[Federal Register Volume 87, Number 223 (Monday, November 21, 2022)]
[Proposed Rules]
[Pages 70753-70758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24702]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2550

[Application No. D-11799]
RIN 1210-ZA23


Prohibited Transaction Exemption (PTE) 2002-51 To Permit Certain 
Transactions Identified in the Voluntary Fiduciary Correction Program

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Proposed amendment to prohibited transaction exemption.

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SUMMARY: This document gives notice of a proposed amendment to 
Prohibited Transaction Exemption 2002-51, an exemption for certain 
transactions identified in the Department's Voluntary Fiduciary 
Correction Program (VFC Program or VFCP). The VFC Program allows 
persons who may have engaged in a breach of fiduciary duty under the 
Employee Retirement Income Security Act (ERISA) to correct the breach 
and avoid certain Department of Labor-initiated civil actions and 
assessment of civil penalties. PTE 2002-51 (the VFCP Class Exemption) 
is a related class exemption that provides an exemption from excise 
taxes imposed by the Internal Revenue Code of 1986, as amended, for 
certain eligible transactions corrected pursuant to the VFC Program. 
This amendment to the VFCP Class Exemption is being proposed in 
connection with the Department's amendment and restatement of the VFC 
Program, published elsewhere in today's issue of the Federal Register 
(2022 Program Notice). If granted, the amendment to the VFCP Class 
Exemption would affect plans, participants and beneficiaries of such 
plans, and certain other persons engaging in such transactions.

DATES: Written comments on the proposed amendment must be received by 
the Department by January 20, 2023.

ADDRESSES: All written comments and requests for a hearing concerning 
the proposed amendment to the class exemption should be sent to the 
Office of Exemption Determinations through the Federal eRulemaking 
Portal and identified by Application No. D-11799:
    Federal eRulemaking Portal: http://www.regulations.gov at Docket ID 
number: EBSA-2022-0024. Follow the instructions for submitting 
comments.
    See SUPPLEMENTARY INFORMATION below for additional information 
regarding comments.

FOR FURTHER INFORMATION CONTACT: Susan Wilker, Office of Exemption 
Determinations, Employee Benefits Security Administration, U.S. 
Department of Labor, telephone number (202) 693-8540 (this is not a 
toll-free number).
    Customer Service Information: Individuals interested in obtaining 
information from the Department concerning ERISA and employee benefit 
plans may call the Employee Benefits Security Administration's Toll-
Free Hotline, at 1-866-444-EBSA (3272) or visit the Department's 
website (www.dol.gov/ebsa).

SUPPLEMENTARY INFORMATION: 

Comment Instructions

    All comments and requests for a hearing must be received by the end 
of the comment period. Requests for a hearing must state the issues to 
be addressed and include a general description of the evidence to be 
presented at the hearing. Persons are encouraged to submit all comments 
electronically and not to submit paper copies. The comments and hearing 
requests may be available for public inspection in the Public 
Disclosure Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue NW, 
Washington, DC 20210. Comments and hearing requests will also be 
available online at http://www.regulations.gov, at Docket ID number: 
EBSA-2022-0024 and http://www.dol.gov/ebsa, at no charge.
    Warning: All comments received will be included in the public 
record without change and will be made available online at http://www.regulations.gov, including any personal information provided, 
unless the comment includes information claimed to be confidential or 
other information whose disclosure is restricted by statute. If you 
submit a comment, EBSA recommends that you include your name and other 
contact information, but DO NOT submit information that you consider to 
be confidential, or otherwise protected (such as Social Security number 
or unlisted phone number), or confidential business information that 
you do not want publicly disclosed. However, if EBSA cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, EBSA might not be able to consider your comment. 
Additionally, the http://www.regulations.gov website is an ``anonymous 
access'' system, which means EBSA will not know your identity or 
contact information unless you provide it.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    Section 3(f) of Executive Order 12866 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

[[Page 70754]]

the principles set forth in the Executive Order. Pursuant to the terms 
of the Executive Order, OMB has determined that this action is 
``significant'' within the meaning of Section 3(f)(4) of the Executive 
Order. Accordingly, the Department has undertaken an assessment of the 
costs and benefits of the proposed amendment, and OMB has reviewed this 
regulatory action.\1\
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    \1\ See 2022 Program Notice, Section D, ``Regulatory Impact 
Analysis.''
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Paperwork Reduction Act

