7516 Federal Register / Vol. 72, No. 31 / Thursday, February 15, 2007 / Rules and Regulations 

1Under § 2578.1(d)(2)(vii)(B), a QTA is directed 

to make distributions in accordance with the safe 

harbor regulation. 

2 71 FR 20830 n. 21. 

3See 26 CFR 1.402(c)–2, Q&A–12. 

4 71 FR 20828 n.14. 

5Section 829 of the Pension Protection Act. 

6Section 829 of the Pension Protection Act 

requires that the individual retirement plan 

established on behalf of a nonspouse beneficiary 

must be treated as an inherited individual 

retirement plan within the meaning of Code 

§ 408(d)(3)(C) and must be subject to the applicable 

mandatory distribution requirements of Code 

§ 401(a)(9)(B). 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Parts 2550 and 2578 

RIN 1210–AB16 

Amendments to Safe Harbor for 

Distributions From Terminated 

Individual Account Plans and 

Termination of Abandoned Individual 

Account Plans To Require Inherited 

Individual Retirement Plans for 

Missing Nonspouse Beneficiaries 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Interim final rule with request 

for comments. 

SUMMARY: This document contains an 

interim final rule amending regulations 

under the Employee Retirement Income 

Security Act of 1974 (ERISA or the Act) 

that provide guidance and a fiduciary 

safe harbor for the distribution of 

benefits on behalf of participants or 

beneficiaries in terminated and 

abandoned individual account plans. 

The Department is amending these 

regulations to reflect changes enacted as 

part of the Pension Protection Act of 

2006, Public Law 109–280, to the 

Internal Revenue Code of 1986 (the 

Code), under which a distribution of a 

deceased plan participant’s benefit from 

an eligible retirement plan may be 

directly transferred to an individual 

retirement plan established on behalf of 

the designated nonspouse beneficiary of 

such participant. Specifically, the 

amended regulations require as a 

condition of relief under the fiduciary 

safe harbor that benefits for a missing, 

designated nonspouse beneficiary be 

directly rolled over to an individual 

retirement plan that fully complies with 

Code requirements. This interim final 

rule will affect fiduciaries, plan service 

providers, and participants and 

beneficiaries of individual account 

pension plans. 

DATES: Effective and Applicability 

Dates: The amendments made by this 

rule are effective March 19, 2007. This 

interim final rule is applicable to 

distributions made on or after March 19, 

2007. 

Comment Date: Written comments 

must be received by April 2, 2007. 

ADDRESSES: To facilitate the receipt and 

processing of comments, the 

Department encourages interested 

persons to submit their comments 

electronically by e-mail to eORI@dol.gov, or by using the Federal 

eRulemaking portal at 

www.regulations.gov (follow 

instructions for submission of 

comments). Persons submitting 

comments electronically are encouraged 

not to submit paper copies. Persons 

interested in submitting comments on 

paper should send or deliver their 

comments (at least three copies) to the 

Office of Regulations and 

Interpretations, Employee Benefits 

Security Administration, Room N–5669, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 20210, Attn: Amendments to 

Distribution Safe Harbor and 

Abandoned Plans Regulation for 

Missing Nonspouse Beneficiaries. All 

comments received will be available to 

the public, without charge, online at 

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

ebsa, and at the Public Disclosure 

Room, Employee Benefits Security 

Administration, Room N–1513, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Stephanie L. Ward, Office of 

Regulations and Interpretations, 

Employee Benefits Security 

Administration, (202) 693–8500. This is 

not a toll-free number. 

SUPPLEMENTARY INFORMATION: 

A. Background 

This interim final rule amends two 

regulations under ERISA that facilitate 

the termination of individual account 

plans, including abandoned individual 

account plans, and the distribution of 

benefits from such plans. The first 

regulation, codified at 29 CFR 

2550.404a–3, provides plan fiduciaries 

of terminated plans and qualified 

termination administrators (QTAs) of 

abandoned plans with a fiduciary safe 

harbor for making distributions on 

behalf of participants or beneficiaries 

who fail to make an election regarding 

a form of benefit distribution, 

commonly referred to as missing 

participants or beneficiaries. The second 

regulation, codified at 29 CFR 2578.1, 

establishes a procedure for financial 

institutions holding the assets of an 

abandoned individual account plan to 

terminate the plan and distribute 

benefits to the plan’s participants or 

beneficiaries, with limited liability.1

Appendices to these two regulations 

contain model notices for notifying 

participants or beneficiaries of the 

plan’s termination and distribution 

options. 

