Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58447 

enterprises to compete with foreignbased 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 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 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 fundamental 

provisions of the statute with respect to 

employee benefit plans, and as such 

would have no implications for the 

States or the relationship or distribution 

of power between the national 

government and the States. 

List of Subjects in 29 CFR Part 2509 

Employee benefit plans, Pensions. 

■ For the reasons set forth in the 

preamble, the Department amends 

Chapter XXV of Title 29 of the Code of 

Federal Regulations as follows: 

PART 2509—INTERPRETIVE 

BULLETINS RELATING TO THE 

EMPLOYEE RETIREMENT INCOME 

SECURITY ACT OF 1974 

■ 1. The authority citation for part 2509 

is revised to read as follows: 

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

Labor’s Order 1–2003, 68 FR 5374 (Feb. 3, 

2003). Sections 2509.75–10 and 2509.75–2 

issued under 29 U.S.C. 1052, 1053, 1054. Sec. 

2509.75–5 also issued under 29 U.S.C. 1002. 

Sec. 2509.95–1 also issued under sec. 625, 

Pub. L. 109–280, 120 Stat. 780. 

■ 2. Section 2509.95–1 is amended by 

revising the section heading and 

paragraph (a) to read as follows: 

§ 2509.95–1 Interpretive bulletin relating to 

the fiduciary standards under ERISA when 

selecting an annuity provider for a defined 

benefit pension plan. 

(a) Scope. This Interpretive Bulletin 

provides guidance concerning certain 

fiduciary standards under part 4 of title 

I of the Employee Retirement Income 

Security Act of 1974 (ERISA), 29 U.S.C. 

1104–1114, applicable to the selection 

of an annuity provider for the purpose 

of benefit distributions from a defined 

benefit pension plan (hereafter ‘‘pension 

plan’’) when the pension plan intends to 

transfer liability for benefits to an 

annuity provider. For guidance 

applicable to the selection of an annuity 

provider for benefit distributions from 

an individual account plan see 29 CFR 

2550.404a–4. 

* * * * * 

Signed at Washington, DC, this 29th day of 

September, 2008. 

Bradford P. Campbell, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. E8–23433 Filed 10–6–08; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2550 

RIN 1210–AB19 

Selection of Annuity Providers—Safe 

Harbor for Individual Account Plans 

AGENCY: Employee Benefits Security 

Administration, Department of Labor. 

ACTION: Final rule. 

SUMMARY: This document contains a 

final regulation that establishes a safe 

harbor for the selection of annuity 

providers for the purpose of benefit 

distributions from individual account 

plans covered by title I of the Employee 

Retirement Income Security Act 

(ERISA). This regulation will affect plan 

sponsors and fiduciaries of individual 

account plans and the participants and 

beneficiaries covered by such plans. 

Also appearing in today’s Federal 

Register is a final rule amending 

Interpretive Bulletin 95–1 to limit the 

application of the Bulletin to the 

selection of annuity providers for 

defined benefit plans. 

DATES: This final rule is effective on 

December 8, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Janet A. Walters or Allison E. Wielobob, 

Office of Regulations and 

Interpretations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, Washington, DC 

20210, (202) 693–8510. This is not a 

toll-free number. 

SUPPLEMENTARY INFORMATION: 

A. Background 

On September 12, 2007, the 

Department published an interim final 

regulation (72 FR 52004) limiting the 

scope of Interpretive Bulletin 95–1, 

relating to the selection of annuity 

providers, to defined benefit plans, as 

directed by section 625 of the Pension 

Protection Act of 2006 (the PPA) (Pub. 

L. 109–280, 120 Stat. 780). On the same 

date, the Department published a 

proposed rule (72 FR 52021) that would 

establish a safe harbor for the selection 

of annuity providers for individual 

account plans. The Department received 

10 comment letters in response to its 

request for comments. Set forth below is 

an overview of the final rule and the 

public comments submitted on the 

proposed rule. A final rule amending 

Interpretive Bulletin 95–1 also appears 

in today’s Federal Register. 

B. Overview of Final Rule and 

Comments 

As discussed below, the substance of 

the final rule is very similar to the 

Department’s proposed rule. The 

Department, however, has made 

changes to the proposed rule that clarify 

and simplify the safe harbor conditions, 

consistent with the suggestions of the 

commenters. 