    The amendments to the VFC Program include a revision to its 
information collection provisions. Accordingly, the revisions have been 
submitted to OMB for review and approval under the Paperwork Reduction 
Act (PRA). Because this proposed amendment to the VFCP Class Exemption 
would be used when finalized in connection with the VFC Program, and 
for ease of public review, the burden of the Information Collection 
Request (ICR) in the VFC Program is combined with the burden of the 
information collection provisions of the exemption for purposes of 
accounting for burden under the PRA. These burden calculations can be 
viewed in the PRA analysis included in the 2022 Program Notice, 
Amendment and Restatement of Voluntary Fiduciary Correction Program, 
published elsewhere in today's Federal Register.
    Persons are not required to respond to the information collection 
unless it displays a currently valid OMB control number 1210-0118, 
which is scheduled to expire on May 31, 2025. Currently, EBSA is 
soliciting comments concerning the proposed changes to this ICR. A copy 
of the ICR may be obtained by contacting the PRA addressee shown in the 
2022 Program Notice.

Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA) \2\ 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, or any other law, and are likely to have a significant 
economic impact on a substantial number of small entities.\3\ Unless 
the head of 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 the agency to prepare and make 
available for public comment an initial regulatory flexibility analysis 
of the proposed rule.\4\
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    \2\ 5 U.S.C. 601 et seq. (1980).
    \3\ 5 U.S.C. 551 et seq. (1946).
    \4\ 5 U.S.C. 604 (1980).
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    The Department certifies that these proposed amendments to PTE 
2002-51 will not have a significant economic impact on a substantial 
number of small entities. See 2022 Program Notice for the factual basis 
for the certification.

Background

History of the VFC Program and VFCP Class Exemption

    The Department of Labor's Employee Benefits Security Administration 
(EBSA) originally adopted the VFC Program in 2002, and later revised it 
in 2005 and 2006.\5\ EBSA designed the VFC Program to encourage 
employers and plan fiduciaries to voluntarily comply with the Employee 
Retirement Income Security Act (ERISA) and allow those potentially 
liable for certain specified fiduciary breaches under ERISA to 
voluntarily apply for relief from enforcement actions and certain 
penalties, provided they meet the VFC Program's criteria and follow the 
procedures outlined in the VFC Program. Many workers have benefited 
from the VFC Program due to the restoration of plan assets and the 
payment of promised benefits.
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    \5\ 67 FR 15062 (March 28, 2002); 70 FR. 17516 (April 6, 2005); 
71 FR. 20262 (April 19, 2006).
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    The VFC Program describes how to apply for relief and lists the 
specific transactions covered and acceptable methods for correcting 
fiduciary breaches under the Program. The most frequently corrected 
transaction under the Program is the correction of delinquent 
participant contributions. The Program provides a model application 
form, a checklist, and an online calculator for determining amounts to 
be restored to plans. Eligible applicants that satisfy the terms and 
conditions of the existing VFC Program receive a no-action letter from 
EBSA and avoid the assessment of civil monetary penalties. The VFC 
Program has been, and will continue to be, administered in EBSA's 
Regional Offices.
    The Department granted the VFCP Class Exemption in connection with 
the VFC Program. Some of the breaches that may be corrected under the 
VFC Program are also prohibited transactions subject to excise tax 
under Internal Revenue Code (Code) section 4975. Reorganization Plan 
No. 4 of 1978 transferred the authority of the Secretary of Treasury to 
issue exemptions from the prohibited transaction provisions of Code 
section 4975 to the Secretary of Labor.\6\ Therefore, the exemption 
provides excise tax relief to parties that correct certain specified 
breaches under the VFC Program.
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    \6\ 5 U.S.C. App. 252 (2020).
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    The VFCP Class Exemption currently covers the following 
transactions:
     The failure to transmit participant contributions to a 
pension plan within the time frames described in the Department's 
regulation, and/or failure to transmit participant loan repayments to a 
pension plan within a reasonable time after withholding or receipt by 
the employer.\7\
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    \7\ See 29 CFR 2510.3-102.
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     The making of a loan at a fair market interest rate to a 
disqualified person.
     The purchase or sale of an asset (including real property) 
between a plan and a disqualified person at fair market value.
     The sale of real property to a plan by the employer and 
the leaseback of the property to the employer, at fair market value and 
fair market rental value, respectively.
     The purchase of an asset (including real property) by a 
plan where the asset has later been determined to be illiquid, or in 
which the asset was acquired from an unrelated third party, and/or the 
subsequent sale of such asset in a prohibited transaction pursuant to 
Code section 4975(c)(1).
     The use of plan assets to pay expenses, including 
commissions or fees, to a service provider for services provided in 
connection with the establishment, design or termination of the plan, 
provided that the payment of these settlor expenses was not expressly 
prohibited by the plan.
    The VFCP Class Exemption is subject to several general conditions. 
First, the breach must be appropriately corrected and the party 
applying must satisfy all the conditions of the VFC Program and receive 
a no-action letter from EBSA. Further, the applicant may not have taken 
advantage of the relief provided by the VFC Program and the exemption 
for a similar type of transaction(s) during three years before the 
current VFCP application.\8\ The applicant must provide notice to 
interested persons of the transaction for which relief is sought within 
60 days of the VFC Program submission. However, notice is not required 
if the excise tax that would otherwise be imposed under the Code is 
less than or equal to $100 and that

