[Federal Register Volume 88, Number 212 (Friday, November 3, 2023)]
[Proposed Rules]
[Pages 76032-76045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-23782]


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

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2550

[Application No. D-12094]
ZRIN 1210-ZA34


Proposed Amendment to Prohibited Transaction Exemptions 75-1, 77-
4, 80-83, 83-1, and 86-128

AGENCY: Employee Benefits Security Administration (EBSA), U.S. 
Department of Labor.

ACTION: Notice of Proposed Amendment to Prohibited Transaction 
Exemptions 75-1, 77-4, 80-83, 83-1, and 86-128.

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

SUMMARY: This document contains a notice of pendency before the 
Department of Labor (the Department) of proposed amendments to 
Prohibited Transaction Exemptions (PTEs) 75-1, 77-4, 80-83, 83-1, and 
86-128, exemptions from certain prohibited transaction provisions of 
the Employee Retirement Income Security Act of 1974 (ERISA) and the 
Internal Revenue Code of 1986 (the Code). The amendments would affect 
participants and beneficiaries of plans, IRA owners, and certain 
fiduciaries of plans and IRAs.

DATES: Public Comments. Comments are due on or before January 2, 2024.
    Public Hearing. The Department anticipates holding a public hearing 
approximately 45 days following the date of publication in the Federal 
Register. Specific information regarding the date, location, and 
submission of requests to testify will be published in a notice in the 
Federal Register.
    Applicability Date. The Department proposes to make the final 
amendment effective 60 days after it is published in the Federal 
Register.

ADDRESSES: All written comments concerning the proposed amendments 
should be sent to the Employee Benefits Security Administration, Office 
of Exemption Determinations, U.S. Department of Labor through the 
Federal eRulemaking Portal and identified by Application No. D-12094:
    Federal eRulemaking Portal: https://www.regulations.gov. at Follow 
the instructions for submitting comments.
    Docket: For access to the docket to read background documents, 
including the plain-language summary of the proposal of not more than 
100 words in length required by the Providing Accountability Through 
Transparency Act of 2023, or comments, go to the Federal eRulemaking 
Portal at https://www.regulations.gov.
    See SUPPLEMENTARY INFORMATION below for additional information 
regarding comments.

FOR FURTHER INFORMATION CONTACT: Susan Wilker, telephone (202) 693-
8540, Office of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor (these are not toll-free 
numbers).

SUPPLEMENTARY INFORMATION: 

Comment Instructions

    Warning: All comments received will be included in the public 
record without change and will be made available online at https://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 an 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 https://www.regulations.gov website is an ``anonymous 
access'' system, which means EBSA will not know your identity or 
contact information unless you provide it. If you send an email 
directly to EBSA without going through https://www.regulations.gov, 
your email address will be automatically captured and included as part 
of the comment that is placed in the public record and made available 
on the internet.

Background

    As described elsewhere in this edition of the Federal Register, the 
Department is proposing to amend the regulation defining when a person 
renders ``investment advice for a fee or other compensation, direct or 
indirect'' with respect to any moneys or other property of an employee 
benefit plan, for purposes of the definition of a ``fiduciary'' in 
section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 
1974 (ERISA or the Act) and in section 4975(e)(3)(B) of the Internal 
Revenue Code (Code). The Department is also proposing, elsewhere in 
this edition of the Federal Register, to amend prohibited transaction 
exemption (PTE) 2020-02 to provide additional clarity for advice 
fiduciaries and additional protections for plans and investors and PTE 
84-24 to address specific issues that financial institutions face 
complying with the conditions of PTE 2020-02 when distributing 
annuities through independent agents.
    The Department is hereby proposing amendments to existing PTEs 75-
1, 77-4, 80-83, 83-1, and 86-128 that currently provide relief for 
investment advice fiduciaries to receive compensation when plans and 
IRAs enter into certain transactions recommended by the fiduciaries as 
well as certain related transactions. The ERISA and Code provisions at 
issue generally prohibit fiduciaries with respect to employee benefit 
plans and individual retirement accounts (IRAs) from engaging in self-
dealing in connection with transactions involving these plans and IRAs. 
The proposed amendments would remove fiduciary investment advice, as 
defined under ERISA and in a proposed regulation issued by the 
Department that is found elsewhere in this issue of the Federal 
Register, from the covered transactions in each exemption and make 
certain other administrative changes. The Department is proposing these 
amendments on its own motion, pursuant to its authority under ERISA 
section 408(a) and Code section 4975(c)(2) and in accordance with 
procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637 
(October 27, 2011)).\1\
---------------------------------------------------------------------------

    \1\ Reorganization Plan No. 4 of 1978 (5 U.S.C. App. 1 (2018)) 
generally transferred the authority of the Secretary of the Treasury 
to grant administrative exemptions under Code section 4975 to the 
Secretary of Labor.

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

[[Page 76033]]

Current PTEs 75-1, 77-4, 80-83, 83-1, and 86-128

    PTEs 75-1, 77-4, 80-83, 83-1, and 86-128 currently provide 
investment advice fiduciaries with relief for the following 
transactions:
    PTE 75-1 \2\ provides an exemption for broker-dealers, reporting 
dealers, and banks to engage in certain classes of transactions with 
employee benefit plans and IRAs. The exemption has five parts: \3\
---------------------------------------------------------------------------

    \2\ Exemptions from Prohibitions Respecting Certain Classes of 
Transactions Involving Employee Benefit Plans and Certain Broker-
Dealers, Reporting Dealers and Banks, 40 FR 50845 (Oct. 31, 1975), 
as amended at 71 FR 5883 (Feb. 3, 2006).
    \3\ 71 FR 5883 (Feb. 3, 2006).
---------------------------------------------------------------------------

     Part I provides relief for agency transactions and 
services; \4\
---------------------------------------------------------------------------

    \4\ Part I(a) expired on May 1, 1978. It ultimately was replaced 
by PTE 86-128 (51 FR 41686 (Nov. 18, 1986)).
---------------------------------------------------------------------------

     Part II(1) permits the purchase or sale of a security 
between an employee benefit plan or IRA and a broker-dealer registered 
under the Securities Exchange Act of 1934 (15 U.S.C. 78a et. seq.), a 
reporting dealer who makes primary markets in securities of the United 
States Government or of any agency of the United States Government and 
reports daily to the Federal Reserve Bank of New York its positions 
with respect to Government securities and borrowings thereon, or a bank 
supervised by the United States or a State. The exemption provided in 
Part II(1) does not extend to the fiduciary self-dealing and conflicts 
of interest prohibitions of ERISA and the Code;
     Part II(2) contains a special exemption for mutual fund 
purchases (the mutual fund exemption) between fiduciaries and plans or 
IRAs. Although it does provide relief for fiduciary self-dealing and 
conflicts of interest, the mutual fund exemption is only available if 
the fiduciary who decides on behalf of the plan or IRA to enter into 
the transaction is not a principal underwriter for, or affiliated with, 
the mutual fund;
     Part III permits a fiduciary to cause a plan or IRA to 
purchase securities from a member of an underwriting syndicate other 
than the fiduciary itself when the fiduciary is also a member of the 
syndicate;
     Part IV permits a plan or IRA to purchase securities in a 
principal transaction from a fiduciary that is a market maker with 
respect to such securities; and
     Part V permits the extension of credit to a plan or IRA by 
a broker-dealer in connection with the purchase or sale of securities;
    PTE 77-4 \5\ provides relief for a plan's or IRA's purchase or sale 
of open-end investment company shares where the investment adviser for 
the open-end investment company is also a fiduciary to the plan or IRA;
---------------------------------------------------------------------------

    \5\ Class Exemption for Certain Transactions Between Investment 
Companies and Employee Benefit Plans, 42 FR 18732 (Apr. 8, 1977).
---------------------------------------------------------------------------

    PTE 80-83 \6\ provides relief for a fiduciary causing a plan or IRA 
to purchase a security when the proceeds of the securities issuance may 
be used by the issuer to retire or reduce indebtedness to the fiduciary 
or an affiliate;
---------------------------------------------------------------------------

    \6\ Class Exemption for Certain Transactions Involving Purchase 
of Securities Where Issuer May Use Proceeds to Reduce or Retire 
Indebtedness to Parties in Interest, 45 FR 73189 (Nov. 4, 1980), as 
amended at 67 FR 9483 (March 1, 2002).
---------------------------------------------------------------------------

    PTE 83-1 \7\ provides relief for the sale of certificates in an 
initial issuance of certificates by the sponsor of a mortgage pool to a 
plan or IRA when the sponsor, trustee, or insurer of the mortgage pool 
is a fiduciary with respect to the plan or IRA assets invested in such 
certificates; and
---------------------------------------------------------------------------

    \7\ Class Exemption for Certain Transactions Involving Mortgage 
Pool Investment Trusts, 48 FR 895 (Jan. 7, 1984), as amended at 67 
FR 9483 (March 1, 2002).
---------------------------------------------------------------------------

    PTE 86-128 \8\ provides an exemption for certain types of 
fiduciaries to use their authority to cause a plan or IRA to pay a fee 
to the fiduciary, or its affiliate, for effecting or executing 
securities transactions as agent for the plan. The exemption further 
provides relief for these types of fiduciaries to act as agent in an 
``agency cross transaction'' for both a plan or IRA and one or more 
other parties to the transaction, and for such fiduciaries or their 
affiliates to receive fees from the other party(ies) in connection with 
the agency cross transaction. An agency cross transaction is defined in 
the exemption as a securities transaction in which the same person acts 
as agent for both any seller and any buyer for the purchase or sale of 
a security.
---------------------------------------------------------------------------

    \8\ Class Exemption for Securities Transactions Involving 
Employee Benefit Plans and Broker-Dealers, 51 FR 41686 (November 18, 
1986), as amended at 67 FR 64137 (October 17, 2002).
---------------------------------------------------------------------------

