 

described in section I(b) of the class exemption. In 

this regard, the Distribution Transactions involve 

the investment of Plan assets in the QTA’s 

proprietary investment vehicles. Section II 

‘‘distribution’’ services relate to the transfer of Plan 

assets to Plan participants and/or investment 

vehicles that are unrelated to the QTA. 

9See section II(b)(1) of PTE 2006–06. 

10Section 7701(a)(37) of the Internal Revenue 

Code describes an ‘‘individual retirement plan’’ as 

an individual retirement account described in 

section 408(a) of the Code, and an individual 

retirement account described in section 408(b) of 

the Code. Section 408(a) of the Code describes the 

term ‘‘individual retirement account’’ as meaning a 

trust created or organized in the United States for 

the exclusive benefit of an individual or his 

beneficiaries, if certain requirements are met. 

Section 408(b) of the Code describes the term 

‘‘individual retirement annuity’’ as meaning an 

annuity contract, or an endowment contract, which 

meets certain requirements. 

11 In this regard, section 3(21)(A)(i) of ERISA 

provides that a person is a ‘‘fiduciary’’ with respect 

to a plan to the extent he exercises any 

discretionary authority or discretionary control 

respecting management of such plan or exercises 

any authority or control respecting management or 

disposition of its assets. In addition, section 

3(21)(A)(iii) of ERISA provides that a person is a 

‘‘fiduciary’’ with respect to a plan to the extent he 

has any discretionary authority or discretionary 

responsibility in the administration of such plan. 

12Section 404 of ERISA requires, among other 

things, that a fiduciary shall discharge his duties 

with respect to a plan solely in the interest of the 

participants and beneficiaries and with the care, 

skill prudence, and diligence under the 

circumstances then prevailing that a prudent man 

acting in a like capacity and familiarity with such 

matters would use in the conduct of an enterprise 

of a like character and with like aims. 

deemed termination of the plan. The 

second category of transactions 

(hereinafter, Covered Distribution 

Transactions) involves the use by a QTA 

of its authority in connection with the 

termination of an abandoned individual 

account plan pursuant to the QTA 

Regulation to: (1) Designate itself or an 

affiliate as: (i) Provider of an individual 

retirement plan; (ii) provider, in the case 

of a distribution on behalf of a 

designated beneficiary (as defined by 

section 401(a)(9)(E) of the Code) who is 

not the surviving spouse of the deceased 

participant, of an inherited individual 

retirement plan (within the meaning of 

section 402(c)(11) of the Code) 

established to receive the distribution 

on behalf of the nonspouse beneficiary 

under the circumstances described in 

section (d)(1)(ii) of the Safe Harbor 

Regulation; or (iii) provider of an 

interest-bearing, federally insured bank 

or savings association account 

maintained in the name of the 

participant or beneficiary, in the case of 

a distribution described in section 

(d)(1)(iii) of the Safe Harbor Regulation, 

for the distribution of the account 

balance of the participant or beneficiary 

of the abandoned individual account 

plan who does not provide direction as 

to the disposition of such assets; (2) 

make the initial investment of the 

account balance of the participant or 

beneficiary in the QTA’s or its affiliate’s 

proprietary investment product; (3) 

receive fees in connection with the 

establishment or maintenance of the 

individual retirement plan or other 

account; and (4) pay itself or an affiliate 

investment fees as a result of the 

investment of the individual retirement 

plan or other account assets in the 

QTA’s or its affiliate’s proprietary 

investment product. 

Section II contains conditions 

applicable to the Covered Termination 

Transactions. These conditions include 

the requirement that the fees and 

expenses paid to the QTA, and its 

affiliate, for services associated with the 

termination of a plan and the 

distribution of its benefits (hereinafter, 

Termination Services) 8 be consistent 

with industry rates for such or similar 

services, based on the experience of the 

QTA.9 Section II provides further that 

the fees and expenses paid to the QTA, 

and its affiliate, may not exceed the 

rates ordinarily charged by the QTA (or 

affiliate) for the same or similar services 

provided to customers that are not plans 

terminated pursuant to the QTA 

regulation, if the QTA (or affiliate) 

provides the same or similar services to 

such other customers. Among the 

remaining conditions set forth in section 

II is the requirement that, with respect 

to a Termination Transaction, the 

requirements of the QTA Regulation are 

met. 