[[Page 70755]]

amount is paid to the plan and allocated to participants and 
beneficiaries.
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    \8\ There is an exception to the three-year rule for certain 
service providers that are broker-dealers, banks, insurance 
companies and their affiliates and that did not use their discretion 
to cause the prohibited transaction and did not have actual 
knowledge or reason to know that the underlying transaction was a 
non-exempt prohibited transaction.
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    In addition to these general conditions, the exemption includes 
certain transaction-specific conditions. For example, as relevant to 
this proposal, participant contributions and loan repayments that are 
not timely transmitted (referred to collectively as delinquent 
participant contributions) must be transmitted to the pension plan no 
more than 180 calendar days from the date they either were received by 
the employer or otherwise would have been payable to the participant in 
cash.

2022 Amendments to VFC Program

    The 2022 Program Notice contains an amended and restated VFC 
Program including the establishment of a self-correction feature for 
certain delinquent participant contributions and loan repayments to 
pension plans (the SC Component). The VFC Program is used most 
frequently to correct delinquent participant contributions; therefore, 
the Department has concluded that an appropriately designed self-
correction feature will: (1) positively respond to public feedback 
concerning the time and expense currently required to file VFC Program 
applications for transactions that involve small dollar amounts; (2) 
offer plan officials and other responsible fiduciaries a streamlined 
correction process thereby encouraging more voluntary corrections; and 
(3) enable EBSA to better allocate resources currently dedicated to 
processing VFC Program applications for these transactions.
    If granted, this amendment to the VFCP Class Exemption would 
provide excise tax relief for transactions that are corrected pursuant 
to the SC Component. The proposed amendment also would clarify existing 
transactions eligible for correction under the Program, expand the 
scope of other transactions currently eligible for correction, and 
simplify certain administrative or procedural requirements for 
participation in, and correction of, transactions under the VFC 
Program. Code section 4975, which governs the Department's authority to 
issue exemptions from the prohibited transaction provisions in the 
Code, requires the Department to provide notice to interested persons 
and opportunity for public comment before issuing an exemption or 
amendment thereto.\9\ Thus the amendments to the VFCP Class Exemption 
proposed in this notice will not be effective until the Department 
grants a final amendment to the exemption.
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    \9\ As noted above, under Reorganization Plan No. 4 of 1978, 5 
U.S.C. App. at 252 (2020), the authority of the Secretary of 
Treasury to issue exemptions pursuant to Code section 4975 was 
transferred to the Secretary of Labor.
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Description of the Proposed Amendments to the VFCP Class Exemption

Self-Correction Feature for Delinquent Participant Contributions and 
Loan Repayments to Pension Plans

