Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58459 

disclosure regarding the conditions 

under which the cross-trades may take 

place, including the written policies and 

procedures described in section 

408(b)(19)(H) of the Act. This disclosure 

must be in a document that is separate 

from any other agreement or disclosure 

involving the asset management 

relationship. For purposes of section 

408(b)(19)(D) of the Act, the policies 

and procedures furnished to the 

authorizing fiduciary must conform 

with the requirements of this regulation. 

(4) The standards set forth in this 

section apply solely for purposes of 

determining whether an investment 

manager’s written policies and 

procedures satisfy the content 

requirements of section 408(b)(19)(H) of 

the Act. Accordingly, such standards do 

not determine whether the investment 

manager satisfies the other requirements 

for relief under section 408(b)(19) of the 

Act. 

(1)(b) Policies and Procedures. In 

General. This paragraph specifies the 

content of the written policies and 

procedures required to be adopted by an 

investment manager and disclosed to 

the plan fiduciary prior to authorizing 

cross-trading in order for transactions to 

qualify for relief under section 

408(b)(19) of the Act. 

(2) Style and Format. The content of 

the policies and procedures required by 

this paragraph must be clear and 

concise and written in a manner 

calculated to be understood by the plan 

fiduciary authorizing cross-trading. 

Although no specific format is required 

for the investment manager’s written 

policies and procedures, the 

information contained in the policies 

and procedures must be sufficiently 

detailed to facilitate a periodic review 

by the compliance officer of the crosstrades and a determination by such 

compliance officer that the cross-trades 

comply with the investment manager’s 

written cross-trading policies and 

procedures. 

(3) Content (i). An investment 

manager’s policies and procedures must 

be fair and equitable to all accounts 

participating in its cross-trading 

program and reasonably designed to 

ensure compliance with the 

requirements of section 408(b)(19)(H) of 

the Act. Such policies and procedures 

must include: 

(A) A statement of policy which 

describes the criteria that will be 

applied by the investment manager in 

determining that execution of a 

securities transaction as a cross-trade 

will be beneficial to both parties to the 

transaction; 

(B) A description of how the 

investment manager will determine that 

cross-trades are effected at the 

independent ‘‘current market price’’ of 

the security (within the meaning of 

section 270.17a–7(b) of Title 17, Code of 

Federal Regulations and SEC no-action 

and interpretative letters thereunder) as 

required by section 408(b)(19)(B) of the 

Act, including the identity of sources 

used to establish such price; 

(C) A description of the procedures 

for ensuring compliance with the 

$100,000,000 minimum asset size 

requirement of section 408(b)(19). A 

plan or master trust will satisfy the 

minimum asset size requirement as to a 

transaction if it satisfies the requirement 

upon its initial participation in the 

cross-trading program and on an annual 

basis thereafter; 

(D) A statement that any investment 

manager participating in a cross-trading 

program will have conflicting loyalties 

and responsibilities to the parties 

involved in any cross-trade transaction 

and a description of how the investment 

manager will mitigate such conflicts; 

(E) A requirement that the investment 

manager allocate cross-trades among 

accounts in an objective and equitable 

manner and a description of the 

allocation method(s) available to and 

used by the investment manager for 

assuring an objective allocation among 

accounts participating in the crosstrading program. If more than one 

allocation methodology may be used by 

the investment manager, a description 

of what circumstances will dictate the 

use of a particular methodology; 

(F) Identification of the compliance 

officer responsible for periodically 

reviewing the investment manager’s 

compliance with section 408(b)(19)(H) 

of the Act and a statement of the 

compliance officer’s qualifications for 

this position; 

(G) A statement that the cross-trading 

statutory exemption under section 

408(b)(19) of the Act requires 

satisfaction of several objective 

conditions in addition to the 

requirements that the investment 

manager adopt and effect cross-trades in 

accordance with written cross-trading 

policies and procedures; and 

(H) A statement which specifically 

describes the scope of the annual review 

conducted by the compliance officer. 

(ii) Nothing herein is intended to 

preclude an investment manager from 

including such other policies and 

procedures not required by this 

regulation as the investment manager 

may determine appropriate to comply 

with the requirements of section 

408(b)(19). 

(c) Definitions. For purposes of this 

section: 

(1) The term ‘‘account’’ includes any 

single customer or pooled fund or 

account. 

(2) The term ‘‘compliance officer’’ 

means an individual designated by the 

investment manager who is responsible 

for periodically reviewing the crosstrades made for the plan to ensure 

compliance with the investment 

manager’s written cross-trading policies 

and procedures and the requirements of 

section 408(b)(19)(H) of the Act. 

(3) The term ‘‘plan fiduciary’’ means 

a person described in section 3(21)(A) of 

the Act with respect to a plan (other 

than the investment manager engaging 

in the cross-trades or an affiliate) who 

has the authority to authorize a plan’s 

participation in an investment 

manager’s cross-trading program. 

(4) The term ‘‘investment manager’’ 

means a person described in section 

3(38) of the Act. 

(5) The term ‘‘plan’’ means any 

employee benefit plan as described in 

section 3(3) of the Act to which Title I 

of the Act applies or any plan defined 

in section 4975(e)(1) of the Code. 

(6) The term ‘‘cross-trade’’ means the 

purchase and sale of a security between 

a plan and any other account managed 

by the same investment manager. 

Signed at Washington, DC, this 29th day of 

September, 2008. 

Bradford P. Campbell, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. E8–23434 Filed 10–6–08; 8:45 am] 

BILLING CODE 4510–29–P 

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: Final rule. 

