[Federal Register Volume 89, Number 97 (Friday, May 17, 2024)]
[Rules and Regulations]
[Pages 43675-43684]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09030]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2550

[Application Number D-11657]
RIN 1210-ZA20


Prohibited Transaction Exemption 2006-06 for Services Provided in 
Connection With the Termination of Abandoned Individual Account Plans

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Exemption amendment.

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SUMMARY: This document gives notice of an amendment to prohibited 
transaction exemption (PTE) 2006-06, a class exemption issued under the 
Employee Retirement Income Security Act of 1974 (ERISA). The exemption 
permits a ``qualified termination administrator'' (QTA) of an 
individual account pension plan that has been abandoned by its 
sponsoring employer to select itself to provide services to the plan in 
connection with the plan's termination and pay itself fees for the 
services. This amendment to PTE 2006-06 permits chapter 7 trustees who 
elect to be QTAs to rely on the exemption. This amendment to PTE 2006-
06 also permits ``eligible designees'' of such chapter 7 trustees to 
rely on the exemption. The amendment is issued in connection with 
amendments to three related regulations under ERISA, published 
elsewhere in this issue of the Federal Register, that provide 
streamlined procedures for the termination of, and distribution of 
benefits from, abandoned individual account pension plans. The 
amendment would affect employee pension benefit plans (primarily small 
defined contribution plans), participants and beneficiaries of such 
plans, service providers, and individuals appointed to serve as 
bankruptcy trustees under chapter 7 of the U.S. Bankruptcy Code.

DATES: This amendment will be effective on July 16, 2024.

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

SUPPLEMENTARY INFORMATION:

A. Summary Overview

    On April 21, 2006, the Department of Labor issued three regulations 
that established the Employee Benefits Security Administration's (EBSA) 
Abandoned Plan Program to facilitate the orderly and efficient 
termination of, and distribution of benefits from, individual account 
pension plans that have been abandoned by their sponsoring 
employers.\1\ The first regulation (the QTA Regulation) establishes 
standards for determining when individual account plans may be 
considered ``abandoned'' and procedures by which financial 
institutions, called ``qualified termination administrators'' (QTAs) 
holding the assets of such plans may terminate the plans and distribute 
benefits to participants and beneficiaries, with limited liability 
under Title I of the Employee Retirement Income Security Act 
(ERISA).\2\ The second regulation (the Safe Harbor Regulation) provides 
a fiduciary safe harbor for QTAs to make distributions on behalf of 
participants and beneficiaries who fail to elect a form of benefit 
distribution. These participants and beneficiaries are sometimes 
referred to as ``missing participants.'' \3\ The third regulation 
establishes a simplified method for filing a terminal report for 
abandoned individual account plans.\4\
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    \1\ 71 FR 20820. See also, 73 FR 58459 (Oct. 7, 2008) for 
subsequent amendments with regard to distributions on behalf of a 
missing non-spouse beneficiary.
    \2\ 29 CFR 2578.1.
    \3\ 29 CFR 2550.404a-3. This safe harbor also is available to 
fiduciaries of terminated individual account plans that are not 
abandoned.
    \4\ 29 CFR 2520.103-13.
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    The 2006 regulations were accompanied by a class prohibited 
transaction exemption, PTE 2006-06, that facilitates the goal of the 
2006 regulations by permitting a QTA who meets the exemption's 
conditions to (1) select itself or an affiliate to carry out the 
termination and winding up activities specified in the 2006 
regulations, and (2) pay fees to itself or an affiliate for those 
services. In addition, PTE 2006-06 permits QTAs to receive fees in 
connection with establishing an individual retirement plan or other 
account and selecting the initial investment product for missing 
participants. These activities are prohibited under the following 
provisions of Title I of ERISA (and parallel Code provisions) in the 
absence of a prohibited transaction exemption:
     ERISA section 406(a)(1)(C), which prohibits a plan 
fiduciary from causing the plan to engage in a transaction that 
constitutes a direct or indirect furnishing of goods, services, or 
facilities between the plan and a party in interest;
     ERISA section 406(a)(1)(D), which prohibits a fiduciary 
from entering into a transaction that constitutes a direct or indirect 
transfer of plan assets to a party in interest, or the use of plan 
assets by or for the benefit of a party in interest;
     ERISA section 406(b)(1), which prohibits a plan fiduciary 
from dealing with the assets of the plan in the fiduciary's own 
interest or for the fiduciary's own account; and
     ERISA section 406(b)(2), which prohibits a plan fiduciary 
from acting, in any transaction involving the plan, on behalf of a 
party (or representing a party) whose interests are adverse to the 
interests of the plan or its participants or beneficiaries.
    On December 12, 2012, the Department published proposed amendments 
to the 2006 regulations and the associated PTE 2006-06.\5\ The purpose 
of proposed amendments to the 2006 regulations was to advance the 
interests of participants and beneficiaries by:
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    \5\ 77 FR 74063; 77 FR 74056.
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    (1) facilitating the orderly and efficient termination of 
individual account plans whose sponsors are in liquidation under 
chapter 7 of the Bankruptcy Code (``Chapter 7 ERISA Plans''); \6\
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    \6\ The proposal referred to these plans as ``chapter 7 plans.'' 
The new term ``Chapter 7 ERISA Plans'' is used for avoidance of 
confusion regarding the term chapter 7 plan used in the bankruptcy 
context.
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    (2) reducing administrative burden and costs imposed on Chapter 7 
ERISA Plan Plans that terminate in accordance with the regulations; and
    (3) providing an avenue for bankruptcy trustees to discharge their 
duties under ERISA and the Bankruptcy Code with respect to Chapter 7 
ERISA Plans.
    The purpose of the proposed amendments to PTE 2006-06 was to 
supplement the amendments to the 2006 regulations by providing the 
necessary prohibited transaction relief to facilitate the termination 
of Chapter 7 ERISA Plans.
    The Department received seven written comment letters on the 2012 
proposed amendments, several of which raised issues related to the 
proposed amendment to PTE 2006-06 that are

[[Page 43676]]

available on the Department's website.\7\ The Department considered the 
issues raised by the commenters in granting this amendment to PTE 2006-
06. The Department also issued interim final amendments to the 2006 
regulations with a request for comment (referred to as the 
``Regulations'') \8\ that appear elsewhere in this issue of the Federal 
Register.
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    \7\ Available at https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/public-comments/1210-AB47.
    \8\ The Department intends that PTE 2006-06 will cover 
transactions related to the interim final regulations or any 
subsequent final regulations published thereafter. The Department 
will consider proposing an additional amendment to PTE 2006-06 if it 
makes changes to the Abandoned Plan Program that impact the relief 
available under this exemption.
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    In granting this amendment to PTE 2006-06, the Department has 
determined that the amendment is administratively feasible, in the 
interests of plans and their participants and beneficiaries, and 
protective of the rights of plan participants and beneficiaries as 
required by ERISA section 408(a) and Internal Revenue Code (Code) 
section 4975(c)(2).\9\
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    \9\ Effective December 31, 1978, section 102 of Reorganization 
Plan No. 4 of 1978, 5 U.S.C. App. (2018), transferred the authority 
of the Secretary of the Treasury to issue exemptions of the type 
proposed to the Secretary of Labor. Therefore, this amendment is 
issued solely by the Department.
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B. Fiduciary Status of Bankruptcy Trustees and Prohibited Transactions

