Federal Register / Vol. 87, No. 45 / Tuesday, March 8, 2022 / Notices 12985 

1 Dodd-Frank Wall Street Reform and Consumer 

Protection Act section 931(5), Public Law 111–203, 

124 Stat. 1376 (2010). 

2 Id., section 939A. 

3Code section 4975(c)(2) authorizes the Secretary 

of the Treasury to grant exemptions from the 

parallel prohibited transaction provisions of the 

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

app. at 214 (2000)) generally transferred the 

authority of the Secretary of the Treasury to grant 

administrative exemptions under Code section 4975 

to the Secretary of Labor. 

examined at the Clerk’s Office, United 

States District Court for the Northern 

District of Ohio, 2 South Main Street, 

Akron, Ohio 44308. In addition, the 

proposed Consent Decree may be 

examined electronically at http://

www.justice.gov/enrd/consent-decrees. 

Cherie Rogers, 

Assistant Section Chief, Environmental 

Defense Section, Environment and Natural 

Resources Division. 

[FR Doc. 2022–04850 Filed 3–7–22; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application Number D–11681] 

ZRIN 1210–ZA18 

Amendments to Class Prohibited 

Transaction Exemptions To Remove 

Credit Ratings Pursuant to the DoddFrank Wall Street Reform and 

Consumer Protection Act 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Notice of amendments to class 

exemptions. 

SUMMARY: This document amends six 

class exemptions from prohibited 

transaction rules set forth in the 

Employee Retirement Income Security 

Act of 1974 (ERISA or the Act) and the 

Internal Revenue Code (the Code). The 

amended exemptions are Prohibited 

Transaction Exemptions (PTEs) 75–1, 

80–83, 81–8, 95–60, 97–41 and 2006–16. 

The amendments relate to the use of 

credit ratings as conditions in these 

class exemptions. Section 939A of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act requires the 

Department to remove any references to 

or requirements of reliance on credit 

ratings from its class exemptions and to 

substitute standards of creditworthiness 

as the Department determines to be 

appropriate. The amendments affect 

participants and beneficiaries of 

employee benefit plans, owners of 

individual retirement accounts (IRAs), 

fiduciaries of employee benefit plans 

and IRAs, and the financial institutions 

that engage in transactions with, or 

provide services or products to, the 

plans and IRAs. 

DATES: This amendment will be in effect 

on May 9, 2022. 

FOR FURTHER INFORMATION CONTACT: 

Susan Wilker, 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: 

Executive Order 12866 and 13563 

Statement 

Under Executive Orders 12866 and 

13563, the Department must determine 

whether a regulatory action is 

‘‘significant’’ and therefore subject to 

the requirements of the Executive Order 

and subject to review by the Office of 

Management and Budget (OMB). 

Executive Orders 13563 and 12866 

direct agencies to assess the costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing and 

streamlining rules, and of promoting 

flexibility. It also requires federal 

agencies to develop a plan under which 

the agencies will periodically review 

their existing significant regulations to 

make the agencies’ regulatory programs 

more effective or less burdensome in 

achieving their regulatory objectives. 

Under Executive Order 12866, 

‘‘significant’’ regulatory actions are 

subject to the requirements of the 

Executive Order and review by OMB. 

Section 3(f) of Executive Order 12866, 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

rule (1) having an annual effect on the 

economy of $100 million or more, or 

adversely and materially affecting a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local or 

tribal governments or communities (also 

referred to as an ‘‘economically 

significant action’’); (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. 

In 2013, OMB determined that the 

proposal was significant within the 

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

Executive Order. However, since then 

other regulators have adopted similar 

changes to their regulations and 

financial institutions have been 

complying with updated credit quality 

standards. Therefore, 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. This action also does not impose 

an information collection burden under 

the provisions of the Paperwork 

Reduction Act (44 U.S.C. 3501 et seq.). 

Background 

In the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (DoddFrank), Congress included provisions 

designed to reduce federal regulatory 

reliance on credit ratings, finding that in 

the financial crisis of 2008 certain credit 

ratings had been inaccurate, and that 

they ‘‘contributed significantly to the 

mismanagement of risks by financial 

institutions and investors, which in turn 

adversely impacted the health of the 

economy in the United States and 

around the world.’’ 1 Thus, Dodd-Frank 

required federal agencies, including the 

Department, to review any regulation 

that referenced or required credit 

ratings, and to remove the references or 

requirements and substitute standards 

of creditworthiness as the agency 

deemed appropriate.2 As part of its 

compliance with Dodd-Frank, the 

Department conducted a review of its 

administrative class prohibited 

transaction exemptions. 

In the absence of an exemption, 

ERISA and the Code prohibit certain 

transactions involving employee benefit 

plans and IRAs. Class exemptions 

granted by the Department provide 

prohibited transaction relief that is 

broadly available to any party that can 

satisfy its conditions and definitional 

provisions. Under the authority 

provided in ERISA section 408(a), the 

Department may grant such exemptions, 

provided the Secretary of Labor (the 

‘‘Secretary’’) finds that the exemptions 

are (i) administratively feasible, (ii) in 

the interests of plans and IRAs, and 

their participants and beneficiaries, and 

(iii) protective of the rights of 

participants and beneficiaries of plans 

and IRAs.3

The Department’s review of its class 

exemptions determined that PTEs 75–1, 


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12986 Federal Register / Vol. 87, No. 45 / Tuesday, March 8, 2022 / Notices 

4 40 FR 50845 (October 31, 1975) as amended by 

71 FR 5883 (February 3, 2006). 5 45 FR 73189 (November 4, 1980). 

6 46 FR 7511 (January 23, 1981), as amended by 

50 FR 14043 (April 9, 1985). 

7 60 FR 35925 (July 12, 1995). 

8 62 FR 42830 (August 8, 1997). 

9 71 FR 63786 (October 31, 2006). 

10The Department understands that ‘‘investment 

grade’’ is the common term for a credit rating in the 

highest four rating categories issued by a credit 

rating agency. 

11 78 FR 37572 (June 21, 2013). The Department 

proposed the amendments on its own motion, 

pursuant to ERISA section 408(a) and Code section 

4975(c)(2), and in accordance with the procedures 

set forth in 29 CFR part 2570, subpart B (76 FR 

66637 (October 27, 2011)). 

12Among other things, the Investment Company 

Act seeks to address conflicts of interest in 

investment companies by requiring disclosure of 

material details about an investment company and 

placing restrictions on certain activities of 

registered investment companies. The Department 

also reviewed amendments made by the 

Commodity Futures Trading Commission (CFTC), 

the Office of the Comptroller of the Currency (OCC), 

the Federal Deposit Insurance Corporation (FDIC) 

and the National Credit Union Administration 

(NCUA). However, the Department determined that 

the SEC amendments described in the Department’s 

2013 proposal provide the most appropriate basis 

for amending the affected prohibited transaction 

class exemptions. 

13 77 FR 70117, 70118 (November 23, 2012). 

14 Id. 

15 Id. (‘‘In making their credit quality 

determinations, a BIDCO’s [Business and Industrial 

Development Corporation] board of directors or 

members (or its or their delegate) can also consider 

credit quality reports prepared by outside sources, 

including NRSRO ratings, that the BIDCO board or 

members conclude are credible and reliable for this 

purpose.’’) 

Parts III & IV,4 80–83,5 81–8,6 95–60,7

97–41,8 and 2006–16 9 (collectively, the 

‘‘Class Exemptions’’) include references 

to, or require reliance on, credit ratings. 

Each Class Exemption provides relief for 

a transaction involving a financial 

instrument, and in each of the Class 

Exemptions, the Department 

conditioned exemptive relief on the 

financial instrument, or its issuer, 

receiving a specified minimum credit 

rating. The credit ratings conditions 

were part of the exemption safeguards 

designed to protect the interests of 

affected plans, participants and 

beneficiaries, and IRAs. 

The credit ratings conditions in the 

Class Exemptions range from requiring 

a rating in one of the four highest 

generic categories of credit ratings (i.e., 

an ‘‘investment grade’’ rating) to 

requiring a rating in one of the two 

highest generic categories of credit 

ratings from a nationally recognized 

statistical rating organization (NRSRO). 

In this regard, PTEs 75–1 and 80–83, 

which provide exemptions for securities 

transactions with plans and IRAs, 

required any non-convertible debt 

securities involved in a transaction to be 

rated in ‘‘one of the four highest rating 

categories from a nationally recognized 

statistical rating organization[.]’’ PTE 

81–8 required commercial paper sold to 

plans or IRAs to possess a rating in ‘‘one 

of the three highest rating categories by 

at least one nationally recognized 

statistical rating service.’’ PTE 2006–16, 

which applies to securities lending 

transactions, included the following 

credit ratings requirements applicable to 

the loan’s collateral: For letters of credit, 

the issuer must receive a credit rating of 

at least ‘‘investment grade,’’ while 

foreign sovereign debt securities must 

be rated in ‘‘one of the two highest 

rating categories.’’ 10 PTEs 95–60 and 

97–41 do not require specific credit 

ratings, but instead refer generally to the 

credit ratings of certain financial 

instruments. 

Following its review of the Class 

Exemptions, the Department proposed 

to amend them to remove references to 

and requirements to rely on credit 

ratings as required by Dodd-Frank.11 In 

drafting the amendments to the Class 

Exemptions, the Department reviewed 

other agencies’ methods of compliance 

with Dodd-Frank’s required removal of 

references to credit ratings. The 

Department focused on the Securities 

and Exchange Commission’s (SEC’s) 

amended Investment Company Act 

rules 6a–5, 10f–3, 2a–7, and 5b–3.12

Several requirements under the 

Investment Company Act historically 

relied on credit ratings from nationally 

recognized credit rating agencies. 

Following Dodd-Frank, the SEC issued 

new rules and amended existing ones to 

comply with the law and protect 

investors from the risks of over-reliance 

on credit ratings. The Department 

believes that the alternatives described 

in the SEC releases discussed below are 

instructive in its development of 

appropriate alternatives for credit 

ratings referenced in the Class 

Exemptions. 

This document sets forth the 

Department’s final amendments to the 

Class Exemptions. The Department is 

finalizing the amendments largely as 

proposed, with minor changes 

discussed below. The Department 

intends for the amended exemption 

conditions to require the same degree of 

credit quality the Class Exemptions 

required before the amendments, but 

without referencing or relying on credit 

ratings. Instead, parties relying on the 

exemptions must determine whether the 

requisite amended credit standards are 

satisfied. In amending the Class 

Exemptions, the Department has 

maintained the protections and 

safeguards that have historically been a 

part of the Class Exemptions. Therefore, 

the Secretary finds that the amended 

exemptions are (i) administratively 

feasible, (ii) in the interests of plans, 

their participants and beneficiaries, 

IRAs and IRA owners, and (iii) 

protective of the rights of participants 

and beneficiaries of plans and IRAs. 

Description of the Proposal and 

Comments Received 

The Proposal 

The Department’s proposal included 

credit standards to replace the following 

credit rating requirements set forth in 

the Class Exemptions: (i) A rating in one 

of the four highest rating categories from 

a NRSRO, or ‘‘investment grade,’’ (ii) a 

rating in one of the three highest rating 

categories by at least one NRSRO, and 

(iii) a rating in one of the two highest 

rating categories by at least one NRSRO. 

In its proposal, the Department relied on 

the approaches taken by the SEC in 

several rules issued under the 

Investment Company Act. The 

Department proposed to replace the 

requirement in each of PTE 75–1, Part 

III, Part IV, PTE 80–83 and PTE 2016– 

06 for a security to be ‘‘investment 

grade’’ or in one of the four highest 

rating categories from a NRSRO with a 

new standard requiring the securities to 

be (i) subject to no greater than 

moderate credit risk and (ii) sufficiently 

liquid that such securities can be sold 

at or near their fair market value within 

a reasonably short period of time. This 

amendment was based on the SEC’s 

adoption of rule 6a–5 and amendment 

to rule 10f–3 under the Investment 

Company Act. In replacing the reference 

to credit ratings, the SEC stated that the 

standards aimed to ensure the securities 

are ‘‘sufficiently high credit quality that 

they are likely to maintain a fairly stable 

market value and may be liquidated 

easily . . . .’’ 13 In establishing the new 

standard, the SEC explained that 

‘‘[m]oderate credit risk would denote 

current low expectations of default risk 

associated with the security, with an 

adequate capacity for payment by the 

issuer of principal and interest.’’ 14 The 

SEC made clear that NRSRO ratings may 

be relevant to these considerations, even 

though they cannot be relied upon 

solely.15

For PTE 81–8, the Department 

proposed to substitute ‘‘subject to a 

minimal or low amount of credit risk 

and (ii) sufficiently liquid that such 

securities can be sold at or near their 

fair market value within a reasonably 

short period of time’’ for a credit rating 

in one of the three highest rating 

categories. This proposal also was based 


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16See 44 FR 36153 (June 29, 1979). 

17 73 FR 40124, 40130 (July 11, 2008). 

18 74 FR 52358, 52364 (October 9, 2009). 

19 Investment Company Act rule 2a–7 allows 

money market funds to use special valuation and 

pricing procedures that help the fund maintain a 

stable net asset value per share (typically $1.00). 17 

CFR 270.2a–7(a)(11)(i). 

20See 56 FR 8113, 8125 (February 27, 1991) 

(adopting rule 2a–7 sections (a)(6) & (a)(14)). The 

SEC’s 2011 proposal would have maintained this 

distinction between first and second tier securities, 

but a number of commenters objected. See 79 FR 

47986, 47988–89 (August 14, 2014) (describing 

2011 proposal). In re-proposing the amendment in 

2014, the SEC proposed to combine these into a 

single standard that would require all eligible 

securities to present ‘‘minimal credit risks,’’ and the 

fund’s board of directors to find that the security’s 

issuer has an ‘‘exceptionally strong capacity to meet 

its short-term financial obligations.’’ Id. at 47989 

and 48013. Commenters raised concerns with this 

proposed standard too, asserting that an 

‘‘exceptionally strong capacity’’ could create an 

unclear standard for determining eligible securities. 

80 FR 58124, 58127–28 (September 25, 2015). 

21 Id. at 58129. 

22See References to Ratings of Nationally 

Recognized Statistical Rating Organizations: A 

Small Entity Compliance Guide, Feb. 4, 2014, 

available at https://www.sec.gov/info/smallbus/ 

secg/5b-3-small-entity-compliance-guide.htm. 

23 66 FR 36156, 36161 (July 11, 2001). 

24 79 FR 1316, 1329 (January 8, 2014) (amending 

17 CFR 270.5b–3(c)(1)(iv)(C)(1)). 

25 Id. at 1329, (amending 17 CFR 270.5b– 

3(c)(1)(iv)(C)(2)). 

26See References to Ratings of Nationally 

Recognized Statistical Rating Organizations: A 

Small Entity Compliance Guide, Feb. 4, 2014, 

available at https://www.sec.gov/info/smallbus/ 

secg/5b-3-small-entity-compliance-guide.htm. 

27 80 FR 58124 (September 25, 2015). The SEC 

first re-proposed amendments to rule 2a–7. 79 FR 

47986 (August 14, 2014). Under the new proposal, 

the fund’s board of directors would be required to 

determine that any eligible security presented 

minimal credit risks, and that determination was 

required to include a finding that the security’s 

issuer has an ‘‘exceptionally strong capacity to meet 

its short-term financial obligations.’’ (79 FR at 

447989 and 48013.) Commenters raised concerns 

with this standard too, maintaining that an 

‘‘exceptionally strong capacity’’ could create an 

unclear standard for determining eligible securities. 

(80 FR at 58127–28.) In its final amendment, the 

SEC required the board to determine that the 

security presents ‘‘minimal credit risks,’’ and 

codified certain factors relevant to money market 

funds the board of directors should consider in 

making this determination. (17 CFR 270.2a– 

7(a)(11)(i).) 