Section III of PTE 2006–06 contains 

conditions applicable to the Covered 

Distribution Transactions. These 

conditions include the requirement that, 

with respect to a Covered Distribution 

Transaction, the conditions of the QTA 

Regulation are met. Section III 

additionally requires that, in connection 

with the notice to participants and 

beneficiaries requirement described in 

the QTA Regulation, a statement is 

provided explaining that: (1) If the 

participant or beneficiary fails to make 

an election within the 30-day period 

referenced in the QTA Regulation, the 

QTA will directly distribute the account 

balance to an individual retirement plan 

or other account offered by the QTA or 

its affiliate; and (2) the proceeds of the 

distribution may be invested in the 

QTA’s (or affiliate’s) own proprietary 

investment product, which is designed 

to preserve principal and provide a 

reasonable rate of return and liquidity. 

This section of the class exemption 

requires further that the terms of the 

individual retirement plan or other 

account, including the fees and 

expenses for establishing and 

maintaining the individual retirement 

plan or other account, may be no less 

favorable than those available to 

comparable individual retirement plans 

or other accounts established for reasons 

other than the receipt of a distribution 

described in the QTA Regulation. 

Among the remaining conditions set 

forth in section III is the requirement 

that the rate of return or the investment 

performance of the individual 

retirement plan or other account may be 

no less favorable than the rate of return 

or investment performance of an 

identical investment(s) that could have 

been made at the same time by 

comparable individual retirement plans 

or other accounts established for reasons 

other than the receipt of a distribution 

described in the QTA Regulation. 

Section IV contains the recordkeeping 

requirements for the QTA, and section 

V defines certain terms that appear in 

the class exemption. In this last regard, 

section V(a) currently provides that a 

termination administrator is ‘‘qualified’’ 

for purposes of the Abandoned Plan 

Regulations and the class exemption if: 

(1) The QTA is eligible to serve as a 

trustee or issuer of an individual 

retirement plan or other account, within 

the meaning of section 7701(a)(37) of 

the Code,10 and (2) the QTA holds plan 

assets of the plan considered 

abandoned. Accordingly, relief under 

the existing class exemption extends 

only to entities with experience 

providing services to plans that are 

subject to ERISA. 

III. Description of the Proposed 

Amendment to the Class Exemption 

When an entity that sponsors an 

individual account plan is liquidated 

under chapter 7 of title 11 of the United 

States Code, a person appointed as a 

bankruptcy trustee (a Bankruptcy 

Trustee) will, among other things, 

perform the obligations that otherwise 

would have been required of the 

bankrupt entity. Once appointed, the 

Bankruptcy Trustee is responsible for 

administering the plan, which may 

include taking the steps necessary to 

terminate the plan and wind up the 

affairs of the plan. A Bankruptcy 

Trustee who undertakes these plan 

responsibilities is a fiduciary with 

respect to the plan,11 and therefore 

subject to section 404 of ERISA.12 As 

noted in the preamble to PTE 2006–06, 

as proposed, a violation of section 

406(a) and/or (b) of the Act may occur 

if the QTA determines to pay itself or 

an affiliate for services rendered to the 

plan from the assets of an abandoned 


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Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Notices 74059 

13 In this regard, section 406(a)(1) of the Act 

prohibits, in part, a fiduciary of a plan from causing 

the plan to engage in a transaction that constitutes 

a direct or an indirect sale, exchange or leasing of 

any property between the plan and a party in 

interest; lending of money or other extension of 

credit between the plan and a party in interest; 

furnishing of goods, services, or facilities between 

the plan and a party in interest; and a transfer to, 

or use by or for the benefit of, a party in interest 

of any assets of the plan. Section 406(b)(1) and 

(b)(2) of the Act prohibits a fiduciary with respect 

to a plan from dealing with the assets of the plan 

in his own interest or for his own account; and from 

acting in his individual or in any other capacity in 

any transaction involving the plan on behalf of a 

party (or representing a party) whose interests are 

adverse to the interests of the plan or the interests 

of its participants or beneficiaries. 