    The 2022 Program Notice establishes the SC Component for certain 
delinquent contributions to pension plans. The SC Component allows 
``self-correctors'' to make a plan whole and receive relief under the 
VFC Program without submitting an application to EBSA and receiving a 
no-action letter. Instead, self-correctors provide a notice (the SCC 
notice) to EBSA through an electronic tool on EBSA's website and 
receive an email acknowledgement from EBSA of a properly completed and 
submitted SCC notice. Relief under the SC Component for delinquent 
participant contributions is limited to corrections where the amount of 
lost earnings is $1,000.00 or less.\10\ In the 2022 Program Notice, the 
Department solicits comments on specific aspects of the SC Component. 
To the extent commenters suggest changes to the SC Component, the 
Department requests comments on whether corresponding changes to the 
exemption are necessary.
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    \10\ The $1,000 limit is calculated without regard to any amount 
that is contributed to the plan under the exception to the notice 
provision.
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    The Department is proposing to amend Section I.A. of the exemption 
to clarify that excise tax relief is available for transactions that 
are corrected under the SC Component. These transactions would be 
required to comply with the applicable exemption conditions, including 
the requirement that delinquent contributions may not have been 
transmitted to the plan more than 180 calendar days from the date they 
were either received by the employer or otherwise would have been 
payable to the participant in cash.
    The proposal also includes an amendment to Section III.B of the 
exemption, which provides that the exemption will apply only if the 
applicant receives an EBSA no-action letter pursuant to the VFC 
Program. Since self-correctors will receive an email acknowledgement 
instead of a no-action letter from EBSA, this condition would be 
amended to add a specific reference to the email acknowledgement of a 
properly completed and submitted SCC notice.

Frequency of Use

    The exemption is generally unavailable to VFC Program applicants 
that have, within the previous three years, taken advantage of the 
relief provided by the VFC Program and the exemption for a similar type 
of transaction. The exemption provides a narrow exception from the 
three-year limitation for certain service providers (broker-dealers, 
banks, insurance companies and their affiliates) who may have 
reasonably relied on a plan fiduciary's mistaken belief that an 
administrative or statutory exemption was available.
    The Department is proposing to eliminate the three-year limitation. 
The three-year provision was initially included in the exemption to 
prevent parties from becoming lax in complying with fiduciary and other 
ERISA duties because of the availability of the exemption. Based on the 
Department's experience with the VFC Program and the exemption, the 
Department concluded that the risk of such behavior is low. 
Notwithstanding the three-year limit on use of the exemption., 
applicants may correct covered transactions under the VFC Program 
itself multiple times within three years, but the Department has not 
seen indications that they are doing so in significant numbers. More 
importantly, the application filing process and reporting requirements 
under the VFC Program and the SC Component provide the Department with 
notice of repeat usage. This, together with the ``under investigation'' 
ineligibility condition, provides the Department with tools to protect 
participants and beneficiaries from inappropriate use of the exemption. 
Thus, in the Department's view, the VFC Program (including the SC 
Component) and the other conditions of this exemption should provide 
sufficient safeguards to ensure that the exemption is in the interests 
of plans, their participants and beneficiaries and protective of the 
rights of participants and beneficiaries as required by Code section 
4975(c)(2).
    The Department requests comments regarding whether removal of the 
three-year limitation would encourage greater use of the VFC Program 
without loss of meaningful protections for participants and 
beneficiaries or whether the three-year provision or some other 
frequency limitation should be retained for some or all covered 
transactions because it provides protection for participants and 
beneficiaries that cannot be achieved by the application, reporting, 
and of other conditions in the exemption and VFC Program.

[[Page 70756]]

Sale and Leaseback of Real Property to an Employer

    Section I.D. of the VFCP Class Exemption applies to the sale of 
real property to a plan by the sponsoring employer and the leaseback of 
such property to the same employer if it is corrected as required under 
the VFC Program. The amendment would expand the covered transactions in 
Section I.D. to include affiliates of plan sponsors, which reflects a 
change made in the 2022 Program Notice. Accordingly, the amended 
exemption would be available for a sale of real property by an 
affiliate of the employer sponsoring the plan, to the plan, and a 
leaseback of such property to the affiliate of the sponsoring employer.
    In the proposed amendment, the term ``affiliate'' of a person would 
be defined as follows--

(1) any person directly, or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person; (2) any officer, director, partner, employee, or 
member of the family (as defined in Code section 4975(e)(6)) of the 
person; or (3) any corporation or partnership of which such person 
is an officer, director, partner or employee.