Other Advice Exemptions

PTE 2020-02

    PTE 2020-02 \9\ permits investment advice fiduciaries to receive 
compensation as a result of their advice, including as a result of 
advice to roll over assets from an employee benefit plan to an IRA, and 
to engage in certain principal transactions and was designed to promote 
investment advice that is in the best interest of retirement investors 
(e.g., plan participants and beneficiaries, and IRA owners). The 
exemption's conditions emphasize mitigating conflicts of interest and 
ensuring that retirement investors receive advice that is prudent and 
loyal. An important objective of the exemption is to require fiduciary 
investment advice providers to adhere to stringent standards that are 
designed to ensure that their investment recommendations reflect the 
best interest of plan and IRA investors. Accordingly, financial 
institutions and investment professionals relying on PTE 2020-02 must: 
(i) acknowledge their fiduciary status in writing; (ii) disclose their 
services and material conflicts of interest; and adhere to impartial 
conduct standards; (iii) adopt policies and procedures prudently 
designed to ensure compliance with the impartial conduct standards and 
mitigate conflicts of interest that could otherwise cause violations of 
those standards; (iii) document and disclose the specific reasons that 
any rollover recommendations are in the retirement investor's best 
interest; (iv) and conduct an annual retrospective compliance review.
---------------------------------------------------------------------------

    \9\ Prohibited Transaction Exemption 2020-02, Improving 
Investment Advice for Workers & Retirees 85 FR 82798 (Dec. 18, 
2020).
---------------------------------------------------------------------------

    The Department is proposing an amendment to PTE 2020-02 that is 
published separately in this edition of the Federal Register. The 
proposed amendment to PTE 2020-02 would build on these existing 
conditions to provide more protections for retirement investors 
receiving advice and more certainty for financial institutions and 
investment professionals complying with the exemption's conditions. In 
this regard, among other things, the Department is proposing additional 
disclosures to ensure that retirement investors have sufficient 
information to make informed decisions about the costs of the 
investment advice transaction and about the significance and severity 
of the investment advice fiduciary conflicts of interest. The proposed 
amendment also would provide more guidance for financial institutions 
and investment professionals complying with the impartial conduct 
standards and implementing the policies and procedures requirement. As 
discussed in detail in the preamble to the amendment, these additional 
conditions would provide important protections to retirement investors 
by enhancing the existing protections of PTE 2020-02.

[[Page 76034]]

PTE 84-24

    PTE 84-24 \10\ provides exemptive relief for certain prohibited 
transactions that occur when plans or IRAs purchase insurance and 
annuity contracts and shares in an investment company registered under 
the Investment Company Act of 1940 (a mutual fund). The exemption 
permits insurance agents, insurance brokers and pension consultants 
that are parties in interest or fiduciaries with respect to plans and 
IRAs to effect the purchase of the insurance or annuity contracts for 
the plans or IRAs and receive a commission on the sale. The exemption 
also is available for the prohibited transaction that occurs when the 
insurance company selling the insurance or annuity contract is a party 
in interest or disqualified person with respect to the plan or IRA. 
Likewise, with respect to mutual fund transactions, PTE 84-24 permits 
mutual fund principal underwriters that are parties in interest or 
fiduciaries to effect the sale of mutual fund shares to plans or IRAs 
and receive a commission on the transaction.
---------------------------------------------------------------------------

    \10\ 49 FR 13208 (April 3, 1983), as amended at 71 FR 5887 (Feb. 
3, 2006).
---------------------------------------------------------------------------

    The Department is proposing an amendment to PTE 84-24 that is 
published separately in this edition of the Federal Register that would 
provide an alternative exemption for independent insurance agents to 
receive insurance commissions in connection with recommendations of 
annuity products if certain conditions are met that are similar to the 
conditions contained in PTE 2020-02. These conditions are tailored to 
protect retirement investors from the specific conflicts of interest 
that arise when independent insurance agents are compensated through 
insurance commissions. Additionally, the amendment would exclude 
investment advice fiduciaries from the existing relief provided in the 
current Section II of PTE 84-24, add a new eligibility provision for 
investment advice transactions, and amend the current recordkeeping 
condition to be similar to the recordkeeping provision in PTE 2020-02.

Description of Proposed Amendments to PTEs 75-1, 77-4, 80-83, 83-1, and 
86-128

    Providing for a single standard of care (which is currently found 
in PTE 2020-02) that would apply universally to all fiduciary 
investment advice, regardless of the specific type of product or advice 
provider, will provide greater protection for retirement investors and 
create a level playing field among investment advice providers. 
Therefore, to ensure a universal standard of care for the provision of 
investment advice that is based on the conditions of PTE 2020-02, the 
Department is proposing to amend PTEs 75-1 Parts III & IV, 77-4, 80-83, 
83-1, and 86-128 to include the following statement: ``Exception. No 
relief from the restrictions of ERISA section 406(b) and the taxes 
imposed by Code section 4975(a) and (b) by reason of Code sections 
4975(c)(1)(E) and (F) is available for fiduciaries providing investment 
advice within the meaning of ERISA section 3(21)(A)(ii) or Code section 
4975(e)(3)(B) and regulations thereunder.''
    As a result of this amendment, investment advice fiduciaries would 
instead rely on the amended PTE 2020-02 for exemptive relief for 
covered investment advice transactions. By providing exemptive relief 
for fiduciary investment advice transactions under one exemption, PTE 
2020-02, retirement investors would receive consistent protections when 
receiving investment advice from investment professionals such that a 
level playing regulatory playing field would apply regardless of the 
investment product the advisor recommends. The Department requests 
comment on this proposed change.
    In addition to removing exemptive relief for investment advice 
transactions, the Department also is proposing certain administrative 
amendments to these exemptions, which are discussed below.

Amendments to PTE 75-1

    The Department is proposing to revoke parts of PTE 75-1, which was 
granted shortly after ERISA's passage to provide certainty to the 
securities industry over the nature and extent to which ordinary and 
customary transactions between broker-dealers and plans or IRAs would 
be subject to ERISA's prohibited transaction rules.

PTE 75-1 Part I

    PTE 75-1, Part I, paragraphs (b) and (c) provide exemptive relief 
for certain non-fiduciary services provided by broker-dealers in 
securities transactions. Code section 4975(d)(2), ERISA section 
408(b)(2) and regulations thereunder, have clarified the scope of 
relief for service providers to plans and IRAs.\11\ The Department 
believes that the relief provided in Parts I(b) and I(c) of PTE 75-1 
duplicates the relief available under the statutory exemptions at Code 
section 4975(d)(2) and ERISA section 408(b)(2). Therefore, the 
Department is proposing to revoke paragraphs (b) and (c) of Part I, and 
requests comments on this proposed revocation.
---------------------------------------------------------------------------

    \11\ See 29 CFR 2550.408b-2; 42 FR 32390 (June 24, 1977); 
Reasonable Contract or Arrangement under Section 408(b)(2)--Fee 
Disclosure, Final Rule, 77 FR 5632 (Feb. 3, 2012).
---------------------------------------------------------------------------

PTE 75-1, Part II

    PTE 75-1, Part II(2), contains a special exemption for mutual fund 
purchases (the mutual fund exemption) between fiduciaries and plans or 
IRAs subject to minimal safeguards for retirement investors. The 
conditions of the exemption require a fiduciary to customarily purchase 
and sell securities for its own account in the ordinary course of its 
business, the transaction to occur on terms at least as favorable to 
the plan as an arm's length transaction with an unrelated party, and 
records to be maintained.
    The Department is proposing to revoke PTE 75-1, Part II(2), because 
it has determined that it is not protective of retirement investors and 
has been broadly interpreted beyond the Department's intention when it 
was issued.\12\ The transactions that have been covered by PTE 75-1 
Part II(2) are largely now covered by newer, more protective 
exemptions, and fiduciaries providing investment advice on the purchase 
or sale of a mutual fund security can rely on PTE 2020-02. Moreover, 
fiduciaries providing investment management on the purchase or sale of 
a mutual fund security can receive non-commission compensation under 
PTE 77-4. The Department requests comment on this proposed revocation, 
and also on how the remaining parts of PTE 75-1 Part II will be used.
---------------------------------------------------------------------------

    \12\ 81 FR 21181, 21199 (Apr. 8, 2016).
---------------------------------------------------------------------------

    The Department is further proposing to revise the recordkeeping 
provisions of Section (e) of PTE 75-1, Part II. Section (e) currently 
provides that records demonstrating compliance with the exemption must 
be maintained by the plan or IRA involved in the transaction. The 
proposed amendment would place the responsibility for maintaining such 
records on the broker-dealer, reporting dealer, or bank engaging in the 
transaction with such plan or IRA. The proposed amendment also would 
provide that parties relying on the exemption do not have to disclose 
trade secrets or other confidential information to members of the 
public (i.e., plan fiduciaries, contributing employers or employee 
organizations whose members are covered by the plan, participants and 
beneficiaries and IRA owners), but that in the event a party refuses to 
disclose information on this basis, it must

[[Page 76035]]

provide a written notice to the requester advising it of the reasons 
for the refusal and that the Department may request such information on 
the requester's behalf.
    The Department requests comment regarding whether fiduciaries 
providing discretionary investment management services on the purchase 
or sale of a mutual fund security in a principal transaction need the 
relief that is provided by PTE 75-1, Part II(2), and, if so, what 
conditions would be appropriate.