Scope of the Final Rule 

Although restructured to simplify and 

clarify the rule, paragraph (a)(1) of 

§ 2550.404a–4 of the final rule, like the 

proposed rule, describes the scope of 

the regulation. As described in 

paragraph (a)(1) of the final rule, the 

regulation establishes a safe harbor for 

satisfying the fiduciary duties under 

section 404(a)(1)(B) of ERISA in 

selecting an annuity provider and 

contract for benefit distributions from 

an individual account plan. Paragraph 

(a)(1) also includes a reference to 

§ 2509.95–1 for guidance concerning the 

selection of annuity providers for 

defined benefit plans. 

Several commenters expressed 

concerns about a safe harbor structure. 

Some suggested that a safe harbor is 

inconsistent with the prudent person 

standard and that the prudent person 

standard alone would more effectively 

reduce impediments to annuities as a 


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58448 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 

distribution option under an individual 

account plan. 

Other commenters asserted that the 

regulation should explicitly state that 

the generally applicable fiduciary 

standards apply outside the safe harbor 

and that a fiduciary can discharge its 

fiduciary duties in ways other than 

those prescribed by the regulation. In 

this regard, some commenters expressed 

concerns that fiduciaries may believe 

that they must meet the safe harbor 

conditions in order to satisfy their 

fiduciary duties if the regulation is not 

clearly identified as a safe harbor. 

Others argued that the safe harbor has 

the effect of establishing a heightened 

standard of review for the selection and 

monitoring of annuities that is unduly 

stringent and has limited relevance to 

many annuity investment and 

distribution options. 

After careful consideration of these 

comments, the Department continues to 

believe that the safe harbor criteria will 

be useful to many plan fiduciaries when 

selecting annuity providers and 

contracts. The Department agrees, 

however, that a clearer statement 

concerning the nature of the safe harbor 

would be beneficial. Accordingly, the 

Department has modified paragraph (a) 

of the safe harbor to add new 

subparagraph (a)(2), clarifying that the 

regulation does not establish minimum 

requirements or the exclusive means for 

satisfying the responsibilities under 

section 404(a)(1)(B) of ERISA with 

respect to the selection of an annuity 

provider or contract for benefit 

distributions. Further, in an effort to 

minimize confusion concerning the 

scope of the safe harbor, as well as to 

simplify the regulation generally, the 

Department has eliminated paragraph 

(b) of the proposal, which discussed the 

general fiduciary standards of section 

404(a)(1). 

Safe Harbor 

Paragraph (b) of § 2550.404a–4 of the 

final rule sets forth the conditions of the 

safe harbor. While the conditions for 

relief under the final safe harbor 

regulation are essentially the same as 

those contained in the proposal, some 

changes have been made to the ordering 

and language of the conditions for 

purposes of clarifying and simplifying 

the overall regulation. 

As with the proposal, the first 

condition for safe harbor relief is that 

the plan fiduciary engage in an 

objective, thorough and analytical 

search for the purpose of identifying 

and selecting providers from which to 

purchase annuities. See paragraph (b)(1) 

of § 2550.404a–4 of the final rule. 

Consistent with other guidance from the 

Department, this process must avoid self 

dealing, conflicts of interest or other 

improper influence, and should, to the 

extent feasible, involve consideration of 

competing annuity providers. 

Paragraph (b)(2) of the final rule, 

consistent with the proposal, requires 

that the fiduciary appropriately consider 

information sufficient to assess the 

ability of the annuity provider to make 

all future payments under the annuity 

contract. 

Paragraph (b)(3), requires that the 

fiduciary appropriately consider the 

cost of the annuity contract, including 

fees and commissions, in relation to the 

benefits and administrative services to 

be provided under the contract. This 

paragraph is also consistent with the 

proposal, except that a reference to ‘‘fees 

and commissions’’ has been added to 

emphasize their importance to the 

fiduciary’s decision making process. 

Paragraph (b)(4), also like the 

proposal, requires that the fiduciary 

appropriately conclude that, at the time 

of the selection, the annuity provider is 

financially able to make all future 

payments under the annuity contract 

and the cost of the annuity contract is 

reasonable in relation to the benefits 

and services to be provided under the 

contract. 

Paragraph (b)(5) provides that, if 

necessary, the fiduciary should consult 

with an appropriate expert or experts for 

purposes of complying with the 

requirements of the safe harbor as set 

forth in paragraph (b). The proposal 

included as a condition that a fiduciary 

appropriately determine either that he 

or she had, at the time of the selection, 

the appropriate expertise to evaluation 

the selection of an annuity provider or 

that the advice of a qualified, 

independent expert was necessary. A 

number of commenters expressed 

concern that this requirement, as 

framed, would require all employers to 

engage independent experts to conduct 

an analysis of the provider and contract, 

even those that believed they had the 

requisite knowledge to make a prudent 

decision. Commenters believed this 

would be a particularly onerous 

requirement for small employers. As 

modified, the regulation makes clear 

that engaging an independent expert is 

not required in all cases. Rather, 

whether and to what extent, if at all, an 

expert may be needed is a determination 

to be made by the plan fiduciary taking 

into account what, if any, assistance the 

fiduciary needs to satisfy the conditions 

in paragraphs (b)(1)–(4) of the 

regulation. 