The proposal also would define the term ``control'' as the power to 
exercise a controlling influence over the management of a person other 
than an individual.\11\
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    \11\ Both terms are defined in a proposed new Section V.
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Proposed Deletion of Section II.E.

    The proposed amendment would delete Section II.E. of the exemption. 
The condition relates to all the covered transactions under Section I 
and requires that ``the transaction was not part of an agreement, 
arrangement or understanding designed to benefit a disqualified 
person.'' The Department believes that this condition is unnecessary in 
light of the other, more specific conditions of the exemption, and the 
fact that the transaction must have been corrected in accordance with 
the applicable requirements of the VFC Program for the exemption to 
apply.

Notice to Interested Persons

    The proposed amendment to the VFCP Class Exemption would make 
several changes to Section IV of the exemption, which governs notice to 
interested persons. Under existing Section IV, VFC Program applicants 
seeking relief under the exemption must provide written notice to 
interested persons of the transactions for which relief is sought 
pursuant to the VFC Program and the exemption. A copy of the notice 
must be provided to the appropriate EBSA Regional Office.
    There is an existing exception to the notice requirement for 
delinquent participant contributions and/or loan repayments described 
in Section I.A. of the exemption if the amount of the excise tax that 
would otherwise be paid under Code section 4975 is less than or equal 
to $100. Under the exception in Section IV.C., applicants may pay to 
the plan an amount equal to the excise tax otherwise due, instead of 
providing the written notice to interested persons. VFC Program 
applicants using the exception must provide a copy of a completed IRS 
Form 5330 or written documentation containing the information required 
by IRS Form 5330 and proof of payment with the submission of their VFC 
Program applications to the appropriate EBSA Regional Office.
    The proposed amendment would provide a special rule for self-
correctors with respect to providing notice to interested persons. In 
light of the streamlined procedure for self-correction and the small 
amounts of excise taxes that would be imposed on transactions corrected 
under the SC Component, the Department is proposing in Section IV.D. to 
make the exception to the notice provision mandatory for self-
correctors. For purposes of this proposed condition, the amount of the 
excise tax that would otherwise be imposed by Code section 4975 would 
be paid to the plan and allocated to the individual accounts of 
participants and beneficiaries in the same manner as provided under the 
plan with respect to plan earnings. The Department also is proposing 
that self-correctors using the exemption would not be subject to the 
requirement to provide a copy of the completed IRS Form 5330 along with 
proof of payment to the appropriate EBSA Regional Office. Instead, such 
self-correctors would be required to retain a completed Form 5330 or 
other written documentation of the determination of the otherwise 
applicable excise taxes and proof of payment of the amounts paid to the 
plan and provide a copy of such documentation to be kept by the plan 
administrator.
    The Department has not proposed any dollar limitation for amounts 
contributed to the plan pursuant to Section IV.D., because the amounts 
should be small due to the 2022 Program Notice's $1,000 limitation on 
lost earnings. However, the Department requests comment on whether 
there should be a dollar limit associated with this condition in case 
the $1,000 dollar threshold to participate in the SC Component is later 
raised or eliminated. In that event, should self-correctors be required 
to follow the general rule set forth in Section IV.C., under which 
notice must be provided to interested persons unless the amount of the 
excise tax that would otherwise be paid is less than or equal to $100?
    Section IV.B. of the exemption, relating to the manner of providing 
the notice to interested persons, also would be amended to prohibit 
that notice from being provided through posting alone. The Department 
no longer believes that posting the notification is reasonably 
calculated to ensure that interested persons actually receive the 
notice.
    The Department has reviewed several notices to interested persons 
submitted to the applicable Regional Offices and found that some of 
them do not meet the applicable requirements of Section IV. To 
facilitate compliance with Section IV, the Department has prepared a 
model notice to interested persons as an appendix to this proposal. 
Because the purpose of the model notice is to provide compliance 
assistance, VFC Program applicants are not required to use the model 
notice.

Other Proposed Amendments

    The Department is also proposing certain ministerial changes to PTE 
2002-51 to improve readability. For example, the Department is 
proposing to replace references ``to sections of the Code'' to instead 
refer to ``Code section.''