28 79 FR 1316 (January 8, 2014). 

on Rule 10f–3 under the Investment 

Company Act, which also required 

certain securities be rated in one of the 

three highest ratings from an NRSRO.16

The SEC amended this rule to replace 

the credit ratings reference with a 

requirement that these less seasoned 

securities be ‘‘sufficiently liquid that 

they can be sold at or near their carrying 

value within a reasonably short period 

of time’’ and ‘‘subject to a minimal or 

low amount of credit risk.’’ 17 In its final 

amendment, the SEC explained that 

securities with a minimal or low 

amount of credit risk ‘‘would be less 

susceptible to default risk (i.e., have a 

low risk of default) than those with 

moderate credit risk. These securities 

(or their issuers) also would 

demonstrate a strong capacity for 

principal and interest payments and 

present above average creditworthiness 

relative to other municipal or taxexempt issues (or issuers).’’ 18

PTE 2006–16 required foreign 

sovereign debt securities for foreign 

collateral used in securities lending 

transactions to be rated in one of the 

two highest categories of at least one 

NRSRO. The Department proposed to 

replace this requirement in PTE 2006– 

16 Section V(f)(4) with a requirement 

that the security be ‘‘subject to a 

minimal amount of credit risk and (ii) 

sufficiently liquid that such securities 

can be sold at or near their fair market 

value in the ordinary course of business 

within seven calendar days.’’ The 

minimal credit risk standard was based 

on the SEC’s rule 2a–7, which applies 

to money market funds.19 Before the 

credit rating reform amendment, rule 

2a–7 limited money market funds to 

investing in debt obligations that, at the 

time of acquisition, qualified as 

‘‘eligible securities.’’ The definition of 

‘‘eligible securities’’ required an NRSRO 

rating in one of the two highest shortterm rating categories. Rule 2a–7 

distinguished between first tier 

securities (ones that the board of 

directors determined had the highest 

capacity to meet their short-term 

financial obligations) and second tier 

securities (all eligible securities that did 

not qualify as first tier securities).20 In 

its final amendment, the SEC required 

that the fund’s board determine the 

security presents ‘‘minimal credit risks’’ 

and codified certain factors that the 

board should consider in making this 

determination. As amended, the fund’s 

board of directors must determine the 

security presents ‘‘minimal credit 

risks.’’ This determination must include 

an analysis of the security’s issuer or 

guarantor’s capacity to meet its financial 

obligations, based on its: 

(A) Financial condition; 

(B) Sources of liquidity; 

(C) Ability to react to future marketwide and issuer- or guarantor-specific 

events, including ability to repay debt in 

a highly adverse situation; and 

(D) Strength of the issuer or 

guarantor’s industry within the 

economy and relative to economic 

trends, and issuer or guarantor’s 

competitive position within its industry. 

In the preamble, the SEC explained that 

most money market fund managers 

already considered these factors when 

making minimal credit risk 

determinations.21

The liquidity standard proposed in 

PTE 2006–16 Section V(f)(2) was based 

on SEC rule 5b–3, which allows a fund 

to look through repurchase agreements 

to the underlying collateral securities 

for certain counterparty limitation and 

diversification purposes if the collateral 

meets certain credit quality standards.22

Before being amended under DoddFrank, rule 5b–3 applied to securities 

that, at the time of a repurchase 

agreement, ‘‘rated in the highest rating 

category by the [r]equisite NRSROs.’’ 23

The SEC amended rule 5b–3 to require 

the fund’s board of directors (or its 

delegate) to determine that nongovernmental collateral securities be 

issued by an issuer that has an 

‘‘exceptionally strong capacity to meet 

its financial obligations’’ 24 and the 

securities must be ‘‘sufficiently liquid 

that they can be sold at approximately 

their carrying value in the ordinary 

course of business within seven 

calendar days.’’ 25 The SEC explained 

that the replacement standard was 

designed to retain a similar degree of 

credit quality to the highest rating 

category that was in the prior version of 

rule 5b–3.26

Comments Received 

The Department received three 

comments in response to its 2013 

proposal. The comments were generally 

supportive of the Department’s 

approach in light of the Dodd-Frank 

requirement to remove credit ratings 

references and requirements, and 

commenters did not suggest specific 

changes to the language of the 

amendments. Because the Department 

had relied on the SEC’s proposed 

amendment to rules 2a–7 and 5b–3 

(which had not been finalized at the 

time of the proposal), two commenters 

asked the Department to wait to finalize 

its proposal until the SEC finalized all 

of its proposals. One commenter had 

already submitted comments to the SEC 

on its proposed amendment to rule 2a– 

7 and urged the Department to wait 

until the SEC addressed issues raised in 

those comments before finalizing its 

amendments that are based on the 

proposal. Since the Department issued it 

2013 proposal, the SEC finalized its 

Dodd-Frank amendments to rules 2a– 

7 27 in 2015 and 5b–3 in 2014.28

One comment included a general 

discussion on the usefulness of credit 

ratings, recommending that policymakers acknowledge that credit ratings 

are one input to the investment analysis 

process, but one with value for 

investors. 


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29Fiduciary Counselors, comment letter 

submitted August 15, 2013. Available at https://

www.dol.gov/sites/default/files/ebsa/laws-andregulations/rules-and-regulations/publiccomments/1210-ZA18/00001.pdf (recommending 

credit ratios such as Standard & Poor’s Funds from 

Operations/Debt, Debt/Earnings Before Interests, 

Taxes, Interest, Depreciation and Amortization, and 

Debt/Capital). In addition, this commenter 

requested guidance on whether plan fiduciaries can 

rely on credit ratings in contexts other than the 

Class Exemptions, such as to satisfy its general 

fiduciary obligations under ERISA section 404. 

While this request is outside the scope of this 

document, the Department notes that nothing in 

Dodd-Frank prohibits the consideration of credit 

ratings in other contexts. 

30 86 FR 33360 (June 24, 2021). 

31The SEC proposed to amend rule 2a–7 in 2011, 

re-proposed a modified amendment in 2014, and 

finalized the amendment in 2015. 76 FR 12896 

(March 9, 2011); 79 FR 47986 (August 14, 2014); 80 

FR 58124 (September 25, 2015). 

Commenters asked the Department to 

provide additional guidance on how to 

comply with the amended exemptions. 

One commenter was concerned that 

plan fiduciaries may not be able to 

analyze credit quality on their own and 

recommended that the Department 

suggest certain financial ratios to help 

guide fiduciaries’ analyses.29 Another 

commenter specifically asked the 

Department to include a definition of 

‘‘minimal credit risk’’ in its amendment 

to PTE 2006–16 Section V(f)(2). 

According to the commenter, the 

proposed language that the issuer ‘‘has 

a strong ability to repay its debt 

obligations’’ or a ‘‘very low vulnerability 

to default’’ was subjective, and 

fiduciaries would need additional 

information to determine if they were 

satisfying this condition. 

Reopening the Comment Period 

On June 24, 2021, the Department 

published a notice in the Federal 

Register reopening the comment period 

for its 2013 Dodd-Frank amendments.30

The Department reopened the comment 

period due to the passage of time since 

the 2013 Proposal was published and 

solicited comments on all aspects of the 

2013 Proposal to provide all interested 

parties with an opportunity to provide 

comments or new information. In the 

notice, the Department specifically 

sought comments regarding the 

following questions: 

• Are changes to the 2013 Proposal’s 

standards of creditworthiness necessary 

as a result of the SEC’s finalization of 

amendments to Rules 2a–7 and 5b–3? 

• Are changes to the 2013 Proposal’s 

standards of creditworthiness necessary 

as a result of other regulators’ actions 

removing references to credit ratings? 

For example, should the Department 

incorporate OCC, Federal Reserve 

Board, FDIC and/or NCUA standards 

developed for depository institutions? 

Have other regulators developed 

standards the Department should 

incorporate into the Class Exemptions? 

Are there particular challenges in the 

ERISA context to implementing any of 

those standards? 

• Are changes to the 2013 Proposal’s 

standards of creditworthiness necessary 

in light of business or other economic 

developments since the Department 

proposed changes to the Class 

Exemptions in 2013? 

• Should references to ‘‘fair market 

value’’ in the 2013 Proposal’s standards 

of creditworthiness be replaced with 

references to ‘‘carrying value’’? If so, 

please explain why. 

• Do commenters recommend that the 

Department require financial 

institutions to adopt policies and 

procedures for compliance with the 

standards of creditworthiness? If so, 

please describe the types of specific 

policies and procedures that would be 

helpful. Do financial institutions 

already have similar policies and 

procedures in place? Will 180 days 

provide sufficient time for financial 

institutions that currently do not have 

such policies and procedures in place to 

adopt them? 

The Department received one 

comment in response to the notice 

reopening the comment period. Kroll 

Bond Rating Agency, LLC (KBRA), a 

rating agency registered with the SEC, 

submitted a comment in support of the 

Department implementing section 939A 

of Dodd-Frank. Noting that many 

institutional investors require the use of 

one or more of the largest NRSROs, 

KBRA stated that those guidelines are 

outdated, because they were written 

before other rating agencies existed. 

KBRA did not address any of the 

specific questions the Department asked 

in the notice. 

Descriptions of Final Amendments to 

Class Exemptions 

In General 

The Department is adopting the 

amendments as proposed in 2013, with 

minor changes to address comments on 

the 2013 proposal, including changes 

the SEC made in finalizing its DoddFrank amendments. These final 

amendments will be effective 60 days 

after the date they are published in the 

Federal Register. 

Based on the SEC’s 2011 proposed 

amendment to rule 2a–7, the 

Department’s proposed amendment to 

PTE 81–8 would have required the 

commercial paper to be subject to 

minimal or low amount of credit risk 

‘‘based on factors pertaining to credit 

quality and the issuer’s ability to meet 

its short-term financial obligations.’’ 

However, the SEC did not include this 

‘‘based on’’ language in its final 

amendment; therefore, the Department 

is similarly not including it in this final 

amendment.31 The Department notes 

that a fiduciary may consider a variety 

of factors in making a determination of 

credit quality. While credit ratings may 

no longer serve as specific exemption 

requirements, fiduciaries are not 

prohibited from using them as an 

element or data point to analyze credit 

quality. The Department also is making 

certain ministerial changes to the Class 

Exemptions to correct prior 

typographical errors. 

The Department is not suggesting that 

fiduciaries consider any specific 

financial ratios when analyzing credit 

quality, as suggested by one commenter, 

but it notes that fiduciaries have broad 

discretion in evaluating investments 

and may choose to incorporate financial 

ratios into their review of investment 

options. The Department also declines 

to provide a definition of ‘‘minimal 

credit risk,’’ because fiduciaries should 

be able to determine whether a security 

satisfies this standard based its analysis 

of the issuer’s ability to repay its debt 

obligations. Fiduciaries that rely on the 

amended exemptions remain subject to 

the obligations described in ERISA 

section 404 such as prudence and 

loyalty, as well as all other conditions 

of the applicable Class Exemptions, 

including maintaining records to 

demonstrate compliance with 

exemption conditions. Fiduciaries are 

required to use a prudent process in 

evaluating whether investing in the 

securities is in the interests of plans and 

plan participants and beneficiaries and 

should document the processes they use 

to demonstrate compliance with the 

applicable exemption. 

As stated above, these amendments to 

the Class Exemptions are designed to 

implement the mandate of Dodd-Frank 

section 939A to ‘‘remove any reference 

to or requirement of reliance on credit 

ratings and to substitute in such 

regulations such standard of creditworthiness as each respective agency 

shall determine as appropriate for such 

regulations.’’ To meet this requirement, 

the Department has designed the 

amendments to retain the same degree 

of credit quality required under the 

Class Exemptions before the 

amendments without referencing or 

requiring reliance on credit ratings. 

1. PTE 75–1 

PTE 75–1 was granted by the 

Department shortly after the enactment 

of ERISA and provides relief for certain 


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32Exemptions from Prohibitions Respecting 

Certain Classes of Transactions Involving Employee 

Benefit Plans and Certain Broker-Dealers, Reporting 

Dealers and Banks, 40 FR 50845 (October 31, 1975), 

as amended at 71 FR 5883 (February 3, 2006). 

33 Class Exemption for Certain Transactions 

Involving Purchase of Securities Where Issuer May 

Use Proceeds to Reduce or Retire Indebtedness to 

Parties in Interest, 45 FR 73189 (November 4, 1980), 

as amended at 67 FR 9483 (March 1, 2002). 

34Class Exemption Covering Certain Short-term 

Investments, 46 FR 7511 (January 23, 1981), as 

amended by 50 FR 14043 (April 9, 1985). 

transactions that were customary at the 

time between plans and broker-dealers 

or banks.32 PTE 75–1 Part III permits a 

fiduciary to cause a plan or IRA to 

purchase securities from a member of an 

underwriting syndicate other than the 

fiduciary when the fiduciary also is a 

member of the syndicate. PTE 75–1 Part 

IV permits a plan or IRA to purchase 

securities in a principal transaction 

from a fiduciary that is a market maker 

with respect to the securities. The relief 

afforded in these exemptions is 

generally conditioned on, among other 

things, the issuer of the securities 

having been in continuous operation for 

no less than three years. The 

Department intends this condition to 

ensure that the issued securities are 

more predictable regarding pricing and 

trading volume stability than securities 

issued by unproven entities with shorter 

operating histories. However, there is an 

exception from the three-year rule in 

both exemptions if the securities have 

‘‘sufficient credit quality,’’ which is 

defined in the exemptions to mean that 

the investment is ‘‘rated in one of the 

four highest rating categories by at least 

one nationally recognized statistical 

rating organization.’’ This language 

recognized that credit rating is an 

indication of a security’s credit quality 

by providing predictability on price, 

volatility, and ultimate payment of 

principal. Thus, any substitute for the 

credit rating requirement must provide 

the same level of protection for plans 

purchasing covered securities. 

The Department is replacing the 

references to credit ratings in PTE 75– 

1 Part III Paragraph (c)(1) and Part IV 

Paragraph (a)(1) of PTE 75–1 with a 

requirement that, ‘‘at the time of 

acquisition, such securities are 

nonconvertible debt securities that are 

(i) subject to no greater than moderate 

credit risk and (ii) sufficiently liquid 

that such securities can be sold at or 

near their fair market value within a 

reasonably short period of time.’’ Thus, 

as amended, PTE 75–1, Part III(c)(1) and 

Part IV(a)(1) require securities to be 

issued by an issuer that has been in 

continuous operation for no less than 

three years, including the operations of 

any predecessors, unless, among other 

exceptions, the fiduciary directing the 

plan in the transaction has made a 

determination that the securities satisfy 

the amended credit standard when they 

are acquired. For purposes of this 

amendment, debt securities subject to a 

‘‘moderate credit risk’’ should possess at 

least average credit-worthiness relative 

to other similar debt issues. Moderate 

credit risk denotes current low 

expectations of default risk, with an 

adequate capacity for payment of 

principal and interest. 

The Department modeled this new 

standard on the SEC’s adoption of rule 

6a–5 and amendment to rule 10f–3 of 

the Investment Company Act. As 

described above, rules 6a–5 and 10f–3 

each set forth a standard that replaced 

a reference to an ‘‘investment grade’’ 

rating, which the Department 

understands is the same as a reference 

to one of the four highest rating 

categories issued by at least one NRSRO. 

The amended standard in the 

exemptions thus preserves the purpose 

of the original conditions in PTE 75–1, 

Part III, paragraph (c)(1) and PTE 75–1, 

Part IV paragraph (a)(1) that restrict 

fiduciaries’ acquisitions to purchases of 

securities of sufficiently high credit 

quality. Furthermore, because PTE 75– 

1, Part III and rule 10f–3 both involve 

the acquisition of securities in an 

underwriting, if there is a relationship 

between the acquiring fund or entity 

and a member of the underwriting 

syndicate, the Department is ensuring 

that the credit quality standard required 

under each rule is similar. 

The Department views the new 

standard as reflecting the same level of 

credit quality that was required before 

this amendment. A fiduciary making 

these determinations is not precluded 

from considering credit quality reports 

prepared by outside sources that the 

fiduciary concludes are credible and 

reliable for this purpose, including 

credit ratings prepared by credit rating 

agencies. 

2. PTE 80–83 

PTE 80–83 generally provides relief 

for a fiduciary causing a plan or IRA to 

purchase a security when the proceeds 

of the securities issuance may be used 

by the issuer to retire or reduce 

indebtedness to the fiduciary or an 

affiliate.33 If the fiduciary of the plan 

knows (as defined in the exemption) 

that the proceeds of the issue will be 

used in whole or in part by the issuer 

of the securities to reduce or retire 

indebtedness owed to the fiduciary or 

its affiliate, the issuer must have been in 

continuous operation for not less than 

three years. However, before this 

amendment, the exemption had an 

exception if the securities were nonconvertible debt securities rated in one 

of the four highest rating categories by 

at least one nationally recognized 

statistical rating organization. 

Similar to PTE 75–1, Parts III and IV, 

the Department is replacing the 

reference to credit ratings in PTE 80–83 

with a requirement that, ‘‘at the time of 

acquisition, such securities are nonconvertible debt securities that are (i) 

subject to no greater than moderate 

credit risk and (ii) sufficiently liquid 

that such securities can be sold at or 

near their fair market value within a 

reasonably short period of time.’’ 

For purposes of this amendment, debt 

securities subject to a moderate level of 

credit risk should possess at least 

average credit-worthiness relative to 

other similar debt issues. Moderate 

credit risk denotes current low 

expectations of default risk, with an 

adequate capacity for payment of 

principal and interest. The Department 

views this new standard as requiring 

debt securities to have the same level of 

credit quality that was required before 

this amendment. 

3. PTE 81–8 

PTE 81–8 permits employee benefit 

plans to invest plan assets in certain 

short-term investments, including 

commercial paper, issued by a party in 

interest.34 As a condition of this relief, 

paragraph II(D) required the commercial 

paper to be ranked in one of the three 

highest rating categories by at least one 

NRSRO before this amendment. This 

condition allowed fiduciaries who made 

investment decisions regarding the 

short-term investments of a plan to 

choose from a broad range of issues of 

commercial paper while assuring that 

an independent third party has assessed 

the quality of the issue. 