Part 75-1, Part V

    PTE 75-1, Part V permits a broker-dealer to extend credit to a plan 
or IRA in connection with the purchase or sale of securities. It 
originally did not permit the receipt of compensation for an extension 
of credit by broker-dealers that are fiduciaries with respect to the 
assets involved in the transaction. In 2016, the Department amended 
this exemption to allow investment advice fiduciaries to receive 
compensation when they extend credit to plans and IRAs to avoid a 
failed securities transaction. As a condition of the amendment, the 
failure of the purchase or sale of the securities could not have been 
caused by the fiduciary or an affiliate. The Department also added a 
definition of the term ``IRA'' as any account or annuity described in 
Code section 4975(e)(1)(B) through (F), including, for example, an 
individual retirement account described in section 408(a) of the Code 
and a health savings account described in section 223(d) of the 
Code.\13\ The amendment also revised the recordkeeping provisions of 
PTE 75- 1, Part V, to require the broker-dealer engaging in the covered 
transaction, as opposed to the plan or IRA, to maintain the records. 
The Department is proposing to make these amendments to PTE 75-1 Part V 
as it did in 2016.
---------------------------------------------------------------------------

    \13\ The Department has previously determined, after consulting 
with the Internal Revenue Service (the IRS), that plans described in 
4975(e)(1) of the Code are included within the scope of relief 
provided by PTE 75-1 because it was issued jointly by the Department 
and the IRS. See PTE 2002-13, 67 FR 9483 (Mar. 1, 2002) (preamble 
discussion). For simplicity and consistency with the other new 
exemptions and amendments to other existing exemptions published 
elsewhere in this issue of the Federal Register, the Department has 
adopted this specific definition of IRA.
---------------------------------------------------------------------------

PTE 86-128

    The Department is proposing certain administrative changes to PTE 
86-128, which are not directly related to the provision of fiduciary 
investment advice. As it did in 2016, the Department is proposing to 
delete Section IV(a), which provides an exclusion from the conditions 
of the exemption for certain plans not covering employees, including 
IRAs, to increase the safeguards available to these retirement 
investors. Therefore, investment advice fiduciaries to IRAs would have 
to rely on another exemption, such as PTE 2020-02. Fiduciaries that 
exercise full discretionary authority or control with respect to IRAs 
could continue to rely on PTE 86-128, as long as they comply with all 
of the exemption's conditions.
    The Department is also proposing certain technical changes to the 
exemption, including deleting subsection IV(b)(1), and redesignating 
remaining sections as needed. The language currently in Section 
IV(b)(1) excludes investment advice providers; however, investment 
advice providers would be excluded from the exemption as a whole; 
therefore, the exclusion does not need to be repeated in Section IV. As 
a result of the deletion of Section IV(a) and IV(b)(1), the Department 
is redesignating subsections IV(b)(2) and (3) as subsections IV(a)(1) 
and (2), respectively, and Section IV(c) as Section IV(b).
    The Department is proposing to revise the new Section IV(b) to 
read: ``Recapture of profits. Sections III(a) and III(i) of this 
exemption do not apply in cases where the person engaging in a covered 
transaction returns or credits to the plan all profits earned by that 
person in connection with the securities transactions associated with 
the covered transaction.'' Discretionary trustees were first permitted 
to rely on PTE 86-128 without meeting the ``recapture of profits'' 
provision pursuant to an amendment made in 2002 (2002 Amendment). To 
effect this change, the 2002 Amendment revised Section III(a), which 
had provided that ``[t]he person engaging in the covered transaction 
[may not be] a trustee (other than a nondiscretionary trustee), or an 
administrator of the plan, or an employer any of whose employees are 
covered by the plan.'' Under the amendment, the reference to ``trustee 
(other than a nondiscretionary trustee)'' was deleted from Section 
III(a), and discretionary trustees had to satisfy certain additional 
conditions set forth in Section III(h) and (i) to rely on the 
exemption. Section III(h) provides that discretionary trustees may 
engage in the covered transactions only with plans or IRAs with total 
net assets of at least $50 million,\14\ and Section III(i) requires 
discretionary trustees to provide additional disclosures. The 
Department understands that after the 2002 Amendment, practitioners had 
questions regarding whether discretionary trustees were permitted to 
rely on the ``recapture of profits'' provision, which allows persons 
identified in Section III(a) to engage in the covered transactions if 
they return or credit to the plan or IRA all profits, as an alternative 
to complying with Sections III(h) and (i). By deleting the reference to 
discretionary trustees from Section III(a), the Department believes 
that the 2002 Amendment inadvertently may have prevented trustees of 
plans or IRAs from using the recapture of profits approach, and 
instead, has limited the exemption to trustees that satisfy Section 
III(h) and (i). This result was not intended, therefore, the Department 
is proposing to modify the exemption to permit all trustees, regardless 
of associated plan or IRA size, to utilize the recapture of profits 
exception as they originally were permitted to do in PTE 86-128.
---------------------------------------------------------------------------

    \14\ Special rules apply under Section III(h) for pooled funds 
and groups of plans maintained by a single employer or controlled 
group of employers.
---------------------------------------------------------------------------

    In order to achieve this result, the Department has proposed an 
amendment to section IV(c) providing that Sections III(a) and III(i) do 
not apply in any case where the person engaging in the covered 
transaction returns or credits to the plan or IRA all profits earned by 
that person in connection with the securities transaction associated 
with the covered transaction. In addition, the Department proposes to 
reinsert a reference to trustees (other than nondiscretionary trustees) 
in Section III(a) along with the existing references to plan 
administrators and employers. Finally, the Department is proposing to 
add a sentence to the end of Section III(a) stating: ``Notwithstanding 
the foregoing, this condition does not apply to a trustee that 
satisfies Section III(h) and (i).'' The purpose of these proposed 
amendments is to clarify that trustees may engage in covered 
transactions subject to the recapture of profits limitations in Section 
V(b) of the exemption.
    The Department is not proposing to amend PTE 86-128 to include 
mutual fund principal transactions that are currently covered in PTE 
75-1 Part II(2). The Department previously made such a change in 2016 
to allow both investment advice and investment discretion mutual fund 
principal fund transactions to rely on an amended PTE 86-128. However, 
the Department now believes other exemptions, including PTE 2020-02, 
provide sufficient relief for these types of transactions and enhanced 
protection for retirement investors.

[[Page 76036]]

    Lastly, the Department is proposing to add a new Section VII to PTE 
86-128 that would require the fiduciary engaging in a transaction 
covered by the exemption to maintain records necessary to enable 
certain persons (described in proposed Section VII(b)) to determine 
whether the conditions of this exemption have been met. The proposed 
recordkeeping requirement is consistent with the recordkeeping 
provisions contained in other existing class exemptions as well as the 
recordkeeping provisions of proposed amendments to PTEs 84-24 and 2020-
02, which are published separately in this issue of the Federal 
Register.

Executive Order 12866 and 13563 Statement

    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 costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility.
    Under Executive Order 12866, as amended by Executive Order 14094, 
``significant'' regulatory actions are 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 $200 
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; (2) creating a 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 legal or policy issues for which centralized 
review would meaningfully further the President's priorities or the 
principles set forth in the Executive order. It has been determined 
that this proposal is ``significant regulatory action'' within the 
scope of section 3(f)(1) of the Executive order. Therefore, the 
Department has provided an assessment of the proposal's potential 
costs, benefits, and transfers, and OMB has reviewed this proposed 
amendment pursuant to the Executive order.

Paperwork Reduction Act Statements

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department conducts a preclearance consultation program to 
allow the general public and Federal agencies to comment on proposed 
and continuing collections of information in accordance with the 
Paperwork Reduction Act of 1995 (PRA). This helps to ensure that the 
public understands the Department's collection instructions, 
respondents can provide the requested data in the desired format, 
reporting burden (time and financial resources) is minimized, 
collection instruments are clearly understood, and the Department can 
properly assess the impact of collection requirements on respondents.
    Currently, the Department is soliciting comments concerning the 
information collection requests (ICRs) included in the proposed 
amendments to Prohibited Transaction Exemptions 75-1, 77-4, 80-83, 83-
1, and 86-128. To obtain a copy of the ICRs, contact the PRA addressee 
shown below or go to https://www.RegInfo.gov. The Department has 
submitted a copy of the amendments to the OMB in accordance with 44 
U.S.C. 3507(d) for review of its information collections. The 
Department and OMB are particularly interested in comments that:
     Evaluate whether the collection of information is 
necessary for the functions of the agency, including whether the 
information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the collection of information, including the validity of the 
methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology (e.g., permitting 
electronically delivered responses).
    Commenters may send their views on the Department's PRA analysis in 
the same way they send comments in response to these proposed rules 
(for example, through the www.regulations.gov website), including as 
part of a comment responding to the broader proposal. Comments are due 
by January 2, 2024 to ensure their consideration.
    PRA Addressee: Address requests for copies of the ICR to James 
Butikofer, Office of Research and Analysis, U.S. Department of Labor, 
Employee Benefits Security Administration, 200 Constitution Avenue NW, 
Room N-5718, Washington, DC 20210, or [email protected]. ICRs also are 
available at https://www.RegInfo.gov (https://www.reginfo.gov/public/do/PRAMain).

