Procedure for Application for Exemption from the Prohibited Transaction Provisions of Section 408(a) of the Employee Retirement Income Security Act of 1974 (ERISA)
Procedure for Application for Exemption from the Prohibited Transaction Provisions of Section 408(a) of the Employee Retirement Income Security Act of 1974 (ERISA)
The Department is issuing a proposed rule that would, if adopted, supersede the existing rule of procedure governing the filing and processing of applications for administrative exemptions from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code of 1986 (the Code), and the Federal Employees' Retirement System Act of 1986 (FERSA). The proposed regulation updates the exemption procedure to reflect various changes in the Department's practices that have evolved since the current procedural rule was adopted in 1990. Among other things, key elements of the exemption policies and guidance currently found in ERISA Technical Release 85-1 (pertaining to retroactive exemptions) and the Department's 1995 exemption publication would be consolidated within the text of a unitary, comprehensive final regulation, thus reducing the regulatory burdens on applicants for exemptive relief.
Sections 2570.34 and 2570.35 of the exemption procedure regulation would be expanded as follows: all applications would be required to include a chronology of events leading to the exemption transaction; the specialized statements from qualified independent appraisers would be amended to require the appraisal report to be current and not more than one year old as of the date of the transaction and the appraiser's rationale, credentials, and a statement regarding the appraiser's independence from the parties involved in the transaction would need to be included; a new requirement would be added regarding the content requirements for specialized statements submitted by third-party experts other than qualified independent appraisers; a new qualified independent fiduciary statements would be required that discloses the independent fiduciary's qualifications, duties, and current compensation.
A new requirement contained in section 2570.43(d) and (e), if adopted, would permit the Department, in its discretion, to require an applicant to furnish interested persons with a Summary of Proposed Exemption (SPE). The Departments expects this requirement to be used in instances where the proposed transaction is relatively complex, and it is likely that the notice of proposed exemption may not be readily understandable by interested persons (i.e., participants and beneficiaries).
The SPE, must be written in a manner calculated to be understood by the average recipient. Among other things, the SPE must objectively describe the exemption transaction and the parties thereto, the reasons why the plan seeks to engage in the transaction, and the conditions and safeguards proposed to protect the plan and its participants from potential abuse or unnecessary risk of loss in the event the Department grants the exemption. Applicants who must provide interested persons with an SPE also would be required to furnish the Department with a copy of the SPE for review and approval before it is distributed to interested persons.
Finally, the Department also proposes to amend §2570.43 to permit applicants to utilize electronic means (such as e-mail) to deliver notice to interested persons of a pending exemption, provided that the applicant can demonstrate satisfactory proof of electronic delivery to the entire class of interested persons.
On behalf of this Federal agency, I certify that the collection of information encompassed by this request complies with 5 CFR 1320.9 and the related provisions of 5 CFR 1320.8(b)(3).
The following is a summary of the topics, regarding the proposed collection of information, that the certification covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control number;
If you are unable to certify compliance with any of these provisions, identify the item by leaving the box unchecked and explain the reason in the Supporting Statement.
Procedure for Application for Exemption from the Prohibited Transaction Provisions of Section 408(a) of the Employee Retirement Income Security Act of 1974 (ERISA)