The Department is amending 

paragraph II(D) of PTE 81–8 to delete 

the reference to the credit rating of 

commercial paper and replace it with a 

requirement that, ‘‘at the time of 

acquisition, the commercial paper is (i) 

subject to a minimal or low amount of 

credit risk and (ii) sufficiently liquid 

that such securities can be sold at or 

near their fair market value within a 

reasonably short period of time.’’ This is 

a higher standard than the standard 

replacing ‘‘investment grade’’ in PTEs 

75–1 Parts III and IV and 80–83. 

Commercial paper subject to a minimal 

or low credit risk would have a lower 

risk of default than commercial paper 

with moderate credit risk. These 

instruments also would demonstrate a 


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35The SEC proposed to amend rule 2a–7 in 2011, 

re-proposed a modified amendment in 2014, and 

finalized the amendment in 2015. 76 FR 12896 

(March 9, 2011); 79 FR 47986 (August 14, 2014); 80 

FR 58124 (September 25, 2015). 

36 46 FR 7509, 7512 (January 23, 1981). 

37Class Exemption for Certain Transactions 

Involving Insurance Company General Accounts, 60 

FR 35925 (July 12, 1995). 

38 510 US 86 (1993). 

39 48 FR 895 (January 7, 1983). PTE 83–1 provides 

relief for the operation of certain mortgage pool 

investment trusts and the acquisition and holding 

by plans of certain mortgage-backed pass-through 

certificates evidencing interests therein. 

40The Underwriter Exemptions are comprised of 

a number of individual exemptions that rely on 

credit ratings. See, e.g., PTE 2009–31 (74 FR 59003, 

November 16, 2009)), amending existing 

exemptions which provided relief for the operation 

of certain asset pool investment trusts and the 

acquisition and holding by plans of certain assetbased pass-through certificates representing 

interests in those trusts. The amendment provided 

a six-month period to resolve certain affiliations as 

a result of corporate transactions. 

41The term ‘‘Underwriter Exemption’’ refers to 

the following individual Prohibited Transaction 

Exemptions (PTEs)—PTE 89–88, 54 FR 42582 

(October 17, 1989); PTE 89–89, 54 FR 42569 

(October 17, 1989); PTE 89–90, 54 FR 42597 

(October 17, 1989); PTE 90–22, 55 FR 20542 (May 

17, 1990); PTE 90–23, 55 FR 20545 (May 17, 1990); 

PTE 90–24, 55 FR 20548 (May 17, 1990); PTE 90– 

28, 55 FR 21456 (May 24, 1990); PTE 90–29, 55 FR 

21459 (May 24, 1990); PTE 90–30, 55 FR 21461 

(May 24, 1990); PTE 90–31, 55 FR 23144 (June 6, 

1990); PTE 90–32, 55 FR 23147 (June 6, 1990); PTE 

90–33, 55 FR 23151 (June 6, 1990); PTE 90–36, 55 

FR 25903 (June 25, 1990); PTE 90–39, 55 FR 27713 

(July 5, 1990); PTE 90–59, 55 FR 36724 (September 

6, 1990); PTE 90–83, 55 FR 50250 (December 5, 

1990); PTE 90–84, 55 FR 50252 (December 5, 1990); 

PTE 90–88, 55 FR 52899 (December 24, 1990); PTE 

91–14, 55 FR 48178 (February 22, 1991); PTE 91– 

22, 56 FR 03277 (April 18, 1991); PTE 91–23, 56 

FR 15936 (April 18, 1991); PTE 91–30, 56 FR 22452 

(May 15, 1991); PTE 91–39, 56 FR 33473 (July 22, 

1991); PTE 91–62, 56 FR 51406 (October 11, 1991); 

PTE 93–6, 58 FR 07255 (February 5, 1993); PTE 93– 

31, 58 FR 28620 (May 5, 1993); PTE 93–32, 58 FR 

28623 (May 14, 1993); PTE 94–29, 59 FR 14675 

(March 29, 1994); PTE 94–64, 59 FR 42312 (August 

17, 1994); PTE 94–70, 59 FR 50014 (September 30, 

1994); PTE 94–73, 59 FR 51213 (October 7, 1994); 

PTE 94–84, 59 FR 65400 (December 19, 1994); and 

any other exemption providing similar relief to the 

extent that the Department expressly determines, as 

part of the proceeding to grant such exemption, to 

include the exemption within this definition. 

42Class Exemption for Collective Investment 

Fund Conversion Transactions 62 FR 42830 (August 

8, 1997). 

strong capacity for principal and 

interest payments and present aboveaverage credit-worthiness relative to 

other issues of commercial paper. The 

Department views the new standard as 

reflecting the same level of credit 

quality required before this amendment. 

As described above, ‘‘minimal or low 

amount of credit risk’’ is an element of 

the SEC’s rule 10f–3 of the Investment 

Company Act. 

The amended PTE 81–8 also relies on 

the SEC’s amendment to rule 2a–7, 

which requires a security to present 

‘‘minimal credit risk’’ to the fund. The 

Department’s 2013 proposed 

amendment to PTE 81–8 would have 

required the commercial paper to be 

subject to minimal or low amount of 

credit risk ‘‘based on factors pertaining 

to credit quality and the issuer’s ability 

to meet its short-term financial 

obligations.’’ The Department modeled 

this language on the SEC’s 2011 

proposed amendment to rule 2a–7, but 

the SEC did not include this ‘‘based on’’ 

language in its final amendment.35

While the Department has therefore also 

not included these factors in its 

amendment to PTE 81–8, fiduciaries 

investing in commercial paper may 

choose to consult the factors described 

in the SEC’s proposed amendment to 

rule 2a–7. 

The Department discussed the credit 

rating requirement in the preamble to 

the original 1981 exemption. In 

response to the original 1980 proposal, 

commenters had raised concerns that 

the credit ratings condition would limit 

the investments available to the plan 

and could prevent plan fiduciaries from 

making independent judgments about 

appropriate investments. In finalizing 

the 1981 exemption, the Department 

determined that the credit rating 

condition was an important 

independent safeguard, but that it was 

not sufficient to conclude an investment 

was appropriate for a plan.36 While the 

Department can no longer require a 

specified credit rating, the Department 

reiterates its position from 1981, that 

‘‘responsible plan fiduciaries, taking 

into account all the relevant facts and 

circumstances’’ must determine whether 

a specific acquisition is appropriate for 

the plan. For purposes of this 

amendment, the Department believes 

that a fiduciary’s determination of the 

commercial paper’s credit quality 

according to the amended standard 

should, as a matter of prudence, include 

the reports or advice of independent 

third parties, including where 

appropriate, the commercial paper’s 

credit rating. 

4. PTE 95–60 

The Department originally granted 

PTE 95–60 37 in response to the 

Supreme Court’s decision in John 

Hancock Mutual Life Insurance Co. v. 

Harris Trust & Savings Bank (Harris 

Trust).38 After the Court’s decision, 

there was uncertainty with respect to a 

number of existing exemptions that had 

been granted for operating asset pool 

investment trusts that issue assetbacked, pass-through certificates to 

plans. Specifically, the Department had 

previously granted PTE 83–1 39 and the 

‘‘Underwriter Exemptions,’’ 40 which 

were conditioned, among other things, 

on the certificates that were purchased 

by plans not being subordinated to other 

classes of certificates issued by the same 

trust. In a typical asset pool investment 

trust, one or more classes of 

subordinated certificates are often 

purchased by life insurance companies. 

The Supreme Court held in Harris Trust 

that insurance company general 

accounts may be considered ‘‘plan 

assets’’ and raised the potential that 

servicers and trustees of pools may be 

engaging in prohibited transactions for 

the same acts involving the operation of 

trusts which would be exempt if the 

certificates were not subordinated. 

PTE 95–60 Section III provided an 

exemption for the operation of asset 

pool investment trusts if, among other 

things, the conditions of either PTE 83– 

1 or an applicable Underwriter 

Exemption are met, other than the 

requirements that the certificates 

acquired by the general account not be 

subordinated and receive a rating that is 

in one of the three highest generic rating 

categories from an independent rating 

agency. The Department is amending 

PTE 95–60 Section III to delete this 

reference to credit ratings and replacing 

it with a general reference to the credit 

quality of the certificates, as required by 

the relevant underwriter exemption.41

Thus, PTE 95–60 Section III(a)(2), as 

amended, provides that ‘‘[t]he 

conditions of either PTE 83–1 or the 

relevant Underwriter Exemption are 

met, except for the requirements that 

. . . the certificates acquired by the 

general account have the credit quality 

required under the relevant Underwriter 

Exemption at the time of such 

acquisition.’’ The Department believes 

that this modification will bring PTE 

95–60 into compliance with Dodd-Frank 

without amending the Underwriter 

Exemptions. 

5. PTE 97–41 

If a plan is withdrawing all of its 

assets from a collective investment fund 

(CIF) that is maintained by a bank or 

plan adviser, and that bank or plan 

adviser is both the investment adviser to 

the mutual fund and also a fiduciary of 

the plan, PTE 97–41 permits the plan to 

purchase shares of mutual funds in 

exchange for plan assets that are 

transferred in-kind to the mutual fund 

from the CIF.42 The exemption generally 

requires the transferred assets to 

constitute the plan’s pro rata portion of 

the assets that were held by the CIF 

immediately before the transfer. 

However, original Section II(c) provided 

an exception if, among other 

requirements, at the time of the transfer, 

the securities have the same credit 


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43Class Exemption To Permit Certain Loans of 

Securities by Employee Benefit Plans 71 FR 63786 

(October 31, 2006). 

ratings from nationally recognized 

statistical rating organizations. This 

exception allowed plans to avoid the 

transaction costs involved in liquidating 

small positions in fixed-income 

securities that are not divisible or that 

can be divided only at substantial cost 

before their maturity. 

The Department is amending the 

exemption by deleting the requirement 

that the securities transferred in-kind 

from a CIF to a mutual fund have the 

same credit ratings and replacing it with 

a requirement that the securities must 

be of the same credit quality. Section 

II(c), as amended, provides that the 

allocation of fixed-income securities 

held by a CIF among the plans on the 

basis of each plan’s pro rata share of the 

aggregate value of the securities will not 

fail to meet the requirements of Section 

II(c) if, among other requirements, the 

‘‘securities have the same coupon rate 

and maturity and at the time of transfer, 

the same credit quality.’’ 

In making the determination as to the 

credit quality of fixed income securities 

for purposes of this amended condition, 

the Department notes that a fiduciary 

should, to the extent possible, engage in 

credit quality comparisons of securities 

using the same standards (e.g., 

employing the same metrics) for each 

set of securities. The Department 

believes that an ‘‘apples to apples’’ 

comparison of the credit quality of each 

security taking into account the same 

variables would satisfy the amended 

condition in Section II(c)(2). 

Furthermore, the Department notes that 

a fiduciary may rely on reports and 

advice given by independent third 

parties, including ratings issued by 

rating agencies, when making a credit 

quality determination. 

6. PTE 2006–16 

PTE 2006–16 permits lending 

securities that are employee benefit plan 

assets to certain banks and brokerdealers that are parties in interest to the 

plan.43 Specific conditions apply to 

‘‘Foreign Collateral.’’ Under Section 

V(f)(2) Foreign Collateral included 

‘‘foreign sovereign debt securities 

provided that at least one nationally 

recognized statistical rating organization 

has rated in one of its two highest 

categories either the issue, the issuer or 

guarantor.’’ Under Section V(f)(4) 

Foreign Collateral included ‘‘irrevocable 

letters of credit issued by a Foreign 

Bank, other than the borrower or an 

affiliate thereof, which has a 

counterparty rating of investment grade 

or better as determined by a nationally 

recognized statistical rating 

organization.’’ 

The Department is amending Section 

V(f)(4) to delete the reference to credit 

ratings and provide that ‘‘Foreign 

Collateral’’ will include ‘‘irrevocable 

letters of credit issued by a Foreign 

Bank, other than the borrower or an 

affiliate thereof, provided that, at the 

time the letters of credit are issued, the 

Foreign Bank’s ability to honor its 

commitments thereunder is subject to 

no greater than moderate credit risk.’’ 

To satisfy this credit risk requirement, a 

Foreign Bank would demonstrate at 

least average credit-worthiness relative 

to other issuers of similar debt. 

Moderate credit risk would denote 

current low expectations of default risk, 

with an adequate capacity for payment 

of principal and interest. 

In amending Section V(f)(4), the 

Department is relying on the SEC rule 

6a–5. As described above, rule 6a–5 

relies on the issuing bank’s ability to 

honor its commitment under the letter 

of credit, and was designed to reflect the 

same level of credit quality as the credit 

ratings they replaced in the Investment 

Company Act, similar to the 

‘‘investment grade’’ standard being 

replaced in Section V(f)(4) of PTE 2006– 

16. 

The Department is amending Section 

V(f)(2) to delete the reference to credit 

ratings and provide that ‘‘Foreign 

Collateral’’ will include foreign 

sovereign debt securities that are ‘‘(i) 

subject to a minimal amount of credit 

risk, and (ii) sufficiently liquid that such 

securities can be sold at or near their 

fair market value in the ordinary course 

of business within seven calendar 

days.’’ To satisfy this credit-worthiness 

requirement the foreign sovereign debt 

security should have a very strong 

ability to repay its debt obligations, and 

a very low vulnerability to default. 

In making this amendment, the 

Department is relying on SEC’s 

amendment to rules 2a–7 and 5b–3. The 

amendment to rule 2a–7 governs the 

securities that certain money market 

funds may hold as investments. Despite 

the request in the public comments to 

define ‘‘minimal credit risk,’’ the 

Department is not adding a definition of 

such term to the exemption text. The 

Department believes that the ‘‘minimal 

credit risk’’ standard in rule 2a–7 is an 

appropriate model for the alternative 

standard of credit quality in Section 

V(f)(2), as both provisions reflect credit 

ratings in one of the two highest rating 

categories. However, while rule 2a–7 is 

limited to short-term securities, foreign 

sovereign debt securities described in 

Section V(f)(2) could be either long-term 

or short-term securities. Therefore, the 

Department did not include the SEC’s 

language from rule 2a–7 describing the 

factors to consider. In the case of a 

short-term foreign sovereign debt 

security, fiduciaries may wish to 

consider the issuer’s ability to meet its 

short-term obligations and the factors 

discussed by the SEC in rule 2a–7 in 

evaluating the security’s credit quality. 

The Department’s approach also relies 

on SEC rule 5b–3 which relates to funds 

entering into repurchase agreements 

that are collateralized with certain high 

credit-quality securities. The 

Department believes that the economic 

considerations and regulatory 

framework underpinning securities 

repurchase agreements is similar to that 

for securities lending transactions. 

Thus, the liquidity requirement in 

amended rule 5b–3 (‘‘sufficiently 

liquid’’ that the securities ‘‘can be sold 

at approximately their carrying value in 

the ordinary course of business within 

seven calendar days’’) is appropriate for 

the alternative standard of credit quality 

in PTE 2006–16, Section V(f)(2). The 

Department has determined that the 

credit risk associated with this new 

language would differ only slightly from 

the prior language requiring highest 

credit quality. 

Regarding Sections V(f)(2) and V(f)(4) 

of PTE 2006–16, the Department notes 

that lending fiduciaries making 

determinations of credit quality retain 

the ability after the amendment to 

consider credit quality determinations 

prepared by outside sources, including 

credit ratings issued by rating 

organizations that fiduciaries conclude 

are credible and reliable in making 

determinations of credit worthiness. 

Paperwork Reduction Act 

According to the Paperwork 

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

(the PRA), no persons are required to 

respond to a collection of information 

unless such collection displays a valid 

OMB control number. The Department 

notes that a Federal agency cannot 

conduct or sponsor a collection of 

information unless it is approved by 

OMB under the PRA, and displays a 

currently valid OMB control number, 

and the public is not required to 

respond to a collection of information 

unless it displays a currently valid OMB 

control number. See 44 U.S.C. 3507. 

Also, notwithstanding any other 

provisions of law, no person shall be 

subject to penalty for failing to comply 

with a collection of information if the 

collection of information does not 

display a currently valid OMB control 

number. See 44 U.S.C. 3512. 


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The Department has not made a 

submission to OMB at this time, because 

the final amendments do not revise the 

information collection requests 

contained in the following PTEs: PTE 

75–1, which currently is approved by 

OMB under OMB Control Number 

1210–0092 until August 31, 2022; PTE 

80–83, which currently is approved by 

OMB under OMB Control Number 

1210–0064 until January 31, 2023; PTE 

81–8, which currently is approved by 

OMB under OMB Control Number 

1210–0061 until January 31, 2024; PTE 

95–60, which currently is approved by 

OMB under OMB Control Number 

1210–0114 until November 30, 2024; 

PTE 97–41, which is approved by OMB 

under OMB Control Number 1210–0104 

until April 30, 2022; and PTE 2006–16, 

which currently is approved by OMB 

under OMB Control Number 1210–0065 

until October 31, 2022. 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under ERISA 

section 408(a) and Code section 

4975(c)(2) does not relieve a fiduciary, 

or other party in interest or disqualified 

person with respect to a plan, from 

certain other provisions of ERISA and 

the Code, including any prohibited 

transaction provisions to which the 

exemption does not apply and the 

general fiduciary responsibility 

provisions of ERISA section 404 which 

require, among other things, that a 

fiduciary act prudently and discharge 

his or her duties respecting the plan 

solely in the interests of the participants 

and beneficiaries of the plan. 