14 It is also the understanding of the Department 

that Bankruptcy Trustees do not maintain 

proprietary investment vehicles, and thus do not, in 

the general course of their business activities, offer 

services associated with the Distribution 

Transactions. Accordingly, this proposed 

amendment does not extend relief for a Bankruptcy 

Trustee/QTA that designates itself or an affiliate to 

offer such services. 

15 In the preamble to the QTA Regulation, the 

Department further noted that in developing its 

criteria for QTAs, the Department limited QTA 

status to trustees or issuers of an individual account 

plan within the meaning of section 7701(a)(37) of 

the Code, because the standards applicable to such 

trustees and issuers are well understood by the 

regulated community and the Department is 

unaware of any problems attributable to weaknesses 

in the existing Code and regulatory standards for 

such persons. See 77 FR 20820 at 20821. 

16This proposed amendment does not affect the 

obligations under the class exemption of a QTA that 

is not a Bankruptcy Trustee. 

17The Department notes that the Act’s general 

standards of fiduciary conduct would apply to this 

arrangement. In this regard, section 404 of the Act 

requires, among other things, that Bankruptcy 

Trustee/QTA discharge his or her duties in a 

prudent manner. Accordingly, a Bankruptcy 

Trustee/QTA who appoints an ‘‘eligible designee’’ 

would thereafter be responsible for monitoring the 

services provided by the ‘‘eligible designee.’’ The 

Department cautions that such monitoring, and the 

fee associated therewith, must be consistent with, 

and reflective of, the Plan’s interest in having its 

operations wound down in an expeditious and cost 

effective manner. In this regard, the rates charged 

to the Plan by the Bankruptcy Trustee/QTA for 

monitoring the ‘‘eligible designee’’ must reflect the 

rates charged by a plan fiduciary for similar 

services, rather than the generally higher fees 

charged by bankruptcy trustees for legal services 

provided to the bankruptcy estate. 

plan.13 Also, additional violations may 

occur if the QTA designates itself or an 

affiliate as the provider of an individual 

retirement plan or other account 

established for the benefit of 

participants and beneficiaries who do 

not make an election as to the form of 

distribution. 

As described below, a Bankruptcy 

Trustee may determine that it is capable 

of prudently and expeditiously winding 

down the operations of an individual 

account plan. However, the relief 

currently provided by PTE 2006–06 

generally does not extend to the 

provision of Termination Services by a 

Bankruptcy Trustee to a plan. In this 

regard, it is the understanding of the 

Department that Bankruptcy Trustees 

seldom hold custody of plan assets of 

the bankrupt plan sponsor. Thus, 

Bankruptcy Trustees are generally 

unable to meet the definition of QTA, as 

set forth in section V(a) of the existing 

class exemption. 

In addition, the provision of 

Termination Services by a Bankruptcy 

Trustee to a Plan is often outside the 

scope of relief intended by the 

Department for the existing class 

exemption.14 In this regard, the class 

exemption currently limits relief to 

entities that are eligible to serve as 

trustees or issuers of individual 

retirement plans and thus have 

experience providing services to 

individual account plans subject to 

ERISA.15 As noted above, the existing 

class exemption requires, among other 

things, that the fees and expenses paid 

to a QTA, and its affiliate, for 

Termination Services are consistent 

with industry rates, based on the 

experience of the QTA. This condition 

may have little or no relevance to 

Bankruptcy Trustees that have minimal 

or no experience providing services to 

ERISA-covered individual account 

plans. 

Nevertheless, the Department 

recognizes that when the sponsor of an 

individual account plan is in 

liquidation pursuant to a Chapter 7 

bankruptcy proceeding, participants in 

the plan benefit to the extent the plan’s 

operations are wound down properly 

and in an expeditious manner. The 

Department is proposing this 

amendment based on its belief that 

extending relief under the class 

exemption to Bankruptcy Trustees will 

enable these Trustees to carry out plan 

terminations consistent with ERISA and 

the Department’s expectations. 