Amendments to PTE 75-1

    The Department proposes to amend PTE 75-1, Part V, to include a new 
disclosure requirement requiring the plan or IRA to receive a written 
disclosure of certain terms before the extension of credit. The 
disclosure must include the rate of interest or other fees that will be 
charged on such extension of credit, and the method of determining the 
balance upon which interest will be charged. The plan or IRA must 
additionally be provided with prior written disclosure of any changes 
to these terms. The Department believes that it is a usual and 
customary business practice to maintain records required to demonstrate 
compliance with disclosure distribution regulations mandated by the 
Securities and Exchange Commission (SEC). The Department believes that 
this new disclosure requirement is consistent with the disclosure 
requirement mandated by the SEC in 17 CFR 240.10b-16(1) for margin 
transactions. Therefore, the Department concludes that this requirement 
produces no additional burden to the public.
    The Department is also amending PTE 75-1, Parts II and V to adjust 
the recordkeeping requirement to shift the burden from plans and IRAs 
to financial institutions. The amended class exemption requires as a 
condition for relief that financial institutions engaging in the 
exempted transactions (rather than the plans or IRAs) to retain or 
cause to be maintained all records pertaining to such transactions for 
six years and provide access to the records upon request to the 
specified parties.
    Finally, the Department is proposing to amend PTE 75-1 Parts III 
and IV, which currently provide relief for investment advice 
fiduciaries, by removing fiduciary investment advice from the covered 
transactions. Investment advice providers would instead have to rely on 
the amended PTE 2020-02 for exemptive relief covering investment advice 
transactions.
    Broker-dealers registered under the Securities Exchange Act of 1934 
(15 U.S.C. 78a et seq.), reporting dealers, and banks are eligible to 
rely on the exemption. According to the SEC, approximately 3,508 
broker-dealers

[[Page 76037]]

were SEC-registered as of December 2021.\15\ Not all broker-dealers 
perform services for employee benefit plans. In 2021, 54 percent of 
registered investment advisers provided employer-sponsored retirement 
benefits consulting.\16\ Assuming the percentage of broker-dealers 
provide advice to retirement plans is the same as the percent of 
investment advisers providing services to plans, the Department 
estimates 54 percent, or 1,894 broker-dealers, would be affected by PTE 
75-1.
---------------------------------------------------------------------------

    \15\ Estimates based on SEC's FOCUS filings and SEC's Form ADV 
filings.
    \16\ Cerulli Associates, U.S. RIA Marketplace 2022, Exhibit 
5.10, Part 1, The Cerulli Report.
---------------------------------------------------------------------------

    According to the Federal Deposit Insurance Corporation, there are 
4,096 commercial banks as of March 31, 2023.\17\ If one-half of these 
banks (about 2,048) and 54 percent of broker-dealers (about 1,894 
broker-dealers) relied on this exemption, there would be approximately 
3,942 respondents.\18\
---------------------------------------------------------------------------

    \17\ Federal Insurance Deposit Corporation, Quarterly Banking 
Profile, Statistics at a Glance- as of March 31, 2023, https://www.fdic.gov/analysis/quarterly-banking-profile/statistics-at-a-glance/2023mar/industry.pdf.
    \18\ Reporting dealers covered by the exemption are not 
accounted for separately because they are banks and security 
brokerages that trade in U.S. Government Securities; thus, reporting 
dealers are already accounted for in the number of broker-dealer 
firms and banks. The New York Federal Reserve Bank reported 21 
primary dealers on March 21, 2013. http://www.newyorkfed.org/markets/pridealers_current.html.
---------------------------------------------------------------------------

Recordkeeping Requirements

    The Department has assumed that financial service providers that 
transact with employee benefit plans will maintain these records on 
behalf of their client plans. Because of the sophisticated nature of 
financial service providers and the regulation of the securities 
industry by State and federal government, and by self-regulatory 
organizations, the Department has assumed that the records required by 
this class exemption are the same records kept in the normal course of 
business, or in compliance with other requirements. The Department 
requests comment on this assumption.
    The Department has estimated that the additional time needed to 
maintain records for the financial institutions to be consistent with 
the exemption will be four hours per entity annually at a wage rate of 
$190.63 per hour.\19\ Thus, the Department estimates it would take 
15,768 hours at an equivalent cost of $3,005,854 to maintain the 
records and make the records available for inspection.\20\
---------------------------------------------------------------------------

    \19\ Internal Department calculation based on 2023 labor cost 
data. For a description of the Department's methodology for 
calculating wage rates, see https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/technical-appendices/labor-cost-inputs-used-in-ebsa-opr-ria-and-pra-burden-calculations-june-2019.pdf.
    \20\ The burden is estimated as follows: (3,942 financial 
institutions x 4 hours) = 15,768 hours. A labor rate of $190.63 is 
used for a financial manager. The labor rate is applied in the 
following calculation: (3,942 x 4 hours) x $190.63 = $3,005,854.

                     Table 1--Hour Burden and Equivalent Cost Associated With Recordkeeping
----------------------------------------------------------------------------------------------------------------
                                                              Year 1                     Subsequent years
----------------------------------------------------------------------------------------------------------------
                                                                    Equivalent                      Equivalent
                    Activity                       Burden hours     burden cost    Burden hours     burden cost
----------------------------------------------------------------------------------------------------------------
Financial Manager...............................          15,768      $3,005,854          15,768      $3,005,854
                                                 ---------------------------------------------------------------
    Total.......................................          15,768       3,005,854          15,768       3,005,854
----------------------------------------------------------------------------------------------------------------

Summary

    In sum, the Department estimates the total burden hours for the 
amended PTE 1975-1 is 15,768 hours at a total equivalent burden cost of 
$3,005,854. The total cost burden is estimated to be de minimis. The 
Department assumes that required records are maintained by the relevant 
affected entities, the broker-dealers and banks. Thus, there are no 
additional tasks performed outside of those performed by the brokerage 
firms/banks.
    The paperwork burden estimates are summarized as follows:
    Type of Review: Revision of an existing collection.
    Agency: Employee Benefits Security Administration, Department of 
Labor.
    Titles: Prohibited Transaction Exemption 75-1 (Security 
Transactions with Broker-Dealers, Reporting Dealers and Banks).
    OMB Control Number: 1210-0092.
    Affected Public: Businesses or other for-profits; not for profit 
institutions.
    Estimated Number of Respondents: 3,942.
    Estimated Number of Annual Responses: 3,942.
    Frequency of Response: Initially, Annually, When engaging in 
exempted transaction.
    Estimated Total Annual Burden Hours: 15,768 hours.
    Estimated Total Annual Burden Cost: $0.

Amendments to PTE 86-128

    The Department is proposing to amend Section VI of PTE 86-128 to 
require financial institutions to maintain or cause to be maintained 
for six years the records necessary for the Department, IRS, plan 
fiduciary, contributing employer or employee organization whose members 
are covered by the plan, participants and beneficiaries and IRA owners 
to determine whether conditions of this exemption have been met.
    In addition, the amendment would impose conditions on IRAs. Section 
III of the class exemption imposes the following requirements on 
fiduciaries of employee benefit plans that effect or execute securities 
transactions and the independent plan fiduciaries authorizing the plan 
or IRA to engage in the transactions with the investment advice 
provider (``authorizing fiduciary'') under the conditions contained in 
the exemption:
    (1) The authorizing fiduciary must provide the investment advice 
provider with an advance written authorization for the transactions;
    (2) The investment advice provider must provide the authorizing 
fiduciary with information necessary to determine whether an 
authorization should be made, including a copy of the exemption, a form 
for termination, a description of the investment advice provider's 
brokerage placement practices, and any other reasonably available 
information regarding the matter that the authorizing fiduciary 
requests;
    (3) The investment advice provider must provide the authorizing 
fiduciary with a termination form, at least annually, explaining that 
the authorization is terminable at will, without penalty to the plan, 
and that failure to return the form will result in continued 
authorization for the

[[Page 76038]]

investment advice provider to engage in securities transactions on 
behalf of the plan or IRA;
    (4) The investment advice provider must provide the authorizing 
fiduciary with either (a) a confirmation slip for each individual 
securities transaction within 10 days of the transaction containing the 
information described in Rule 10b-10(a)(1-7) under the Securities 
Exchange Act of 1934, 17 CFR 240.10b-10 or (b) a quarterly report 
containing certain financial information including the total of all 
transaction-related charges incurred by the plan or IRA;
    (5) The investment advice provider must provide the authorizing 
fiduciary with an annual summary of the confirmation slips or quarterly 
reports, containing all security transaction-related charges, the 
brokerage placement practices (if changed), and a portfolio turnover 
ratio;
    (6) An investment advice provider who is a discretionary trustee 
must provide the authorizing fiduciary with an annual report showing 
separately the commissions paid to affiliated brokers and non-
affiliated brokers, on both a total dollar basis and a cents-per-share 
basis.
    Using data from 2021 Form 5500, the Department estimates that 1,257 
unique plans hired service providers denoting on the Schedule C that 
they were a discretionary trustee. Further, among these plans, 801 also 
reported that they provided investment management services or received 
investment management fees paid directly or indirectly by the plan.\21\ 
Based on these values, the Department estimates on average, 1,000 plans 
have discretionary fiduciaries with full discretionary control. As 
small plans do not file the Schedule C, this estimate may be an 
underestimate. The Department requests comment on how many plans have 
discretionary fiduciaries with full discretionary control and how many 
would continue to rely on PTE 1986-128 under the proposed amendments.
---------------------------------------------------------------------------

    \21\ Estimates based on 2021 Form 5500 data.
---------------------------------------------------------------------------

    The Department estimates that of the estimated 1,000 plans 
discussed above, 7.5 percent are new accounts or new financial advice 
relationships.\22\ Based on these assumptions, the Department estimates 
that 75 plans would be affected by the proposed amendments to PTE 1986-
128.\23\
---------------------------------------------------------------------------

    \22\ EBSA identified 57,575 new plans in its 2021 Form 5500 
filings, or 7.5 percent of all Form 5500 pension plan filings.
    \23\ The number of new plans is estimated as: 1,000 plans x 7.5 
percent of plans are new = 75 new plans.
---------------------------------------------------------------------------

    The Department lacks reliable data on the number of managed IRAs 
that would experience such a transaction in a given year. The 
Department estimates that there are 10,000 managed IRAs. The Department 
also does not have data on the number of new IRA accounts that are 
opened each year. However, in 2022, of the 67.8 million IRA owners, 1.4 
million, or approximately 2.1 percent, opened an IRA for the first 
time.\24\ Inferring from this statistic, the Department estimates that 
2.1 percent of IRA accounts are new each year. The Department 
acknowledges that some IRA owners may have multiple IRAs, and as such, 
this statistic may underestimate the percentage of new IRAs opened.\25\ 
This results in an estimate of 210 IRAs that are new accounts or new 
financial advice relationships.\26\
---------------------------------------------------------------------------