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under Code section 4975(c)(2) does not relieve a fiduciary or other 
disqualified person with respect to a plan from certain other 
provisions of ERISA and the Code, including any prohibited transaction 
provisions to which the exemption does not apply, the requirement that 
all assets of an employee benefit plan be held in trust by one or more 
trustees, and the general fiduciary responsibility provisions of ERISA 
which require, among other things, that a fiduciary discharge their 
duties respecting the plan solely in the interests of the participants 
and beneficiaries of the plan and in a prudent fashion; nor does it 
affect the requirement of Code section 401(a) that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries.
    (2) The proposed amendment to PTE 2002-51, if granted, would not 
extend to

[[Page 70757]]

transactions prohibited under Code section 4975(c)(1)(F).
    (3) Before the proposed amendment is granted under Code section 
4975(c)(2), the Department must find that the amendment is 
administratively feasible, in the interests of plans and their 
participants and beneficiaries, and protective of the rights of 
participants and beneficiaries of such plans.
    (4) The proposed amendment to the exemption, if granted, would be 
supplemental to, and not in derogation of other provisions of ERISA and 
the Code, including statutory or administrative exemptions and 
transitional rules. Furthermore, the fact that a transaction is subject 
to an administrative or statutory exemption is not dispositive of 
whether the transaction is in fact a prohibited transaction.
    (5) If granted, the amendment to the exemption would be applicable 
to a transaction only if the conditions specified in the class 
exemption are satisfied.

Proposed Amendment to PTE 2002-51

    Under Code section 4975(c)(2) and in accordance with the procedures 
set forth in 29 CFR 2570, subpart B (76 FR 66637, October 27, 2011), 
the Department proposes to amend and restate PTE 2002-51 as set forth 
below.

Section I. Eligible Transactions

    The sanctions resulting from the application of Code section 
4975(a) and (b), by reason of Code section 4975(c)(1)(A) through (E), 
shall not apply to the following eligible transactions described in 
Section 7 of the Voluntary Fiduciary Correction (VFC) Program, as 
amended, provided that the applicable conditions set forth in Sections 
II, III, and IV are met:
    A. Failure to forward participant contributions and/or loan 
repayments to a pension plan for investment within the time frames 
determined with reference to the principles of the Department's 
regulation at 29 CFR 2510.3-102 so that the employer retains such 
contributions or loan repayments for a longer period of time. (See VFC 
Program, Section 7.1(a) and Section 7.1(b) (relating to the Self-
Correction (SC) Component of the VFC Program).)
    B. Loan at a fair market interest rate to a disqualified person 
with respect to a plan. (See VFC Program, Section 7.2(a).)
    C. Purchase or sale of an asset (including real property) between a 
plan and a disqualified person at fair market value. (See VFC Program, 
Sections 7.4(a) and 7.4(b).)
    D. Sale of real property to a plan by the employer or an affiliate 
of such an employer and the leaseback of the property to the employer 
or the affiliate, at fair market value and fair market rental value, 
respectively. (See VFC Program, Section 7.4(c).)
    E. Purchase of an asset (including real property) by a plan, where 
the asset has later been determined to be illiquid as described under 
the VFC Program in a transaction which was a prohibited transaction 
pursuant to Code section 4975(c)(1), or in which the asset was acquired 
from an unrelated third party, and/or the subsequent sale of such asset 
in a transaction prohibited pursuant to Code section 4975(c)(1). (See 
VFC Program, Section 7.4(f).)
    F. Use of plan assets to pay expenses, including commissions or 
fees, to a service provider (e.g., attorney, accountant, recordkeeper, 
actuary, financial advisor, or insurance agent) for services provided 
in connection with the establishment, design or termination of the plan 
(settlor expenses), which relate to the activities of the plan sponsor 
in its capacity as settlor, provided that the payment of the settlor 
expense was not expressly prohibited by a plan provision relating to 
the payment of expenses by the plan. (See VFC Program, Section 7.6(b).)