    In bankruptcy cases, as with abandoned plans generally, the sponsor 
usually is not in a position to carry out the activities associated 
with formally terminating the plan. Instead, the Department expected 
that, in chapter 7 bankruptcy cases, the appointed bankruptcy trustee 
would take the necessary steps to terminate the plan, wind up its 
affairs, and distribute plan benefits. The issue of the bankruptcy 
trustee's authority to terminate and wind up the plan was addressed by 
the enactment of 11 U.S.C. 704(a)(11) as part of the Bankruptcy Abuse 
Prevention and Consumer Protection Act of 2005.\10\ Under that 
provision, when an entity that sponsors an individual account plan is 
liquidated under chapter 7 of the Bankruptcy Code, the appointed 
bankruptcy trustee administering the liquidation proceeding is required 
to continue to perform the plan administration obligations that would 
otherwise be required of the bankrupt entity.\11\
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    \10\ Public Law 109-8, 119 Stat. 23.
    \11\ 11 U.S.C. 704(a)(11) refers to whether the debtor (or any 
entity designated by the debtor) serves as the administrator (as 
defined in ERISA section 3) of an employee benefit plan. ERISA 
section 3(16) defines the ``administrator'' as the plan sponsor in 
the absence of any designation in the plan document of another 
person as administrator.
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    Such obligations include taking the steps necessary to terminate 
the plan, wind up the affairs of the plan, and distribute plan benefits 
to participants and beneficiaries. A bankruptcy trustee who undertakes 
these plan responsibilities is a fiduciary within the meaning of ERISA 
section 3(21) \12\ who is obligated under ERISA section 404 to act 
prudently and solely in the interests of plan participants and 
beneficiaries.
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    \12\ In this regard, section 3(21)(A)(i) of ERISA provides that 
a person is a ``fiduciary'' with respect to a plan to the extent he 
exercises any discretionary authority or discretionary control 
respecting management of such plan or exercises any authority or 
control respecting management or disposition of its assets. In 
addition, section 3(21)(A)(iii) of ERISA provides that a person is a 
``fiduciary'' with respect to a plan to the extent he has any 
discretionary authority or discretionary responsibility in the 
administration of such plan.
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    The Department has concluded that expanding the Abandoned Plan 
Program regulations to cover Chapter 7 ERISA Plans and making other 
technical changes in response to the public comments would result in an 
improved Abandoned Plan Program. The Department acknowledges that it 
has been over 10 years since the comment period closed for the 2012 
proposal. However, the purposes of the Department's regulatory action 
and its rationale for the 2012 proposal continue to be relevant and 
would advance the interests of participants and beneficiaries in 
abandoned plans. The Department is relying on the 2012 proposal, its 
consideration of comments on that proposal, and its understanding of 
the challenges facing Chapter 7 ERISA Plans in granting this exemption. 
Although, the procedures and requirements in the program are voluntary, 
in the Department's view, a bankruptcy trustee that follows the 
Regulations should generally be able to reduce its administrative 
burden and costs that are associated with terminating an abandoned 
plan.

C. Description of the Amendment

1. Summary of Major Changes in This Granted Exemption Amendment

    This amendment to PTE 2006-06 expands the types of service 
providers that are eligible to serve as QTAs to include bankruptcy 
trustees and entities designated by bankruptcy trustees to terminate 
and wind up the affairs of plans according to the Regulations (referred 
to as ``eligible designees''). This amendment would permit these 
parties to rely on PTE 2006-06 to select and pay themselves fees for 
services provided in terminating and winding up the affairs of a plan. 
Furthermore, for the accounts of missing participants of an abandoned 
plan, the amendment will permit certain eligible designees to select 
themselves or an Affiliate \13\ (and receive fees) to establish an 
Individual Retirement Plan \14\ or other account and to select the 
initial investment product. The prohibited transaction relief provided 
by the exemption is available only if the exemption conditions are 
satisfied, which are designed to protect the interests of the plans and 
their participants and beneficiaries as required by ERISA section 
408(a) and Code section 4975(c)(2).
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    \13\ Affiliate is defined to include: (1) Any person directly or 
indirectly controlling, controlled by, or under common control with, 
the person; or (2) Any officer, director, partner or employee of the 
person. The terms ``controlling, controlled by, or under common 
control'' means the power to exercise a controlling influence over 
the management or policies of a person other than an individual. See 
Sections V(e) and V(f) of this exemption amendment.
    \14\ Section V(b) of this exemption defines Individual 
Retirement Plan to mean: an individual retirement plan described in 
section 7701(a)(37) of the Code. For purposes of Section III of this 
exemption, the term ``Individual Retirement Plan'' shall also 
include an inherited individual retirement plan (within the meaning 
of section 402(c)(11) of the Code) established to receive a 
distribution on behalf of a non-spouse beneficiary. Notwithstanding 
the foregoing, the term ``Individual Retirement Plan'' shall not 
include an employee benefit plan covered by Title I of ERISA.
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2. Definition of ``Qualified Termination Administrator''

    To be a QTA that is eligible for the prohibited transaction relief 
under the original version of PTE 2006-06, an entity was required to 
(i) be eligible to serve as a trustee or issuer of an individual 
retirement plan or other account, within the meaning of Code section 
7701(a)(37) and (ii) hold assets of the plan that is considered 
abandoned. Bankruptcy trustees ordinarily would not be eligible for the 
exemptive relief as QTAs under this definition.
    As noted above, the Regulations are amended elsewhere in this issue 
of the Federal Register to include bankruptcy trustees and their 
eligible designees. Therefore, the final amendment likewise expands the 
exemption's QTA definition to include a bankruptcy trustee in a 
liquidation proceeding under chapter 7 of title 11 of the United States 
Code with responsibility under 11 U.S.C. 704(a)(11) to administer one 
or more individual account plans sponsored by the entity that is the 
subject of the proceeding, who elects to be a QTA under 29 CFR 
2578.1(j)(6).\15\
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    \15\ Eligible designees are defined in 29 CFR 2578.1(j)(4)(i) 
and (ii).
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    The Regulations expand the group of entities that can serve as a 
QTA by

[[Page 43677]]

allowing the bankruptcy trustee to also appoint as an eligible designee 
either a traditional asset custodian or a person, other than the 
bankruptcy trustee of the plan sponsor's case, who has served within 
the previous five years as a bankruptcy trustee in a case under chapter 
7 of the Bankruptcy Code (referred to as the ``independent bankruptcy 
trustee practitioner''). This amendment correspondingly expands the 
prohibited transaction relief in PTE 2006-06 by including these 
``eligible designees'' in the exemption's definition of QTA.\16\
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    \16\ See Section V(a) of this exemption amendment.
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    The Department also added a new clarification which indicates that 
if a bankruptcy trustee designates an eligible designee, it shall not 
be considered a QTA with respect to the relief provided in this 
exemption. The Department is making this additional modification to the 
QTA definition because the QTA Regulation considers the bankruptcy 
trustee and the eligible designee to be the QTA for certain 
purposes.\17\ In connection with the exemption, however, the Department 
determined that once an eligible designee is appointed, the eligible 
designee should be the only entity authorizing appropriate payments to 
the bankruptcy trustee.
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    \17\ See 29 CFR 2578.1(e)(4).
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3. The ``Designating Bankruptcy Trustee''