The safe harbor regulation provides 

that both a fiduciary and a QTA will be 

deemed to have satisfied ERISA’s 

prudence requirements under section 

404(a) of the Act if the conditions of the 

safe harbor are met with respect to the 

distribution of benefits on behalf of 

missing participants from terminated 

individual account plans.2 In general, 

the regulation provides that a fiduciary 

or QTA qualifies for the safe harbor if 

a distribution is made to an individual 

retirement plan within the meaning of 

section 7701(a)(37) of the Code. See 

§ 2550.404a–3(d)(1)(i). However in April 

2006, when the Department published 

this safe harbor regulation, a 

distribution of benefits from an 

individual account plan to a nonspouse 

beneficiary was not considered an 

eligible rollover distribution under the 

provisions of section 402(c) of the Code 

and, therefore, could not be rolled over 

into an individual retirement plan.3 As 

a result, the safe harbor regulation 

mandated, among other requirements, 

the distribution of benefits on behalf of 

a missing nonspouse beneficiary to an 

account that was not an individual 

retirement plan. See § 2550.404a– 

3(d)(1)(ii). Consequently, such 

distributions were subject to income tax 

and mandatory tax withholding in the 

year distributed into the account.4

The Pension Protection Act changed 

the characterization of certain 

distributions from tax exempt plans and 

trusts to permit such distributions to 

qualify for eligible rollover distribution 

treatment.5 Section 829 of the Pension 

Protection Act amended section 402(c) 

of the Code to permit the direct rollover 

of a deceased participant’s benefit from 

an eligible retirement plan to an 

individual retirement plan established 

on behalf of a designated nonspouse 

beneficiary.6 These rollover 

distributions would not trigger 

immediate income tax consequences 

and mandatory tax withholding for the 

nonspouse beneficiary. 

In light of the Pension Protection 

Act’s changes to the Code allowing a 

rollover distribution on behalf of a 

nonspouse beneficiary into an inherited 

individual retirement plan with the 

resulting deferral of income tax 

consequences, the Department is 

amending the regulatory safe harbor for 

distributions from a terminated 


hsrobinson on PROD1PC76 with RULES2
Federal Register / Vol. 72, No. 31 / Thursday, February 15, 2007 / Rules and Regulations 7517 

7See also I.R.S. Notice 2007–07 (January 10, 

2007). 

8 71 FR 20856 (April 21, 2006). 

individual account plan, including an 

abandoned plan, at 29 CFR 2550.404a–

3. These amendments require that a 

deceased participant’s benefit be 

directly rolled over to an inherited 

individual retirement plan established 

to receive the distribution on behalf of 

a missing, designated nonspouse 

beneficiary. These amendments 

eliminate the prior safe harbor condition 

that required a distribution on behalf of 

a missing nonspouse beneficiary to be 

made only to an account other than an 

individual retirement plan. See 

§ 2550.404a–3(d)(1)(ii). Therefore, when 

these amendments become applicable, a 

distribution on behalf of a missing 

nonspouse beneficiary would satisfy 

this condition of the safe harbor only if 

directly rolled into an individual 

retirement plan that satisfies the 

requirements of new section 402(c)(11) 

of the Code.7

Conforming changes are made to the 

content requirements of the mandated 

participant and beneficiary termination 

notice and its model notice under the 

safe harbor (at the Appendix to 

§ 2550.404a–3). The amendments to 29 

CFR 2578.1 also make conforming 

changes to the content of the required 

participant and beneficiary termination 

notice and model notice for abandoned 

plans (at Appendix C to § 2578.1). 

Concurrently with publication of this 

rule, the Department is publishing 

proposed amendments to PTE 2006–06,8

which, when finalized, will clarify that 

the exemption provides relief to a QTA 

that designates itself or an affiliate as 

the provider of an inherited individual 

retirement plan for a missing, 

designated nonspouse beneficiary 

pursuant to the exemption’s conditions. 