Section II. Conditions

    A. With respect to a transaction involving participant 
contributions or loan repayments to pension plans described in Section 
I.A., the contributions or repayments were transmitted to the pension 
plan not more than 180 calendar days from the date the amounts were 
received by the employer (in the case of amounts that a participant or 
beneficiary pays to an employer) or the date the amounts otherwise 
would have been payable to the participant in cash (in the case of 
amounts withheld by an employer from a participant's wages).
    B. With respect to the transactions described in Sections I.B., 
I.C., I.D., or I.E., the plan assets involved in the transaction, or 
series of related transactions, did not, in the aggregate, exceed 10 
percent of the fair market value of all the assets of the plan at the 
time of the transaction.
    C. The fair market value of any plan asset involved in a 
transaction described in Sections I.C., I.D., or I.E., was determined 
in accordance with Section 5 of the VFC Program.
    D. The terms of a transaction described in Sections I.B., I.C., 
I.D., I.E., or I.F., were at least as favorable to the plan as the 
terms generally available in arm's-length transactions between 
unrelated parties.
    E. With respect to a transaction involving a sale of an illiquid 
asset under the VFC Program described in Section I.E., the plan paid no 
brokerage fees, or commissions in connection with the sale of the 
asset.
    F. With respect to any transaction described in Section I.F., the 
amount of plan assets involved in the transaction or series of related 
transactions did not, in the aggregate, exceed the lesser of $10,000 or 
five (5) percent of the fair market value of all the assets of the plan 
at the time of the transaction.

Section III. Compliance With the VFC Program

    A. The applicant or self-corrector, as applicable, has met all 
applicable requirements of the VFC Program.
    B. EBSA has issued a no-action letter to the applicant pursuant to 
the VFC Program with respect to a transaction described in Section I, 
other than for transactions corrected pursuant to the SC Component of 
the VFC Program. For transactions corrected pursuant to the SC 
Component of the VFC Program, the terms of this section will be 
satisfied if EBSA has acknowledged receipt of the SCC notice in 
accordance with Section 6.2 of the VFC Program.

Section IV. Notice to Interested Persons and Special Rules for Self-
Correctors

    A. Written notice of the transaction(s) for which the applicant is 
seeking relief pursuant to the VFC Program, and this exemption, and the 
method of correcting the transaction, was provided to interested 
persons within 60 calendar days following the date of the submission of 
an application under the VFC Program. A copy of the notice was provided 
to the appropriate Regional Office of the United States Department of 
Labor, Employee Benefits Security Administration, within the same 60-
day period, and the applicant indicated the date upon which notice was 
distributed to interested persons. Plan assets were not used to pay for 
the notice. The notice included an objective description of the 
transaction and the steps taken to correct it, written in a manner 
reasonably calculated to be understood by the average Plan participant 
or beneficiary. The notice provided for a period of 30 calendar days, 
beginning on the date the notice was distributed, for interested 
persons to provide comments to the appropriate Regional Office, and it 
included the address and telephone number of such Regional Office. The 
Model Notice to Interested Persons contained in the Appendix may be 
used to satisfy the written notice

[[Page 70758]]

requirement contained in this Section IV.
    B. The notice to interested persons described in Section IV.A. was 
given in a manner that was reasonably calculated, taking into 
consideration the circumstances of the plan, to result in the receipt 
of such notice by interested persons, including but not limited to 
regular mail, or electronic mail, or any combination thereof. The 
notice informed interested persons of the applicant's participation in 
the VFC Program and intention of availing itself of relief under the 
exemption.
    C. Notwithstanding the foregoing and solely with respect to 
applicants seeking relief with respect to the VFC Program other than 
through the SC Component, Section IV.A. and IV.B. shall not apply to a 
transaction described in Section I.A., provided that: (1) the applicant 
under the VFC Program has met all of the other applicable Program 
requirements; (2) the amount of the excise tax that otherwise would be 
imposed by Code section 4975 with respect to any transaction(s) 
described in Section I.A would be less than or equal to $100; (3) the 
amount of the excise tax that otherwise would be imposed by Code 
section 4975 was paid to the plan and allocated to the individual 
accounts of participants and beneficiaries in the same manner as 
provided under the plan with respect to plan earnings; and (4) the 
applicant under the VFC Program provides a copy of a completed IRS Form 
5330 or written documentation containing the information required by 
IRS Form 5330 and proof of payment with the submission of the 
application to the appropriate EBSA Regional Office. For the sole 
purpose of determining whether the excise tax due under Code section 
4975 on the ``amount involved'' with respect to the prohibited 
transaction involving the failure to timely transmit participant 
contributions and loan repayments is less than or equal to $100, an 
applicant may calculate the excise tax due based upon the Lost Earnings 
amount computed using the online calculator provided under the Program.
    D. Notwithstanding the foregoing and solely with respect to self-
correctors seeking relief with respect to transactions corrected 
pursuant to the SC Component of the VFC Program, Section IV.A. and B. 
shall not apply, and additionally the self-corrector must: (1) pay to 
the plan the amount of the excise tax that otherwise would be imposed 
by Code section 4975 and allocate such amount to the individual 
accounts of participants and beneficiaries in the same manner as 
provided under the plan with respect to plan earnings, and (2) retain a 
copy of a completed IRS Form 5330 or written documentation regarding 
the determination of the otherwise applicable excise tax and proof of 
payment of the amounts paid to the plan pursuant to the VFC Program and 
this exemption and (3) provide to the plan administrator a copy of such 
documentation. Self-correctors must calculate the excise tax otherwise 
due based upon the Lost Earnings amount computed using the online 
calculator provided under the Program.