    The amendment includes a new defined term for a ``Designating 
Bankruptcy Trustee.'' \18\ A Designating Bankruptcy Trustee is a 
bankruptcy trustee that designates an eligible designee instead of 
serving as the QTA itself.\19\ Importantly, this amendment would allow 
the Designating Bankruptcy Trustee to provide services to the plan 
before designating an eligible designee. These services could include 
making reasonable and diligent efforts to determine whether the plan is 
owed any employee or employer contributions, notifying the eligible 
designee of its findings with respect to missing or delinquent 
contributions, establishing procedures to ensure the eligible designee 
has reasonable access to records in possession of the bankruptcy 
trustee which are needed to wind up the plan, selecting an eligible 
designee, and subsequently monitoring eligible designees in accordance 
with ERISA section 404(a)(1)(A) and (B). As noted in the QTA 
Regulation, the duty to monitor the eligible designee is ongoing 
throughout the termination and winding up process.
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    \18\ See Section V(h) of this exemption amendment.
    \19\ As noted above, the QTA Regulation indicates that the 
bankruptcy trustee and eligible designee are both considered the QTA 
for certain purposes. The Department's limitations with respect to 
the bankruptcy trustee being considered the QTA for purposes of this 
exemption do not modify or otherwise supersede the QTA Regulation.
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    From a prohibited transaction standpoint, the Department determined 
there may be uncertainty regarding an eligible designee's decision to 
pay the Designating Bankruptcy Trustee with plan assets. This is due, 
at least in part, to the role of the bankruptcy trustee in the QTA 
Regulation. To avoid this uncertainty and facilitate the use of the 
Abandoned Plan Program and PTE 2006-06 when an eligible designee is 
selected, this amendment includes specific prohibited transaction 
relief for this scenario that is described in the next section, below.

4. Covered Transactions and Conditions--Overview

    The prohibited transaction relief provided by the amended exemption 
would permit four general categories of transactions in connection with 
termination services. First, it would permit the QTA to select itself 
or an Affiliate to provide services to the plan. Second, it would 
permit the QTA to pay fees to itself or an Affiliate for those 
services. Third, it would permit the QTA to pay fees to itself for 
services provided before the plan's deemed termination.\20\ Finally, it 
would permit the QTA to pay fees to a Designating Bankruptcy Trustee 
for services provided to the plan. Without the availability of the 
prohibited transaction exemption, QTAs, their Affiliates, and 
bankruptcy trustees would be unable to use plan assets as a source of 
compensation for their services, even though those plan assets are 
usually the only available source of payment.
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    \20\ See 29 CFR 2578.1(c).
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    The amended exemption would also permit certain distribution 
transactions. First, an asset custodian QTA could designate itself or 
an Affiliate as the provider of an Individual Retirement Plan, other 
account, or a federally insured bank or savings association account for 
the distribution of benefits if participants and beneficiaries do not 
respond to the QTA regarding how they would like their benefits 
distributed.\21\ Second, the amended exemption would permit the asset 
custodian QTA to select a proprietary investment product as the initial 
investment in connection with such distributions. Third, the QTA or its 
Affiliate may receive fees in connection with establishing and 
maintaining the Individual Retirement Plan or other account. Fourth, 
the QTA may pay investment fees to itself or an Affiliate as a result 
of investment in a qualifying proprietary investment product.
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    \21\ As explained in more detail below with respect to Section 
I(b), this prohibited transaction relief is available only to 
eligible designee QTAs that are asset custodians. It is not 
available for QTAs that are bankruptcy trustees. It is also not 
available for eligible designees that are independent bankruptcy 
trustee practitioners.
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(a) Termination Services and Payment of Fees--Generally
    Section I(a) of the amended exemption provides prohibited 
transaction relief for a QTA to select and pay itself fees for services 
to the plan, subject to the conditions in Sections II and IV.\22\ 
Generally, the exemption would permit a QTA to use its authority to 
select itself or an Affiliate to provide services to the plan and to 
pay itself or an Affiliate fees for services performed as the QTA. 
Prohibited transaction relief under Section I(a) is available to all 
entities that may serve as a QTA according to the QTA Regulation. 
Therefore, if the applicable conditions are satisfied, a bankruptcy 
trustee could select itself to be the QTA and also pay itself for the 
QTA services it provides to the plan. Similarly, if the bankruptcy 
trustee appoints an eligible designee to be the QTA, the eligible 
designee could pay itself for services it provides to the plan.
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    \22\ Section I(a) provides prohibited transaction relief for 
ERISA sections 406(a)(1)(A) through (D), 406(b)(1), and 406(b)(2) 
and the taxes imposed by Code section 4975(a) and (b) by reason of 
Code section 4975(c)(1)(A) through (E).
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    The amended exemption also provides prohibited transaction relief 
for plan-related services provided by a bankruptcy trustee before a 
formal determination is made regarding who will be the QTA.\23\ If the 
bankruptcy trustee becomes the QTA, the exemption would permit the 
bankruptcy trustee to pay itself for the non-QTA services that were 
performed before it becomes the QTA. The Department provides this 
relief to ensure that necessary plan services can continue to be 
performed while a decision is made regarding the selection of a QTA. 
Relatedly, the amended exemption also permits the eligible designee to 
pay the bankruptcy trustee for services provided

[[Page 43678]]