As noted in the preamble to the 

proposed amendments, however, the 

Department interprets PTE 2006–06 as 

currently available to the QTA for its 

self-selection as an inherited individual 

retirement plan provider subject to the 

conditions of the exemption. 

B. Request for Comments 

The Department invites comments 

from interested persons on all aspects of 

the interim final rule. To facilitate the 

receipt and processing of comments, the 

Department encourages interested 

persons to submit their comments 

electronically by e-mail to eORI@dol.gov, or by using the Federal 

eRulemaking portal at 

www.regulations.gov (follow 

instructions for submission of 

comments). Persons submitting 

comments electronically are encouraged 

not to submit paper copies. Persons 

interested in submitting comments on 

paper should send or deliver their 

comments (at least three copies) to the 

Office of Regulations and 

Interpretations, Employee Benefits 

Security Administration, Room N–5669, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 20210, Attn: Amendments to 

Distribution Safe Harbor and 

Abandoned Plans Regulation for 

Missing Nonspouse Beneficiaries. All 

comments will be available to the 

public, without charge, at 

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

ebsa, and in the Public Disclosure 

Room, N–1513, Employee Benefits 

Security Administration, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC. 

C. Amendments Relating to the Safe 

Harbor for Distributions From 

Terminated Individual Account Plans 

1. Section 2550.404a–3(d)—Conditions 

Paragraph (d)(1)(ii) of this section 

requires that the distribution of benefits 

on behalf of a nonspouse beneficiary of 

a participant be made to ‘‘an account 

(other than an individual retirement 

plan)’’ because historically such 

distribution was not eligible for rollover 

into an individual retirement plan. This 

condition is being revised to require that 

the distribution of benefits on behalf of 

a designated nonspouse beneficiary be 

rolled over into an inherited individual 

retirement plan that complies with the 

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

Code, as permitted under the Pension 

Protection Act for distributions 

occurring after December 31, 2006. 

Paragraph (d)(1)(iii)(C) of this section 

permits as an alternative distribution 

option that certain small benefits on 

behalf of a nonspouse beneficiary of a 

participant be distributed to ‘‘an 

account (other than an individual 

retirement plan)’’ that a financial 

institution, other than the qualified 

termination administrator, provides to 

the public at the time of the 

distribution. This alternative option is 

similarly being revised to require the 

rollover of benefits on behalf of a 

designated nonspouse beneficiary to an 

inherited individual retirement plan. 

Paragraph (d)(2)(ii)(A) of this section 

is being revised to incorporate the 

appropriate cross references to 

individual retirement plan and 

inherited individual retirement plan 

and eliminate reference to ‘‘other 

account.’’

Paragraphs (d)(2)(iii), (d)(2)(iv) and 

(d)(3) of this section are being revised to 

incorporate the appropriate cross 

references to individual retirement plan 

and inherited individual retirement 

plan, and bank or savings association 

accounts for certain small amounts. 

2. Section 2550.404a–3(e)—Notice to 

Participants and Beneficiaries 

Paragraphs (e)(1)(iv), (e)(1)(v) and 

(e)(1)(vi) of this section are being 

revised to incorporate the appropriate 

cross references to individual retirement 

plan and inherited individual 

retirement plan and eliminate reference 

to ‘‘other account.’’

3. Section 2550.404a–3(f)—Model 

Notice 

The appendix to this section contains 

a Notice of Plan Termination for 

terminated individual account plans 

other than abandoned plans that 

currently includes an optional 

paragraph referring to distributions to 

nonspouse beneficiaries. This paragraph 

is being deleted because distributions to 

nonspouse beneficiaries will no longer 

be required to be made to accounts other 

than individual retirement plans. A 

parenthetical is being added to the 

fourth paragraph to clarify that 

individual retirement plans established 

on behalf of missing, designated 

nonspouse beneficiaries are inherited 

individual retirement plans. 

D. Amendments Relating to the 

Termination of Abandoned Individual 

Account Plans 

1. Section 2578.1(d)(2)(vi)—Notify 

Participants 

Paragraph (d)(2)(vi)(A)(5)(ii) of this 

section is being revised to incorporate 

the appropriate cross reference to 

conditions for rollovers on behalf of 

nonspouse beneficiaries in § 2550.404a–

3(d)(1)(ii). 