Additionally, the fact that a transaction 

is the subject of an exemption does not 

affect the requirement of Code section 

401(a) that the plan must operate for the 

exclusive benefit of the employees of 

the employer maintaining the plan and 

their beneficiaries; 

(2) The Department finds that the 

exemptions, as amended, are 

administratively feasible, in the 

interests of plans, their participants and 

beneficiaries, IRAs and IRA owners, and 

protective of the rights of participants 

and beneficiaries of plans and IRAs; 

(3) The exemptions, as amended, are 

applicable to a particular transaction 

only if the transaction satisfies the 

conditions specified in the exemption; 

and 

(4) The exemptions, as amended, are 

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. 

The Department has republished the 

entire text of the amended PTEs for the 

convenience of readers. The Department 

does not intend to make any substantive 

changes to the PTEs by republishing the 

full text of the PTEs in this Federal 

Register notice other than the credit 

rating amendments. 

PTE 75–1 

Part III is amended to read as follows: 

The restrictions of section 406 of the 

Employee Retirement Income Security 

Act of 1974 (the Act) and the taxes 

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

the Internal Revenue Code of 1954 (the 

Code), by reason of section 4975(c)(1) of 

the Code, shall not apply to the 

purchase or other acquisition of any 

securities by an employee benefit plan 

during the existence of an underwriting 

or selling syndicate with respect to such 

securities, from any person other than a 

fiduciary with respect to the plan, when 

such a fiduciary is a member of such 

syndicate, provided that the following 

conditions are met: 

(a) No fiduciary who is involved in 

any way in causing the plan to make the 

purchase is a manager of such 

underwriting or selling syndicate, 

except that this paragraph shall not 

apply until July 1, 1977. For purposes 

of this exemption, the term ‘‘manager’’ 

means any member of an underwriting 

or selling syndicate, who, either alone 

or together with other members of the 

syndicate, is authorized to act on behalf 

of the members of the syndicate in 

connection with the sale and 

distribution of the securities being 

offered or who receives compensation 

from the members of the syndicate for 

its services as a manager of the 

syndicate. 

(b) The securities to be purchased or 

otherwise acquired are— 

(1) Part of an issue registered under 

the Securities Act of 1933 or, if exempt 

from such registration requirement, are 

(i) issued or guaranteed by the United 

States or by any person controlled or 

supervised by and acting as an 

instrumentality of the United States 

pursuant to authority granted by the 

Congress of the United States, (ii) issued 

by a bank, (iii) issued by a common or 

contract carrier, if such issuance is 

subject to the provisions of section 20a 

of the Interstate Commerce Act, as 

amended, (iv) exempt from such 

registration requirement pursuant to a 

Federal statue other than the Securities 

Act of 1933, or (v) are the subject of a 

distribution and are of a class which is 

required to be registered under section 

12 of the Securities Exchange Act of 

1934 (15 U.S.C. 781), and the issuer of 

which has been subject to the reporting 

requirements of section 13 of that Act 

(15 U.S.C. 78m) for a period of at least 

90 days immediately preceding the sale 

of securities and has filed all reports 

required to be filed thereunder with the 

Securities and Exchange Commission 

during the preceding 12 months. 

(2) Purchased at not more than the 

public offering price prior to the end of 

the first full business day after the final 

terms of the securities have been fixed 

and announced to the public, except 

that: 

(i) If such securities are offered for 

subscription upon exercise of rights, 

they are purchased on or before the 

fourth day preceding the day on which 

the rights offering terminates; or 

(ii) If such securities are debt 

securities, they may be purchased at a 

public offering price on a day 

subsequent to the end of such first full 

business day, provided that the interest 

rates on comparable debt securities 

offered to the public subsequent to such 

first full business day and prior to the 

purchase are less than the interest rate 

of the debt securities being purchased. 

(3) Offered pursuant to an 

underwriting agreement under which 

the members of the syndicate are 

committed to purchase all of the 

securities being offered, expect if— 

(i) Such securities are purchased by 

others pursuant to a rights offering; or 

(ii) Such securities are offered 

pursuant to an over-allotment option. 

(c) The issuer of such securities has 

been in continuous operation for not 

less than three years, including the 

operations of any predecessors, unless— 

(1) Effective May 9, 2022, at the time 

of acquisition, such securities are 

nonconvertible debt securities that are 

(i) subject to no greater than moderate 

credit risk and (ii) sufficiently liquid 

that such securities can be sold at or 

near their fair market value within a 

reasonably short period of time; 

(2) Such securities are issued or fully 

guaranteed by a person described in 

paragraph (b)(1)(i) of this exemption; or 

(3) Such securities are fully 

guaranteed by a person who has issued 

securities described in in paragraph 

(b)(1)(ii), (iii), (iv) or (v) and this 

paragraph (c). 

(d) The amount of such securities to 

be purchased or otherwise acquired by 

the plan does not exceed three percent 

of the total amount of such securities 

being offered. 

(e) The consideration to be paid by 

the plan in purchasing or otherwise 


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acquiring such securities does not 

exceed three percent of the fair market 

value of the total assets of the plan as 

of the last day of the most recent fiscal 

quarter of the plan prior to such 

transaction, provided that if such 

consideration exceeds $1 million, it 

does not exceed one percent of such fair 

market value of the total assets of the 

plan. 

(f) The plan maintains or causes to be 

maintained for a period of six years 

from the date of such transaction such 

records as are necessary to enable the 

persons described in paragraph (g) of 

this exemption to determine whether 

the conditions of this exemption have 

been met, except that a prohibited 

transaction will not be deemed to have 

occurred if, due to circumstances 

beyond the control of the plan 

fiduciaries, such records are lost or 

destroyed prior to the end of such sixyear period. 

(g) Notwithstanding anything to the 

contrary in subsections (a)(2) and (b) of 

section 504 of the Act, the records 

referred to in paragraph (f) are 

unconditionally available for 

examination during normal business 

hours by duly authorized employees of 

(1) the Department of Labor, (2) the 

Internal Revenue Service, (3) plan 

participants and beneficiaries, (4) any 

employer of plan participants and 

beneficiaries, and (5) any employee 

organization any of whose members are 

covered by such plan. 

If such securities are purchased by the 

plan from a party in interest or 

disqualified person with respect to the 

plan, such party in interest or 

disqualified person shall not be subject 

to the civil penalty which may be 

assessed under section 502(i) of the Act, 

or to the taxes imposed by section 

4975(a) and (b) of the Code, if the 

conditions of this exemption are not 

met. However, if such securities are 

purchased from a party in interest or 

disqualified person with respect to the 

plan, the restrictions of section 406(a) of 

the Act shall apply to any fiduciary with 

respect to the plan and the taxes 

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

the Code, by reason of section 

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

shall apply to such party in interest or 

disqualified person, unless the 

conditions for exemption of Part II of 

this notice (relating to certain principal 

transactions) are met. 

For purposes of this exemption, the 

term ‘‘fiduciary’’ shall include such 

fiduciary and any affiliates of such 

fiduciary, and the term ‘‘affiliate’’ shall 

be defined in the same manner as that 

term is defined in 29 CFR 2510.3–21(e) 

and 26 CFR 54.4975–9(e). Part IV is 

amended to read as follows: 

The restrictions of section 406 of the 

Employee Retirement Income Security 

Act of 1974 (the Act) and the taxes 

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

the Internal Revenue Code of 1954 (the 

Code), by reason of section 4975(c)(1) of 

the Code, shall not apply to any 

purchase or sale of any securities by an 

employee benefit plan from or to a 

market-maker with respect to such 

securities who is also a fiduciary with 

respect to such plan, provided that the 

following conditions are met: 

(a) The issuer of such securities has 

been in continuous operation for not 

less than three years, including the 

operations of any predecessors, unless— 

(1) Effective May 9, 2022, at the time 

of acquisition, such securities are 

nonconvertible debt securities that are 

(i) subject to no greater than moderate 

credit risk and (ii) sufficiently liquid 

that such securities can be sold at or 

near their fair market value within a 

reasonably short period of time; 

(2) Such securities are issued or 

guaranteed by the United States or by 

any person controlled or supervised by 

and acting as an instrumentality of the 

United States pursuant to authority 

granted by the Congress of the United 

States, or 

(3) Such securities are fully 

guaranteed by a person described in this 

paragraph (a). 

(b) As a result of purchasing such 

securities— 

(1) The fair market value of the 

aggregate amount of such securities 

owned, directly or indirectly, by the 

plan and with respect to which such 

fiduciary is a fiduciary, does not exceed 

three percent of the fair market value of 

the assets of the plan with respect to 

which such fiduciary is a fiduciary, as 

of the last day of the most recent fiscal 

quarter of the plan prior to such 

transaction, provided that if the fair 

market value of such securities exceeds 

$1 million, it does not exceed one 

percent of such fair market value of 

such assets of the plan, except that this 

paragraph shall not apply to securities 

described in paragraph (a)(2) of this 

exemption; and 

(2) The fair market value of the 

aggregate amount of all securities for 

which such fiduciary is a market-maker, 

which are owned, directly or indirectly, 

by the plan and with respect to which 

such fiduciary is a fiduciary, does not 

exceed 10 percent of the fair market 

value of the assets of the plan with 

respect to which such fiduciary is a 

fiduciary, as of the last day of the most 

recent fiscal quarter of the plan prior to 

such transaction, except that this 

paragraph shall not apply to securities 

described in paragraph (a)(2) of this 

exemption. 

(c) At least one person other than 

such fiduciary is a market-maker with 

respect to such securities. 

(d) The transaction is executed at a 

net price to the plan for the number of 

shares or other units to be purchased or 

sold in the transaction which is more 

favorable to the plan than that which 

such fiduciary, acting in good faith, 

reasonably believes to be available at the 

time of such transaction from all other 

market-makers with respect to such 

securities. 

(e) The plan maintains or causes to be 

maintained for a period of six years 

from the date of such transaction such 

records as are necessary to enable the 

persons described in paragraph (f) of 

this exemption to determine whether 

the conditions of this exemption have 

been met, except that a prohibited 

transaction will not be deemed to have 

occurred if, due to circumstances 

beyond the control of the plan 

fiduciaries, such records are lost or 

destroyed prior to the end of such six 

year period. 

(f) Notwithstanding anything to the 

contrary in subsections (a)(2) and (b) of 

section 504 of the Act, the records 

referred to in paragraph (e) are 

unconditionally available for 

examination during normal business 

hours by duly authorized employees of 

(1) the Department of Labor, (2) the 

Internal Revenue Service, (3) plan 

participants and beneficiaries, (4) any 

employer of plan participants and 

beneficiaries, and (5) any employee 

organization any of whose members are 

covered by such plan. 

For purposes of this exemption— 

(1) The term ‘‘market-maker’’ shall 

mean any specialist permitted to act as 

a dealer, and any dealer who, with 

respect to a security, holds himself out 

(by entering quotations in an interdealer communications system or 

otherwise) as being willing to buy and 

sell such security for his own account 

on a regular or continuous basis. 

(2) The term ‘‘fiduciary’’ shall include 

such fiduciary and any affiliates of such 

fiduciary, and the term ‘‘affiliate’’ shall 

be defined in the same manner as that 

term is defined in 29 CFR 2510.3–21(e) 

and 26 CFR 54.4975–9(e). 

PTE 80–83 

PTE 80–83 is amended to read as 

follows: 

I. Transactions 

A. Effective January 1, 1975 the 

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

through (D) of the Act and the taxes 


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imposed by reason of section 

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

shall not apply to the purchase or other 

acquisition prior to December 1, 1980 in 

a public offering (defined in Section 

II(B)) of securities by a fiduciary on 

behalf of an employee benefit plan 

solely because the proceeds from the 

sale were or were to be used by the 

issuer of the securities to retire or 

reduce indebtedness owed to a party in 

interest with respect to the plan other 

than the fiduciary, provided that the 

price paid by the plan for the securities 

does not exceed adequate consideration 

as defined in section 3(18) of the Act. 

B. Subject to the conditions described 

in section II(A), effective December 1, 

1980, the restrictions of sections 

406(a)(1)(A) through (D) of the Act and 

the taxes imposed by reason of section 

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

shall not apply to the purchase or other 

acquisition in a public offering (defined 

in section II(B)) of securities by a 

fiduciary on behalf of an employee 

benefit plan solely because the proceeds 

from the sale may be used by the issuer 

of the securities to retire or reduce 

indebtedness owed to a party in interest 

of the plan other than the fiduciary. 

C. Subject to conditions described in 

section II(A), effective January 1, 1975, 

the restrictions of sections 406(a)(1)(A) 

through (D) and 406(b)(1) and (2) of the 

Act and the taxes imposed by reason of 

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

Code shall not apply to the purchase or 

other acquisition in a public offering 

(defined in section II(B)) of securities by 

a fiduciary, which is a bank or an 

affiliate thereof, on behalf of an 

employee benefit plan solely because 

the proceeds from the sale may be used 

by the issuer of the securities to retire 

or reduce indebtedness owed to such 

fiduciary or any affiliate thereof, 

provided that, if such fiduciary of the 

plan knows (as defined in paragraph 7) 

that the proceeds of this issue will be 

used in whole or in part by the issuer 

of the securities to reduce or retire 

indebtedness owed to such fiduciary or 

affiliate thereof, the transaction shall 

have complied with the conditions set 

forth in paragraph 1 through 6 below: 

1. Such securities are purchased prior 

to the end of the first full business day 

after the securities have been offered to 

the public, except that— 

a. If such securities are offered for 

subscription upon exercise of rights, 

they may be purchased on or before the 

fourth day preceding the day on which 

the rights offering terminates; or 

b. If such securities are debt 

securities, they may be purchased on a 

day subsequent to the end of such first 

full business day, if the effective interest 

rates on comparable debt securities 

offered to the public subsequent to such 

first full business day and prior to the 

purchase are less than effective interest 

rate of the debt securities being 

purchased; 

2. Such securities are offered by the 

issuer pursuant to an underwriting 

agreement under which the members of 

the underwriting syndicate are 

committed to purchase all of the 

securities being offered, except if the 

securities 

a. Are purchased by others pursuant 

to a rights offering, or 

b. Are offered pursuant to an 

overallotment option; 

3. Effective May 9, 2022, the issuer of 

such securities has been in continuous 

operation for not less than three years, 

including the operations of any 

predecessors, unless at the time of 

acquisition, such securities are 

nonconvertible debt securities that are 

(i) subject to no greater than moderate 

credit risk and (ii) sufficiently liquid 

that such securities can be sold at or 

near their fair market value within a 

reasonably short period of time; 

4. The amount of securities purchased 

or otherwise acquired on behalf of the 

plan by the fiduciary does not exceed 

three percent of the total amount of the 

securities being offered; 

5. The consideration to be paid by any 

plan in purchasing or otherwise 

acquiring such securities does not 

exceed three percent of the fair market 

value, as of the most recent valuation 

date of the plan prior to such 

transaction, of the plan assets which are 

subject to the management and control 

of such fiduciary; 

6. The total amount of securities in 

any single offering purchased by the 

fiduciary on behalf of the plan together 

with the total amount of such securities 

purchased by such fiduciary acting as a 

fiduciary on behalf of any other 

employee benefit plan subject to Title I 

of the Act does not exceed 10 percent 

of the amount of the offering; 

7. As used in this section I(C), a 

fiduciary will be deemed to know that 

the proceeds of an issuance of securities 

will be used in whole or in part by the 

issuer of the securities to reduce or 

retire indebtedness owed to such 

fiduciary or an affiliate thereof, if 

a. Such knowledge is actually 

communicated to, or 

b. Information reasonably sufficient to 

cause belief that the proceeds will be 

used in whole or in part by the issuer 

of the securities to reduce or retire 

indebtedness owed to the fiduciary, or 

an affiliate thereof, is possessed by, the 

officers or employees of the fiduciary, 

who are authorized to be involved in 

carrying out the investment 

responsibilities, obligations, or duties of 

the fiduciary, or who in fact are 

involved in carrying out such 

responsibilities, obligations, or duties, 

regarding the purchase or other 

acquisition. 