to the plan if the eligible designee is the QTA. This includes paying 
the bankruptcy trustee for services provided to the plan before the 
eligible designee provided notice to the Department of its intention to 
serve as QTA \24\ or for ongoing services provided after the notice is 
submitted (such as monitoring the QTA).
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    \23\ As noted above and described in the QTA Regulation, these 
services include making reasonable and diligent efforts to determine 
whether the plan is owed any employee or employer contributions, 
notifying the eligible designee of its findings with respect to 
missing or delinquent contributions, establishing procedures to 
ensure the eligible designee has reasonable access to records in 
possession of the bankruptcy trustee which are needed to wind up the 
plan, and selecting and monitoring eligible designees in accordance 
with ERISA section 404(a)(1)(A) and (B).
    \24\ See 29 CFR 2578.1(j)(6).
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    Section II of the amended exemption includes conditions for covered 
termination services and the corresponding receipt of fees. Section 
II(a) provides prohibited transaction relief only if the requirements 
of the QTA Regulation are satisfied. Section II(b) provides that when 
the QTA, its Affiliate, and any Designating Bankruptcy Trustee are paid 
fees and expenses, they must comply with the applicable provisions 
regarding reasonable expenses of the QTA Regulation. Therefore, for 
QTAs that are not chapter 7 bankruptcy trustees or their eligible 
designees, the exemption cross references paragraph (d)(2)(v)(B)(2)(i) 
and (ii) of the QTA Regulation. For chapter 7 bankruptcy trustee QTAs 
and their eligible designees, the exemption cross references paragraph 
(j)(7)(iv) of the QTA Regulation.\25\
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    \25\ This amendment cross references these provisions instead of 
restating them to avoid any potential confusion regarding the 
standards and to accommodate future amendments to the QTA Regulation 
that would not otherwise require an amendment to PTE 2006-06. If, in 
the future, the Department makes changes to the QTA Regulation in 
the cross-referenced provisions, the Department will consider 
whether the statutory exemption requirements in ERISA section 408(a) 
and Code section 4975(c)(2) necessitate proposing an amendment to 
the exemption.
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    The fee provisions in the QTA Regulation generally provide that 
plan assets may be used to pay reasonable expenses of plan termination. 
What is reasonable is judged in light of industry rates for ordinary 
plan administration under ERISA.\26\ Consequently, these provisions do 
not allow a bankruptcy trustee or eligible designee to charge attorney 
hourly rates for plan administration activities of termination and 
winding up the plan.
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    \26\ See 29 CFR 2578.1(d)(2)(v).
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    The QTA Regulation contains a limited exception to the general rule 
regarding fees that would apply to services provided by the eligible 
designee in connection with the duty to collect delinquent 
contributions on behalf of the plan. Under the exception, the fees must 
be consistent with rates ordinarily charged by firms or individuals 
representing or assisting a bankruptcy trustee in performing similar 
collection services on behalf of an estate in a chapter 7 proceeding. 
This limited exception applies to activities such as filing proofs of 
claims, tracing assets, responding to objections, motion practice, and 
litigation on behalf of the plan, but it does not apply to determining 
whether the plan is owed contributions. The act of determining whether 
a plan is owed a contribution is a routine act of plan administration 
and is therefore covered under the general rule rather than the 
exception.
(b) Termination Services and Payment of Fees--Before Notice of Intent 
To Serve as QTA
    Additional conditions apply to transactions in which a QTA pays 
itself fees for services provided to a plan before submitting notice to 
the Department of its intent to act as the QTA.\27\ Section II(c) 
requires any such services to be performed in good faith according to 
an executed written agreement or otherwise in full compliance with the 
QTA Regulation. The QTA must represent under penalty of perjury that 
such services were actually performed and/or will actually be performed 
(in the case of services provided after notice but before deemed 
termination). This condition specifically requires a prospective 
representation for such services in the notice of intent to serve as 
QTA.\28\ The Department believes this will avoid uncertainty as to 
services that will be performed after notice is provided to the 
Department but before the deemed termination. If past services were 
performed according to a contract, a copy of the executed contract that 
authorized such services must be provided to the Department along with 
the notice.
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    \27\ See Section I(a)(3) of this exemption amendment.
    \28\ See paragraph 29 CFR 2578.1(c)(3) of the QTA Regulation or 
in the case of a QTA described in Section V(a)(2)(i) of this 
exemption, 29 CFR 2578.1(j)(6).
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    For transactions in which the eligible designee QTA pays the 
Designating Bankruptcy Trustee, the exemption requires the services to 
be performed by the Designating Bankruptcy Trustee in full compliance 
with the QTA Regulation. Additionally, the Designating Bankruptcy 
Trustee must represent under penalty of perjury that the services were 
actually performed and/or will actually be performed (in the case of 
services provided after notice but before deemed termination). The 
Designating Bankruptcy Trustee must provide this written representation 
to the QTA for the QTA to submit to the Department.
(c) Distribution Transactions
    Section I(b) provides prohibited transaction relief for an asset 
custodian QTA to designate itself or an Affiliate as the provider of an 
Individual Retirement Plan, other account, or a federally insured bank 
or savings association account for the distribution of benefits.\29\ 
Section I(b) is available only to eligible designees that are asset 
custodians and QTAs, as defined in section V(a)(1) and V(a)(2)(ii) of 
this amendment. The relief in Section I(b) is not available to QTAs 
that are bankruptcy trustees or independent bankruptcy trustee 
practitioners. In the 2012 proposed exemption amendment, the Department 
noted that bankruptcy trustees do not maintain proprietary investment 
vehicles; thus, the relief in Section I(b) was not proposed to extend 
to bankruptcy trustees. The Department did not receive comments on this 
issue with respect to the 2012 proposed exemption amendment, so the 
Department has maintained the same scope of relief in Section I(b) of 
this amendment.
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    \29\ Section I(b) of the amended exemption provides relief from 
the restrictions of ERISA sections 406(a)(1)(A) through (D), 
406(b)(1), and 406(b)(2) and the taxes imposed by Code section 
4975(a) and (b) by reason of Code section 4975(c)(1)(A) through (E).
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    Generally, the prohibited transaction relief in Section I(b) 
applies only if the participant or beneficiary has otherwise failed to 
notify the QTA regarding how they want to take their distribution. The 
relief in Section I(b) is subject to the additional conditions of 
Sections III and IV. More specifically, Section I(b) permits a QTA to 
use its authority in connection with the termination of an abandoned 
individual account plan to designate itself or an Affiliate as the 
service provider of (1) an Individual Retirement Plan, (2) an inherited 
Individual Retirement Plan in the case of a distribution on behalf of a 
non-spouse beneficiary as described in paragraph (d)(1)(ii) of the Safe 
Harbor Regulation, or (3) an interest bearing, federally insured bank 
or savings association account for a distribution described in 
paragraph (d)(1)(iii) of the Safe Harbor Regulation.\30\
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    \30\ See 29 CFR 2550.404a-3.
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    Section I(b) also permits a QTA to engage in certain activities in 
connection with establishing an Individual Retirement Plan or other 
account. First, the QTA may make the initial investment of a 
participant's or beneficiary's account balance in its or its 
Affiliate's propriety investment product. Second, the QTA or its 
Affiliate may receive fees in connection

[[Page 43679]]

with establishing and maintaining the Individual Retirement Plan or 
other account. Third, the QTA may pay investment fees to itself or an 
Affiliate as a result of investment in a proprietary investment product 
that qualifies as an Eligible Investment Product defined in Section 
V(c).
    Section III provides conditions for the transactions described in 
Section I(b) and was not altered by the 2012 proposed exemption 
amendment. This final amendment makes minor ministerial changes to 
Section III, such as the addition of headings to facilitate the ease of 
use of the exemption.
    Section III(a) requires compliance with the QTA Regulation, and 
Section III(b) requires additional notifications to participants or 
beneficiaries to accompany the notice to participants and beneficiaries 
described in the QTA Regulation.\31\ Section III(c) requires each 
Individual Retirement Plan or other account to be established and 
maintained for the exclusive benefit of the Individual Retirement Plan 
account holder or other account holder or their beneficiaries. This 
requirement is consistent with Code section 408(a) and ensures that the 
establishment of such plans or accounts does not conflict with the 
basic purpose for which Congress afforded them special tax benefits 
(i.e., to provide retirement savings for account holders and their 
beneficiaries).
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    \31\ See 29 CFR 2578.1(d)(2)(vi).
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    Section III(d) requires the terms of the Individual Retirement Plan 
or other account to be no less favorable than those available to 
comparable Individual Retirement Plans or other accounts established 
for reasons other than the receipt of a rollover distribution described 
in the QTA Regulation. This exemption condition applies to all terms, 
including the fees and expenses for establishing and maintaining the 
Individual Retirement Plan or other account.
    Section III(e) requires distributions to be invested in an Eligible 
Investment Product as defined in section V(c) of this amendment.\32\ 
The definition of Eligible Investment Product was not changed as part 
of this amendment.
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    \32\ This is an investment product designed to preserve 
principal and provide a reasonable rate of return, whether or not 
such return is guaranteed, consistent with liquidity. For this 
purpose, the product must be offered by a Regulated Financial 
Institution and shall seek to maintain, over the term of the 
investment, the dollar value that is equal to the amount invested in 
the product by the Individual Retirement Plan or other account. An 
Eligible Investment Product includes money market funds maintained 
by registered investment companies, and interest-bearing savings 
accounts and certificates of deposit of a bank or similar financial 
institution. In addition, it would also include ``stable value 
products'' issued by a financial institution that are fully benefit-
responsive to the Individual Retirement Plan account holder or other 
account holder (i.e., that provide a liquidity guarantee by a 
financially responsible third party of principal and previously 
accrued interest for liquidations or transfers initiated by the 
Individual Retirement Plan account holder or other account holder 
exercising their right to withdraw or transfer funds under the terms 
of an arrangement that does not include substantial restrictions to 
the account holder to access the Individual Retirement Plan or other 
account's assets).
---------------------------------------------------------------------------