SUMMARY: This document contains a 

final rule amending regulations under 

the Employee Retirement Income 

Security Act of 1974 that provide 

guidance and a fiduciary safe harbor for 

the distribution of benefits on behalf of 

participants or beneficiaries in 


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58460 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / 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). 

7 72 FR 7516 (Feb. 15, 2007). The interim final 

rule was effective and applicable to distributions 

made on or after March 19, 2007. 

8See also I.R.S. Notice 2007–7, 2007–5 I.R.B. 395. 

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 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 final rule will 

affect fiduciaries, plan service 

providers, and participants and 

beneficiaries of individual account 

pension plans. 

DATES: This final rule is effective 

November 6, 2008. 

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 final rule amends two 

regulations under the Employee 

Retirement Income Security Act of 1974, 

as amended, (ERISA or the Act) 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 of 2006, 

Public Law 109–280, (PPA) 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 PPA 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 PPA’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, on 

February 15, 2007, published in the 

Federal Register an interim final rule 

amending its regulatory safe harbor for 

distributions from a terminated 

individual account plan, including an 

abandoned plan, and invited interested 

parties to comment.7 The Department 

received two comments, neither of 

which related directly to the interim 

final rule; both comments pertain to the 

scope and impact of section 402(c) of 

the Code, as amended by section 829 of 

the PPA. Accordingly, the interim final 

rule amending 29 CFR 2550.404a–3 and 

29 CFR 2578.1 is adopted as a final rule 

without change. In this regard, however, 

the Department notes that section 410(a) 

of the PPA amended section 4050 of 

ERISA to permit terminating plans not 

subject to the PBGC insurance program, 

such as defined contribution plans, to 

transfer the benefits of missing 

participants to the Pension Benefit 

Guaranty Corporation (PBGC). Section 

410(c) of the PPA provides that the 

amendments to section 4050 would be 

effective for benefit distributions made 

after the PBGC prescribes final rules 

implementing such amendments. The 

Department will further review whether, 

and to what extent, changes to 29 CFR 

2550.404a–3 and 29 CFR 2578.1 would 

be appropriate following PBGC 

regulations pursuant to section 4050 of 

ERISA. 

B. Overview of Final Rule 

The final rule amends the 

Department’s regulatory safe harbor for 

distributions from terminated (including 

abandoned) individual account plans to 

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, 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.8 The final rule 

also makes conforming changes to the 

content requirements of the mandated 

participant and beneficiary termination 


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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58461 

9 71 FR 20856 (April 21, 2006). 

10As described earlier, the Department is 

publishing, concurrently with publication of this 

rule, amendments to PTE 2006–06, which will 

establish under the conditions of the exemption 

Continued 

notice (and the related model notice 

under the safe harbor at the Appendix 

to § 2550.404a–3) and to the content of 

the required participant and beneficiary 

termination notice (and the related 

model notice for abandoned plans at 

Appendix C to § 2578.1). The specific 

changes being made to § 2550.404a–3 

and § 2578.1 are described below in 

Section C and Section D of this 

preamble, respectively. Concurrently 

with publication of this final rule, the 

Department is publishing a final 

amendment to PTE 2006–06,9 which 

clarifies 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 to PTE 2006– 

06, 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. 

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 PPA 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 

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. 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 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.10


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58462 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 

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 final rule, the Department 

has taken into account the 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. 

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. Pursuant to the terms of the 

Executive Order, it has been determined 

that this action is not ‘‘significant’’ 

within the meaning of section 3(f) of the 

Executive Order, and, therefore, is not 

subject to review by OMB. 

Paperwork Reduction Act 

The information collections included 

in this final rule, together with 

information collections included in the 

amendments to 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 June 30, 2009. The 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 final rule or the amendments to PTE 

2006–06, published simultaneously 

with this 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 the rule initially was 

issued as an interim final rule, the RFA 

does not apply and the Department is 

not required to either certify that the 

rule will not have a significant impact 

on a substantial number of small 

businesses or conduct an initial 

regulatory flexibility analysis. 

Furthermore, because the 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 final rule being issued here 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 will be 

transmitted to Congress and the 

Comptroller General for review. The 

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 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, adjusted for inflation. 

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 

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: 

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: 


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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58463 

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. Amend § 2550.404a–3 by revising 

paragraphs (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 

* * * * * 

BILLING CODE 4510–29–P 


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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 

paragraphs (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 

§ 2550.404a–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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Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations 58467 

Signed at Washington, DC, this 29th day of 

September 2008. 

Bradford P. Campbell, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. E8–23424 Filed 10–6–08; 8:45 am] 

BILLING CODE 4510–29–C 

DEPARTMENT OF THE INTERIOR 

Minerals Management Service 

30 CFR Parts 203 and 260 

[Docket ID: MMS–2007–OMM–0074] 

RIN 1010–AD29 

Royalty Relief for Deepwater Outer 

Continental Shelf Oil and Gas 

Leases—Conforming Regulations to 

Court Decision 

AGENCY: Minerals Management Service 

(MMS), Interior. 

ACTION: Final rule. 

SUMMARY: This rule amends 30 CFR 

parts 203 and 260 to conform the 

regulations to the decision of the United 

States Court of Appeals for the Fifth 

Circuit in Santa Fe Snyder Corp., et al. 

v. Norton. That decision found that 

certain provisions of the MMS 

regulations interpreting section 304 of 

the Deep Water Royalty Relief Act are 

contrary to the requirements of the 

statute. MMS will determine lessees’ 

royalty under leases subject to Deep 

Water Royalty Relief Act section 304, for 

both past and future periods, in a 

manner consistent with the Fifth 

Circuit’s decision in the Santa Fe 

Snyder case and this rule. 


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