Paragraph (c)(2) of the proposed 

regulation provided additional guidance 

concerning what information a fiduciary 

should consider in meeting the 

requirements for the safe harbor. A 

number of commenters argued that the 

provisions of paragraph (c)(2) were 

duplicative, confusing and unnecessary. 

The Department agrees that the 

paragraph, as part of the safe harbor, is 

not necessary and, in some instances, 

may be confusing. Accordingly, the final 

safe harbor does not include the listing 

of supplemental considerations set forth 

in paragraph (c)(2) of the proposal. 

The Department believes that the 

general safe harbor conditions in the 

final regulation will be more useful for 

fiduciaries. Further, although an 

annuity provider’s ratings by insurance 

ratings services are not part of the final 

safe harbor, in many instances, 

fiduciaries may want to consider them, 

particularly if the ratings raise questions 

regarding the provider’s ability to make 

future payments under the annuity 

contract. The Department also believes 

that some information regarding 

additional protections that might be 

available through a state guaranty 

association for an annuity provider also 

would be useful information to a plan 

fiduciary, even if limited to that 

information which is generally available 

to the public and easily accessible 

through such associations, state 

insurance departments, or elsewhere. 

Time of Selection 

Commenters expressed concern that 

plan fiduciaries would have to comply 

with the conditions of the proposed safe 

harbor merely because they offered 

investment options through an annuity 

contract, without regard to whether a 

participant or plan fiduciary actually 

exercised the annuity feature of the 

contract. If so, commenters argued, 

investment products offered by insurers 

would be subject to what they perceived 

as a different, if not higher, fiduciary 

standard than that applied to the 

selection of other investment products. 

The Department does not intend, by 

virtue of the safe harbor, to establish 

different fiduciary standards for the 

selection of investment products. 

Rather, the safe harbor conditions apply 

solely to a fiduciary’s decision to 

purchase a distribution annuity for an 

individual account plan. To clarify this 

point, the final regulation includes a 

new paragraph (c) that affords plan 

fiduciaries flexibility concerning when 

they must meet the safe harbor 

conditions in order to take advantage of 

the safe harbor. Paragraph (c)(1) of the 

final regulation provides that, under the 

safe harbor, the time of selection may be 

the time that the fiduciary selects the 

annuity provider and contract for 

distribution of benefits to a specific 


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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58449 

participant or beneficiary. Paragraph 

(c)(2) provides, in the alternative, that 

the fiduciary may meet the safe harbor 

conditions when the fiduciary selects an 

annuity provider to provide annuity 

contracts at future dates to participants 

or beneficiaries, provided that the 

selecting fiduciary periodically reviews 

the continuing appropriateness of the 

conclusion that the annuity provider is 

financially able to make all future 

payments under the annuity contract 

and the cost of the annuity contract is 

reasonable in relation to the benefits 

and services to be provided under the 

contract, taking into account the factors 

described in paragraphs (b)(2), (3) and 

(5) of § 2550.404a–4 of the final rule. For 

purposes of paragraph (c)(2), a fiduciary 

is not required to review the 

appropriateness of this conclusion with 

respect to any annuity contract 

purchased for any specific participant or 

beneficiary. 

C. Effective Date 

This final regulation will be effective 

60 days after the date of its publication 

in the Federal Register. 

D. Regulatory Impact Analysis 

Executive Order 12866 Statement 

Under Executive Order 12866 (58 FR 

51735), the Department must determine 

whether a regulatory action is 

‘‘significant’’ and therefore subject to 

review by the Office of Management and 

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

Executive Order defines a ‘‘significant 

regulatory action’’ as an action that is 

likely to result in a rule (1) having an 

annual effect on the economy of $100 

million or more, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. Pursuant to the terms of the 

Executive Order, it has been determined 

that this action is not ‘‘significant’’ 

within the meaning of section 3(f) of the 

Executive Order, and, therefore, is not 

subject to review by OMB. 