Paragraphs (d)(2)(vi)(A)(5)(iii) and 

(d)(2)(vi)(A)(6) of this section are being 

revised to incorporate the appropriate 

cross references to individual retirement 

plan and inherited individual 

retirement plan in § 2550.404a–3(d)(1)(i) 

and (d)(1)(ii) and eliminate reference to 

‘‘account.’’

Paragraphs (d)(2)(vi)(A)(7) and 

(d)(2)(vi)(A)(8) of this section are being 

revised to incorporate the appropriate 

cross references to individual retirement 

plan and inherited individual 

retirement plan in § 2550.404a–3(d)(1)(i) 

and (d)(1)(ii). 

2. Section 2578.1(i)—Model notices 

Appendix C to this section contains a 

Notice of Plan Termination for 

abandoned plans that currently includes 

an optional paragraph (‘‘Option 2’’) 

referring to distributions to nonspouse 


hsrobinson on PROD1PC76 with RULES2
7518 Federal Register / Vol. 72, No. 31 / Thursday, February 15, 2007 / Rules and Regulations 

9As described earlier, the Department is 

publishing, concurrently with publication of this 

rule, proposed amendments to PTE 2006–06, which 

will establish under the conditions of the 

exemption that a QTA may designate itself or an 

affiliate as the provider of an inherited individual 

retirement plan for a nonspouse beneficiary who 

has not returned a distribution election. In assessing 

the economic costs and benefits of this interim final 

rule, the Department has taken into account the 

proposed amendments to PTE 2006–06, which will 

make explicit the availability of the conditional 

relief to parties that follow the amended rules with 

respect to nonspouse distributions, a result that the 

Department believes will assist in the achievement 

of the purposes underlying the regulations. 

beneficiaries. This optional paragraph is 

being deleted because distributions to 

nonspouse beneficiaries will no longer 

be required to be made to accounts other 

than individual retirement plans. To 

conform to this change, the instructions 

for ‘‘Option 1’’ are being revised to 

delete reference to ‘‘participant’s 

spouse.’’ ‘‘Option 3’’ is renumbered as 

‘‘Option 2’’ and the instructions are 

revised to eliminate reference to ‘‘(or 

special account for non-spousal 

beneficiaries if you are a beneficiary 

other than the participant’s spouse)’’

and ‘‘(or special non-spousal account).’’

A parenthetical is being added to 

Option 1 and Option 2 to clarify that 

individual retirement plans established 

on behalf of missing, designated 

nonspouse beneficiaries are inherited 

individual retirement plans. ‘‘Option 4’’

is renumbered as ‘‘Option 3.’’

E. Good Cause Finding That Proposed 

Rulemaking Unnecessary 

Rulemaking under section 553 of the 

Administrative Procedure Act (APA) 

ordinarily involves publication of a 

notice of proposed rulemaking in the 

Federal Register and the public is given 

an opportunity to comment on the 

proposed rule. The APA authorizes 

agencies to dispense with proposed 

rulemaking procedures, however, if they 

find both good cause that such 

procedures are impracticable, 

unnecessary, or contrary to the public 

interest, and incorporate a statement of 

the finding with the underlying reasons 

in the interim final rule issued. 

In this case, the Department finds that 

it is unnecessary to undertake proposed 

rulemaking with regard to the 

amendments to the regulatory safe 

harbor for distributions from a 

terminated individual account plan, 

including an abandoned plan. The 

Department believes such rulemaking is 

unnecessary because it views these 

amendments to an existing regulatory 

scheme as technical, noncontroversial 

and merely adaptive of recent Code 

changes allowing distributions on behalf 

of missing nonspouse beneficiaries of 

deceased participants to be rolled over 

into tax-advantaged individual 

retirement plans. The Department 

therefore finds for good cause that 

notice and public procedure is 

unnecessary. It is publishing these 

amendments as an interim final rule and 

is including a request for comment. 