    \24\ Cerulli Associates, U.S. Retirement End-Investor 2023: 
Fostering Comprehensive Relationships, The Cerulli Report.
    \25\ The Department lacks data on the number of IRA owners that 
own multiple IRAs. To provide scope of magnitude, one source 
reported that in 2019, 19 percent of IRA owners contributed to both 
a traditional IRA and Roth IRA. (See Investment Company Institute, 
The Role of IRAs in U.S. Households' Saving for Retirement, 2020, 
27(1) ICI Research Perspective, (2021).) This statistic does not 
account for individuals who own multiple IRAs of each type or those 
who did not contribute in 2019, but it provides a lower bound.
    \26\ (10,000 managed IRAs x 2.1 percent of IRAs are new) = 210 
IRAs.
---------------------------------------------------------------------------

    The Department lacks reliable data on the number of investment 
advice providers who are discretionary fiduciaries that would rely on 
the amended exemption. For the purposes of this analysis, the 
Department assumes that the number of discretionary fiduciaries relying 
on the exemption is equal to the estimated number of broker-dealers 
estimated to be affected by the amendments to PTE 2020-02, or 1,894 
investment advice providers.\27\
---------------------------------------------------------------------------

    \27\ Estimates are based on the SEC's FOCUS filings and Form ADV 
filings for broker-dealers.
---------------------------------------------------------------------------

    The Department requests comment on this assumption, particularly 
with regard to what types of entities would be likely to rely on the 
amended exemption, as well as any underlying data.
    The following wage rates are assumed: an in-house rate of $159.34 
for legal professionals and $63.45 for clerical staff.\28\ In addition, 
the Department assumes that 100 percent of plans will use electronic 
means to deliver the required information with no associated cost 
burden. The Department also assumes that 94.2 percent of IRAs and 
financial institutions will use electronic means to deliver the 
required information with no associated cost burden.\29\ The Department 
assumes that is similar to the percent receiving electronically under 
the Department's 2020 electronic disclosure safe harbor.\30\ The 
Department requests comments on these assumptions.
---------------------------------------------------------------------------

    \28\ Internal Department calculation based on 2023 labor cost 
data. For a description of the Department's methodology for 
calculating wage rates, see https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/technical-appendices/labor-cost-inputs-used-in-ebsa-opr-ria-and-pra-burden-calculations-june-2019.pdf.
    \29\ The Department estimates approximately 94.2 percent of 
retirement investors receive disclosures electronically. This is the 
sum of the estimated share of retirement investors receiving 
electronic disclosures under the 2002 electronic disclosure safe 
harbor (58.2 percent) and the estimated share of retirement 
investors receiving electronic disclosures under the 2020 electronic 
disclosure safe harbor (36 percent).
    \30\ 85 FR 31884 (May 27, 2020).
---------------------------------------------------------------------------

Recordkeeping Requirement

    The Department is proposing to amend Section VI to require 
financial institutions to maintain or cause to be maintained for six 
years the records necessary for the Department, IRS, plan fiduciary, 
contributing employer or employee organization whose members are 
covered by the plan, participants and beneficiaries and IRA owners to 
determine whether conditions of this exemption have been met.
    Each of the 1,894 investment advice providers will maintain these 
records on behalf of their client plans in their normal course of 
business. Therefore, the Department has estimated that the additional 
time needed to maintain records consistent with the exemption will only 
require about one-half hour, on average annually for a financial 
manager at an hourly rate of $190.63 to organize and collate the 
documents. This results in 947 hours of burden at an equivalent cost of 
$180,527.\31\ The recordkeeping requirement will also require 15 
minutes of clerical time at an hourly rate of $63.45 to prepare and 
send the documents for inspection, resulting in 474 hours of burden at 
an equivalent cost of $30,044.\32\
---------------------------------------------------------------------------

    \31\ The burden is estimated as follows: [(1,894 investment 
advice providers x 30 minutes) / 60 minutes] = 947 hours. A labor 
rate of $190.63 is used for a financial manager. The labor rate is 
applied in the following calculation: [(1,894 investment advice 
providers x 30 minutes) / 60 minutes] x $190.63 per hour = $180,527.
    \32\ The burden is estimated as follows: 1,894 investment advice 
providers x 15 minutes = 474 hours. A labor rate of $63.45 is used 
for a clerical worker. The labor rate is applied in the following 
calculation: [(1,894 investment advice providers x 15 minutes) / 60 
minutes] x $63.45 per hour = $30,044.
---------------------------------------------------------------------------

    In total, the recordkeeping requirement is expected to impose an 
hour burden of 1,421 hours with an equivalent cost of $210,571.

[[Page 76039]]



                     Table 2--Hour Burden and Equivalent Cost Associated With Recordkeeping
----------------------------------------------------------------------------------------------------------------
                                                              Year 1                     Subsequent years
----------------------------------------------------------------------------------------------------------------
                                                                    Equivalent                      Equivalent
                    Activity                       Burden hours     burden cost    Burden hours     burden cost
----------------------------------------------------------------------------------------------------------------
Financial Manager...............................             947        $180,527             947        $180,527
Clerical........................................             474          30,044             474          30,044
                                                 ---------------------------------------------------------------
    Total.......................................           1,421         210,571           1,421         210,571
----------------------------------------------------------------------------------------------------------------

Written Authorization From the Authorizing Fiduciary to the Broker-
Dealer

    Authorizing fiduciaries of new plans and IRAs entering into a 
relationship with an investment advice provider are required to provide 
the investment advice provider with an advance written authorization to 
perform transactions for the plan or IRA. The Department estimates that 
there are approximately 285 plans and IRAs that are new or that enter 
new arrangements each year.\33\ Therefore, the Department estimates 
that approximately 285 authorizing fiduciaries are expected to send an 
advance written authorization. It is assumed that a legal professional 
will spend 15 minutes per plan reviewing the disclosures and preparing 
an authorization form. This results in an hour burden of 71 hours with 
an equivalent cost of $11,353.\34\
---------------------------------------------------------------------------

    \33\ 75 plans + 210 IRAs = 285 plans and IRAs that are new or 
that enter new arrangements each year.
    \34\ The burden is estimated as follows: [(285 plans and IRAs x 
15 minutes per plan or IRA) / 60 minutes] = 71 hours. A labor rate 
of $159.34 is used for a legal professional. The labor rate is 
applied in the following calculation: [(285 plans and IRAs x 15 
minutes per plan or IRA) / 60 minutes] x $159.34 per hour = $11,353.
---------------------------------------------------------------------------

    To produce and distribute the authorization, the Department assumes 
that 100 percent of plans and 94.2 percent of IRAs will use traditional 
electronic methods at no additional burden, and the remaining 5.8 
percent of IRAs will be mailed. The Department assumes that clerical 
staff will spend 5 minutes preparing and sending the authorization, 
resulting in an hour burden of approximately 24 hours with an 
equivalent cost of $1,507.\35\ It is assumed that the authorization 
will be two pages and paper authorizations will cost $0.76 each, which 
results in a cost burden of $9.\36\
---------------------------------------------------------------------------

    \35\ The burden is estimated as follows: [(285 plans or IRAs x 5 
minutes per plan or IRA) / 60 minutes] = 24 hours; A labor rate of 
$63.45 is used for a clerical worker. The labor rate is applied in 
the following calculation: [(285 plans or IRAs x 5 minutes per IRA) 
/ 60] x $63.45 = $1,507.
    \36\ The burden is estimated as follows: (2 pages x $0.05 per 
page) + $0.66 for postage = $0.76; The mailing rate is applied in 
the following calculation: (210 authorizations for IRAs x 5.8 
percent paper) x $0.76 = $9.
---------------------------------------------------------------------------

    In total, the written authorization requirement is expected to 
result in a total hour burden of 95 hours with an equivalent cost of 
$12,860 and a total cost burden of $9.

                       Table 3--Hour Burden, Equivalent Cost, Postage and Material Cost Associated With the Written Authorization
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Year 1                                                Subsequent years
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Equivalent                                                 Equivalent
             Activity                Burden hours     burden cost     Pages     Material cost   Burden hours     burden cost     Pages     Material cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Legal.............................              71         $11,353          0              $0              71         $11,353          0              $0
Clerical..........................              24           1,507          2               9              24           1,507          2               9
                                   ---------------------------------------------------------------------------------------------------------------------
    Total.........................              95          12,860          2               9              95          12,860          2               9
--------------------------------------------------------------------------------------------------------------------------------------------------------

Provision of Materials for Evaluation of Authorization of Transaction

    Prior to a written authorization being made, the authorizing 
fiduciary must be provided by the financial institution with a copy of 
the exemption, a form for termination of authorization, a description 
of broker's placement practices, and any other reasonably available 
information. This information is assumed to be readily available.
    To produce and distribute the materials, the Department assumes 
that 94.2 percent of financial institutions will use traditional 
electronic methods at no additional burden, while the remaining 5.8 
percent of financial institutions will mail the materials. The 
Department estimates that a clerical staff member will spend five 
minutes to prepare and distribute the required information to the 
authorizing fiduciary. This information will be sent to the 285 plans 
and IRAs entering into an agreement with a financial institution, and 
based on the above, the Department estimates that this requirement 
results in an hour burden of 24 hours with an equivalent cost of 
$1,507.\37\ It is assumed that this information will be seven pages and 
paper distribution will cost $1.01 each, which results in a cost burden 
of about $17.\38\
---------------------------------------------------------------------------

    \37\ The burden is estimated as follows: [[(75 plans x 5 minutes 
per plan) / 60 minutes] + [(210 IRAs x 5 minutes per IRA) / 60 
minutes] = 24 hours; A labor rate of $63.45 is used for a clerical 
worker. The labor rate is applied in the following calculation: 
{[(75 plans x 5 minutes per plan) / 60 minutes] x $63.45{time}  + 
[{(210 IRAs x 5 minutes per IRA) / 60 minutes] x $63.45{time}  = 
$1,507.
    \38\ The burden is estimated as follows: 7 pages x $0.05 per 
page + $0.66 for postage = $1.01; The mailing rate is applied in the 
following calculation: (75 plans x 5.8 percent paper x $1.01) + (210 
materials packages for IRAs x 5.8 percent paper x $1.01) = $17.
---------------------------------------------------------------------------

    In total, the written authorization requirement is expected to 
result in a total hour burden of 24 hours with an equivalent cost of 
$1,507 and a total cost burden of $17.