    Section III(f) requires the rate of return or investment 
performance of plans or accounts established in connection with QTA 
Regulation to be the same as other similar type of plans or accounts. 
This condition was designed to work in tandem with the requirement in 
Section III(d). It ensures fees are not hidden within separately 
designed investment products provided only to plans or accounts 
established under the QTA Regulation.
    Example 1: Assume a customer opens a new Individual Retirement Plan 
and invests in a one-year certificate of deposit that returns 2.0%. The 
one-year certificate of deposit that returns 2.0% is also available to 
an Individual Retirement Plan established at the same time in 
accordance with the QTA Regulation. This is a permissible investment 
option.
    Example 2: Assume a customer opens a new Individual Retirement Plan 
and invests in a one-year certificate of deposit that returns 2.0%. For 
Individual Retirement Plans established under the QTA Regulation, all 
certificates of deposit have a 5% lower return so that the one-year 
certificate of deposit only returns 1.9%. This is not a permissible 
investment option.
    Section III(g) does not permit the Individual Retirement Plan or 
other account to pay a sales commission in connection with the 
acquisition of an Eligible Investment Product. Furthermore, Section 
III(h) indicates that the Individual Retirement Plan account holder or 
other account holder must be able to transfer their account balance to 
a different investment offered by the QTA or its Affiliate within a 
reasonable period of time after their request. In connection with the 
request, the QTA or its Affiliate may not assess any penalty against 
the principal amount of the account balance. According to those same 
standards, the Individual Retirement Plan account holder or other 
account holder must be able to transfer their account balance to an 
Individual Retirement Plan established with a different financial 
institution.
    Finally, Section III(i) includes restrictions on fees and expenses 
associated with the Individual Retirement Plan or other account 
including with respect to investment of assets. This provision requires 
equal treatment for any such charges, which includes but is not limited 
to: establishment charges, maintenance fees, investment expenses, 
termination costs, and surrender charges. The fees and expenses may not 
exceed those charged by the QTA for comparable Individual Retirement 
Plans or other accounts established for reasons other than the receipt 
of a rollover distribution made pursuant to the QTA Regulation. 
Relatedly, fees and expenses associated with the Individual Retirement 
Plan or other account, other than establishment charges, may be charged 
only against the income earned by the Individual Retirement Plan or 
other account and may not be charged against principal. Finally, fees 
and expenses may not exceed reasonable compensation within the meaning 
of Code section 4975(d)(2).

5. Recordkeeping

    Section IV of the amended exemption contains a recordkeeping 
requirement that is mostly unchanged from the proposed amendment. The 
Department made a minor modification in Section IV(a) by replacing the 
phrase ``determination of plan abandonment and its election'' with 
``intent'' so that the recordkeeping requirement clearly applies to the 
new categories of QTAs (i.e., chapter 7 bankruptcy trustees and 
eligible designees). Ultimately, this means that any party serving as a 
QTA must maintain records to enable certain persons to determine 
whether the applicable conditions of the class exemption have been 
satisfied. The records must be available for examination by the 
Department of the Treasury, the Department, and any account holder of 
an Individual Retirement Plan or other account established pursuant to 
this exemption or any duly authorized representative of such account 
holder.

D. Other Ministerial Changes

    The Department is also making a few ministerial changes to the 
exemption that will not substantively alter the conditions or relief 
provided under the exemption. Specifically, the Department has 
capitalized most of the defined terms, added the word ``Section'' to 
each section, modified the text of the headings slightly, added 
headings in Sections II and III to facilitate ease of use of the 
exemption, and made other edits to improve readability. The Department 
also removed the reference to ``spouse'' in Section III(c) because the

[[Page 43680]]

exclusive benefit rule in Code section 408(a) does not separately 
reference a spouse.

E. Discussion of Comments

    While the Department did not receive any comments on the 2012 
proposed amendment's expansion to bankruptcy trustees, it received 
several comments on other aspects of the 2012 proposed amendment. One 
commenter requested elimination of a condition in the exemption 
limiting the amount of fees and expenses that may be charged when a QTA 
recommends itself or an affiliate as a provider of an Individual 
Retirement Plan or other account. The condition in Section III(i)(2) 
requires fees and expenses charged to the Individual Retirement Plan or 
other account may only be taken from the income earned by the 
Individual Retirement Plan or other account with the exception of 
establishment charges.
    The Department considered a similar request to remove Section 
III(i)(2) when it first granted PTE 2006-06. The Department continues 
to believe that removal of this condition is not warranted because the 
Regulations provide significant flexibility for small account balances 
to be distributed by methods other than through a rollover to an 
Individual Retirement Plan or other account sponsored by the QTA or its 
affiliate. For example, participant account balances of $1,000 or less 
that are below the minimum amount required for investment in the QTA's 
Individual Retirement Plan investment product may be distributed to: 
(i) an interest-bearing federally insured bank or savings association 
account in the name of the participant or beneficiary; (ii) the 
unclaimed property fund of the State in which the participant's or 
beneficiary's last known address is located; or (iii) to an 
unaffiliated Individual Retirement Plan if the Individual Retirement 
Plan is also offered to the public at the time of the distribution. The 
Department continues to believe that Section III(i)(2) is necessary to 
preserve the principal balance of missing and non-responsive 
participants and beneficiaries (consistent with protecting the 
retirement savings for participants and their beneficiaries). Section 
III(i)(2) also provides a valuable safeguard against potential 
conflicts of interest associated with a QTA's selection of its own or 
its affiliate's Individual Retirement Plan or account and initial 
investment product.
    Another commenter requested clarification that providers of 
Individual Retirement Plans or investment accounts who are not 
affiliated or related to a QTA and accept distribution accounts from a 
QTA into their own proprietary investment products, are not subject to 
the same fee and expense restrictions described in Section III(i)(2) of 
the exemption. The Department responds that the scenario described by 
the commenter does not appear to involve a prohibited transaction, and 
parties only are required to rely on the exemption (including complying 
with Section III(i)(2)) if the receipt of compensation in connection 
with these transactions involves a prohibited transaction.

F. Regulatory Impact Analysis

1. Background and Need for Regulatory Action

    As stated earlier in this preamble, this document contains an 
amendment to PTE 2006-06 which expands the types of service providers 
that are eligible to serve as QTAs to include bankruptcy trustees and 
entities designated by bankruptcy trustees to terminate and wind up the 
affairs of plans according to the Regulations that facilitate the 
termination of, and distribution of benefits from, individual account 
pension plans that have been abandoned by their sponsoring employers. 
The need for the amendments is explained in detail above in this 
preamble, as well as the preamble to the 2012 proposal and preamble to 
the Regulations that appear elsewhere in this issue of the Federal 
Register.
    The Department has examined the effects of these amendments as 
required by Executive Order 12866,\33\ Executive Order 13563,\34\ the 
Congressional Review Act,\35\ the Paperwork Reduction Act of 1995,\36\ 
the Regulatory Flexibility Act,\37\ section 202 of the Unfunded 
Mandates Reform Act of 1995,\38\ and Executive Order 13132.\39\
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    \33\ Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993).
    \34\ Improving Regulation and Regulatory Review, 76 FR 3821 
(Jan. 21, 2011).
    \35\ 5 U.S.C. 804(2) (1996).
    \36\ 44 U.S.C. 3506(c)(2)(A) (1995).
    \37\ 5 U.S.C. 601 et seq. (1980).
    \38\ 2 U.S.C. 1501 et seq. (1995).
    \39\ Federalism, 64 FR 43255 (Aug. 10, 1999).
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2. Executive Orders 12866 and 13563 Statement