F. Regulatory Impact Analysis 

Summary 

By conforming regulations pertaining 

to distributions from certain terminated 

plans with recent changes to the Code, 

this interim final rule preserves for 

certain nonspouse beneficiaries of 

deceased participants the opportunity to 

take advantage of preferential tax 

treatment newly permitted by the 

Pension Protection Act for distributions 

after December 31, 2006. Nonspouse 

beneficiaries will benefit from the 

preservation, on their behalf, of taxfavored savings set aside for retirement. 

This interim final rule also will affect 

plan fiduciaries, including QTAs, by 

altering the procedures applicable to 

certain termination distributions. The 

Department anticipates that, rather than 

increasing costs, these amendments will 

reduce compliance costs modestly for 

plan fiduciaries and QTAs. Because the 

rule’s new distribution procedures for 

terminated plans apply only to the 

narrow group of nonspouse 

beneficiaries who have not returned a 

distribution election, the Department 

believes that the rule’s economic impact 

will be small, overall, but positive.9

Executive Order 12866 Statement 

Under Executive Order 12866, 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). Under section 3(f) of the 

Executive Order, a ‘‘significant 

regulatory action’’ is an action that is 

likely to result in a rule: (1) Having an 

annual effect on the economy of $100 

million or more, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. The Department has determined 

that this regulatory action is not 

economically significant within the 

meaning of section 3(f)(1) of the 

Executive Order. However, the Office of 

Management and Budget (OMB) has 

determined that the action is significant 

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

the Executive Order, and the 

Department, accordingly, provides the 

following assessment of its potential 

costs and benefits. 

Costs 

Plan fiduciaries and QTAs generally 

are not expected to change their use of 

service providers in connection with the 

termination and winding-up of plans as 

a result of the amendments made by this 

interim final rule. In addition, costs 

related to selecting institutions and 

establishing appropriate accounts and 

investments for benefits directly 

transferred to an inherited individual 

retirement plan are expected to be the 

same as costs related to establishing 

other types of accounts on behalf of 

nonspouse beneficiaries. The safeguards 

included in the safe harbor regulation to 

preserve assets, such as requiring that 

fees and expenses do not exceed certain 

limits, apply to both individual 

retirement plans and other accounts. 

Fiduciaries and QTAs that currently 

select separate institutions for making 

tax-deferred and taxable distributions 

may have modest administrative cost 

savings as a result of this rule because 

they will be able to distribute 

nonspouse benefits to inherited 

individual retirement plans with the 

same institutions to which other taxdeferred distributions are made. 

Plan fiduciaries and QTAs also will 

have reduced administrative costs as a 

result of not having to comply with 

otherwise applicable mandatory tax 

withholding requirements under the 

Code. The distribution of benefits to an 

account other than an individual 

retirement plan is considered a lump 

sum distribution under the Code, 

requiring a plan administrator to 

withhold a percentage of the taxable 

amount and send the withheld amount 

to the Internal Revenue Service as 

income tax withholding. This 

requirement to withhold does not apply 

to distributions made to inherited 

individual retirement plans. As the safe 

harbor regulation requires the rollover 

of distributions, except for certain small 

benefits, the administrative costs 

associated with mandatory tax 

withholding will be reduced. 


hsrobinson on PROD1PC76 with RULES2
Federal Register / Vol. 72, No. 31 / Thursday, February 15, 2007 / Rules and Regulations 7519 

Benefits 

When the Department published the 

safe harbor regulation for distributions 

from terminated individual account 

plans in April 2006, it was designed, in 

part, to prevent participants and 

beneficiaries of terminated plans, 

insofar as then possible under the Code, 

from losing the favorable tax treatment 

otherwise accorded distributions from 

qualified plans. As a result, the safe 

harbor regulation generally mandated 

that benefits on behalf of a participant 

or spouse be distributed to an 

individual retirement plan. Tax laws 

then in effect prevented the Department 

from extending this favorable tax 

treatment to nonspouse beneficiaries. 

This interim final rule, which takes into 

account the Pension Protection Act 

change enabling a nonspouse 

beneficiary to be treated as inheriting an 

individual retirement plan, will benefit 

nonspouse beneficiaries by enabling 

them to have continued tax-deferral of 

retirement savings, similar to that 

available to participants and spouses. 