D. Effective January 1, 1975, the 

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

through (D) and 406(b)(1) and (2) of the 

Act and the taxes imposed by reason of 

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

Code shall not apply to the receipt by 

a party in interest of any of the proceeds 

resulting from the issuance, in a public 

offering (as defined in section II(B)), of 

securities merely because such proceeds 

are used by the issuer of the securities 

to retire or reduce indebtedness owed to 

the party in interest provided that, when 

such party in interest is a fiduciary 

acquiring such securities on behalf of a 

plan, such fiduciary is a bank or an 

affiliate thereof (as defined in section 

II(B)) which meets the provisions of 

section I(C) of this exemption. 

II. General Conditions 

A. The following conditions apply to 

the transactions described in section 

I(B) and (C) above: 

1. The price paid by the plan 

fiduciary for the securities shall not be 

in excess of the offering price described 

in an effective registration statement 

under the Securities Act of 1933 

covering such securities, or in the case 

of securities described in section 

II(B)(1)(b), in the offering circular 

required under applicable federal law; 

2. (a) The fiduciary, on behalf of the 

plan, maintains for a period of six years 

from the date of the transaction the 

records necessary to enable the persons 

described in section II(A)(2)(b) below to 

determine whether the conditions of 

this exemption have been met, except 

that a prohibited transaction will not be 

deemed to have occurred if, due to 

circumstances beyond the control of the 

fiduciary, the records are lost or 

destroyed prior to the end of the sixyear period; 

(b) Notwithstanding any provisions of 

subsections (a)(2) and (b) of section 504 

of the Act, the records referred to in 

section II(A)(2)(a) above are 

unconditionally available at their 

customary location for examination 

during normal business hours by: 

(i) Any duly authorized employee or 

representative of the Department of 

Labor or the Internal Revenue Service, 

(ii) Any fiduciary of a plan who has 

authority to manage and control the 

assets of the plan, or to allocate to 

another fiduciary the authority to 

manage and control the assets of the 


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plan, or any duly authorized employee 

or representative of such fiduciary, 

(iii) Any contributing employer to the 

plan or representative of such employer, 

(iv) Any participant or beneficiary of 

the plan or any duly authorized 

employee or representative of such 

participant or beneficiary. 

(v) None of the persons described in 

subparagraph (ii) through (iv) of this 

paragraph shall be authorized to 

examine any fiduciary’s trade secrets or 

required to be kept commercial or 

financial information which is 

privileged or required to be kept 

confidential. 

B. For the purposes of the exemptions 

contained in Part I, 

1. The term ‘‘public offering’’ means 

a. The offering of securities registered 

under the Securities Act of 1933 

(Securities Act), or 

b. The offerings of securities exempt 

from registration under the Securities 

Act which are 

(i) Issued by a bank, 

(ii) Issued by a motor carrier if such 

issuance is subject to the provisions of 

section 214 of the Interstate Commerce 

Act, as amended, 

(iii) Exempt from the registration 

requirements of the Securities Act 

pursuant to a federal statute other than 

the Securities Act, or 

(iv) The subject of a distribution and 

of a class which is required to be 

registered under section 12 of the 

Securities Exchange Act of 1934 (15 

U.S.C. 781), and the issuer of which has 

been subject to the reporting 

requirements of section 13 of that Act 

(15 U.S.C. 78m) for a period of at least 

90 days immediately preceding the sale 

of securities and has filed all reports 

required to be filed thereunder with the 

Securities and Exchange Commission 

during the preceding 12 months. 

2. An ‘‘affiliate’’ of a bank means any 

entity directly or indirectly, through one 

or more intermediaries, controlling, 

controlled by, or under common control 

with such bank. 

For the 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. 

3. Each plan participating in a 

collective or commingled fund shall be 

considered to own the same 

proportionate undivided interest in each 

asset of the collective investment fund 

as its proportionate interest in the total 

assets of the collective investment fund 

as calculated on the most recent 

preceding valuation date of the fund. 

4. For purposes of this exemption, the 

terms ‘‘employee benefit plan’’ and 

‘‘plan’’ refer to an employee benefit plan 

described in section 3(3) of ERISA and/ 

or a plan described in section 4975(e)(1) 

of the Code. 

PTE 81–8 

PTE 81–8 is amended to read as 

follows: Effective January 1,1975, the 

restrictions of sections 406(a)(1)(A), (B) 

and (D) of the Act, and the taxes 

imposed by reason of section 

4975(c)(1)(A), (B) and (D) of the Code 

shall not apply to an investment of 

employee benefit plan assets which 

involves the purchase or other 

acquisition, holding, sale, exchange or 

redemption by or on behalf of an 

employee benefit plan of the following: 

I. Banker’s Acceptances 

A banker’s acceptance that is issued 

by a bank if: 

A. The banker’s acceptance has a 

stated maturity date of one year or less 

from the date of issue or has a maturity 

date of one year or less from the date of 

purchase on behalf of the plan; 

B. Neither the bank nor any affiliate 

of the bank has discretionary authority 

or control with respect to the 

investment of the plan assets involved 

in the transaction or renders investment 

advice (within the meaning of 29 CFR 

2510.3–21(c)) with respect to those 

assets; 

C. The terms of the transaction are at 

least as favorable to the plan as those of 

an arm’s length transaction with an 

unrelated party would be; and, 

D. With respect to transactions 

occurring on or after April 23, 1981 the 

bank issuing the banker’s acceptance is 

supervised by the United States or a 

State. 

II. Commercial Paper 

Commercial paper if: 

A. It is not issued by an employer any 

of whose employees are covered by the 

plan or by an affiliate of such employer; 

B. It has a stated maturity date of nine 

months or less from the date of issue, 

exclusive of days of grace, or is a 

renewal of an issue of commercial paper 

the maturity of which is likewise 

limited; 

C. Neither the issuer of the 

commercial paper, any guarantor of the 

commercial paper, nor an affiliate of 

such issuer or guarantor, has 

discretionary authority or control with 

respect to the investment of the plan 

assets involved in the transaction or 

renders investment advice (within the 

meaning of 29 CFR 2510.3–21(c)) with 

respect to those assets; 

D. With respect to an acquisition or 

holding of commercial paper (including 

an acquisition by exchange) occurring 

on or after May 9, 2022, at the time of 

acquisition, the commercial paper is (i) 

subject to a minimal or low amount of 

credit risk and (ii) sufficiently liquid 

that such securities can be sold at or 

near their fair market value within a 

reasonably short period of time. 

III. Repurchase Agreements 

A repurchase agreement (or securities 

or other instruments under cover of a 

repurchase agreement) in which the 

seller of the underlying securities or 

other instruments is a bank which is 

supervised by the United States or a 

State; a broker-dealer registered under 

the Securities Exchange Act of 1934; or 

a dealer who makes primary markets in 

securities of the United States 

government or any agency thereof or in 

bankers acceptances and reports daily to 

the Federal Reserve Bank of New York 

its position with respect to these 

obligations, if each of the following 

conditions are satisfied. 

A. The repurchase agreement is 

embodied in, or is entered into pursuant 

to, a written agreement the terms of 

which are at least as favorable to the 

plan as an arm’s length transaction with 

an unrelated party would be. For 

transactions occurring before April 23, 

1981 a written confirmation of a 

repurchase agreement whose terms were 

at least as favorable to the plan as an 

arm’s length transaction with an 

unrelated party will be deemed to 

satisfy this condition. 

B. The plan receives interest at a rate 

no less than that which it would receive 

in a comparable transaction with an 

unrelated party. 

C. The repurchase agreement has a 

duration of one year or less. 

D. The plan receives securities, 

banker’s acceptances, commercial 

paper, or certificates of deposit having 

a market value equal to not less than 

100 percent of the purchase price paid 

by the plan. 

E. Upon expiration of the repurchase 

agreement and return of the securities or 

other instruments to the bank, brokerdealer or dealer (seller), the seller 

transfers to the plan an amount equal to 

the purchase price plus the appropriate 

interest. 

F. Neither the seller nor an affiliate of 

the seller has discretionary authority or 

control with respect to the investment of 

the plan assets involved in the 

transaction or renders investment 

advice (within the meaning of 29 CFR 

2510.3–21(c)) with respect to those 

assets. 

G. The securities, banker’s 

acceptances, commercial paper or 

certificates of deposit received by the 

plan— 


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(1) Could be acquired directly by the 

plan in a transaction not covered by this 

section III without violating sections 

406(a)(1)(E), 406(a)(2) or 407(a) of the 

Act; and, 

(2) If the securities are subject to the 

provisions of the Securities Act of 1933, 

they are obligations that are not 

‘‘restricted securities’’ within the 

meaning of Rule 144 under that act. 

H. With respect to transactions 

occurring on or after April 23, 1981, 

(1) If the market value of the 

underlying securities or other 

instruments falls below the purchase 

price at any time during the term of the 

agreement, the plan may, under the 

written agreement required by 

paragraph A of this section, require the 

seller to deliver, by the close of business 

on the following business day, 

additional securities or other 

instruments the market value of which, 

together with the market value of 

securities previously delivered or sold 

to the plan under the repurchase 

agreement, equals at least 100 percent of 

the purchase price paid by the plan; 

(2) If the seller does not deliver 

additional securities or other 

instruments as required above, the plan 

may terminate the agreement, and, if 

upon termination or expiration of the 

agreement, the amount owing is not 

paid to the plan, the plan may sell the 

securities or other instruments and 

apply the proceeds against the 

obligations of the seller under the 

agreement, and against any expenses 

associated with the sale; and, 

(3) The seller agrees to furnish the 

plan with the most recent available 

audited statement of its financial 

condition as well as its most recent 

available unaudited statement, agrees to 

furnish additional audited and 

unaudited statements of its financial 

condition as they are issued and either: 

(A) Agrees that each repurchase 

agreement transaction pursuant to the 

agreement shall constitute a 

representation by the seller that there 

has been no material adverse change in 

its financial condition since the date of 

the last statement furnished that has not 

been disclosed to the plan fiduciary 

with whom such written agreement is 

made; or (B) prior to each repurchase 

agreement transaction, the seller 

represents that, as of the time the 

transaction is negotiated, there has been 

no material adverse change in its 

financial condition since the date of the 

last statement furnished that has not 

been disclosed to the plan fiduciary 

with whom such written agreement is 

made. 

(4) In the event of termination and 

sale as described in (2) above, the seller 

pays to the plan the amount of any 

remaining obligations and expenses not 

covered by the sale of the securities or 

other instruments, plus interest at a 

reasonable rate. 

If a seller involved in a repurchase 

agreement covered by this exemption 

fails to comply with any condition of 

this exemption in the course of engaging 

in the repurchase agreement, the plan 

fiduciary who caused the plan to engage 

in such repurchase agreement shall not 

be deemed to have caused the plan to 

engage in a transaction prohibited by 

section 406(a)(1)(A) through (D) of the 

Act solely by reason of the seller’s 

failure to comply with the conditions of 

the exemption. 

IV. Certificates of Deposit 

A certificate of deposit that is issued 

by a bank which is supervised by the 

United States or a State if neither the 

bank nor any affiliate of the bank has 

discretionary authority or control with 

respect to the investment of the plan 

assets involved in the transaction or 

renders investment advice (within the 

meaning of 29 CFR 2510.3–21(c)) with 

respect to those assets. 

V. Securities of Banks 

A security issued by a bank or an 

affiliate of the bank if: 

A. The bank is supervised by the 

United States or a State; 

B. The bank is a party in interest or 

disqualified person with respect to the 

plan solely by reason of the furnishing 

of checking account or related services 

to the plan; 

C. The terms of the transaction are at 

least as favorable to the plan as those of 

an arm’s-length transaction with an 

unrelated party would be; and 

D. The investment is not part of an 

arrangement under which the bank 

causes a transaction to be made with or 

for the benefit of a party in interest or 

disqualified person. 

For purposes of this exemption the 

term ‘‘affiliate’’ is defined in 29 CFR 

2510.3–21(e). 

For purposes of this exemption, the 

terms ‘‘employee benefit plan’’ and 

‘‘plan’’ refer to an employee benefit plan 

described in ERISA section 3(3) and/or 

a plan described in section 4975(e)(1) of 

the Code. 

PTE 95–60 

PTE 95–60 is amended to read as 

follows: 

Section I—Basic Exemption 

The restrictions of sections 406(a) and 

407(a) 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 (D) of the Code shall not apply 

to the transactions described below if 

the applicable conditions set forth in 

section IV are met. 

(a) General Exemption. Any 

transaction between a party in interest 

with respect to a plan and an insurance 

company general account in which the 

plan has an interest either as a 

contractholder or as the beneficial 

owner of a contract, or any acquisition, 

or holding by the general account of 

employer securities or employer real 

property, if at the time of the 

transaction, acquisition, or holding, the 

amount of reserves and liabilities for the 

general account contract(s) held by or 

on behalf of the plan, as defined by the 

annual statement for life insurance 

companies approved by the National 

Association of Insurance Commissioners 

(NAIC Annual Statement) together with 

the amount of the reserves and 

liabilities for the general account 

contracts held by or on behalf of any 

other plans maintained by the same 

employer (or affiliate thereof as defined 

in section V(a)(1)) or by the same 

employee organization, as defined by 

the NAIC Annual Statement in the 

general account do not exceed 10% of 

the total reserves and liabilities of the 

general account (exclusive of separate 

account liabilities) plus surplus as set 

forth in the NAIC Annual Statement 

filed with the state of domicile of the 

insurer. For purposes of determining the 

percentage limitation, the amount of 

reserves and liabilities for the general 

account contract(s) held by or on behalf 

of a plan shall be determined before 

reduction for credits on account of any 

reinsurance ceded on a coinsurance 

basis. Notwithstanding the foregoing, 

the 10% limitation is only applicable to 

transactions occurring on or after July 

12, 1995. 

(b) Excess Holdings Exemption for 

Employee Benefit Plans. Any 

acquisition or holding of qualifying 

employer securities or qualifying 

employer real property by a plan (other 

than through an insurance company 

general account), if: 

(1) The acquisition or holding 

contravenes the restrictions of section 

406(a)(1)(E), 406(a)(2), and 407(a) of the 

Act solely by reason of being aggregated 

with employer securities or employer 

real property held by an insurance 

company general account in which the 

plan has an interest; and 

(2) The percentage limitation of 

paragraph (a) of this section is met. 

Section II—Specific Exemptions 

(a) Transactions with persons who are 

parties in interest to the plan solely by 

reason of being certain service providers 


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or certain affiliates of service providers. 

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

through (D) 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 (D) of the Code 

shall not apply to any transaction to 

which the above restrictions or taxes 

would otherwise apply solely because a 

person is deemed to be a party in 

interest (including a fiduciary) with 

respect to a plan as a result of providing 

services to an insurance company 

general account in which the plan has 

an interest either as a contractholder or 

as the beneficial owner of a contract (or 

as a result of a relationship to such 

service provider described in section 

3(14)(F), (G), (H) or (I) of the Act or 

section 4975(e)(2)(F), (G), (H) or (I) of 

the Code), if the applicable conditions 

set forth in section IV are met. 

(b) Transactions involving place of 

public accommodation. The restrictions 

of sections 406(a)(1)(A) through (D), 

406(b)(1) and (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 the furnishing of 

services, facilities, and any goods 

incidental to such services and facilities 

by a place of public accommodation 

owned by an insurance company 

general account to a party in interest 

with respect to a plan that has an 

interest as a contractholder or beneficial 

owner of a contract in the insurance 

company general account, if the 

services, facilities, and incidental goods 

are furnished on a comparable basis to 

the general public. 

Section III—Specific Exemption for 

Operation of Asset Pool Investment 

Trusts 

(a) The restrictions of sections 406(a), 

406(b), and 407(a) of the Act and the 

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

of the Code by reason of section 4975(c) 

of the Code shall not apply to 

transactions in connection with the 

servicing, management, and operation of 

a trust in which an insurance company 

general account has an interest as a 

result of its acquisition of certificates 

issued by the trust, provided: 

(1) The trust is described in 

Prohibited Transaction Exemption 83–1 

(48 FR 895, January 7, 1983) or in one 

of the Underwriter Exemptions (as 

defined in section V(h) below): 

(2) The conditions of either PTE 83– 

1 or the relevant Underwriter 

Exemption are met, except for the 

requirements that: 

(A) The rights and interests evidenced 

by the certificates acquired by the 

general account are not subordinated to 

the rights and interests evidenced by 

other certificates of the same trust; and 

(B) Effective May 9, 2022, the 

certificates acquired by the general 

account have the credit quality required 

under the relevant Underwriter 

Exemption at the time of such 

acquisition. 

Notwithstanding the foregoing, the 

exemption shall apply to a transaction 

described in this section III if: (i) A plan 

acquired certificates in a transaction 

that was not prohibited, or otherwise 

satisfied the conditions of Part II or Part 

III of PTE 75–1 (40 FR 50845, October 

31, 1975); (ii) the underlying assets of a 

trust include plan assets under section 

2510.3–101(f) of the plan assets 

regulation with respect to the class of 

certificates acquired by the plan as a 

result of an insurance company general 

account investment in any class of 

certificates; and (iii) the requirements of 

this section III(a)(1) and (2) are met, 

except that the words ‘‘acquired by the 

general account’’ in section III(a)(2)(A) 

and (B) should be construed to mean 

‘‘acquired by the plan.’’ 