[[Page 76040]]



          Table 4--Hour Burden, Equivalent Cost, Postage and Material Cost Associated With Provision of Materials for Transaction Authorization
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Year 1                                                Subsequent years
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Equivalent                                                 Equivalent
             Activity                Burden hours     burden cost     Pages     Material cost   Burden hours     burden cost     Pages     Material cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clerical..........................              24          $1,507          7             $17              24          $1,507          7             $17
                                   ---------------------------------------------------------------------------------------------------------------------
    Total.........................              24           1,507          7              17              24           1,507          7              17
--------------------------------------------------------------------------------------------------------------------------------------------------------

Provision of an Annual Termination Form

    Each authorizing fiduciary must be supplied annually with a form 
expressly providing an election to terminate the written authorization. 
It is assumed that legal professionals with each of the 1,894 
investment advice providers will spend on average 15 minutes preparing 
the termination forms, which results in an hour burden of 474 hours 
with an equivalent cost of $75,447.\39\
---------------------------------------------------------------------------

    \39\ The burden is estimated as follows: [(1,894 investment 
advice providers x 15 minutes per financial institution) / 60 
minutes] = 474 hours; A labor rate of $159.34 is used for a legal 
professional. The labor rate is applied in the following 
calculation: [(1,894 investment advice providers x 15 minutes per 
financial institution) / 60 minutes] x $159.34 per hour = $75,447.
---------------------------------------------------------------------------

    To produce and distribute the termination form to the 10,000 IRAs 
and 1,000 plans, the Department assumes that 94.2 percent of financial 
institutions will use traditional electronic methods at no additional 
burden, while the remaining 5.8 percent of financial institutions will 
mail the termination forms. The Department estimates that clerical 
staff will spend five minutes per plan or IRA preparing and 
distributing the termination forms resulting in an hour burden of 917 
hours with an equivalent cost of $58,163.\40\ It is assumed that the 
form will be two pages, so paper copies will cost $0.76 each, which 
results in a cost burden of approximately $485.\41\
---------------------------------------------------------------------------

    \40\ The burden is estimated as follows: [(1,000 plans x 5 
minutes per plan) / 60 minutes] + [(10,000 IRAs x 5 minutes per IRA) 
/ 60 minutes] = 917 hours. A labor rate of $63.45 is used for a 
clerical worker. The labor rate is applied in the following 
calculation: {[(1,000 plans x 5 minutes per plan) / 60 minutes] x 
$63.45{time}  + {[(10,000 IRAs x 5 minutes per IRA) / 60 minutes] x 
$63.45{time}  = $58,163.
    \41\ The burden is estimated as follows: 2 pages x $0.05 per 
page + $0.66 for postage = $0.76. The mailing rate is applied in the 
following calculation: (1,000 plans x 5.8 percent paper x $0.76) + 
(10,000 IRAs x 5.8 percent paper x $0.76) = $485.
---------------------------------------------------------------------------

    In total, providing the annual termination form is expected to 
impose an hour burden of 1,391 hours with an equivalent cost of 
$133,610 and a total cost burden of $485.

                Table 5--Hour Burden, Equivalent Cost, Postage and Material Cost Associated With Provision of the Annual Termination Form
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Year 1                                                Subsequent years
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Equivalent                                                 Equivalent
             Activity                Burden hours     burden cost     Pages     Material cost   Burden hours     burden cost     Pages     Material cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Legal.............................             474         $75,447          0              $0             474         $75,447          0              $0
Clerical..........................             917          58,163          2             485             917          58,163          2             485
                                   ---------------------------------------------------------------------------------------------------------------------
    Total.........................           1,391         133,610          2             485           1,391         133,610          2             485
--------------------------------------------------------------------------------------------------------------------------------------------------------

Transaction Reporting

    The investment advice provider engaging in a covered transaction 
must furnish the authorizing fiduciary with either a conformation slip 
for each securities transaction or a quarterly report containing 
specified information. As discussed above, the provision of the 
confirmation already is required under SEC regulations. Therefore, if 
the transaction reporting requirement is satisfied by sending 
conformation slips, no additional hour and cost burden will occur.

Annual Statement

    In addition to the transaction reporting requirement, investment 
advice providers are required to send an annual report to each of the 
11,000 authorizing fiduciaries \42\ containing the same information as 
the quarterly report and also containing all security transaction-
related charges, the brokerage placement practices, and a portfolio 
turnover ratio. Collecting and generating the information required for 
the annual report is reported as a cost burden. Postage cost is not 
included here as it is assumed that the annual statement will be sent 
with the annual termination form and postage costs are accounted for 
there. It is assumed that the annual statement will be five pages, and 
the paper and print costs are $0.25 each.\43\ Therefore, the overall 
cost burden for the paper and print costs are about $160.\44\
---------------------------------------------------------------------------

    \42\ 1,000 plans + 10,000 IRAs = 11,000 plans and IRAs.
    \43\ 5 pages x $0.05 per page = $0.25.
    \44\ (11,000 plans and IRAs x 5.8 percent paper x $0.25) = $160.
---------------------------------------------------------------------------

    In addition, it is assumed that the information that must be sent 
annually could be sent together; therefore, the clerical staff hours 
required to prepare and distribute the report has been included with 
the provision of annual termination form requirement. Therefore, no 
additional hour burden has been reported.
    In total, providing the annual statement is expected to impose a 
total cost burden of $160.

[[Page 76041]]



                          Table 6--Hour Burden, Equivalent Cost, Postage and Material Cost Associated With the Annual Statement
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Year 1                                                Subsequent years
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Equivalent                                                 Equivalent
             Activity                Burden hours     burden cost     Pages     Material cost   Burden hours     burden cost     Pages     Material cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clerical..........................               0              $0          5            $160               0              $0          5            $160
                                   ---------------------------------------------------------------------------------------------------------------------
    Total.........................               0               0          5             160               0               0          5             160
--------------------------------------------------------------------------------------------------------------------------------------------------------

Report of Commissions Paid

    A discretionary trustee must provide an authorizing fiduciary with 
an annual report showing separately the commissions paid to affiliated 
brokers and non-affiliated brokers, on both a total dollar basis and a 
cents-per-share basis. The collecting and generation of the information 
for the quarterly report is reported as a cost burden. The clerical 
hour burden to prepare and distribute the report is included with the 
provision of annual termination form requirement, because both items 
are required to be sent annually.
    A financial institution who is a discretionary trustee must provide 
each of the 11,000 authorizing fiduciaries with an annual report 
showing commissions paid to affiliated and non-affiliated brokers, on 
both a total dollar and a cents-per-share basis. As the report is sent 
annually, it is assumed that it could be sent with the transaction 
report, therefore postage costs are not counted here. The Department 
estimates that 94.2 percent of financial institutions will use 
traditional electronic methods at no additional burden, while the 
remaining 5.8 percent of financial institutions will mail the annual 
reports. It is assumed that the report will be two pages, and the paper 
and print costs are $0.10 each.\45\ Therefore, the overall cost burden 
of the paper and print costs is $64.\46\
---------------------------------------------------------------------------

    \45\ 2 pages x $0.05 per page = $0.10.
    \46\ (11,000 plans and IRAs x 5.8 percent paper x $0.10) = $64.
---------------------------------------------------------------------------

    Financial institutions are required to report specific transaction 
fees and information to the plan fiduciaries. The information must be 
tracked, assigned to specific plans, and reported. It is assumed that 
it costs the financial institution $3.30 per plan or IRA to track this 
information.\47\ With approximately 11,000 affected plans and IRAs, 
this results in a cost burden of approximately $36,300 annually.\48\
---------------------------------------------------------------------------

    \47\ This estimate is based on information from a Request for 
Information and from industry sources.
    \48\ (11,000 plans and IRAs x $3.30) = $36,300.
---------------------------------------------------------------------------

    In total, providing the report is expected to impose a total cost 
burden of $36,364.\49\
---------------------------------------------------------------------------

    \49\ This estimate is calculated as: $64 + $36,300 = $36,364.

                     Table 7--Hour Burden, Equivalent Cost, Postage and Material Cost Associated With the Report of Commissions Paid
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Year 1                                                Subsequent years
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Equivalent                                                 Equivalent
             Activity                Burden hours     burden cost     Pages     Material cost   Burden hours     burden cost     Pages     Material cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clerical..........................               0              $0          2         $36,364               0              $0          2         $36,364
                                   ---------------------------------------------------------------------------------------------------------------------
    Total.........................               0               0          2          36,364               0               0          2          36,364
--------------------------------------------------------------------------------------------------------------------------------------------------------

Summary

    In total, the conditions of this exemption will result in the 
production of 33,570 disclosures.\50\ The Department assumes that 100 
percent of plans will use electronic methods to distribute the required 
information, at de minimis burden. The Department also assumes that 
94.2 percent of IRAs and financial institutions will use electronic 
methods to distribute the required information, at de minimis burden, 
while 1,943 \51\ disclosures will be on paper. Production and 
distribution of disclosures will result in an overall hour burden of 
2,929 hours with an equivalent cost of $358,548 and an overall cost 
burden of $37,034.
---------------------------------------------------------------------------

    \50\ The total number of disclosures is calculated in the 
following manner: 285 (Written authorization disclosures) + 285 
(Provision of materials for evaluation of authorization of 
transaction) + 11,000 (Annual termination form) + 11,000 (Annual 
Statement) + 11,000 (Report of Commissions Paid) = 33,570 
disclosures.
    \51\ The total number of paper disclosures is calculated in the 
following manner: (210 Written authorization disclosures for IRAs x 
5.8 percent paper) + (285 Provision of materials for evaluation of 
authorization of transaction x 5.8 percent paper) + (11,000 Annual 
termination form x 5.8 percent paper) + (11,000 Annual Statement x 
5.8 percent paper) + (11,000 Report of Commissions Paid x 5.8 
percent paper) = 1,943 disclosures.
---------------------------------------------------------------------------

    The paperwork burden estimates are summarized as follows:
    Type of Review: Revision to an existing collection.
    Agency: Employee Benefits Security Administration, Department of 
Labor.
    Titles: PTE 86-128 (Securities Broker-Dealers).
    OMB Control Number: 1210-0059.
    Affected Public: Businesses or other for-profits; not for profit 
institutions.
    Estimated Number of Respondents: 2,179.
    Estimated Number of Annual Responses: 33,570.
    Frequency of Response: Initially, Annually, When engaging in 
exempted transaction.
    Estimated Total Annual Burden Hours: 2,929 hours.
    Estimated Total Annual Burden Cost: $37,034.