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing and streamlining rules, and 
of promoting flexibility. It also requires federal agencies to develop 
a plan under which the agencies will periodically review their existing 
significant regulations to make the agencies' regulatory programs more 
effective or less burdensome in achieving their regulatory objectives. 
The Department identified the amendments to the 2006 regulations as 
part of a retrospective regulatory review project consistent with the 
principles of Executive Order 13563. The changes will improve the 
overall efficiency of the program established under the 2006 
regulations, increase its usage, and substantially reduce burdens and 
costs on bankruptcy trustees (or their designees) terminating the plans 
of sponsors in chapter 7 liquidation, the plans of bankrupt sponsors, 
and the participants in these plans.
    Under Executive Order 12866, ``significant'' regulatory actions are 
subject to the requirements of the executive order and review by the 
Office of Management and Budget (OMB). As amended by Executive Order 
14094 \40\ entitled ``Modernizing Regulatory Review,'' 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 (adjusted every 3 years by the 
Administrator of OIRA for changes in gross domestic product); or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, territorial, or tribal governments 
or communities; (2) creating serious inconsistency or otherwise 
interfering with an action taken or planned by another agency; (3) 
materially altering the budgetary impacts of entitlement grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raising legal or policy issues for which centralized 
review would meaningfully further the President's priorities or the 
principles set forth in this Executive order, as specifically 
authorized in a timely manner by the Administrator of OIRA in each 
case.
---------------------------------------------------------------------------

    \40\ 88 FR 21879 (April 6, 2023).
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3. Affected Entities

    The group of entities affected by the amendments consists of 
affected abandoned plans as defined under the 2006 regulations, Chapter 
7 ERISA Plans

[[Page 43681]]

newly eligible to utilize the abandoned plan rules, and the financial 
firms and bankruptcy trustees who serve as QTAs.

4. Benefits

    The key benefit of the amendment to PTE 2006-06 is facilitation of 
the benefits provided by the Regulations, as explained in the 
Regulatory Impact Analysis that accompanies the Regulations, published 
elsewhere in this issue of the Federal Register. Without the 
accompanying amendment to PTE 2006-06, certain of the benefits of the 
Regulations may be impeded due to the existence of prohibited 
transactions.

5. Costs

    The cost of the amendment to PTE 2006-06 is captured in the 
Regulatory Impact Analysis that accompanies the Regulations, published 
elsewhere in this issue of the Federal Register. The only additional 
cost associated with this amendment to PTE 2006-06 is related to a new 
condition that is applicable in cases where a Designating Bankruptcy 
Trustees provides services to the plan. In that situation, the 
Designating Bankruptcy Trustee must represent under penalty of perjury 
that such services were actually performed and/or will actually be 
performed and provide the QTA with such representation for the QTA to 
provide to the Department in the notice of intent to serve as qualified 
termination administrator. As noted in the Paperwork Reduction Act 
section of the preamble to the Regulations, the Department did not 
include a cost burden for this new condition because it is expected to 
be de minimis and included in other notices sent to the Department.

G. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 
U.S.C. 3506(c)(2)(A)), the Department solicited comments concerning the 
information collection requirements (ICRs) included in the December 12, 
2012, proposed amendments to the 2006 regulations at 77 FR 74063 and 
the proposed amendments to the class exemption PTE 2006-06 at 77 FR 
74055. At the same time, the Department also submitted the ICR to OMB 
in accordance with 44 U.S.C. 3507(d).
    The amendment to PTE 2006-06 would only be used by QTAs that also 
take advantage of the amendments to the Regulations, published 
elsewhere in this issue of the Federal Register. The Department has 
combined the hour and cost burdens associated with the proposed 
amendment to PTE 2006-06 with the hour and cost burden associated with 
the Regulations, under existing OMB Control Number 1210-0127.
    By using a single ICR, the Department believes that the regulated 
community will gain a better understanding of the overall burden impact 
of terminating abandoned plans pursuant to the amendments. The specific 
burden for PTE 2006-06 includes the penalty of perjury statements 
required to be submitted by the QTA and/or Designating Bankruptcy 
Trustee and a recordkeeping requirement for QTAs. The hour and cost 
burden for the ICR is described more fully in the preamble to the 
Regulations under the Paperwork Reduction Act section. A copy of the 
ICR for OMB Control Number 1210-0127 may be obtained by contacting the 
PRA addressee listed in the following sentence or at www.RegInfo.gov. 
For additional information, contact: 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]. The OMB will consider all 
comments that they receive on or before June 17, 2024. Comments and 
recommendations for the information collection should be sent within 30 
days of publication of this notice to www.reginfo.gov/public/do/PRAMain. Find this particular information collection by selecting 
``Currently under 30-day Review--Open for Public Comments'' or by using 
the search function.

H. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) applies 
to most Federal rules that are subject to the notice and comment 
requirements of section 553(b) of the Administrative Procedure Act (5 
U.S.C. 551 et seq.). Unless an agency certifies that such a rule will 
not have a significant economic impact on a substantial number of small 
entities, section 603 of the RFA requires the agency to present a final 
regulatory flexibility analysis at the time of the publication of the 
rulemaking describing the impact of the rule on small entities. Small 
entities include small businesses, organizations, and governmental 
jurisdictions. For purposes of analysis under the RFA, the Department 
considers a small entity to be an employee benefit plan with fewer than 
100 participants. The basis of this definition is found in section 
104(a)(3) of ERISA, which permits the Secretary of Labor to prescribe 
simplified annual reports for welfare benefit plans that cover fewer 
than 100 participants. While some large employers may have small plans, 
in general, small employers maintain most small plans. Thus, the 
Department believes that assessing the impact of these final 
regulations on small plans is an appropriate substitute for evaluating 
the effect on small entities. The definition of small entity considered 
appropriate for this purpose differs, however, from a definition of 
small business that is based on size standards promulgated by the Small 
Business Administration (SBA) (13 CFR 121.201) pursuant to the Small 
Business Act (15 U.S.C. 631 et seq.). The Department requested comments 
on the appropriateness of this size standard at the proposed rule stage 
and received no adverse responses.
    Due to the small number of small plans involved and relatively low 
cost per plan, the Assistant Secretary of the Employee Benefit Security 
Administration hereby certifies under 5 U.S.C. 605 that this amended 
exemption in combination with the Regulations will not have a 
significant economic impact on a substantial number of small 
entities.\41\
---------------------------------------------------------------------------

    \41\ 2,506 abandoned plans each year divided by the roughly 6 
million establishments with less than 50 participants results in 
less than 0.05%.
---------------------------------------------------------------------------

I. Congressional Review Act

    This amendment is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and will be transmitted to the Congress and 
the Comptroller General for review. The exemption is not a ``major 
rule'' as that term is defined in 5 U.S.C. 804, because it is not 
likely to result in (1) an annual effect on the economy of $100 million 
or more; (2) a major increase in costs or prices for consumers, 
individual industries, or Federal, State, or local government agencies, 
or geographic regions; or (3) significant adverse effects on 
competition, employment, investment, productivity, innovation, or on 
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets.

J. Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), the rule does not include any Federal mandate that will result 
in expenditures by state, local, or tribal governments in the aggregate 
of more than $100 million, adjusted for inflation, or increase 
expenditures by the private sector of more than $100 million, adjusted 
for inflation.

[[Page 43682]]

K. Federalism Statement

    Executive Order 13132 (August 4, 1999) outlines fundamental 
principles of federalism and requires the adherence to specific 
criteria by Federal agencies in the process of their formulation and 
implementation of policies that have substantial direct effects on the 
States, the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. This rule does not have federalism 
implications because it has no substantial direct effect on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government. Section 514 of ERISA provides, with certain 
exceptions specifically enumerated, that the provisions of Titles I and 
IV of ERISA supersede any and all laws of the States as they relate to 
any employee benefit plan covered under ERISA. The requirements 
implemented in the rule do not alter the fundamental provisions of the 
statute with respect to employee benefit plans, and as such would have 
no implications for the States or the relationship or distribution of 
power between the national government and the States.