(b) The restrictions of section 

406(a)(1)(A) through (D) 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 (D) of the Code 

shall not apply to any transaction to 

which the above restrictions or taxes 

would otherwise apply merely because 

a person is deemed to be a party in 

interest (including a fiduciary) with 

respect to a plan as a result of providing 

services to a plan (or as a result of a 

relationship to such service provider 

described in section 3(14)(F), (G), (H), or 

(I) of the Act or section 4975(e)(2)(F), 

(G), (H), or (I) of the Code) solely 

because of the plan’s ownership of 

certificates issued by a trust that 

satisfies the requirements described in 

section III(a) above. 

Section IV—General Conditions 

(a) At the time the transaction is 

entered into, and at the time of any 

subsequent renewal thereof that requires 

the consent of the insurance company, 

the terms of the transaction are at least 

as favorable to the insurance company 

general account as the terms generally 

available in arm’s-length transactions 

between unrelated parties. 

(b) The transaction is not part of an 

agreement, arrangement, or 

understanding designed to benefit a 

party in interest. 

(c) The party in interest is not the 

insurance company, any pooled 

separate account of the insurance 

company, or an affiliate of the insurance 

company. 

Section V—Definitions 

For the purpose of this exemption: 

(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; 

(2) Any officer, director, employee 

(including, in the case of an insurance 

company, an insurance agent thereof, 

whether or not the agent is a common 

law employee of the insurance 

company), or relative of, or partner in, 

any such person; and 

(3) Any corporation or partnership of 

which such person is an officer, 

director, partner, or employee. 

(b) The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(c) The term ‘‘employer securities’’ 

means ‘‘employer securities’’ as that 

term is defined in Act section 407(d)(1), 

and the term ‘‘employer real property’’ 

means ‘‘employer real property’’ as 

defined in Act section 407(d)(2). 

(d) The term ‘‘insurance company’’ 

means an insurance company 

authorized to do business under the 

laws of one or more states. 

(e) The term ‘‘insurance company 

general account’’ means all of the assets 

of an insurance company that are not 

legally segregated and allocated to 

separate accounts under applicable state 

law. 

(f) The term ‘‘party in interest’’ means 

a person described in Act section 3(14) 

and includes a ‘‘disqualified person’’ as 

defined in Code section 4975(e)(2). 

(g) The term ‘‘relative’’ means a 

‘‘relative’’ as that term is defined in 

section 3(15) of the Act (or a ‘‘member 

of the family’’ as that term is defined in 

section 4975(e)(6) of the Code), or a 

brother, a sister, or a spouse of a brother 

or sister. 

(h) The term ‘‘Underwriter 

Exemption’’ refers to the following 

individual Prohibited Transaction 

Exemptions (PTEs)— 

PTE 89–88, 54 FR 42582 (October 17, 

1989); PTE 89–89, 54 FR 42569 (October 

17, 1989); PTE 89–90, 54 FR 42597 

(October 17, 1989); PTE 90–22, 55 FR 

20542 (May 17, 1990); PTE 90–23, 55 FR 

20545 (May 17, 1990); PTE 90–24, 55 FR 

20548 (May 17, 1990); PTE 90–28, 55 FR 

21456 (May 24, 1990); PTE 90–29, 55 FR 

21459 (May 24, 1990); PTE 90–30, 55 FR 

21461 (May 24, 1990); PTE 90–31, 55 FR 

23144 (June 6, 1990); PTE 90–32, 55 FR 

23147 (June 6, 1990); PTE 90–33, 55 FR 

23151 (June 6, 1990); PTE 90–36, 55 FR 

25903 (June 25, 1990); PTE 90–39, 55 FR 

27713 (July 5, 1990); PTE 90–59, 55 FR 


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36724 (September 6, 1990); PTE 90–83, 

55 FR 50250 (December 5, 1990); PTE 

90–84, 55 FR 50252 (December 5, 1990); 

PTE 90–88, 55 FR 52899 (December 24, 

1990); PTE 91–14, 55 FR 48178 

(February 22, 1991); PTE 91–22, 56 FR 

03277 (April 18, 1991); PTE 91–23, 56 

FR 15936 (April 18, 1991); PTE 91–30, 

56 FR 22452 (May 15, 1991); PTE 91– 

39, 56 FR 33473 (July 22, 1991); PTE 

91–62, 56 FR 51406 (October 11, 1991); 

PTE 93–6, 58 FR 07255 (February 5, 

1993); PTE 93–31, 58 FR 28620 (May 5, 

1993); PTE 93–32, 58 FR 28623 (May 14, 

1993); PTE 94–29, 59 FR 14675 (March 

29, 1994); PTE 94–64, 59 FR 42312 

(August 17, 1994); PTE 94–70, 59 FR 

50014 (September 30, 1994); PTE 94–73, 

59 FR 51213 (October 7, 1994); PTE 94– 

84, 59 FR 65400 (December 19, 1994); 

and any other exemption providing 

similar relief to the extent that the 

Department expressly determines, as 

part of the proceeding to grant such 

exemption, to include the exemption 

within this definition. 

(i) For purposes of this exemption, the 

time as of which any transaction, 

acquisition, or holding occurs is the 

date upon which the transaction is 

entered into, the acquisition is made, or 

the holding commences. In addition, in 

the case of a transaction that is 

continuing, the transaction shall be 

deemed to occur until it is terminated. 

If any transaction is entered into, or 

acquisition made, on or after January 1, 

1975, or any renewal that requires the 

consent of the insurance company 

occurs on or after January 1, 1975, and 

the requirements of this exemption are 

satisfied at the time the transaction is 

entered into or renewed, respectively, or 

at the time the acquisition is made, the 

requirements will continue to be 

satisfied thereafter with respect to the 

transaction or acquisition, and the 

exemption shall apply thereafter to the 

continued holding of the securities or 

property so acquired. This exemption 

also applies to any transaction or 

acquisition entered into or renewed, or 

holding commencing prior to January 1, 

1975, if either the requirements of this 

exemption would have been satisfied on 

the date the transaction was entered into 

or acquisition was made (or on which 

the holding commenced), or the 

requirements would have been satisfied 

on January 1, 1975, if the transaction 

had been entered into, the acquisition 

was made, or the holding had 

commenced, on January 1, 1975. 

Notwithstanding the foregoing, this 

exemption shall cease to apply to a 

transaction or holding exempt by virtue 

of section I(a) or section I(b) at such 

time as the interest of the plan in the 

insurance company general account 

exceeds the percentage interest 

limitation contained in section I(a), 

unless no portion of such excess results 

from an increase in the assets allocated 

to the insurance company general 

account by the plan. For this purpose, 

assets allocated do not include the 

reinvestment of general account 

earnings. Nothing in this paragraph 

shall be construed as exempting a 

transaction entered into by an insurance 

company general account that becomes 

a transaction described in section 406 of 

the Act or section 4975 of the Code 

while the transaction is continuing, 

unless the conditions of the exemption 

were met either at the time the 

transaction was entered into or at the 

time the transaction would have become 

prohibited but for this exemption. 

(j) The terms ‘‘employee benefit plan’’ 

and ‘‘plan’’ refer to an employee benefit 

plan described in section 3(3) of ERISA 

and/or a plan described in section 

4975(e)(1) of the Code. 

Section VI—Effective Date 

The effective date of this exemption is 

January 1, 1975. 

PTE 97–41 

PTE 97–41 is amended to read as 

follows: 

Section I. Retroactive Exemption for the 

Purchase of Fund Shares With Assets 

Transferred In-Kind From a CIF 

For the period from October 1, 1988 

to August 8, 1997, the restrictions of 

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

of the Act and the taxes imposed by 

section 4975 of the Code, by reason of 

section 4975(c)(1)(A) through (E), shall 

not apply to the purchase by an 

employee benefit plan (the Client Plan) 

of shares of one or more open-end 

management investment companies (the 

Fund or Funds) registered under the 

Investment Company Act of 1940, in 

exchange for assets of the Client Plan 

transferred in-kind to the Fund from a 

collective investment fund (the CIF) 

maintained by a bank (the Bank) or a 

plan adviser (the Plan Adviser), where 

the Bank or Plan Adviser is the 

investment adviser to the Fund and also 

a fiduciary of the Client Plan. The 

transfer and purchase must be in 

connection with a complete withdrawal 

of the Client Plan’s assets from the CIF, 

and the following conditions must be 

met: 

(a) No sales commissions or other fees 

are paid by the Client Plan in 

connection with the purchase of Fund 

shares. 

(b) All transferred assets are securities 

for which market quotations are readily 

available, or cash. 

(c) The transferred assets constitute 

the Client Plan’s pro rata portion of all 

assets that were held by the CIF 

immediately prior to the transfer. 

(d) The Client Plan receives Fund 

shares that have a total net asset value 

equal to the value of the Client Plan’s 

transferred assets on the date of the 

transfer, as determined with respect to 

securities, in a single valuation for each 

asset, with all valuations performed in 

the same manner, at the close of the 

same business day, in accordance with 

Securities and Exchange Commission 

Rule 17a–7 (using sources independent 

of the Bank or Plan Adviser and the 

Fund) and the procedures established 

by the Funds pursuant to Rule 17a–7. 

(e) An independent fiduciary with 

respect to the Client Plan (the 

Independent Fiduciary) receives 

advance written notice of an in-kind 

transfer and purchase of assets and full 

written disclosure of information 

concerning the Fund which includes the 

following: 

(1) A current prospectus for each 

Fund to which the CIF assets may be 

transferred; 

(2) A statement describing the fees to 

be charged to, or paid by, a Client Plan 

and the Funds to the Bank or Plan 

Adviser, including the nature and extent 

of any differential between the rates of 

the fees; 

(3) A statement of the reasons why the 

Bank or Plan Adviser may consider the 

transfer and purchase to be appropriate 

for the Client Plan; and 

(4) A statement of whether there are 

any limitations on the Bank or Plan 

Adviser with respect to which plan 

assets may be invested in shares of the 

Funds, and, if so, the nature of such 

limitations. 

(f) On the basis of the foregoing 

information, the Independent Fiduciary 

gives prior approval, in writing, for each 

purchase of Fund shares in exchange for 

the Client Plan’s assets transferred from 

the CIF, consistent with the 

responsibilities, obligations and duties 

imposed on fiduciaries by Part 4 of Title 

I of the Act. 

(g) The Bank or Plan Adviser sends by 

regular mail or personal delivery to the 

Independent Fiduciary of each Client 

Plan that purchases Fund shares in 

connection with the in-kind transfer, no 

later than 105 days after completion of 

each purchase, a written confirmation of 

the transaction containing— 

(1) The number of CIF units held by 

the Client Plan immediately before the 

in-kind transfer, the related per unit 


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value and the total dollar amount of 

such CIF units; and 

(2) The number of shares in the Funds 

that are held by the Client Plan 

immediately following the purchase, the 

related per share net asset value and the 

total dollar amount of such shares. 

(h) As to each Client Plan, the 

combined total of all fees received by 

the Bank or Plan Adviser for the 

provision of services to the Client Plan, 

and in connection with the provision of 

services to a Fund in which a Client 

Plan holds shares purchased in 

connection with the in-kind transfer, is 

not in excess of ‘‘reasonable 

compensation’’ within the meaning of 

section 408(b)(2) of the Act. 

(i) All dealings in connection with the 

in-kind transfer and purchase between 

the Client Plan and a Fund are on a 

basis no less favorable to the Client Plan 

than dealings between the Fund and 

other shareholders. 

Section II. Prospective Exemption for 

the Purchase of Fund Shares With 

Assets Transferred In-Kind From a CIF 

Effective after August 8, 1997, the 

restrictions of sections 406(a) and 

406(b)(1) and (b)(2) of the Act and the 

taxes imposed by section 4975 of the 

Code, by reason of section 4975(c)(1)(A) 

through (E) of the Code, shall not apply 

to the purchase by an employee benefit 

plan (the Client Plan) of shares of one 

or more open-end management 

investment companies (the Fund or 

Funds) registered under the Investment 

Company Act of 1940, in exchange for 

assets of the Client Plan transferred inkind to the Fund from a collective 

investment fund (the CIF) maintained 

by a bank (the Bank) or a plan adviser 

(the Plan Adviser), where the Bank or 

Plan Adviser is the investment adviser 

to the Fund and also a fiduciary of the 

Client Plan. The transfer and purchase 

must be in connection with a complete 

withdrawal of the Client Plan’s assets 

from the CIF, and the following 

conditions must be met: 

(a) No sales commissions or other fees 

are paid by the Client Plan in 

connection with the purchase of Fund 

shares. 

(b) All transferred assets are securities 

for which market quotations are readily 

available, or cash. 

(c) The transferred assets constitute 

the Client Plan’s pro rata portion of all 

assets that were held by the CIF 

immediately prior to the transfer. 

Notwithstanding the foregoing, the 

allocation of fixed-income securities 

held by a CIF among Client Plans on the 

basis of each Client Plan’s pro rata share 

of the aggregate value of such securities 

will not fail to meet the requirements of 

this subsection if: 

(1) The aggregate value of such 

securities does not exceed one (1) 

percent of the total value of the assets 

held by the CIF immediately prior to the 

transfer; and 

(2) Effective May 9, 2022, such 

securities have the same coupon rate 

and maturity, and at the time of the 

transfer, the same credit quality. 

(d) The Client Plan receives Fund 

shares that have a total net asset value 

equal to the value of the Client Plan’s 

transferred assets on the date of the 

transfer, as determined with respect to 

securities, in a single valuation for each 

asset, with all valuations performed in 

the same manner, at the close of the 

same business day, in accordance with 

Securities and Exchange Commission 

Rule 17a–7 (using sources independent 

of the Bank or Plan Adviser and the 

Fund) and the procedures established 

by the Funds pursuant to Rule 17a–7. 

(e) An independent fiduciary with 

respect to the Client Plan (the 

Independent Fiduciary) receives 

advance written notice of the in-kind 

transfer and purchase of assets and full 

written disclosure of information 

concerning the Funds which includes 

the following: 

(1) A current prospectus for each 

Fund to which the CIF assets may be 

transferred; 

(2) A statement describing the fees to 

be charged to, or paid by, a Client Plan 

and the Funds to the Bank or Plan 

Adviser, including the nature and extent 

of any differential between the rates of 

the fees paid by the Fund and the rates 

of the fees paid by the Client Plan in 

connection with the Client Plan’s 

investment in the CIF; 

(3) A statement of the reasons why the 

Bank or Plan Adviser may consider the 

transfer and purchase to be appropriate 

for the Client Plan; 

(4) A statement of whether there are 

any limitations on the Bank or Plan 

Adviser with respect to which plan 

assets may be invested in shares of the 

Funds, and, if so, the nature of such 

limitations; 

(5) The identity of all securities that 

will be valued in accordance with Rule 

17a–7(b)(4) and allocated on the basis of 

the Client Plan’s pro rata portion under 

section II(c); and 

(6) The identity of any fixed-income 

securities that will be allocated on the 

basis of each Client Plan’s pro rata share 

of the aggregate value of such securities 

pursuant to section II(c). 

(f) On the basis of the foregoing 

information, the Independent Fiduciary 

gives prior approval, in writing, for each 

purchase of Fund shares in exchange for 

the Client Plan’s assets transferred from 

the CIF, consistent with the 

responsibilities, obligations and duties 

imposed on fiduciaries by Part 4 of Title 

I of the Act. In addition, the 

Independent Fiduciary must give prior 

approval, in writing, for the receipt of 

confirmation statements described 

below in paragraph (g)(1) and (g)(2) by 

facsimile or electronic mail if the 

Independent Fiduciary elects to receive 

such statements in that form. 

(g) The Bank or Plan Adviser sends by 

regular mail or personal delivery or, if 

applicable, by facsimile or electronic 

mail to the Independent Fiduciary of 

each Client Plan that purchases Fund 

shares in connection with the in-kind 

transfer, the following information: 

(1) No later than 30 days after the 

completion of the purchase, a written 

confirmation which contains— 

(i) The identity of each transferred 

security that was valued for purposes of 

the purchase of Fund shares in 

accordance with Rule 17a–7(b)(4); 

(ii) The current market price, as of the 

date of the in-kind transfer, of each such 

security involved in the purchase of 

Fund shares; and 

(iii) The identity of each pricing 

service or market-maker consulted in 

determining the current market price of 

such securities. 

(2) No later than 105 days after the 

completion of each purchase, a written 

confirmation which contains— 

(i) The number of CIF units held by 

the Client Plan immediately before the 

in-kind transfer, the related per unit 

value and the total dollar amount of 

such CIF units; and 

(ii) The number of shares in the Funds 

that are held by the Client Plan 

immediately following the purchase, the 

related per share net asset value and the 

total dollar amount of such shares. 