Accordingly, the Department is 

proposing to expand the definition of 

QTA to include Bankruptcy Trustees 

and certain persons designated by such 

trustees to act as QTAs. Specifically, 

this new category of QTA is: (1) A 

person appointed as a bankruptcy 

trustee pursuant to a liquidation 

proceeding under chapter 7 of title 11 of 

the United States Code, or (2) an 

‘‘eligible designee’’ of such bankruptcy 

trustee (as described below). Given that 

a Bankruptcy Trustee may have little or 

no experience providing services to 

employee benefit plans, the Department 

is proposing to modify section II(b)(1) of 

the class exemption. The modification, 

which applies only to Bankruptcy 

Trustee/QTAs and not ‘‘eligible 

designees’’ or other QTAs, eliminates 

the ‘‘experience of the QTA’’ component 

of the condition. In this regard, section 

II(b)(1) of this proposed amendment 

limits the total amount of compensation 

that may be paid to a Bankruptcy 

Trustee/QTA (or any affiliate) for 

Termination Services to an amount that 

is consistent with industry rates for 

such or similar services.16

The Department notes that 

compliance with section II(b)(1) of this 

proposed amendment imposes an 

obligation on a Bankruptcy Trustee/ 

QTA, prior to performing any 

Termination Service on behalf of a Plan, 

to investigate and determine that the 

fees and expenses proposed to be paid 

to such Bankruptcy Trustee/QTA are 

consistent with the amount the Plan 

would have to pay to an experienced 

service provider for the same or similar 

Termination Services. The Department 

believes that information currently 

available on the Department’s Web site, 

as described in further detail below, will 

assist Bankruptcy Trustee/QTAs set fees 

for Termination Services in the manner 

required by section II(b)(1) of the 

proposed exemption. The Department 

recognizes that a Bankruptcy Trustee, 

once appointed to administer the 

termination of a Plan, may seek to 

appoint the Plan’s custodian to provide 

Termination Services and/or 

Distribution Services to such Plan.17

The Department believes that the 

provision of Termination Services and/ 

or Distribution Services by a plan 

custodian who has been retained in this 

manner to act as QTA would be 

consistent with the intended scope of 

the existing class exemption. 

Accordingly, the Department is 

proposing to expand the definition of 

QTA to include an ‘‘eligible designee’’ 

of a Bankruptcy Trustee. The proposed 

amendment defines an ‘‘eligible 

designee’’ to mean any entity appointed 

by a Bankruptcy Trustee/QTA, who: is 

eligible to serve as a trustee or issuer of 

an individual retirement plan; and 

holds assets of the plan(s) sponsored by 

the entity that is the subject of the 

chapter 7 liquidation proceeding. Given 

that ‘‘eligible designees’’ are plan 

custodians with experience providing 

services to employee benefit plans 

subject to ERISA, the Department 

believes that ‘‘eligible designees’’ 

should be treated in the same manner as 

QTAs that are not Bankruptcy Trustee/ 

QTAs. In this regard, the proposed 

amendment permits ‘‘eligible 

designees’’ to engage in all transactions 

covered by the exemption (i.e., Covered 

Termination Transactions and/or 

Covered Distribution Transactions) 

subject to the same conditions 

applicable to QTAs other than 


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74060 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Notices 

18The Proposed Amendment to the QTA 

Regulation provides that if an individual account 

plan’s sponsor is in liquidation under chapter 7 of 

title 11 of the United States Code, the plan may be 

considered abandoned upon the entry of an order 

for relief, and the bankruptcy trustee, or an eligible 

designee, shall be the qualified termination 

administrator. See Paragraph (j)(1) of the Proposed 

Amendment to the QTA Regulation. 

19See paragraph (c)(3)(iii) of the QTA Regulation. 

20Paragraph (d)(2)(v) of the QTA Regulation 

provides, among other things, that expenses of plan 

administration shall be considered reasonable to the 

extent such expenses are consistent with industry 

rates for such or similar services. 21See DOL Reg. Sec. 2520.103–13(b)(3). 

Bankruptcy Trustee/QTAs. Accordingly, 

the fees and expenses paid to an 

‘‘eligible designee’’/QTA pursuant to 

section II(b)(1) of PTE 2006–06 must be, 

among other things, based on the 

experience of such QTA. 