As described earlier in the preamble, 

nonspouse beneficiaries will benefit 

from continued deferral of income taxes 

and distributions that are not subject to 

mandatory tax withholding. Under the 

new tax rules, distributions from an 

inherited individual retirement plan 

will have to be made under the Code’s 

minimum distribution rules. While 

these distribution rules are generally 

more restrictive than what is allowed for 

participants and spouses, the 

Department believes that the additional 

period of tax deferral permitted under 

the new tax rules will be a significant 

benefit to nonspouse beneficiaries. 

Because benefits will continue to be 

held in tax-advantaged retirement 

vehicles, the interim final rule also 

serves to preserve retirement savings. At 

the same time, nonspouse beneficiaries 

retain the benefit of being able to make 

a distribution election and to elect a 

lump sum distribution if they choose. 

Based on the foregoing assessment, 

the Department concludes that 

promulgation of this interim final rule 

will provide substantial benefits 

without imposing additional costs. 

Paperwork Reduction Act 

The information collections included 

in this interim final rule, together with 

information collections included in PTE 

2006–06, are currently approved by the 

Office of Management and Budget 

(OMB) under OMB control number 

1210–0127. This approval is currently 

scheduled to expire on April 30, 2008. 

The interim final rule makes minor 

changes to the content requirements of 

the participant and beneficiary 

termination notices, as described earlier 

in the preamble. These conforming 

changes, which involve the deletion or 

substitution of a small number of words 

in each notice, do not increase the 

burden of the information collections 

and do not constitute a substantive or 

material modification of the existing 

information collection request approved 

under OMB control number 1210–0127. 

Accordingly, the Department has not 

made a submission for OMB approval of 

a revision in the burden estimates in 

connection with this interim final rule 

or the proposed amendments to PTE 

2006–06, published simultaneously 

with this interim final rule. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

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

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

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

are likely to have a significant economic 

impact on a substantial number of small 

entities. Because these amendments are 

being published as an interim final rule, 

without prior notice and comment, the 

Regulatory Flexibility Act does not 

apply. Furthermore, because the interim 

final rule imposes no additional costs 

on employers or plans, the Department 

believes that it would not have a 

significant impact on a substantial 

number of small entities. Accordingly, 

the Department believes that no 

regulatory flexibility analysis would be 

required in any case under the RFA. 

Congressional Review Act Statement 

The interim final rule being issued 

here is subject to the provisions of the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

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

transmitted to Congress and the 

Comptroller General for review. The 

interim final rule is not a ‘‘major rule’’

as that term is defined in 5 U.S.C. 804, 

because it does not result in (1) An 

annual effect on the economy of $100 

million or more; (2) a major increase in 

costs or prices for consumers, 

individual industries, or Federal, State, 

or local government agencies, or 

geographic regions; or (3) significant 

adverse effects on competition, 

employment, investment, productivity, 

innovation, or on the ability of United 

States-based enterprises to compete 

with foreign-based enterprises in 

domestic and export markets. 

Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), the interim final rule does not 

include any Federal mandate that may 

result in expenditures by State, local, or 

tribal governments, or impose an annual 

burden exceeding $100 million on the 

private sector. 

Federalism Statement 

Executive Order 13132 (August 4, 

1999) outlines fundamental principles 

of federalism and requires Federal 

agencies to adhere to specific criteria in 

the process of their formulation and 

implementation of policies that have 

substantial direct effects on the States, 

the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. This interim final 

rule does not have federalism 

implications because it has no 

substantial direct effect on the States, on 

the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Section 514 of 

ERISA provides, with certain exceptions 

specifically enumerated, that the 

provisions of Titles I and IV of ERISA 

supersede any and all laws of the States 

as they relate to any employee benefit 

plan covered under ERISA. The 

requirements implemented in the 

interim rule do not alter the 

fundamental provisions of the statute 

with respect to employee benefit plans, 

and as such would have no implications 

for the States or the relationship or 

distribution of power between the 

national government and the States. 

List of Subjects 

29 CFR Part 2550 

Employee benefit plans, Employee 

Retirement Income Security Act, 

Employee stock ownership plans, 

Exemptions, Fiduciaries, Investments, 

Investments foreign, Party in interest, 

Pensions, Pension and Welfare Benefit 

Programs Office, Prohibited 

transactions, Real estate, Securities, 

Surety bonds, Trusts and Trustees. 

