[Federal Register Volume 72, Number 176 (Wednesday, September 12, 2007)]
[Rules and Regulations]
[Pages 52004-52006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-17744]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2509

RIN 1210-AB22


Amendment to Interpretive Bulletin 95-1

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Interim final rule.

-----------------------------------------------------------------------

SUMMARY: This document contains an interim final rule that amends 
Interpretive Bulletin 95-1 to limit the application of the Bulletin to 
the selection of annuity providers for defined benefit plans. This 
interim final rule implements section 625 of the Pension Protection Act 
of 2006. Also appearing in today's Federal Register is a proposed 
regulation, entitled ``Selection of Annuity Providers for Individual 
Account Plans'', which, in the form of a safe harbor, provides guidance 
concerning the fiduciary considerations attendant to the selection of 
annuity providers and contracts for purposes of benefit distributions 
from individual account plans. The amendment to Interpretive Bulletin 
95-1, as well as the proposed safe harbor for annuity selections, will 
affect plan sponsors and fiduciaries of individual account plans, and 
the participants and beneficiaries covered by such plans.

DATES: This interim final rule is effective November 13, 2007. Written 
comments on the interim final rule should be received by the Department 
of Labor on or before November 13, 2007.

ADDRESSES: To facilitate the receipt and processing of comments, the 
Department encourages interested persons to submit their comments 
electronically to www.regulations.gov (follow instructions for 
submission of comments) or [email protected]. Persons submitting comments 
electronically are encouraged not to submit paper copies. Persons 
interested in submitting comments on paper should send or deliver their 
comments to: Office of Regulations and Interpretations, Employee 
Benefits Security Administration, Room N-5669, U.S. Department of 
Labor, 200 Constitution Avenue, NW., Washington, DC 20210. Attention: 
Interpretive Bulletin 95-1. Comments received will be posted without 
change, including any personal information provided, to 
www.regulations.gov and http://www.dol.gov/ebsa, and also available for 
public inspection at the Public Disclosure Room, Employee Benefits 
Security Administration, U.S. Department of Labor, Room N-1513, 200 
Constitution Avenue, NW., Washington, DC, 20210.

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

    In 1995, the Department issued Interpretive Bulletin 95-1 (29 CFR 
2509.95-1) (the IB), providing guidance concerning the fiduciary 
standards under Part 4 of Title I of ERISA applicable to the selection 
of annuity providers for purposes of pension plan benefit 
distributions. In general, the IB makes clear that the selection of an 
annuity provider in connection with benefit distributions is a 
fiduciary act governed by the fiduciary standards of section 404(a)(1), 
including the duty to act prudently and solely in the interest of the 
plan's participants and beneficiaries. In this regard, the IB provides 
that plan fiduciaries must take steps calculated to obtain the safest 
annuity available, unless under the circumstances it would be in the 
interest of the participants and beneficiaries to do otherwise. The IB 
also provides that fiduciaries must conduct an objective, thorough and 
analytical search for purposes of identifying providers from which to 
purchase annuities and sets forth six factors that should be considered 
by fiduciaries in evaluating a provider's claims paying ability and 
creditworthiness.
    In Advisory Opinion 2002-14A (Dec. 18, 2002) the Department 
expressed the view that the general fiduciary principles set forth in 
the IB with regard to the selection of annuity providers apply equally 
to defined benefit and defined contribution plans. The opinion 
recognized that, the selection of annuity providers by the fiduciary of 
a defined contribution plan would be governed by section 404(a)(1) and, 
therefore, such fiduciary, in evaluating claims paying ability and 
creditworthiness of an annuity provider, should take into account the 
six factors set forth in 29 CFR 2509.95-1(c).
    During 2005, the ERISA Advisory Council created the Working Group 
on Retirement Distributions & Options to study, in part, the nature of 
the distribution options available to participants of defined 
contribution plans. In November 2005, after public hearings and 
testimony, the Advisory Council issued a report, entitled Report of the 
Working Group on Retirement Distributions & Options,\1\ concluding that 
many defined contribution plan distributions tend to be paid out in 
lump sums which ``expose retirees to a wide range of risks including 
the possibility of outliving assets, investment losses, and inflation 
risk.'' The Advisory Council recommended that the Department revise 
Interpretive Bulletin 95-1 to facilitate the availability of annuity 
options in defined contribution plans.
---------------------------------------------------------------------------

    \1\ A copy of the Report can be found on the About EBSA page 
under the heading ERISA Advisory Council at http://www.dol.gov/ebsa/publications/AC_1105A_report.html.
---------------------------------------------------------------------------

    The Pension Protection Act of 2006 (the PPA) (Pub. L. 109-280, 120 
Stat. 780) was enacted on August 17, 2006. Section 625 of the PPA 
directs the Secretary to issue final regulations within one year of the 
date of enactment, clarifying that the selection of an annuity contract 
as an optional form of distribution from an individual account plan is 
not subject to the safest available annuity standard under Interpretive 
Bulletin 95-1 and is subject to all otherwise applicable fiduciary 
standards.
    Consistent with section 625 of the PPA, the Department is amending 
Interpretive Bulletin 95-1 to limit its application only to defined 
benefit plans. The Department is also proposing the adoption of a 
regulation, published in today's Federal Register, which, in the form 
of a safe harbor, provides guidance concerning the fiduciary 
considerations attendant to the selection of annuity providers and 
contracts for purposes of benefit distributions from individual account 
plans.