The Department reemphasizes to all 

entities seeking to take advantage of PTE 

2006–06 that relief under that class 

exemption is conditioned upon, among 

other things, fulfilling the requirements 

set forth in the QTA Regulation. 

Accordingly, following a QTA’s 

determination that an individual 

account plan has been abandoned,18 the 

QTA must furnish the Department with 

a notice that includes, among other 

things, an identification of any services 

considered necessary to wind up the 

plan in accordance with this section, the 

name of the service provider(s) that is 

expected to provide such services, and 

an itemized estimate of expenses 

attendant thereto expected to be paid 

out of plan assets by the qualified 

termination administrator.19 The 

Department cautions that, while all such 

notices are reviewed by the Department, 

any such notice furnished by a 

Bankruptcy Trustee/QTA will be subject 

to additional scrutiny by the 

Department to ensure that plans pay no 

more than reasonable compensation for 

Termination Services.20 At the 

beginning of the termination process, 

the Department conducts a review of the 

estimated expenses for reasonableness. 

In this regard, the Department will: 

Compare the QTA’s estimated expenses 

to those of other QTAs; and consider 

also the facts and circumstances of the 

Plan in question. The Department notes 

that Plans are deemed terminated only 

after the Department establishes that the 

fees are reasonable. 

In addition, the Department notes that 

compliance with the QTA Regulation 

requires that each QTA file a ‘‘Special 

Terminal Report for Abandoned Plans 

(STRAP)’’ with the Department, and 

such Report must set forth, among other 

things, the total termination expenses 

paid by the plan and a separate 

schedule identifying each service 

provider and amount received, itemized 

by expense.21 Completed STRAPs are 

available on the Department’s Web site: 

http://askebsa.dol.gov/ 

AbandonedPlanSearch/UI/ 

QTASearchResults.aspx. The 

Department expects that the information 

contained in these completed STRAPs, 

including the itemized fees set forth 

therein, will assist Bankruptcy Trustee/ 

QTAs set fees for Termination Services 

in the manner required by section 

II(b)(1) of the proposed exemption. For 

further assistance regarding QTA 

participation in the abandoned plan 

program, Bankruptcy Trustee/QTAs 

may contact the EBSA office for the 

region where the abandoned plan is 

located. 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

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

of the Code does not relieve a fiduciary 

or other party in interest or disqualified 

person with respect to a plan from 

certain other provisions of ERISA and 

the Code, including any prohibited 

transaction provisions to which the 

exemption does not apply and the 

general fiduciary responsibility 

provisions of section 404 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 in accordance with 

section 404(a)(1)(B) of the Act. 

(2) If granted, this proposed 

amendment does not extend to 

transactions prohibited under section 

406(b)(3) of the Act or section 

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

(3) Before an amendment may be 

granted under section 408(a) of ERISA 

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

Department must find that the 

amendment is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(4) If granted, the amendment is 

applicable to a particular transaction 

only if the transaction satisfies the 

conditions specified in the exemption; 

and 

(5) If granted, the amendment is 

supplemental to, and not in derogation 

of, any other provisions of ERISA and 

the Code, including statutory or 

administrative exemptions and 

transitional rules. Furthermore, the fact 

that a transaction is subject to an 

administrative or statutory exemption is 

not dispositive of whether the 

transaction is in fact a prohibited 

transaction. 

Proposed Amendment 

Under section 408(a) of the Act and 

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

accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990), the 

Department proposes to amend PTE 

2006–06, effective as of the date the 

adopted amendment is published in the 

Federal Register. The entire exemption, 

as proposed to be amended, is set forth 

below: 

I. Covered Transactions 

(a) The restrictions of sections 

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

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

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

the Code, by reason of section 

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

shall not apply to a QTA (as defined in 

paragraph (a)(1) or (a)(2) of section V) 

using its authority in connection with 

the termination of an abandoned 

individual account plan pursuant to the 

Department’s regulation at 2578.1, 

relating to the Termination of 

Abandoned Individual Account Plans 

(the QTA Regulation) to: 

(1) Select itself or an affiliate to 

provide services to the plan; 

(2) Receive fees for the services 

performed as a QTA; and 

(3) Pay itself fees for services 

provided to the plan prior to the 

deemed termination of the plan, 

provided that the conditions set forth in 

sections II and IV of this exemption are 

satisfied. 