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 

that are likely to have a significant 

economic impact on a substantial 

number of small entities. Section 604 of 

the RFA requires that the agency present 

a final regulatory flexibility analysis of 

the publication of the notice of final 

rulemaking describing the impact of the 

rule on small entities. The Department 

has considered the likely impact of the 

final rule on small entities in 

connection with its assessment under 

Executive Order 12866, described 

above, and believes this rule will not 

have a significant impact on a 

substantial number of small entities. 

Paperwork Reduction Act 

This rulemaking is not subject to the 

requirements of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 301 et 

seq.), because it does not contain 

‘‘collection of information’’ 

requirements as defined in 44 U.S.C. 

3502(3). Accordingly, the final rule is 

not being submitted to the OMB for 

review under the Paperwork Reduction 

Act. 

Congressional Review Act 

This notice of final rulemaking is 

subject to the Congressional Review Act 

provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.) and therefore 

has been transmitted to the Congress 

and the Comptroller General for review. 

Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), the final rule does not include 

any Federal mandate that may result in 

expenditures by State, local, or tribal 

governments, or impose an annual 

burden exceeding $100 million 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 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 final 

rule do not alter the fundamental 

provisions of the statute with respect to 

employee benefit plans, and as such 

would have no implications for the 

States or the relationship or distribution 

of power between the national 

government and the States. 

List of Subjects in 29 CFR Part 2550 

Annuities, Employee benefit plans, 

Fiduciaries, Pensions. 

■ For the reasons set forth in the 

preamble, the Department amends 

Chapter XXV of Title 29 of the Code of 

Federal Regulations as follows: 

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 

is revised 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. 2550.401c–1 also issued under 

29 U.S.C. 1101. Sec. 2550.404a–1 also issued 

under sec. 657, Pub. L. 107–16, 115 Stat. 38. 

Sections 2550.404c–1 and 2550.404c–5 also 

issued under 29 U.S.C. 1104. Sec. 2550.408b– 

1 also issued under 29 U.S.C. 1108(b)(1) and 

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

5 U.S.C. App. 1. Sec. 2550.408b–19 also 

issued under sec. 611, Pub. L. 109–280, 120 

Stat. 780, 972, and sec. 102, Reorganization 

Plan No. 4 of 1978, 5 U.S.C. App. 1. Sec. 

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

■ 2. Add § 2550.404a–4 to read as 

follows: 

§ 2550.404a–4 Selection of annuity 

providers—safe harbor for individual 

account plans. 

(a) Scope. (1) This section establishes 

a safe harbor for satisfying the fiduciary 

duties under section 404(a)(1)(B) of the 

Employee Retirement Income Security 

Act of 1974 (ERISA), 29 U.S.C. 1104– 

1114, in selecting an annuity provider 

and contract for benefit distributions 

from an individual account plan. For 

guidance concerning the selection of an 


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58450 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 

1Section 611(g)(2) of the PPA added a parallel 

provision under the Internal Revenue Code of 1986 

(Code), section 4975(d)(22), which provides relief 

from the prohibitions described in section 4975(c) 

of the Code in connection with the cross-trading of 

securities. Under Reorganization Plan No. 4 of 1978, 

effective December 31, 1978 (5 U.S.C. App. 214 

(2000)), the authority of the Secretary of the 

Treasury to issue interpretations regarding section 

4975 of the Code has been transferred, with certain 

exceptions not here relevant, to the Secretary of 

Labor, and the Secretary of the Treasury is bound 

by the interpretations of the Secretary of Labor 

pursuant to such authority. 

annuity provider for defined benefit 

plans see 29 CFR 2509.95–1. 

(2) This section sets forth an optional 

means for satisfying the fiduciary 

responsibilities under section 

404(a)(1)(B) of ERISA with respect to the 

selection of an annuity provider or 

contract for benefit distributions. This 

section does not establish minimum 

requirements or the exclusive means for 

satisfying these responsibilities. 

(b) Safe harbor. The selection of an 

annuity provider for benefit 

distributions from an individual 

account plan satisfies the requirements 

of section 404(a)(1)(B) of ERISA if the 

fiduciary: 

(1) Engages in an objective, thorough 

and analytical search for the purpose of 

identifying and selecting providers from 

which to purchase annuities; 

(2) Appropriately considers 

information sufficient to assess the 

ability of the annuity provider to make 

all future payments under the annuity 

contract; 

(3) Appropriately considers the cost 

(including fees and commissions) of the 

annuity contract in relation to the 

benefits and administrative services to 

be provided under such contract; 

(4) Appropriately concludes that, at 

the time of the selection, the annuity 

provider is financially able to make all 

future payments under the annuity 

contract and the cost of the annuity 

contract is reasonable in relation to the 

benefits and services to be provided 

under the contract; and 

(5) If necessary, consults with an 

appropriate expert or experts for 

purposes of compliance with the 

provisions of this paragraph (b). 