29 CFR Part 2578 

Employee benefit plans, Pensions, 

Retirement. 

■ For the reasons set forth in the 

preamble, the Department of Labor 

amends 29 CFR chapter XXV as follows: 


hsrobinson on PROD1PC76 with RULES2
7520 Federal Register / Vol. 72, No. 31 / Thursday, February 15, 2007 / Rules and Regulations 

Title 29—Labor 

Subchapter F—Fiduciary 

Responsibility Under the Employee 

Retirement Income Security Act of 1974 

PART 2550—RULES AND 

REGULATIONS FOR FIDUCIARY 

RESPONSIBILITY 

■ 1. The authority citation for part 2550 

continues to read as follows: 

Authority: 29 U.S.C. 1135; and Secretary of 

Labor’s Order No. 1–2003, 68 FR 5374 (Feb. 

3, 2003). Sec. 2550.401b–1 also issued under 

sec. 102, Reorganization Plan No. 4 of 1978, 

43 FR 47713 (Oct. 17, 1978), 3 CFR, 1978 

Comp. 332, effective Dec. 31, 1978, 44 FR 

1065 (Jan. 3, 1978), 3 CFR, 1978 Comp. 332. 

Sec. 2550.401c–1 also issued under 29 U.S.C. 

1101. Sec. 2550.404c–1 also issued under 29 

U.S.C. 1104. Sec. 2550.407c–3 also issued 

under 29 U.S.C. 1107. Sec. 2550.404a–2 also 

issued under 26 U.S.C. 401 note (sec. 657, 

Pub. L. 107–16, 115 Stat. 38). Sec. 

2550.408b–1 also issued under 29 U.S.C. 

1108(b)(1) and sec. 102, Reorganization Plan 

No. 4 of 1978, 3 CFR, 1978 Comp. p. 332, 

effective Dec. 31, 1978, 44 FR 1065 (Jan. 3, 

1978), and 3 CFR, 1978 Comp. 332, Sec. 

2550.412–1 also issued under 29 U.S.C. 1112. 

■ 2. Amend § 2550.404a–3 by revising 

(d)(1)(ii), (d)(1)(iii)(C), (d)(2)(ii)(A), 

(d)(2)(iii), (d)(2)(iv), (d)(3), (e)(1)(iv), 

(e)(1)(v), (e)(1)(vi) and the appendix to 

read as follows: 

§ 2550.404a–3 Safe Harbor for 

Distributions from Terminated Individual 

Account Plans. 

* * * * * 

(d) * * * 

(1) * * * 

(ii) In the case of a distribution on 

behalf of a designated beneficiary (as 

defined by section 401(a)(9)(E) of the 

Code) who is not the surviving spouse 

of the deceased participant, to an 

inherited individual retirement plan 

(within the meaning of section 

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

receive the distribution on behalf of the 

nonspouse beneficiary; or 

(iii) * * * 

* * * * * 

(C) An individual retirement plan 

(described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section) offered by a 

financial institution other than the 

qualified termination administrator to 

the public at the time of the 

distribution. 

(2) * * * 

(ii) * * * 

(A) Seek to maintain, over the term of 

the investment, the dollar value that is 

equal to the amount invested in the 

product by the individual retirement 

plan (described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section), and 

* * * * * 

(iii) All fees and expenses attendant to 

the transferee plan (described in 

paragraph (d)(1)(i) or (d)(1)(ii) of this 

section) or account (described in 

paragraph (d)(1)(iii)(A) of this section), 

including investments of such plan, 

(e.g., establishment charges, 

maintenance fees, investment expenses, 

termination costs and surrender 

charges), shall not exceed the fees and 

expenses charged by the provider of the 

plan or account for comparable plans or 

accounts established for reasons other 

than the receipt of a distribution under 

this section; and 

(iv) The participant or beneficiary on 

whose behalf the fiduciary makes a 

distribution shall have the right to 

enforce the terms of the contractual 

agreement establishing the plan 

(described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section) or account 

(described in paragraph (d)(1)(iii)(A) of 

this section), with regard to his or her 

transferred account balance, against the 

plan or account provider. 