(b) The restrictions of sections 

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

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

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

the Code, by reason of section 

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

shall not apply to a QTA (as defined in 

paragraph (a)(1) or (a)(2)(ii) of section V) 

using its authority in connection with 

the termination of an abandoned 

individual account plan pursuant to the 

QTA Regulation to: 

(1) Designate itself or an affiliate as: 

(i) Provider of an individual retirement 

plan; (ii) provider, in the case of a 

distribution on behalf of a designated 

beneficiary (as defined by section 

401(a)(9)(E) of the Code) who is not the 

surviving spouse of the deceased 

participant, of an inherited individual 

retirement plan (within the meaning of 

section 402(c)(11) of the Code) 

established to receive the distribution 

on behalf of the nonspouse beneficiary 

under the circumstances described in 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Notices 74061 

section (d)(1)(ii) of the Safe Harbor 

Regulation for Terminated Plans (29 

CFR section 2550.404a–3) (the Safe 

Harbor Regulation); or (iii) provider of 

an interest bearing, federally insured 

bank or savings association account 

maintained in the name of the 

participant or beneficiary, in the case of 

a distribution described in section 

(d)(1)(iii) of the Safe Harbor Regulation, 

for the distribution of the account 

balance of the participant or beneficiary 

of the abandoned individual account 

plan who does not provide direction as 

to the disposition of such assets; 

(2) Make the initial investment of the 

account balance of the participant or 

beneficiary in the QTA’s or its affiliate’s 

proprietary investment product; 

(3) Receive fees in connection with 

the establishment or maintenance of the 

individual retirement plan or other 

account; and 

(4) Pay itself or an affiliate investment 

fees as a result of the investment of the 

individual retirement plan or other 

account assets in the QTA’s or its 

affiliate’s proprietary investment 

product, provided that the conditions 

set forth in sections III and IV of this 

exemption are satisfied. 

II. Conditions for Provision of 

Termination Services and Receipt of 

Fees in Connection Therewith 

(a) The requirements of the QTA 

Regulation are met. The QTA provides, 

in a timely manner, any other 

reasonably available information 

requested by the Department regarding 

the proposed termination. 

(b) Fees and expenses paid to the 

QTA, and its affiliate, in connection 

with the termination of the plan and the 

distribution of benefits: 

(1) Are consistent with industry rates 

for such or similar services, based on 

the experience of the QTA, and 

(2) Are not in excess of rates 

ordinarily charged by the QTA (or 

affiliate) for the same or similar services 

provided to customers that are not plans 

terminated pursuant to the QTA 

regulation, if the QTA (or affiliate) 

provides the same or similar services to 

such other customers. Notwithstanding 

the foregoing, solely with respect to a 

QTA described in section V(a)(2)(i) of 

this proposed class exemption, the 

requirement set forth in (b)(1) of this 

paragraph shall be deemed met to the 

extent that the fees and expenses paid 

to such QTA are: (i) For services 

necessary to wind-up the affairs of the 

plan and distribute benefits to the plan’s 

participants and beneficiaries; and (ii) 

consistent with industry rates for such 

or similar services ordinarily charged by 

QTAs described in section V(a)(1)(i); 

(c) In the case of a transaction 

described in section I(a)(3): 

(1) Such services: (i) Were performed 

in good faith pursuant to the terms of a 

written agreement executed prior to the 

service provider becoming a QTA; or (ii) 

were performed pursuant to the QTA 

Regulation; and 

(2) The QTA, in the initial notification 

of plan abandonment described in 

section (c)(3) of the QTA Regulation: (i) 

Represents under penalty of perjury that 

such services were actually performed; 

and (ii) in the case of section II(c)(1)(i) 

above, provides the Department with a 

copy of the executed contract between 

the QTA and a plan fiduciary or the 

plan sponsor that authorized such 

services. 

III. Conditions for Distributions 

(a) The conditions of the QTA 

Regulation are met. 