L. 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 their 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 requirements of Code section 401(a), 
including that the plan must operate for the exclusive benefit of the 
employees of the employer maintaining the plan and their beneficiaries;
    (2) In accordance with ERISA section 408(a) and Code section 
4975(c)(2), and based on the entire record, the Department finds that 
this exemption is administratively feasible, in the interests of Plans, 
their participants and beneficiaries, and IRA owners, and protective of 
the rights of participants and beneficiaries of the Plan and IRA 
owners;
    (3) The amended exemption is applicable to a particular transaction 
only if the transaction satisfies the conditions specified in the 
exemption; and
    (4) The amended exemption 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.
    The Department is granting the following amendment 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)).\42\
---------------------------------------------------------------------------

    \42\ 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. Procedures Governing the Filing and Processing 
of Prohibited Transaction Exemption Applications were amended 
effective April 8, 2024 (29 CFR part 2570, subpart B (89 FR 4662 
(January 24, 2024)).
---------------------------------------------------------------------------

Amended Exemption

Section I. Covered Transactions

    (a) Provided the conditions of Section II and IV are satisfied, the 
restrictions of ERISA sections 406(a)(1)(A) through (D), 406(b)(1) and 
406(b)(2), and the taxes imposed by Internal Revenue Code (Code) 
section 4975(a) and (b), by reason of section 4975(c)(1)(A) through 
(E), shall not apply to a Qualified Termination Administrator (as 
defined in paragraph (a)(1) or (a)(2) of Section V and referred to as a 
QTA) using its authority in connection with the termination of an 
abandoned individual account plan pursuant to the Department's 
regulation at 29 CFR 2578.1, relating to the Termination of Abandoned 
Individual Account Plans (the QTA Regulation) \43\ to:
---------------------------------------------------------------------------

    \43\ The Department intends that this exemption will cover 
transactions related to the interim final regulations published in 
this edition of the Federal Register as well as any subsequent final 
regulations published thereafter. The Department will consider 
amending this exemption if changes are made to the final regulation 
that impact the relief available under this exemption.
---------------------------------------------------------------------------

    (1) Select itself or an affiliate to provide services to the plan;
    (2) Receive fees for the services performed as a QTA;
    (3) Pay itself fees for services provided to the plan before the 
deemed termination of the plan; and
    (4) Pay fees to the Designating Bankruptcy Trustee for services 
provided to the plan; and
    (b) Provided that the conditions set forth in Sections III and IV 
of this exemption are satisfied, the restrictions of ERISA sections 
406(a)(1)(A) through (D), 406(b)(1) and 406(b)(2), and the taxes 
imposed by Code section 4975(a) and (b), by reason of Code section 
4975(c)(1)(A) through (E), shall not apply to a QTA (as defined in 
paragraph (a)(1) or (a)(2)(ii) of Section V) using its authority in 
connection with the termination of an abandoned individual account plan 
pursuant to the QTA Regulation to:
    (1) Designate itself or an affiliate as: (i) provider of an 
Individual Retirement Plan; (ii) provider, in the case of a 
distribution on behalf of a designated beneficiary (as defined by Code 
section 401(a)(9)(E)) who is not the surviving spouse of the deceased 
participant, of an inherited Individual Retirement Plan (within the 
meaning of Code section 402(c)(11)) established to receive the 
distribution on behalf of the non-spouse beneficiary under the 
circumstances described in paragraph (d)(1)(ii) of the Safe Harbor 
Regulation for Terminated Plans (29 CFR 2550.404a-3) (the Safe Harbor 
Regulation); or (iii) provider of an interest bearing, federally 
insured bank or savings association account maintained in the name of 
the participant or beneficiary, in the case of a distribution described 
in paragraph (d)(1)(iii) of the Safe Harbor Regulation, for the 
distribution of the account balance of the participant or beneficiary 
of the abandoned individual account plan who does not provide direction 
as to the disposition of such assets;
    (2) Make the initial investment of the account balance of the 
participant or beneficiary in the QTA's or its affiliate's proprietary 
investment product;
    (3) Receive fees in connection with the establishment or 
maintenance of the Individual Retirement Plan or other account; and
    (4) Pay itself or an affiliate investment fees as a result of the 
investment of the Individual Retirement Plan or other account assets in 
the QTA's or its affiliate's proprietary investment product.

Section II. Conditions for Provision of Covered Termination Services 
and Receipt of Fees

    (a) QTA Regulation. The requirements of the QTA Regulation are met. 
The QTA provides, in a timely manner, any other reasonably available 
information

[[Page 43683]]

requested by the Department regarding the proposed termination.
    (b) Fees and expenses. Fees and expenses paid to the QTA and its 
affiliate, and any Designating Bankruptcy Trustee, in connection with 
the termination of the plan and the distribution of benefits comply 
with paragraphs (d)(2)(v)(B)(2)(i) and (ii) of the QTA Regulation or 
paragraph (j)(7)(iv) of the QTA Regulation, as applicable;
    (c) Fees for services before the deemed termination of the plan. In 
the case of a transaction described in Section I(a)(3):
    (1) Such services: (i) were performed in good faith pursuant to the 
terms of a written agreement executed before the service provider 
became a QTA; or (ii) were performed pursuant to the QTA Regulation; 
and
    (2) The QTA, in the notice of plan abandonment and intent to serve 
as qualified termination administrator described in paragraph (c)(3) of 
the QTA Regulation or in the case of a QTA described in Section 
V(a)(2)(i), the notice of intent to serve as qualified termination 
administrator described in paragraph (j)(6) of the QTA Regulation: (i) 
represents under penalty of perjury that such services were actually 
performed and/or will be performed (in the case of services provided 
after the notice but before deemed termination); and (ii) in the case 
of Section II(c)(1)(i) above, provides the Department with a copy of 
the executed contract between the QTA and a plan fiduciary or the plan 
sponsor that authorized such services.
    (d) Paying the Designating Bankruptcy Trustee. In the case of a 
transaction described in Section I(a)(4):
    (1) Such services were performed by the Designating Bankruptcy 
Trustee pursuant to the QTA Regulation; and
    (2) The Designating Bankruptcy Trustee represents under penalty of 
perjury that such services were actually performed and/or will actually 
be performed and provides the QTA with such representation for the QTA 
to provide to the Department in the notice of intent to serve as 
qualified termination administrator described in paragraph (j)(6) of 
the QTA Regulation.