(3) Both the fiduciary’s selection of a 

transferee plan (described in paragraph 

(d)(1)(i) or (d)(1)(ii) of this section) or 

account (described in paragraph 

(d)(1)(iii)(A) of this section) and the 

investment of funds would not result in 

a prohibited transaction under section 

406 of the Act, unless such actions are 

exempted from the prohibited 

transaction provisions by a prohibited 

transaction exemption issued pursuant 

to section 408(a) of the Act. 

(e) * * * 

(1) * * * 

(iv) A statement explaining that, if a 

participant or beneficiary fails to make 

an election within 30 days from receipt 

of the notice, the plan will distribute the 

account balance of the participant or 

beneficiary to an individual retirement 

plan (i.e., individual retirement account 

or annuity described in paragraph 

(d)(1)(i) or (d)(1)(ii) of this section) and 

the account balance will be invested in 

an investment product designed to 

preserve principal and provide a 

reasonable rate of return and liquidity; 

(v) A statement explaining what fees, 

if any, will be paid from the participant 

or beneficiary’s individual retirement 

plan (described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section), if such 

information is known at the time of the 

furnishing of this notice; 

(vi) The name, address and phone 

number of the individual retirement 

plan (described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section) provider, if 

such information is known at the time 

of the furnishing of this notice; and 

* * * * * 

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7522 Federal Register / Vol. 72, No. 31 / Thursday, February 15, 2007 / Rules and Regulations 

Subchapter G—Administration and 

Enforcement Under the Employee 

Retirement Income Security Act of 1974 

PART 2578—RULES AND 

REGULATIONS FOR ABANDONED 

PLANS 

■ 3. The authority citation for part 

2578.1 continues to read as follows: 

Authority: 29 U.S.C. 1135; 1104(a); 

1103(d)(1). 

■ 4. Amend § 2578.1 by revising 

(d)(2)(vi)(A)(5)(ii), (d)(2)(vi)(A)(5)(iii), 

(d)(2)(vi)(A)(6), (d)(2)(vi)(A)(7), 

(d)(2)(vi)(A)(8) and Appendix C to read 

as follows: 

§ 2578.1 Termination of Abandoned 

Individual Account Plans 

* * * * * 

(d) * * * 

(2) * * * 

(vi) * * * 

(A) * * * 

(5) * * * 

(ii) To an inherited individual 

retirement plan described in 

§ 2550.404a–3(d)(1)(ii) of this chapter 

(in the case of a distribution on behalf 

of a distributee other than a participant 

or spouse), 

(iii) In any case where the amount to 

be distributed meets the conditions in 

§ 2550.404a–3(d)(1)(iii), to an interestbearing federally insured bank account, 

the unclaimed property fund of the 

State of the last known address of the 

participant or beneficiary, or an 

individual retirement plan (described in 

§ 2550.404a–3(d)(1)(i) or (d)(1)(ii) of this 

chapter) or 

* * * * * 

(6) In the case of a distribution to an 

individual retirement plan (described in 

§ 2550.404a–3(d)(1)(i) or (d)(1)(ii) of this 

chapter) a statement explaining that the 

account balance will be invested in an 

investment product designed to 

preserve principal and provide a 

reasonable rate of return and liquidity; 

(7) A statement of the fees, if any, that 

will be paid from the participant or 

beneficiary’s individual retirement plan 

(described in § 2550.404a–3(d)(1)(i) or 

(d)(1)(ii) of this chapter) or other 

account (described in § 2550.404a–

3(d)(1)(iii)(A) of this chapter), if such 

information is known at the time of the 

furnishing of this notice; 

(8) The name, address and phone 

number of the provider of the individual 

retirement plan (described in 

§ 2550.404a7–3(d)(1)(i) or (d)(1)(ii) of 

this chapter), qualified survivor annuity, 

or other account (described in 

§ 2550.404a–3(d)(1)(iii)(A) of this 

chapter), if such information is known 

at the time of the furnishing of this 

notice; and 

* * * * * 


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7524 Federal Register / Vol. 72, No. 31 / Thursday, February 15, 2007 / Rules and Regulations 

Signed at Washington, DC, this 5th day of 

February, 2007. 

Bradford P. Campbell, 

Acting Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. 07–597 Filed 2–14–07; 8:45 am] 

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