(b) In connection with the notice to 

participants and beneficiaries described 

in the QTA Regulation, a statement is 

provided explaining that: 

(1) If the participant or beneficiary 

fails to make an election within the 30- 

day period referenced in the QTA 

Regulation, the QTA will directly 

distribute the account balance to an 

individual retirement plan or other 

account offered by the QTA or its 

affiliate; 

(2) The proceeds of the distribution 

may be invested in the QTA’s (or 

affiliate’s) own proprietary investment 

product, which is designed to preserve 

principal and provide a reasonable rate 

of return and liquidity. 

(c) The individual retirement plan or 

other account is established and 

maintained for the exclusive benefit of 

the individual retirement plan account 

holder or other account holder, his or 

her spouse, or their beneficiaries. 

(d) The terms of the individual 

retirement plan or other account, 

including the fees and expenses for 

establishing and maintaining the 

individual retirement plan or other 

account, are no less favorable than those 

available to comparable individual 

retirement plans or other accounts 

established for reasons other than the 

receipt of a distribution described in the 

QTA Regulation. 

(e) Except in the case of a QTA 

providing a bank or savings account 

pursuant to section I(b)(1)(iii) of the 

exemption, the distribution proceeds are 

invested in an Eligible Investment 

Product(s), as defined in section V(c) of 

this class exemption. 

(f) The rate of return or the investment 

performance of the individual 

retirement plan or other account is no 

less favorable than the rate of return or 

investment performance of an identical 

investment(s) that could have been 

made at the same time by comparable 

individual retirement plans or other 

accounts established for reasons other 

than the receipt of a distribution 

described in the QTA Regulation. 

(g) The individual retirement plan or 

other account does not pay a sales 

commission in connection with the 

acquisition of an Eligible Investment 

Product. 

(h) The individual retirement plan 

account holder or other account holder 

must be able, within a reasonable period 

of time after his or her request and 

without penalty to the principal amount 

of the investment, to transfer his or her 

account balance to a different 

investment offered by the QTA or its 

affiliate, or to a different financial 

institution not related to the QTA or its 

affiliate. 

(i)(1) Fees and expenses attendant to 

the individual retirement plan or other 

account, including the investment of the 

assets of such plan or account, (e.g., 

establishment charges, maintenance 

fees, investment expenses, termination 

costs, and surrender charges) shall not 

exceed the fees and expenses charged by 

the QTA for comparable individual 

retirement plans or other accounts 

established for reasons other than the 

receipt of a distribution made pursuant 

to the QTA Regulation; 

(2) Fees and expenses attendant to the 

individual retirement plan or other 

account, with the exception of 

establishment charges, may be charged 

only against the income earned by the 

individual retirement plan or other 

account; and 

(3) Fees and expenses attendant to the 

individual retirement plan or other 

account are not in excess of reasonable 

compensation within the meaning of 

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

IV. Recordkeeping 

(a) The QTA maintains or causes to be 

maintained, for a period of six (6) years 

from the date the QTA provides notice 

to the Department of its determination 

of plan abandonment and its election to 

serve as the QTA described in the QTA 

Regulation, the records necessary to 

enable the persons described in 

paragraph (b) of this section to 

determine whether the applicable 

conditions of this exemption have been 

met. Such records must be readily 

available to assure accessibility by the 

persons identified in paragraph (b) of 

this section. 

(b) Notwithstanding any provisions of 

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

records referred to in paragraph (a) of 

this section are unconditionally 


emcdonald on DSK67QTVN1PROD with 
74062 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Notices 

available at their customary location for 

examination during normal business 

hours by— 

(1) Any duly authorized employee or 

representative of the Department of 

Labor or the Internal Revenue Service; 

and 

(2) Any account holder of an 

individual retirement plan or other 

account established pursuant to this 

exemption, or any duly authorized 

representative of such account holder. 

(c) A prohibited transaction will not 

be considered to have occurred if due to 

circumstances beyond the control of the 

QTA, the records necessary to enable 

the persons described in paragraph (b) 

to determine whether the conditions of 

the exemption have been met are lost or 

destroyed, and no party in interest other 

than the QTA shall be subject to the 

civil penalty that may be assessed under 

section 502(i) of the Act or to the taxes 

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

the Code if the records are not 

maintained or are not available for 

examination as required by paragraph 

(b). 