Amendments to PTE 77-4, 80-83 and PTE 83-1

    The Department has determined that PTE 77-4 and PTE 80-83 do not 
have information collections impacted by the removal of advice from the 
exemption. There is no paperwork burden related to PTE 83-1.

[[Page 76042]]

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \52\ imposes certain 
requirements on rules subject to the notice and comment requirements of 
section 553(b) of the Administrative Procedure Act or any other 
law.\53\ Under section 603 of the RFA, agencies must submit an initial 
regulatory flexibility analysis (IRFA) of a proposal that is likely to 
have a significant economic impact on a substantial number of small 
entities, such as small businesses, organizations, and governmental 
jurisdictions. This proposed amended exemption, along with related 
amended exemptions and a proposed rule amendment published elsewhere in 
this issue of the Federal Register, is part of a rulemaking regarding 
the definition of fiduciary investment advice, which the Department has 
determined likely will have a significant economic impact on a 
substantial number of small entities. The impact of this proposed 
amendment on small entities is included in the IRFA for the entire 
project, which can be found in the related notice of proposed 
rulemaking found elsewhere in this edition of the Federal Register.
---------------------------------------------------------------------------

    \52\ 5 U.S.C. 601 et seq.
    \53\ 5 U.S.C. 601(2), 603(a); see also 5 U.S.C. 551.
---------------------------------------------------------------------------

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 \54\ requires 
each federal agency to prepare a written statement assessing the 
effects of any federal mandate in a proposed or final rule that may 
result in an expenditure of $100 million or more (adjusted annually for 
inflation with the base year 1995) in any 1 year by state, local, and 
tribal governments, in the aggregate, or by the private sector. For 
purposes of the Unfunded Mandates Reform Act, as well as Executive 
Order 12875, this proposed amended exemption does not include any 
Federal mandate that will result in such expenditures.
---------------------------------------------------------------------------

    \54\ Public Law 104-4, 109 Stat. 48 (Mar. 22, 1995).
---------------------------------------------------------------------------

Federalism Statement

    Executive Order 13132 outlines fundamental principles of 
federalism. It also requires Federal agencies to adhere to specific 
criteria in formulating and implementing policies that have 
``substantial direct effects'' on the states, the relationship between 
the national government and states, or on the distribution of power and 
responsibilities among the various levels of government. Federal 
agencies promulgating regulations that have these federalism 
implications must consult with State and local officials, and describe 
the extent of their consultation and the nature of the concerns of 
State and local officials in the preamble to the final regulation. 
Notwithstanding this, 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 Department does not intend this exemption to change the scope 
or effect of ERISA section 514, including the savings clause in ERISA 
section 514(b)(2)(A) for State regulation of securities, banking, or 
insurance laws. Ultimately, the Department does not believe this 
proposed class exemption has 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.

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 
ERISA section 408(a) and Code section 4975(c)(2) does not relieve a 
fiduciary, or other party in interest or 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 and the general fiduciary responsibility provisions of 
ERISA section 404 which require, among other things, that a fiduciary 
act prudently and discharge his or her duties respecting the Plan 
solely in the interests of the participants and beneficiaries of the 
Plan. Additionally, the fact that a transaction is the subject of an 
exemption does not 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) Before the 
proposed exemption may be granted under ERISA section 408(a) and Code 
section 4975(c)(2), the Department must find that it is 
administratively feasible, in the interests of Plans and their 
participants and beneficiaries and IRA owners, and protective of the 
rights of participants and beneficiaries of the Plan and IRA owners; 
(3) If granted, the proposed exemption is applicable to a particular 
transaction only if the transaction satisfies the conditions specified 
in the exemption; and (4) The proposed exemption, if granted, is 
supplemental to, and not in derogation of, any 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.

Proposed Amendments to Class Exemptions Prohibited Transaction 
Exemption 75-1, Exemptions From Prohibitions Respecting Certain Classes 
of Transactions Involving Employee Benefit Plans and Certain Broker-
Dealers, Reporting Dealers and Banks

    The Department proposes to amend Prohibited Transaction Exemption 
75-1 under the authority of ERISA section 408(a) and Code section 
4975(c)(2), and in accordance with the procedures set forth in 29 CFR 
part 2570, subpart B (76 FR 66637, October 27, 2011).
    I. PTE 75-1, Part I, Agency transactions and services, subparts (b) 
and (c), are revoked in their entirety.
    II. Part II, Principal transactions, the first sentence of subpart 
(2) is revoked; the sentence beginning ``The exemptions set forth in 
(1) and (2) is designated as Part II(2) and amended to read, ``The 
exemption set forth in (1) above is subject to the following 
conditions:'' and new section II(2)(d) is revised to delete the phrase 
``Except with respect to transactions described in section (2) 
above,''.
    III. Part II, Principal transactions, sections (e) and (f) are 
revised to read as follows: (e) The broker-dealer, reporting dealer, or 
bank engaging in the covered transaction maintains or causes to be 
maintained for a period of six years from the date of such transaction 
such records as are necessary to enable the persons described in 
paragraph (f) of this exemption to determine whether the conditions of 
this exemption have been met, except that:
    (1) No party in interest other than the broker-dealer, reporting 
dealer, or bank engaging in the covered transaction, shall be subject 
to the civil penalty, which may be assessed under section 502(i) of the 
Act, or to the taxes imposed by section 4975(a) and (b) of the Code, if 
such records are not maintained, or are not available for examination 
as required by paragraph (f) below; and
    (2) A prohibited transaction will not be deemed to have occurred 
if, due to circumstances beyond the control of the broker-dealer, 
reporting dealer, or bank, such records are lost or destroyed prior to 
the end of such six-year period.
    (f)(1) Notwithstanding anything to the contrary in subsections 
(a)(2) and (b) of section 504 of the Act, the records referred to in 
paragraph (e) are

[[Page 76043]]

reasonably available for examination during normal business hours by:
    (A) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (B) Any fiduciary of the plan or any duly authorized employee or 
representative of such fiduciary;
    (C) Any contributing employer and any employee organization whose 
members are covered by the plan, or any authorized employee or 
representative of these entities; or
    (D) Any participant or beneficiary of the plan, or IRA owner, or 
the duly authorized representative of such participant or beneficiary; 
and
    (2) None of the persons described in subparagraph (1)(B)-(D) above 
shall be authorized to examine trade secrets or commercial or financial 
information of the broker-dealer, reporting dealer, or bank which is 
privileged or confidential, or records regarding a plan or IRA other 
than the plan or IRA with respect to which they are the fiduciary, 
contributing employer, employee organization, participant, beneficiary, 
or IRA owner.
    (3) Should such broker-dealer, reporting dealer, or bank refuse to 
disclose information on the basis that such information is exempt from 
disclosure, the broker-dealer, reporting dealer, or bank shall, by the 
close of the thirtieth (30th) day following the request, provide a 
written notice advising that person of the reasons for the refusal and 
that the Department may request such information.
    (4) Failure to maintain the required records necessary to determine 
whether the conditions of this exemption have been met will result in 
the loss of the exemption only for the transaction or transactions for 
which records are missing or have not been maintained. It does not 
affect the relief for other transactions.
    For purposes of this exemption, the terms ``broker-dealer,'' 
``reporting dealer'' and ``bank'' shall include such persons and any 
affiliates thereof, and the term ``affiliate'' shall be defined in the 
same manner as that term is defined in 29 CFR 2510.3-21(e) and 26 CFR 
54.4975-9(e).
    IV. Part III, Underwritings, is amended by inserting a new section 
III(h) to read as follows:
    Exception. No relief from the restrictions of ERISA section 406(b) 
and the taxes imposed by Code section 4975(a) and (b) by reason of Code 
sections 4975(c)(1)(E) and (F) is available for fiduciaries providing 
investment advice within the meaning of ERISA section 3(21)(A)(ii) or 
Code section and regulations thereunder.
    V. Part IV, Market-making, is amended by inserting a new section 
IV(g) to read as follows:
    Exception. No relief from the restrictions of ERISA section 406(b) 
and the taxes imposed by Code section 4975(a) and (b) by reason of Code 
sections 4975(c)(1)(E) and (F) is available for fiduciaries providing 
investment advice within the meaning of ERISA section 3(21)(A)(ii) or 
Code section 4975(e)(3)(B) and regulations thereunder.
    VI. Part V, Extension of Credit, is amended by replacing Sections 
(c) and (d) with the following: (c) Notwithstanding section (a)(2), a 
fiduciary under ERISA section 3(21)(A)(ii) or Code section 
4975(e)(3)(B) may receive reasonable compensation for extending credit 
to a plan or IRA to avoid a failed purchase or sale of securities 
involving the plan or IRA if:
    (1) The potential failure of the purchase or sale of the securities 
is not caused by such fiduciary or an affiliate;
    (2) The terms of the extension of credit are at least as favorable 
to the plan or IRA as the terms available in an arm's length 
transaction between unaffiliated parties;
    (3) Prior to the extension of credit, the plan or IRA receives 
written disclosure of (i) the rate of interest (or other fees) that 
will apply and (ii) the method of determining the balance upon which 
interest will be charged, in the event that the fiduciary extends 
credit to avoid a failed purchase or sale of securities, as well as 
prior written disclosure of any changes to these terms. This section 
(e)(3) will be considered satisfied if the plan or IRA receives the 
disclosure described in Securities Exchange Act Rule 10b-16; \55\
---------------------------------------------------------------------------