Section V. Definitions

    A. For purposes of this exemption the term ``affiliate'' of a 
person means--
    (1) any person directly, or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) any officer, director, partner, employee, member of the family 
(as defined in Code section 4975(e)(6)) of the person; or
    (3) any corporation or partnership of which such person is an 
officer, director, partner or employee.
    B. For purposes of this Section V, the term ``control'' means the 
power to exercise a controlling influence over the management or 
policies of a person other than an individual.

    Signed at Washington, DC, this 7th day of November, 2022.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.

Appendix--Model Notice to Interested Persons

Dear [Participant or Beneficiary],

    The purpose of this letter is to notify you that the [Insert 
Name of Applicant] is participating in the U.S. Department of 
Labor's Voluntary Fiduciary Correction (VFC) Program with respect to 
the [Insert Name of Plan]. The VFC Program is a voluntary 
enforcement program that encourages the correction of possible 
breaches of Title I of the Employee Retirement Income Security Act 
(ERISA).
    ERISA is the federal law that covers most employee benefit plans 
in the private sector. The U.S. Department of Labor's Employee 
Benefits Security Administration (EBSA) enforces many parts of 
ERISA. If the terms and conditions of the VFC Program are met by 
[Insert Name of Applicant], EBSA will not initiate a civil 
investigation under Title I of ERISA with respect to the transaction 
and voluntary correction described below.
    The VFC Program is accompanied by a ``class exemption'' from 
certain excise taxes imposed under the Internal Revenue Code on 
parties participating in ``prohibited transactions'' as defined in 
ERISA and the Code. The purpose of the prohibited transaction rules 
is to prevent dealings with persons or entities that may be in a 
position to exercise improper influence over employee benefit plan 
assets including [Name of the Plan]. If the terms of the class 
exemption are met, [Insert Name of Applicant] will qualify for 
relief from the excise taxes that would otherwise apply.
    One of the requirements for excise tax relief is for [Insert 
Name of Applicant] to provide you with this notice so you have an 
opportunity to provide comments to EBSA about the prohibited 
transaction and the steps taken to correct the prohibited 
transaction, both of which are described below. To the extent that 
you are interested in providing your written comments to EBSA, you 
may mail them to [Insert the Name of the Appropriate EBSA Regional 
Office from the VFC Program Notice, Appendix C]. The written 
comments should be made to the attention of the ``VFC Program 
Coordinator.'' The address and telephone number for this office are 
[Insert from VFC Program Notice, Appendix C]. You have 30 calendar 
days, beginning on the date this notice was distributed, to provide 
written comments. Individuals submitting written comments on this 
matter are advised not to disclose sensitive personal data such as 
social security numbers.
    [Insert An Objective Description of the Transaction and the 
Steps Taken to Correct the Transaction]
    Please feel free to contact me if you have any questions at 
[Insert Telephone Number of a Person Employed by the Applicant Who 
Is Knowledgeable About this Matter].

Sincerely,
[Insert Name and Title of Person Employed by the Applicant]

[FR Doc. 2022-24702 Filed 11-18-22; 8:45 am]
BILLING CODE 4510-29-P