(3) None of the persons described in 

paragraph (b)(2) of this section shall be 

authorized to examine the trade secrets 

of the QTA or its affiliates or 

commercial or financial information 

that is privileged or confidential. 

V. Definitions 

(a) A termination administrator is 

‘‘qualified’’ for purposes of the QTA 

Regulation and this proposed 

amendment if the requirements set forth 

in either subparagraph (1) or (2) below 

are met: 

(1)(i) The QTA is eligible to serve as 

a trustee or issuer of an individual 

retirement plan or other account, within 

the meaning of section 7701(a)(37) of 

the Code, and (ii) The QTA holds plan 

assets of the plan that is considered 

abandoned; or 

(2)(i) The QTA is a bankruptcy trustee 

in a liquidation proceeding under 

chapter 7 of title 11 of the United States 

Code with responsibility under 11 U.S.C 

704(a)(11) to administer one or more 

individual account plans sponsored by 

the entity that is the subject of the 

proceeding, or (ii) The QTA is an 

‘‘eligible designee,’’ as defined in 

section V(h) below, of such bankruptcy 

trustee. 

(b) The term ‘‘individual retirement 

plan’’ means an individual retirement 

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

the Code. For purposes of section III of 

this exemption, the term ‘‘individual 

retirement plan’’ shall also include an 

inherited individual retirement plan 

(within the meaning of section 

402(c)(11) of the Code) established to 

receive a distribution on behalf of a 

nonspouse beneficiary. Notwithstanding 

the foregoing, the term individual 

retirement plan shall not include an 

individual retirement plan which is an 

employee benefit plan covered by Title 

I of ERISA. 

(c) The term ‘‘Eligible Investment 

Product’’ means an investment product 

designed to preserve principal and 

provide a reasonable rate of return, 

whether or not such return is 

guaranteed, consistent with liquidity. 

For this purpose, the product must be 

offered by a Regulated Financial 

Institution as defined in paragraph (d) of 

this section and shall seek to maintain, 

over the term of the investment, the 

dollar value that is equal to the amount 

invested in the product by the 

individual retirement plan or other 

account. Such term includes money 

market funds maintained by registered 

investment companies, and interestbearing savings accounts and certificates 

of deposit of a bank or similar financial 

institution. In addition, the term 

includes ‘‘stable value products’’ issued 

by a financial institution that are fully 

benefit-responsive to the individual 

retirement plan account holder or other 

account holder, i.e., that provide a 

liquidity guarantee by a financially 

responsible third party of principal and 

previously accrued interest for 

liquidations or transfers initiated by the 

individual retirement plan account 

holder or other account holder 

exercising his or her right to withdraw 

or transfer funds under the terms of an 

arrangement that does not include 

substantial restrictions to the account 

holder access to the individual 

retirement plan or other account’s 

assets. 

(d) The term ‘‘Regulated Financial 

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

subject to state or federal regulation, and 

(ii) is a bank or savings association, the 

deposits of which are insured by the 

Federal Deposit Insurance Corporation; 

a credit union, the member accounts of 

which are insured within the meaning 

of section 101(7) of the Federal Credit 

Union Act; an insurance company, the 

products of which are protected by state 

guaranty associations; or an investment 

company registered under the 

Investment Company Act of 1940. 

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

(1) Any person directly or indirectly 

controlling, controlled by, or under 

common control with, the person; or 

(2) Any officer, director, partner or 

employee of the person. 

(f) The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(g) The term ‘‘individual account 

plan’’ means an individual account plan 

as that term is defined in section 3(34) 

of the Act. 

(h) The term ‘‘eligible designee’’ 

means any person or entity designated 

by a QTA described in section V(a)(2)(i) 

that is eligible to serve as a trustee or 

issuer of an individual retirement plan, 

within the meaning of section 

7701(a)(37) of the Internal Revenue 

Code, and that holds assets of a plan 

described in section V(a)(2)(i). 

Signed at Washington, DC, September, 

2012. 

Lyssa E. Hall, 

Director, Office of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2012–29556 Filed 12–11–12; 8:45 am] 

BILLING CODE 4510–29–P 


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