    \55\ 17 CFR 240.10b-16.
---------------------------------------------------------------------------

    (d) The broker-dealer engaging in the covered transaction maintains 
or causes to be maintained for a period of six years from the date of 
such transaction in a manner that is reasonably accessible for 
examination, such records as are necessary to enable the persons 
described in paragraph (e) of this exemption to determine whether the 
conditions of this exemption have been met with respect to a 
transaction, except that:
    (1) No party other than the broker-dealer engaging in the covered 
transaction shall be subject to the civil penalty which may be assessed 
under section 502(i) of the Act, or to the taxes imposed by section 
4975(a) and (b) of the Code, if such records are not maintained, or are 
not available for examination as required by paragraph (e) below; and
    (2) A prohibited transaction will not be deemed to have occurred 
if, due to circumstances beyond the control of the broker-dealer, such 
records are lost or destroyed prior to the end of such six-year period.
    (e)(1) Except as provided in paragraph (e)(2) of this exemption, 
and notwithstanding anything to the contrary in subsections (a)(2) and 
(b) of section 504 of the Act, the records referred to in paragraph (d) 
are reasonably available at their customary location for examination 
during normal business hours by:
    (A) An authorized employee or representative of the Department of 
Labor or the Internal Revenue Service,
    (B) Any fiduciary of a plan that engaged in a transaction pursuant 
to this exemption, or any authorized employee or representative of such 
fiduciary;
    (C) Any contributing employer and any employee organization whose 
members are covered by a plan described in paragraph (e)(1)(B), or any 
authorized employee or representative of these entities; or
    (D) Any participant or beneficiary of a plan described in paragraph 
(e)(1)(B), IRA owner or the authorized representative of such 
participant, beneficiary or owner.
    (2) None of the persons described in paragraph (e)(1)(B)-(D) of 
this exemption are authorized to examine records regarding a 
recommended transaction involving another investor, or privileged trade 
secrets or privileged commercial or financial information, of the 
broker-dealer engaging in the covered transaction, or information 
identifying other individuals.
    (3) Should the broker-dealer engaging in the covered transaction 
refuse to disclose information on the basis that the information is 
exempt from disclosure, the broker-dealer must, by the close of the 
thirtieth (30th) day following the request, provide a written notice 
advising the requestor of the reasons for the refusal and that the 
Department may request such information.
    (4) Failure to maintain the required records necessary to determine 
whether the conditions of this exemption have been met will result in 
the loss of the exemption only for the transaction or transactions for 
which records are missing or have not been maintained. It does not 
affect the relief for other transactions.
    For purposes of this exemption, the terms ``party in interest,'' 
``disqualified person'' and ``fiduciary'' shall include such party in 
interest, disqualified

[[Page 76044]]

person, or fiduciary, and any affiliates thereof, and the term 
``affiliate'' shall be defined in the same manner as that term is 
defined in 29 CFR 2510.3-21 and 26 CFR 54.4975-9. Also, for the 
purposes of this exemption, the term ``IRA'' means any account or 
annuity described in Code section 4975(e)(1)(B) through (F), including, 
for example, an individual retirement account described in section 
408(a) of the Code and a health savings account described in section 
223(d) of the Code.

Prohibited Transaction Exemption 77-4, Class Exemption for Certain 
Transactions Between Investment Companies and Employee Benefit Plans

    The Department proposes to amend Prohibited Transaction Exemption 
77-4 under the authority of ERISA section 408(a) and Code section 
4975(c)(2), and in accordance with the procedures set forth in 29 CFR 
part 2570, subpart B (76 FR 66637, October 27, 2011).
    I. A new section II(g) is inserted to read as follows:
    Exception. No relief from the restrictions of 406(b) and the taxes 
imposed by section 4975(a) and (b) by reason of sections 4975(c)(1)(E) 
and (F) is available for fiduciaries providing investment advice within 
the meaning of section 3(21)(A)(ii) of ERISA or 4975(e)(3)(B) of the 
Code and regulations thereunder.

Prohibited Transaction Exemption 80-83, Class Exemption for Certain 
Transactions Involving Purchase of Securities Where Issuer May Use 
Proceeds To Reduce or Retire Indebtedness to Parties in Interest

    The Department proposes to amend Prohibited Transaction Exemption 
80-83 under the authority of ERISA section 408(a) and Code section 
4975(c)(2), and in accordance with the procedures set forth in 29 CFR 
part 2570, subpart B (76 FR 66637, October 27, 2011).
    I. A new section I.E. is inserted to read as follows:
    Exception. No relief from the restrictions of 406(b) and the taxes 
imposed by section 4975(a) and (b) by reason of sections 4975(c)(1)(E) 
and (F) is available for fiduciaries providing investment advice within 
the meaning of section 3(21)(A)(ii) of ERISA or 4975(e)(3)(B) of the 
Code and regulations thereunder.

Prohibited Transaction Exemption 83-1, Exemption for Certain 
Transactions Involving Mortgage Pool Investment Trusts

    The Department proposes to amend Prohibited Transaction Exemption 
83-1 under the authority of ERISA section 408(a) and Code section 
4975(c)(2), and in accordance with the procedures set forth in 29 CFR 
part 2570, subpart B (76 FR 66637, October 27, 2011).
    I. A new section I.E. is inserted to read as follows:
    Exception. No relief from the restrictions of 406(b) and the taxes 
imposed by section 4975(a) and (b) by reason of sections 4975(c)(1)(E) 
and (F) is available for fiduciaries providing investment advice within 
the meaning of section 3(21)(A)(ii) of ERISA or 4975(e)(3)(B) of the 
Code and regulations thereunder.

Prohibited Transaction Exemption 86-128, Class Exemption for Securities 
Transactions Involving Employee Benefit Plans and Broker-Dealers

    The Department proposes to amend Prohibited Transaction Exemption 
86-128 under the authority of ERISA section 408(a) and Code section 
4975(c)(2), and in accordance with the procedures set forth in 29 CFR 
part 2570, subpart B (76 FR 66637, October 27, 2011).
    I. New sections II(d) is inserted as follows:
    (d) Exception. No relief from the restrictions of ERISA 406(b) and 
the taxes imposed by Code section 4975(a) and (b) by reason of Code 
sections 4975(c)(1)(E) and (F) is available for fiduciaries providing 
investment advice within the meaning of ERISA section 3(21)(A)(ii) or 
Code section 4975(e)(3)(B) and regulations thereunder.
    II. Section IV(a) is deleted.
    III. Section IV(b) is redesignated as Section IV(a), and IV(a)(1) 
is deleted and Sections IV(b)(2) and (3) are redesignated as Sections 
IV(b)(1) and (2).
    IV. Section IV(c) is redesignated as Section IV(b) and is amended 
to read:
    (c) Recapture of profits. Sections III(a) and III(i) of this 
exemption do not apply in any case where the person engaging in a 
covered transaction returns or credits to the plan all profits earned 
by that person in connection with the securities transactions 
associated with the covered transaction.
    V. The following is added to the end of Section III(a)
    ``Notwithstanding the foregoing, this condition does not apply to a 
trustee that satisfies Section III(h) and (i).''
    VI. New Section VII is inserted as follows:
    Section VII. Recordkeeping Requirements
    (a) The plan fiduciary engaging in a covered transaction maintains 
or causes to be maintained for a period of six years, in a manner that 
is reasonably accessible for examination, the records necessary to 
enable the persons described in Section VI(b) to determine whether the 
conditions of this exemption have been met, except that:
    (1) If such records are lost or destroyed, due to circumstances 
beyond the control of the plan fiduciary, then no prohibited 
transaction will be considered to have occurred solely on the basis of 
the unavailability of those records; and
    (2) No party in interest, other than such plan fiduciary who is 
responsible for complying with this paragraph (a), will be subject to 
the civil penalty that may be assessed under ERISA section 502(i) or 
the taxes imposed by Code section 4975(a) and (b), if applicable, if 
the records are not maintained or are not available for examination as 
required by paragraph (b) below; and
    (b)(1) Except as provided below in subparagraph (2), or as 
precluded by 12 U.S.C. 484, and notwithstanding any provisions of ERISA 
section 504(a)(2) and (b), the records referred to in the above 
paragraph are reasonably available at their customary location for 
examination during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (B) Any fiduciary of the plan or any duly authorized employee or 
representative of such fiduciary;
    (C) Any contributing employer and any employee organization whose 
members are covered by the plan, or any authorized employee or 
representative of these entities; or
    (D) Any participant or beneficiary of the plan or the authorized 
representative of such participant or beneficiary.
    (2) None of the persons described in subparagraph (1)(B)-(D) above 
are authorized to examine privileged trade secrets or privileged 
commercial or financial information of such fiduciary or are authorized 
to examine records regarding a plan or IRA other than the plan or IRA 
with which they are the fiduciary, contributing employer, employee 
organization, participant, beneficiary or IRA owner.
    (3) Should such plan fiduciary refuse to disclose information on 
the basis that such information is exempt from disclosure, such plan 
fiduciary must, by the close of the thirtieth (30th) day following the 
request, provide a written notice advising the requestor of the reasons 
for the refusal and that the Department may request such information.
    (4) Failure to maintain the required records necessary to determine 
whether

[[Page 76045]]

the conditions of this exemption have been met will result in the loss 
of the exemption only for the transaction or transactions for which 
records are missing or have not been maintained. It does not affect the 
relief for other transactions.

    Signed at Washington, DC, this 24th day of October, 2023.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.
[FR Doc. 2023-23782 Filed 11-2-23; 8:45 am]
BILLING CODE 4510-29-P