B. Overview of Interim Final Rule

    In order to implement the Congressional mandate of section 625 of 
the PPA and to eliminate any confusion regarding the applicability of 
the fiduciary standards set forth in IB 95-1 to the selection of 
annuity providers for the purpose of benefit distributions from 
individual account plans, the

[[Page 52005]]

Department is amending Interpretive Bulletin 95-1 to provide that 
Interpretive Bulletin 95-1 is applicable only to the selection of 
annuity providers for the purpose of benefit distributions from a 
defined benefit pension plan.

C. 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 amendment of 
Interpretive Bulletin 95-1. The Department believes such rulemaking is 
unnecessary because section 625 of the Pension Protection Act of 2006 
specifically directs the Secretary to issue final regulations within 
one year clarifying that the selection of an annuity contract as an 
optional form of distribution from an individual account plan is not 
subject to the safest available annuity standard under the Interpretive 
Bulletin 95-1. The amendment to Interpretive Bulletin 95-1 contained in 
this document does nothing more than limit, consistent with the 
statutory directive, the application of the Bulletin to defined benefit 
plans, thereby establishing that the ``safest available'' standard does 
not apply to individual account plans. To avoid any confusion on the 
part of the regulated community, the amendment includes a reference to 
separate guidance for the selection of annuity providers for individual 
account plans.
    For the foregoing reason, the Department finds that proposed 
rulemaking procedures are unnecessary and is publishing the rule as an 
interim final rule. Nevertheless, the Department is affording 
interested persons the opportunity to comment on the amendment. Because 
the Department exercised very limited discretion in implementing the 
directive contained in section 625 of the Pension Protection Act of 
2006, the Department is limiting the comment period to 60 days.

D. Request for Comments

    The Department invites comments from interested persons. To 
facilitate the receipt and processing of comments, EBSA encourages 
interested persons to submit their comments electronically to 
www.regulations.gov (follow instructions for the submission of 
comments) or [email protected]. Persons submitting comments electronically 
are encouraged not to submit paper copies. Persons interested in 
submitting comments on paper should send or deliver their comments to: 
Office of Regulations and Interpretations, Employee Benefits Security 
Administration, Room N-5669, U.S. Department of Labor, 200 Constitution 
Avenue, NW., Washington, DC 20210. Attention: Interpretive Bulletin 95-
1. All comments will be available to the public, without charge, online 
at www.regulations.gov and http://www.dol.gov/ebsa, and at the Public 
Disclosure Room, Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210 from 8 a.m. to 4:30 p.m. (Monday-Friday).

E. Effective Date

    This interim final rule is effective 60 days after the date of 
publication in the Federal Register.

F. 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. For purposes of Executive Order 
12866, the Department has determined that it is appropriate to review 
the amendment contained in this document, which merely serves to make 
clear that the standards set forth in Interpretive Bulletin 95-1 no 
longer apply to individual account plans, in conjunction with the 
review of the proposed rule, also appearing in today's Federal 
Register, that establishes, in the form of safe harbor, standards for 
the selection of annuity providers and contracts by fiduciaries of 
individual account plans. As reflected in that analysis, the Department 
believes that these regulatory actions are not economically significant 
within the meaning of section 3(f)(1) of the Executive Order. The 
actions, however, have been determined to be significant within the 
meaning of section 3(f)(4) of the Executive Order, and the Department 
accordingly provides an assessment of the potential costs and benefits. 
See notice of proposed rulemaking appearing in today's Federal Register 
entitled Selection of Annuity Providers for Individual Account Plans.

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. Unless an agency certifies that a proposed rule will not have 
a significant economic impact on a substantial number of small 
entities, section 603 of the RFA requires that the agency present an 
initial regulatory flexibility analysis at the time of the publication 
of the notice of proposed rulemaking describing the impact of the rule 
on small entities and seeking public comment on such impact. Because 
this rule is being 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. 
Nevertheless, the Department has considered the likely impact of the 
interim 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. 
See notice of proposed rulemaking appearing in today's Federal Register 
entitled Selection of Annuity Providers for Individual Account Plans.

[[Page 52006]]

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, this interim final rule is not being 
submitted to the OMB for review under the Paperwork Reduction Act.

Congressional Review Act

    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 in 29 CFR Part 2509

    Employee benefit plans, Pensions.

0
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

0
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.


0
2. Section 2509.95-1 is amended by revising the section heading and 
paragraph (a) to read as follows:


Sec.  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 31st day of August, 2007.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
[FR Doc. E7-17744 Filed 9-11-07; 8:45 am]
BILLING CODE 4510-29-P