(h) With respect to each of the Funds 

in which the Client Plan continues to 

hold shares acquired in connection with 

the in-kind transfer, the Bank or Plan 

Adviser provides the Independent 

Fiduciary of the Client Plan with— 

(1) A copy of an updated prospectus 

of such Fund, at least annually; and 

(2) Upon request of the Independent 

Fiduciary, a report or statement (which 

may take the form of the most recent 

financial report, the current Statement 

of Additional Information, or some 

other written statement) containing a 

description of all fees paid by the Fund 

to the Bank or Plan Adviser. 

(i) As to each Client Plan, the 

combined total of all fees received by 

the Bank or Plan Adviser for the 

provision of services to the Client Plan, 

and in connection with the provision of 

services to a Fund in which a Client 


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Plan holds shares acquired in 

connection with the in-kind transfer, is 

not in excess of ‘‘reasonable 

compensation’’ within the meaning of 

section 408(b)(2) of the Act. 

(j) All dealings in connection with the 

in-kind transfer and purchase between 

the Client Plan and a Fund are on a 

basis no less favorable to the Client Plan 

than dealings between the Fund and 

other shareholders. 

Section III. Availability of Prohibited 

Transaction Exemption (PTE) 77–4 

Any purchase of Fund shares that 

complies with the conditions of either 

Section I or Section II of this class 

exemption shall be treated as a 

‘‘purchase or sale’’ of shares of an openend investment company for purposes 

of PTE 77–4 and shall be deemed to 

have satisfied paragraphs (a), (d) and (e) 

of section II of that exemption. 42 FR 

18732 (April 8, 1977). 

Section IV. Definitions 

For purposes of this exemption: 

(a) The term ‘‘Bank’’ means a bank or 

trust company, and any affiliate thereof 

[as defined below in paragraph (b)(1)], 

which is supervised by a state or federal 

agency. 

(b) An ‘‘affiliate’’ of a person 

includes— 

(1) Any person directly or indirectly 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the person. 

(2) Any officer, director, employee or 

relative of such person, or partner in 

any such person; and 

(3) Any corporation or partnership of 

which such person is an officer, 

director, partner or employee. 

(c) The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(d) The term ‘‘collective investment 

fund’’ or ‘‘CIF’’ means a common or 

collective trust fund or pooled 

investment fund maintained by a 

‘‘Bank’’ as defined in paragraph (a) of 

this Section IV or by a ‘‘Plan Adviser’’ 

as defined in paragraph (m) of this 

Section IV for the collective investment 

of the assets attributable to two or more 

plans maintained by unrelated 

employers. 

(e) The term ‘‘Fund’’ or ‘‘Funds’’ 

means any open-end management 

investment company or companies 

registered under the 1940 Act for which 

the Bank or Plan Adviser serves as an 

investment adviser, and may also serve 

as a custodian, shareholder servicing 

agent, transfer agent or provide some 

other secondary service (as defined 

below in paragraph (i) of this section). 

(f) The term ‘‘net asset value’’ means the 

amount calculated by dividing the value 

of all securities, determined by a 

method as set forth in a Fund’s 

prospectus and Statement of Additional 

Information, and other assets belonging 

to each of the portfolios in such Fund, 

less the liabilities chargeable to each 

portfolio, by the number of outstanding 

shares. 

(g) The term ‘‘relative’’ means a 

‘‘relative’’ as that term is defined in 

section 3(15) of the Act (or a ‘‘member 

of the family’’ as that term is defined in 

section 4975(e)(6) of the Code), or a 

brother, a sister, or a spouse of a brother 

or a sister. 

(h) The term ‘‘Independent Fiduciary’’ 

means a fiduciary of a Client Plan who 

is independent of and unrelated to the 

Bank or Plan Adviser. For purposes of 

this exemption, the Independent 

Fiduciary will not be deemed to be 

independent of and unrelated to the 

Bank or Plan Adviser if: 

(1) Such fiduciary directly or 

indirectly controls, is controlled by, or 

is under common control with the Bank 

or Plan Adviser; 

(2) Such fiduciary, or any officer, 

director, partner, employee, or relative 

of such fiduciary, is an officer, director, 

partner, employee of the Bank or Plan 

Adviser (or is a relative of such 

persons); 

(3) Such fiduciary, directly or 

indirectly receives any compensation or 

other consideration for his or her own 

personal account in connection with 

any transaction described in this 

exemption. 

If an officer, director, partner, 

employee of the Bank or Plan Adviser 

(or relative of such persons), is a 

director of such Independent Fiduciary, 

and if he or she abstains from 

participation in (i) the choice of the 

Client Plan’s investment adviser, and 

(ii) the approval of any purchase or sale 

between the Client Plan and the Funds, 

as well as any transaction described in 

Sections I and II above, then paragraph 

(h)(2) of this Section IV shall not apply. 

(i) The term ‘‘secondary service’’ 

means a service provided by a Bank or 

Plan Adviser to a Fund other than 

investment management, investment 

advisory or similar services. 

(j) The term ‘‘fixed-income security’’ 

means any interest-bearing or 

discounted government or corporate 

security with a face amount of $1,000 or 

more that obligates the issues to pay the 

holder a specified sum of money, at 

specific intervals, and to repay the 

principal amount of the loan at 

maturity. 

(k) The term ‘‘Client Plan’’ means a 

pension plan described in 29 CFR 

2510.3–2, a welfare benefit plan 

described in 29 CFR 2510.3–1, and a 

plan described in section 4975(e)(1) of 

the Code, but does not include an 

employee benefit plan established or 

maintained by the Bank or a Plan 

Adviser for its own employees. 

(l) The term ‘‘security’’ shall have the 

same meaning as defined in section 

2(36) of the 1940 Act, as amended, 15 

U.S.C. 80a–2(36) (1996). 

(m) The term ‘‘Plan Adviser’’ means 

an investment adviser registered under 

the Investment Advisers Act of 1940, 

and any ‘‘affiliate’’ thereof [as defined 

above in paragraph (b)(1)]. 

(n) The term ‘‘business day’’ means a 

banking day as defined by federal or 

state banking regulations. 

(o) The term ‘‘unrelated employers’’ 

means persons which are not, directly 

or indirectly, affiliates, as defined above 

in paragraph (b)(1). 

(p) The term ‘‘personal delivery’’ 

means delivery of the information 

described in sections I(g) and II(g) above 

to an individual or individuals 

designated by the Client Plan to act on 

behalf of the Independent Fiduciary. 

PTE 2006–16 

PTE 2006–16 is amended to read as 

follows: 

I. Transactions 

(a) Effective January 2, 2007, the 

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

through (D) of ERISA and the taxes 

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

the Code by reason of section 

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

shall not apply to the lending of 

securities that are assets of an employee 

benefit plan to a ‘‘U.S. Broker-Dealer’’ or 

to a ‘‘U.S. Bank,’’ provided that the 

conditions set forth in section II below 

are met. 

(b) Effective January 2, 2007, the 

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

through (D) of ERISA and the taxes 

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

the Code by reason of section 

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

shall not apply to the lending of 

securities that are assets of an employee 

benefit plan to a ‘‘Foreign BrokerDealer’’ or ‘‘Foreign Bank’’, provided 

that the conditions set forth in sections 

II and III below are met. 

(c) Effective January 2, 2007, the 

restrictions of section 406(b)(1) of 

ERISA and the taxes imposed by section 

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

section 4975(c)(1)(E) of the Code shall 

not apply to the payment to a fiduciary 

(the Lending Fiduciary) of 

compensation for services rendered in 


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connection with loans of plan assets 

that are securities, provided that the 

conditions set forth in section IV below 

are met. 

II. General Conditions for Transactions 

Described in Sections I(a) and I(b) 

(a) Neither the borrower nor any 

affiliate of the borrower has or exercises 

discretionary authority or control with 

respect to the investment of the plan 

assets involved in the transaction, or 

renders investment advice (within the 

meaning of 29 CFR 2510.3–21(c)) with 

respect to those assets; 

(b) The plan receives from the 

borrower by the close of the Lending 

Fiduciary’s business on the day in 

which the securities lent are delivered 

to the borrower, (1) ‘‘U.S. Collateral’’ 

having, as of the close of business on the 

preceding business day, a market value 

or, in the case of bank letters of credit, 

a stated amount, equal to not less than 

100 percent of the then market value of 

the securities lent; or 

(2) ‘‘Foreign Collateral’’ having as of 

the close of business on the preceding 

business day, a market value or, in the 

case of bank letters of credit, a stated 

amount, equal to not less than: 

(i) 102 percent of the then market 

value of the securities lent as valued on 

a recognized securities exchange (as 

defined in section V(j)) or an automated 

trading system (as defined in section 

V(k)) on which the securities are 

primarily traded if the collateral posted 

is denominated in the same currency as 

the securities lent, or 

(ii) 105 percent of the then market 

value of the securities lent as valued on 

a recognized securities exchange (as 

defined in section V(j)) or an automated 

trading system (as defined in V(k)) on 

which the securities are primarily 

traded if the collateral posted is 

denominated in a different currency 

than the securities lent. 

Notwithstanding the foregoing, if the 

Lending Fiduciary is a U.S. Bank or U.S. 

Broker-Dealer, and such Lending 

Fiduciary indemnifies the plan with 

respect to the difference, if any, between 

the replacement cost of the borrowed 

securities and the market value of the 

collateral on the date of a borrower 

default, the plan receives from the 

borrower by the close of the Lending 

Fiduciary’s business on the day in 

which the securities lent are delivered 

to the borrower, ‘‘Foreign Collateral’’ 

having as of the close of business on the 

preceding business day, a market value 

or, in the case of bank letters of credit, 

a stated amount, equal to not less than: 

(iii) 100 percent of the then market 

value of the securities lent as valued on 

a recognized securities exchange (as 

defined in section V(j)) or an automated 

trading system (as defined in section 

V(k)) on which the securities are 

primarily traded if the collateral posted 

is denominated in the same currency as 

the securities lent; or 

(iv) 101 percent of the then market 

value of the securities lent as valued on 

a recognized securities exchange (as 

defined in section V(j)) or an automated 

trading system (as defined in V(k)) on 

which the securities are primarily 

traded if the collateral posted is 

denominated in a different currency 

than the securities lent and such 

currency is denominated in Euros, 

British pounds, Japanese yen, Swiss 

francs or Canadian dollars; or 

(v) 105 percent of the then market 

value of the securities lent as valued on 

a recognized securities exchange (as 

defined in section V(j)) or an automated 

trading system (as defined in V(k)) if the 

collateral posted is denominated in a 

different currency than the securities 

lent and such currency is other than 

those specified above. 

(c)(1) If the borrower is a U.S. Bank 

or U.S. Broker-Dealer, the Plan receives 

such U.S. Collateral or Foreign 

Collateral from the borrower by the 

close of the Lending Fiduciary’s 

business on the day in which the 

securities are delivered to the borrower. 

Such collateral is received by the plan 

either by physical delivery, wire transfer 

or by book entry in a securities 

depository located in the United States. 

or, 

(2) If the borrower is a Foreign Bank 

or Foreign Broker-Dealer, the plan 

receives U.S. Collateral or Foreign 

Collateral from the borrower by the 

close of the Lending Fiduciary’s 

business on the day in which the 

securities are delivered to the borrower. 

Such collateral is received by the plan 

either by physical delivery, wire transfer 

or by book entry in a securities 

depository located in the United States 

or held on behalf of the plan at an 

Eligible Securities Depository. The 

indicia of ownership of such collateral 

shall be maintained in accordance with 

section 404(b) of ERISA and 29 CFR 

2550.404b–1. 

(d) Prior to making of any such loan, 

the borrower shall have furnished the 

Lending Fiduciary with: 

(1) The most recent available audited 

statement of the borrower’s financial 

condition, as audited by a United States 

certified public accounting firm or in 

the case of a borrower that is a Foreign 

Broker-Dealer or Foreign Bank, a firm 

which is eligible or authorized to issue 

audited financial statements in 

conformity with accounting principles 

generally accepted in the primary 

jurisdiction that governs the borrowing 

Foreign Broker-Dealer or Foreign Bank; 

(2) The most recent available 

unaudited statement of its financial 

condition (if the unaudited statement is 

more recent than such audited financial 

statement); and 

(3) A representation that, at the time 

the loan is negotiated, there has been no 

material adverse change in its financial 

condition since the date of the most 

recent financial statement furnished to 

the plan that has not been disclosed to 

the Lending Fiduciary. Such 

representations may be made by the 

borrower’s agreement that each loan 

shall constitute a representation by the 

borrower that there has been no such 

material adverse change. 

(e) The loan is made pursuant to a 

written loan agreement, the terms of 

which are at least as favorable to the 

plan as an arm’s-length transaction with 

an unrelated party would be. Such loan 

agreement states that the plan has a 

continuing security interest in, title to, 

or the rights of a secured creditor with 

respect to the collateral. Such agreement 

may be in the form of a master 

agreement covering a series of securities 

lending transactions. 

(f) In return for lending securities, the 

plan: 

(1) Receives a reasonable fee (in 

connection with the securities lending 

transaction), and/or 

(2) Has the opportunity to derive 

compensation through the investment of 

the currency collateral. Where the plan 

has that opportunity, the plan may pay 

a loan rebate or similar fee to the 

borrower, if such fee is not greater than 

the plan would pay in a comparable 

transaction with an unrelated party. 

(g) All fees and other consideration 

received by the plan in connection with 

the loan of securities are reasonable. 

The identity of the currency in which 

the payment of fees and rebates will be 

made shall be disclosed to the plan 

either in the written loan agreement or 

the loan confirmation as agreed to by 

the borrower and the plan (or Lending 

Fiduciary) prior to the making of the 

loan. 

(h) The plan receives the equivalent of 

all distributions made to holders of the 

borrowed securities during the term of 

the loan including, but not limited to, 

dividends, interest payments, shares of 

stock as a result of stock splits and 

rights to purchase additional securities; 

(i) If the market value of the collateral 

at the close of trading on a business day 

is less than the applicable percentage of 

the market value of the borrowed 

securities at the close of trading on that 

day (as described in section II(b) of this 

exemption), then the borrower shall 


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deliver, by the close of business on the 

following business day, an additional 

amount of U.S. Collateral or Foreign 

Collateral the market value of which, 

together with the market value of all 

previously delivered collateral, equals at 

least the applicable percentage of the 

market value of all the borrowed 

securities as of such preceding day. 

Notwithstanding the foregoing, part of 

the U.S. Collateral or Foreign Collateral 

may be returned to the borrower if the 

market value of the collateral exceeds 

the applicable percentage (described in 

section II(b) of the exemption) of the 

market value of the borrowed securities, 

as long as the market value of the 

remaining U.S. Collateral or Foreign 

Collateral equals at least the applicable 

percentage of the market value of the 

borrowed securities; 

(j) The loan may be terminated by the 

plan at any time, whereupon the 

borrower shall deliver certificates for 

securities identical to the borrowed 

securities (or the equivalent thereof in 

the event of reorganization, 

recapitalization or merger of the issuer 

of the borrowed securities) to the plan 

within the lesser of: 

(1) The customary delivery period for 

such securities, 

(2) Five business days, or 

(3) The time negotiated for such 

delivery by the plan and the borrower. 

(k) In the event that the loan is 

terminated, and the borrower fails to 

return the borrowed securities or the 

equivalent thereof within the applicable 

time described in section II(j) above, the 

plan may, under the terms of the loan 

agreement: 

(1) Purchase securities identical to the 

borrowed securities (or their equivalent 

as described above) and may apply the 

collateral to the payment of the 

purchase price, any other obligations of 

the borrower under the agreement, and 

any expenses associated with the sale 

and/or purchase, and 

(2) The borrower is obligated, under 

the terms of the loan agreement, to pay, 

and does pay to the plan the amount of 

any remaining obligations and expenses 

not covered by the collateral, including 

reasonable attorney’s fees incurred by 

the plan for legal action arising out of 

default on the loans, plus interest at a 

reasonable rate. 

Notwithstanding the foregoing, the 

borrower may, in the event the borrower 

fails to return borrowed securities as 

described above, replace collateral, 

other than U.S. currency, with an 

amount of U.S. currency that is not less 

than the then current market value of 

the collateral, provided such 

replacement is approved by the Lending 

Fiduciary. 

(l) If the borrower fails to comply with 

any provision of a loan agreement 

which requires compliance with this 

exemption, the plan fiduciary who 

caused the plan to engage in such 

transaction shall not be deemed to have 

caused the plan to engage in a 

transaction prohibited by section 

406(a)(1)(A) through (D) of ERISA solely 

by reason of the borrower’s failure to 

comply with the conditions of the 

exemption. 

III. Specific Conditions for Transactions 

Described in Section I(b) 

(a) The Lending Fiduciary maintains 

the written documentation for the loan 

agreement at a site within the 

jurisdiction of the courts of the United 

States. 