Section III. Conditions for Covered Distribution Transactions

    (a) QTA Regulation. The conditions of the QTA Regulation (29 CFR 
2578.1) are met.
    (b) Notice to participants and beneficiaries. In connection with 
the notice to participants and beneficiaries described in the QTA 
Regulation, a statement is provided explaining that:
    (1) If the participant or beneficiary fails to make an election 
within the 30-day period referenced in the QTA Regulation, the QTA will 
directly distribute the account balance to an Individual Retirement 
Plan or other account offered by the QTA or its affiliate;
    (2) The proceeds of the distribution may be invested in the QTA's 
(or affiliate's) own proprietary investment product, which is designed 
to preserve principal and provide a reasonable rate of return and 
liquidity.
    (c) Exclusive benefit. The Individual Retirement Plan or other 
account is established and maintained for the exclusive benefit of the 
Individual Retirement Plan account holder or other account holder or 
their beneficiaries.
    (d) Account terms, fees, and expenses. The terms of the Individual 
Retirement Plan or other account, including the fees and expenses for 
establishing and maintaining the Individual Retirement Plan or other 
account, are no less favorable than those available to comparable 
Individual Retirement Plans or other accounts established for reasons 
other than the receipt of a distribution described in the QTA 
Regulation.
    (e) Eligible Investment Product. Except in the case of a QTA 
providing a bank or savings account pursuant to Section I(b)(1)(iii) of 
the exemption, the distribution proceeds are invested in an Eligible 
Investment Product(s), as defined in Section V(c) of this class 
exemption.
    (f) Investment performance. The rate of return or the investment 
performance of the Individual Retirement Plan or other account is no 
less favorable than the rate of return or investment performance of an 
identical investment(s) that could have been made at the same time by 
comparable Individual Retirement Plans or other accounts established 
for reasons other than the receipt of a distribution described in the 
QTA Regulation.
    (g) No sales commissions. The Individual Retirement Plan or other 
account does not pay a sales commission in connection with the 
acquisition of an Eligible Investment Product.
    (h) Transferring account. The Individual Retirement Plan account 
holder or other account holder must be able to transfer their account 
balance to a different investment offered by the QTA or its affiliate, 
or to a different financial institution not related to the QTA or its 
affiliate, within a reasonable period of time after their request and 
without penalty to the principal amount of the investment.
    (i) Fees and expenses. (1) Fees and expenses attendant to the 
Individual Retirement Plan or other account, including the investment 
of the assets of such plan or account, (e.g., establishment charges, 
maintenance fees, investment expenses, termination costs, and surrender 
charges) shall not exceed the fees and expenses charged by the QTA for 
comparable Individual Retirement Plans or other accounts established 
for reasons other than the receipt of a distribution made pursuant to 
the QTA Regulation;
    (2) Fees and expenses attendant to the Individual Retirement Plan 
or other account, with the exception of establishment charges, may be 
charged only against the income earned by the Individual Retirement 
Plan or other account; and
    (3) Fees and expenses attendant to the Individual Retirement Plan 
or other account are not in excess of reasonable compensation within 
the meaning of Code section 4975(d)(2).

Section IV. Recordkeeping

    (a) The QTA maintains or causes to be maintained, for a period of 
six (6) years from the date the QTA provides notice to the Department 
of its intent to serve as the QTA described in the QTA Regulation, the 
records necessary to enable the persons described in paragraph (b) of 
this Section to determine whether the applicable conditions of this 
exemption have been met. Such records must be readily available to 
assure accessibility by the persons identified in paragraph (b) of this 
Section.
    (b) Notwithstanding any provisions of ERISA section 504(a)(2) and 
(b), the records referred to in paragraph (a) of this section are 
unconditionally available at their customary location for examination 
during normal business hours by--
    (1) Any duly authorized employee or representative of the 
Department of Labor or the Internal Revenue Service; and
    (2) Any account holder of an Individual Retirement Plan or other 
account established pursuant to this exemption, or any duly authorized 
representative of such account holder.
    (c) A prohibited transaction will not be considered to have 
occurred if due to circumstances beyond the control of the QTA, the 
records necessary to enable the persons described in paragraph (b) to 
determine whether the conditions of the exemption have been met are 
lost or destroyed, and no party in interest other than the QTA shall be 
subject to the civil penalty that may be assessed under ERISA section 
502(i) or to the taxes

[[Page 43684]]

imposed by Code sections 4975(a) and (b), the records are not 
maintained or are not available for examination as required by 
paragraph (b).
    (3) None of the persons described in paragraph (b)(2) of this 
Section shall be authorized to examine the trade secrets of the QTA or 
its affiliates or commercial or financial information that is 
privileged or confidential.

Section V. Definitions

    (a) A termination administrator is qualified and considered a 
``QTA'' for purposes of this exemption only if:
    (1)(i) It is eligible to serve as a trustee or issuer of an 
individual retirement plan, within the meaning of Code section 
7701(a)(37), and (ii) it holds assets of the plan that is found 
abandoned; or
    (2)(i) It is a bankruptcy trustee in a liquidation proceeding under 
chapter 7 of title 11 of the United States Code with responsibility 
under 11 U.S.C. 704(a)(11) to administer one or more individual account 
plans sponsored by the entity that is the subject of the proceeding, 
who elects to be a QTA under 29 CFR 2578.1(j)(6); (ii) it is an 
``eligible designee,'' as defined in 29 CFR 2578.1(j)(4)(i); or (iii) 
it is an ``eligible designee'' as defined in 29 CFR 2578.1(j)(4)(ii).
    If a bankruptcy trustee designates an eligible designee, then it 
shall not be considered a QTA with respect to the relief provided in 
this exemption.
    (b) The term ``Individual Retirement Plan'' means an individual 
retirement plan described in Code section 7701(a) (37). For purposes of 
Section III of this exemption, the term ``Individual Retirement Plan'' 
shall also include an inherited individual retirement plan (within the 
meaning of Code section 402(c)(11)) established to receive a 
distribution on behalf of a non-spouse beneficiary. Notwithstanding the 
foregoing, the term ``Individual Retirement Plan'' shall not include an 
employee benefit plan covered by Title I of ERISA.
    (c) The term ``Eligible Investment Product'' means an investment 
product designed to preserve principal and provide a reasonable rate of 
return, whether or not such return is guaranteed, consistent with 
liquidity. For this purpose, the product must be offered by a Regulated 
Financial Institution as defined in paragraph (d) of this Section and 
shall seek to maintain, over the term of the investment, the dollar 
value that is equal to the amount invested in the product by the 
Individual Retirement Plan or other account. Such term includes money 
market funds maintained by registered investment companies, and 
interest-bearing savings accounts and certificates of deposit of a bank 
or similar financial institution. In addition, the term includes 
``stable value products'' issued by a financial institution that are 
fully benefit-responsive to the Individual Retirement Plan account 
holder or other account holder, i.e., that provide a liquidity 
guarantee by a financially responsible third party of principal and 
previously accrued interest for liquidations or transfers initiated by 
the Individual Retirement Plan account holder or other account holder 
exercising their right to withdraw or transfer funds under the terms of 
an arrangement that does not include substantial restrictions to the 
account holder's access to the Individual Retirement Plan or other 
account's assets.
    (d) The term ``Regulated Financial Institution'' means an entity 
that: (i) is subject to state or federal regulation, and (ii) is a bank 
or savings association, the deposits of which are insured by the 
Federal Deposit Insurance Corporation; a credit union, the member 
accounts of which are insured within the meaning of section 101(7) of 
the Federal Credit Union Act; an insurance company, the products of 
which are protected by state guaranty associations; or an investment 
company registered under the Investment Company Act of 1940.
    (e) An ``Affiliate'' of a person includes:
    (1) Any person directly or indirectly controlling, controlled by, 
or under common control with, the person; or
    (2) Any officer, director, partner or employee of the person.
    (f) The terms ``controlling, controlled by, or under common 
control'' means the power to exercise a controlling influence over the 
management or policies of a person other than an individual.
    (g) The term ``Individual Account Plan'' means an individual 
account plan as that term is defined in ERISA section 3(34).
    (h) The term ``Designating Bankruptcy Trustee'' means a bankruptcy 
trustee in a liquidation proceeding under chapter 7 of title 11 of the 
United States Code with responsibility under 11 U.S.C. 704(a)(11) to 
administer one or more individual account plans sponsored by the entity 
that is the subject of the proceeding, that provides services to the 
plan but is not the QTA because of the appointment of an eligible 
designee.

    Signed at Washington, DC, on April 22, 2024.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.
[FR Doc. 2024-09030 Filed 5-16-24; 8:45 am]
BILLING CODE 4510-29-P