(c) Time of selection. For purposes of 

paragraph (b) of this section, the ‘‘time 

of selection’’ may be either: 

(1) The time that the annuity provider 

and contract are selected for distribution 

of benefits to a specific participant or 

beneficiary; or 

(2) The time that the annuity provider 

is selected to provide annuity contracts 

at future dates to participants or 

beneficiaries, provided that the selecting 

fiduciary periodically reviews the 

continuing appropriateness of the 

conclusion described in paragraph (b)(4) 

of this section, taking into account the 

factors described in paragraphs (b)(2), 

(3) and (5) of this section. For purposes 

of this paragraph (c)(2), a fiduciary is 

not required to review the 

appropriateness of this conclusion with 

respect to any annuity contract 

purchased for any specific participant or 

beneficiary. 

Signed at Washington, DC, this 29th day of 

September, 2008. 

Bradford P. Campbell, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. E8–23427 Filed 10–6–08; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2550 

RIN 1210–AB17 

Statutory Exemption for Cross-Trading 

of Securities 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Final rule. 

SUMMARY: This document contains a 

final rule that implements the content 

requirements for the written crosstrading policies and procedures 

required under section 408(b)(19)(H) of 

the Employee Retirement Income 

Security Act of 1974 (ERISA or the Act). 

Section 611(g) of the Pension Protection 

Act of 2006, Public Law No. 109–280, 

120 Stat. 780, 972, amended section 

408(b) of ERISA by adding a new 

subsection (19) that exempts the 

purchase and sale of a security between 

a plan and any other account managed 

by the same investment manager if 

certain conditions are satisfied. Among 

other requirements, section 

408(b)(19)(H) stipulates that the 

investment manager must adopt, and 

effect cross-trades in accordance with, 

written cross-trading policies and 

procedures that are fair and equitable to 

all accounts participating in the crosstrading program. This final rule affects 

employee benefit plans, investment 

managers, plan fiduciaries and plan 

participants and beneficiaries. 

DATES: Effective Date: This final rule is 

effective February 4, 2009. 

FOR FURTHER INFORMATION CONTACT: G. 

Christopher Cosby or Brian Buyniski, 

Office of Exemption Determinations, 

Employee Benefits Security 

Administration, Room N–5700, U.S. 

Department of Labor, Washington, DC 

20210, telephone (202) 693–8540. This 

is not a toll-free number. 

SUPPLEMENTARY INFORMATION: 

A. Background 

Section 611(g)(1) of the Pension 

Protection Act of 2006, Public Law No. 

109–280, 120 Stat. 780, 972 (PPA), 

which was enacted on August 17, 2006, 

amended ERISA by adding a new 

section 408(b)(19), which exempts from 

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

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

transactions involving the purchase and 

sale of a security between a plan and 

any other account managed by the same 

investment manager, provided that 

certain conditions are satisfied.1 Among 

other requirements, an investment 

manager must adopt, and cross-trades 

must be effected in accordance with, 

written cross-trading policies and 

procedures that are fair and equitable to 

all accounts participating in the crosstrading program. The policies and 

procedures must include descriptions of 

(i) the investment manager’s policies 

and procedures relating to pricing, and 

(ii) the investment manager’s policies 

and procedures for allocating crosstrades in an objective manner among 

accounts participating in the crosstrading program. 

The investment manager also must 

designate an individual (a compliance 

officer) who is responsible for 

periodically reviewing purchases and 

sales of securities made pursuant to the 

exemption to ensure compliance with 

the foregoing policies and procedures. 

Following such review, the compliance 

officer must provide, on an annual 

basis, a written report describing the 

steps performed during the course of the 

review, the level of compliance with the 

foregoing policies and procedures, and 

any specific instances of 

noncompliance. The report must be 

provided to the plan fiduciary who 

authorized the cross-trading no later 

than 90 days following the period to 

which it relates. Additionally, the 

written report must notify the plan 

fiduciary of the plan’s right to terminate 

participation in the investment 

manager’s cross-trading program at any 

time and must be signed by the 

compliance officer under penalty of 

perjury. 

Section 611(g)(3) of the PPA provides 

that the Secretary of Labor, after 

consultation with the Securities and 

Exchange Commission (SEC), shall, no 

later than 180 days after the date of the 

enactment of the PPA, issue regulations 


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