(b) Prior to entering into a transaction 

involving a Foreign Broker-Dealer that is 

described in section V(c)(1) or a Foreign 

Bank that is described in section V(d)(1) 

either: 

(1) The Foreign Broker-Dealer or 

Foreign Bank agrees to submit to the 

jurisdiction of the United States; agrees 

to appoint an agent for service of 

process in the United States, which may 

be an affiliate (the Process Agent); 

consents to service of process on the 

Process Agent; and agrees that any 

enforcement by a plan of its rights under 

the securities lending agreement will, at 

the option of the plan, occur exclusively 

in the United States courts; or 

(2) The Lending Fiduciary, if a U.S. 

Bank or U.S. Broker-Dealer, agrees to 

indemnify the plan with respect to the 

difference, if any, between the 

replacement cost of the borrowed 

securities and the market value of the 

collateral on the date of a borrower 

default plus interest and any transaction 

costs incurred (including attorney’s fees 

of such plan arising out of the default 

on the loans or the failure to indemnify 

properly under this provision) which 

the plan may incur or suffer directly 

arising out of a borrower default by the 

Foreign Broker-Dealer or Foreign Bank. 

(c) In the case of a securities lending 

transaction involving a Foreign BrokerDealer that is described in section 

V(c)(2) or a Foreign Bank that is 

described in section V(d)(2), the 

Lending Fiduciary must be a U.S. Bank 

or U.S. Broker-Dealer, and prior to 

entering into the loan transaction, such 

fiduciary must agree to indemnify the 

plan with respect to the difference, if 

any, between the replacement cost of 

the borrowed securities and the market 

value of the collateral on the date of a 

borrower default plus interest and any 

transaction costs incurred (including 

attorney’s fees of such plan arising out 

of the default on the loans or the failure 

to indemnify properly under this 

provision) which the plan may incur or 

suffer directly arising out of a borrower 

default by the Foreign Broker-Dealer or 

Foreign Bank. 

IV. Specific Conditions for Transactions 

Described in Section I(c) 

(a) The loan of securities is not 

prohibited by section 406(a) of ERISA or 

otherwise satisfies the conditions of this 

exemption. 

(b) The Lending Fiduciary is 

authorized to engage in securities 

lending transactions on behalf of the 

plan. 

(c) The compensation is reasonable 

and is paid in accordance with the 

terms of a written instrument, which 

may be in the form of a master 

agreement covering a series of securities 

lending transactions. 

(d) Except as otherwise provided in 

section IV(f), the arrangement under 

which the compensation is paid: 

(1) Is subject to the prior written 

authorization of a plan fiduciary (the 

‘‘authorizing fiduciary’’), who is (other 

than in the case of a plan covering only 

employees of the Lending Fiduciary or 

any affiliates of such fiduciary) 

independent of the Lending Fiduciary 

and of any affiliate thereof, and 

(2) May be terminated by the 

authorizing fiduciary within: 

(A) The time negotiated for such 

notice of termination by the plan and 

the Lending Fiduciary, or 

(B) five business days, whichever is 

less, in either case without penalty to 

the plan. 

(e) No such authorization is made or 

renewed unless the Lending Fiduciary 

shall have furnished the authorizing 

fiduciary with any reasonably available 

information which the Lending 

Fiduciary reasonably believes to be 

necessary to determine whether such 

authorization should be made or 

renewed, and any other reasonably 

available information regarding the 

matter that the authorizing fiduciary 

may reasonably request. 

(f) (Special Rule for Commingled 

Investment Funds) In the case of a 

pooled separate account maintained by 

an insurance company qualified to do 

business in a State or a common or 

collective trust fund maintained by a 

bank or trust company supervised by a 

State or Federal agency, the 

requirements of section IV(d) of this 

exemption shall not apply, provided 

that: 

(1) The information described in 

section IV(e) (including information 

with respect to any material change in 

the arrangement) shall be furnished by 

the Lending Fiduciary to the authorizing 


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fiduciary described in section IV(d) with 

respect to each plan whose assets are 

invested in the account or fund, not less 

than 30 days prior to implementation of 

the arrangement or material change 

thereto, and, where requested, upon the 

reasonable request of the authorizing 

fiduciary; 

(2) In the event any such authorizing 

fiduciary submits a notice in writing to 

the Lending Fiduciary objecting to the 

implementation of, material change in, 

or continuation of the arrangement, the 

plan on whose behalf the objection was 

tendered is given the opportunity to 

terminate its investment in the account 

or fund, without penalty to the plan, 

within such time as may be necessary to 

effect such withdrawal in an orderly 

manner that is equitable to all 

withdrawing plans and to the nonwithdrawing plans. In the case of a plan 

that elects to withdraw pursuant to the 

foregoing, such withdrawal shall be 

effected prior to the implementation of, 

or material change in, the arrangement; 

but an existing arrangement need not be 

discontinued by reason of a plan 

electing to withdraw; and 

(3) In the case of a plan whose assets 

are proposed to be invested in the 

account or fund subsequent to the 

implementation of the compensation 

arrangement and which has not 

authorized the arrangement in the 

manner described in sections IV(f)(1) 

and IV(f)(2), the plan’s investment in the 

account or fund shall be authorized in 

the manner described in section 

IV(d)(1). 

V. Definitions 

For purposes of this exemption: 

(a) The term ‘‘U.S. Broker-Dealer’’ 

means a broker-dealer registered under 

the Securities Exchange Act of 1934 (the 

1934 Act or the Exchange Act) or 

exempted from registration under 

section 15(a)(1) of the 1934 Act as a 

dealer in exempted government 

securities (as defined in section 3(a)(12) 

of the 1934 Act). 

(b) The term ‘‘U.S. Bank’’ means a 

bank as defined in section 202(a)(2) of 

the Investment Advisers Act. 

(c) The term ‘‘Foreign Broker-Dealer’’ 

means a broker-dealer that has, as of the 

last day of its most recent fiscal year, 

equity capital that is equivalent of no 

less than $200 million and is: (1)(i) 

Registered and regulated under the laws 

of the Financial Services Authority in 

the United Kingdom, or 

(ii)(a) registered and regulated by a 

securities commission of a Province of 

Canada that is a member of the 

Canadian Securities Administration, 

and (b) is subject to the oversight of a 

Canadian self-regulatory authority; or 

(2) registered and regulated under the 

relevant securities laws of a 

governmental entity of a country other 

than the United States, and such 

securities laws and regulation were 

applicable to a broker-dealer that 

received: (i) An individual exemption, 

granted by the Department under 

section 408(a) of ERISA, involving the 

loan of securities by a plan to a brokerdealer or (ii) a final authorization by the 

Department to engage in an otherwise 

prohibited transaction pursuant to PTE 

96–62, as amended, involving the loan 

of securities by a plan to a broker-dealer. 

(d) The term ‘‘Foreign Bank’’ means 

an institution that has substantially 

similar powers to a bank as defined in 

section 202(a)(2) of the Investment 

Advisers Act, has as of the last day of 

its most recent fiscal year, equity capital 

which is equivalent of no less than $200 

million, and is subject to: 

(1) Regulation by the Financial 

Services Authority in the United 

Kingdom or the Office of the 

Superintendent of Financial Institutions 

in Canada, or 

(2) regulation by the relevant 

governmental banking agency(ies) of a 

country other than the United States, 

and the regulation and oversight of 

these banking agencies were applicable 

to a bank that received: (a) An 

individual exemption, granted by the 

Department under section 408(a) of 

ERISA, involving the loan of securities 

by a plan to a bank or (b) a final 

authorization by the Department to 

engage in an otherwise prohibited 

transaction pursuant to PTE 96–62, as 

amended, involving the loan of 

securities by a plan to a bank. 

(e) The term ‘‘U.S. Collateral’’ means: 

(1) U.S. currency; 

(2) ‘‘government securities’’ as 

defined in section 3(a)(42)(A) and (B) of 

the Exchange Act; 

(3) ‘‘government securities’’ as 

defined in section 3(a)(42)(C) of the 

Exchange Act issued or guaranteed as to 

principal or interest by the following 

corporations: The Federal Home Loan 

Mortgage Corporation, the Federal 

National Mortgage Association, the 

Student Loan Marketing Association 

and the Financing Corporation; 

(4) mortgage-backed securities 

meeting the definition of a ‘‘mortgage 

related security’’ set forth in section 

3(a)(41) of the Exchange Act; 

(5) negotiable certificates of deposit 

and bankers acceptances issued by a 

‘‘bank’’ as that term is defined in section 

3(a)(6) of the Exchange Act, and which 

are payable in the United States and 

deemed to have a ‘‘ready market’’ as that 

term is defined in 17 CFR 240.15c3–1; 

or 

(6) irrevocable letters of credit issued 

by a U.S. Bank other than the borrower 

or an affiliate thereof, or any 

combination, thereof. 

(f) Effective May 9, 2022, the term 

‘‘Foreign Collateral’’ means: 

(1) Securities issued by or guaranteed 

as to principal and interest by the 

following Multilateral Development 

Banks—the obligations of which are 

backed by the participating countries, 

including the United States: The 

International Bank for Reconstruction 

and Development, the Inter-American 

Development Bank, the Asian 

Development Bank, the African 

Development Bank, the European Bank 

for Reconstruction and Development 

and the International Finance 

Corporation; 

(2) foreign sovereign debt securities 

that are (i) subject to a minimal amount 

of credit risk, and (ii) sufficiently liquid 

that such securities can be sold at or 

near their fair market value in the 

ordinary course of business within 

seven calendar days; 

(3) the British pound, the Canadian 

dollar, the Swiss franc, the Japanese yen 

or the Euro; 

(4) irrevocable letters of credit issued 

by a Foreign Bank, other than the 

borrower or an affiliate thereof, 

provided that, at the time the letters of 

credit are issued, the Foreign Bank’s 

ability to honor its commitments 

thereunder is subject to no greater than 

moderate credit risk; or 

(5) any type of collateral described in 

Rule 15c3–3 of the Exchange Act as 

amended from time to time provided 

that the lending fiduciary is a U.S. Bank 

or U.S. Broker-Dealer and such fiduciary 

indemnifies the plan with respect to the 

difference, if any, between the 

replacement cost of the borrowed 

securities and the market value of the 

collateral on the date of a borrower 

default plus interest and any transaction 

costs which a plan may incur or suffer 

directly arising out of a borrower 

default. Notwithstanding the foregoing, 

collateral described in any of the 

categories enumerated in section V(e) 

will be considered U.S. Collateral for 

purposes of the exemption. 

(g) The term ‘‘affiliate’’ of another 

person means: 

(1) Any person directly or indirectly, 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with such person; 

(2) Any officer, director, partner, 

employee, or relative (as defined in 

section 3(15) of ERISA) of such other 

person; and 

(3) Any corporation or partnership of 

which such other person is an officer, 

director, partner or employee. 


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(h) The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(i) The term ‘‘Eligible Securities 

Depository’’ means an eligible securities 

depository as that term is defined under 

Rule 17f–7 of the Investment Company 

Act of 1940 [15 U.S.C. 80a], as such 

definition may be amended from time to 

time. 

(j) The term ‘‘recognized securities 

exchange’’ means a U.S. securities 

exchange that is registered as a 

‘‘national securities exchange’’ under 

section 6 of the Exchange Act of 1934 

(15 U.S.C. 78f) or a designated offshore 

securities market as defined in 

Regulation S of the Securities Act of 

1933 [17 CFR part 230.902(B)], as such 

definition may be amended from time to 

time, which performs with respect to 

securities, the functions commonly 

performed by a stock exchange within 

the meaning of the definitions under the 

applicable securities laws (e.g., 17 CFR 

part 240.3b–16). 

(k) The term ‘‘automated trading 

system’’ means an electronic trading 

system that functions in a manner 

intended to simulate a securities 

exchange by electronically matching 

orders on an agency basis from multiple 

buyers and sellers such as an 

‘‘alternative trading system’’ within the 

meaning of SEC’s Reg. ATS [17 CFR part 

242.300] as such definition may be 

amended from time to time, or an 

‘‘automated quotation system’’ as 

described in section 3(a)(51)(A)(ii) of the 

Securities and Exchange Act of 1934 [15 

U.S.C. 78c(a)(51)(A)(ii)]. 

(l) The term ‘‘lending of securities’’ or 

‘‘loan of securities’’ shall include 

securities loans that are structured as 

repurchase agreements provided, that 

all terms of the exemption are otherwise 

met. 

VI. Effective Dates 

(a) This exemption is effective on 

January 2, 2007. 

(b) PTEs 81–6 and 82–63 are revoked 

effective January 2, 2007. 

Signed at Washington, DC, this 2nd day of 

March, 2022. 

Ali Khawar, 

Acting Assistant Secretary, Employee Benefits 

Security Administration, U.S. Department of 

Labor. 

[FR Doc. 2022–04866 Filed 3–7–22; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Agency Information Collection 

Activities; Submission for OMB 

Review; Comment Request; Request 

for a Medical or Religious Exception or 

Delay to the COVID–19 Vaccination 

Requirement 

AGENCY: Office of the Assistant 

Secretary for Administration and 

Management, Labor. 

ACTION: Notice; request for comments. 

SUMMARY: In compliance with the 

Paperwork Reduction Act of 1995 

(PRA), the DOL is soliciting public 

comments regarding the proposed 

revision of this Office of the Assistant 

Secretary for Administration and 

Management (OASAM)-sponsored 

information collection for the authority 

to continue and revise the information 

collection request (ICR) titled, ‘‘Request 

for a Medical Exception or Delay to the 

COVID–19 Vaccination Requirement,’’ 

currently approved under OMB Control 

Number 1225–0092. 

DATES: Consideration will be given to all 

written comments received by May 9, 

2022. 

ADDRESSES: A copy of this ICR with 

applicable supporting documentation, 

including a description of the likely 

respondents, proposed frequency of 

response, and estimated total burden, 

may be obtained free by contacting 

RARC Info at Rarc.Info@dol.gov. 

Electronic submission: You may 

submit comments and attachments 

electronically at DOL_PRA_PUBLIC@

dol.gov, identified by OMB Control 

Number 1225–0092. 

Comments are invited on: (1) Whether 

the collection of information is 

necessary for the proper performance of 

the functions of the Department, 

including whether the information will 

have practical utility; (2) if the 

information will be processed and used 

in a timely manner; (3) the accuracy of 

the agency’s estimates of the burden and 

cost of the collection of information, 

including the validity of the 

methodology and assumptions used; (4) 

ways to enhance the quality, utility and 

clarity of the information collection; and 

(5) ways to minimize the burden of the 

collection of information on those who 

are to respond, including the use of 

automated collection techniques or 

other forms of information technology. 

FOR FURTHER INFORMATION CONTACT: 

Mara Blumenthal by telephone at 202– 

693–8538, or by email at Rarc.Info@

dol.gov. 

SUPPLEMENTARY INFORMATION: Consistent 

with guidance from the Centers for 

Disease Control and Prevention (CDC), 

guidance from the Safer Federal 

Workforce Task Force established 

pursuant to Executive Order 13991 of 

January 20, 2021, Protecting the Federal 

Workforce and Requiring MaskWearing, and Executive Order 14043 of 

September 9, 2021, Requiring 

Coronavirus Disease 2019 Vaccination 

for Federal Employees, the request for 

this collection of information is 

essential to implement DOL’s health 

and safety measures regarding federal 

employee medical exemptions to the 

COVID–19 mandatory vaccinations. The 

Rehabilitation Act of 1973, as amended, 

requires Federal Agencies to provide 

reasonable accommodations to qualified 

employees with disabilities unless that 

reasonable accommodation would 

impose an undue hardship on the 

employee’s Agency. See 29 U.S.C. 791; 

29 CFR part 1614; see also 20 CFR part 

1630 and Executive Order 13164 of July 

26, 2000, Requiring Federal Agencies to 

Establish Procedures to Facilitate the 

Provision of Reasonable 

Accommodation. Section 2 of E.O. 

14043 mandates that each agency 

‘‘implement, to the extent consistent 

with applicable law, a program to 

require COVID–19 vaccination for all of 

its Federal employees, with exceptions 

only as required by law.’’ This medical 

exemption form is necessary for DOL to 

determine legal exemptions to the 

vaccine requirement under the 

Rehabilitation Act. 

The Department of Labor is proposing 

to revise this ICR, which was approved 

in November 2021 under the Emergency 

Processing provisions of the PRA. The 

Department is requesting the same 

amount of burden in the currently 

approved ICR: 250 respondents, 10 

minutes per response for a total of 42 

hours. Additionally, the Department of 

Labor is proposing that student 

volunteers requesting a medical 

exception or delay to the COVID–19 

Vaccination Requirement be required to 

complete this form. DOL estimates that 

there may be 100 student volunteers 

with the Department beginning this 

summer. While 40 volunteers are 

expected through the Secretary’s formal 

program, many offices bring on 

volunteers through a variety of other 

methods. DOL is estimating that 10% 

may request a medical accommodation, 

for a total of 10 respondents. 

The estimated time burden for a 

student volunteer to complete the form 

is 15 minutes. This is more burden than 

is placed on respondents in the 

currently approved collection that is 

limited to medical professionals 

providing information. Because the 

definition of ‘person’ under the PRA 


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