[Federal Register Volume 73, Number 195 (Tuesday, October 7, 2008)]
[Rules and Regulations]
[Pages 58445-58447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23433]


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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: Final rule.

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SUMMARY: This document contains a 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. Also appearing in 
today's Federal Register is a final regulation, entitled ``Selection of 
Annuity Providers--Safe Harbor for Individual Account Plans'', which 
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). The amendment to Interpretive Bulletin 95-1, as well as the 
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 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

    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

[[Page 58446]]

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 the 
IB to facilitate the availability of annuity options in defined 
contribution plans.
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    \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.
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    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 the IB and 
is subject to all otherwise applicable fiduciary standards. 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). The Department did 
not receive any comments on that interim final rule and is issuing that 
rule in final. Set forth below is an overview of the final rule. The 
Department is also adopting a final regulation, published in today's 
Federal Register, which 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 ERISA.

B. Overview of 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 Department is amending the IB to provide 
that it applies only to the selection of annuity providers for the 
purpose of benefit distributions from a defined benefit pension plan.

C. Effective Date

    This final rule is effective 60 days after the date of 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 in 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. 
See notice of final rulemaking appearing in today's Federal Register 
entitled ``Selection of Annuity Providers--Safe Harbor for Individual 
Account Plans.''

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

Congressional Review Act

    The 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 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

[[Page 58447]]

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 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.

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 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