Proposed Exemption for the Receipt of Compensation by Investment Advice Fiduciaries (Best Interest Contract PTE)

Forms and Documents

Document Name	Status
Best Interest Contract Exemption Supporting Statementfinal.docx Supporting Statement A	2015-04-17

IC Document Collections

IC ID	Document Title	Status
213821	Contract Exemption Conditions	New

ICR Details

OMB Control No: 1210-0156	ICR Reference No: 201411-1210-004
Status: Historical Inactive	Previous ICR Reference No:
Agency/Subagency: DOL/EBSA	Agency Tracking No:
Title: Proposed Exemption for the Receipt of Compensation by Investment Advice Fiduciaries (Best Interest Contract PTE)
Type of Information Collection: New collection (Request for a new OMB Control Number)	Common Form ICR:  No
Type of Review Request: Regular
OIRA Conclusion Action: Comment filed on proposed rule	Conclusion Date: 07/20/2015
	Date Received in OIRA: 04/20/2015
Terms of Clearance: OMB files this comment in accordance with 5 CFR 1320.11( c ). This OMB action is not an approval to conduct or sponsor an information collection under the Paperwork Reduction Act of 1995. This action has no effect on any current approvals. If OMB has assigned this ICR a new OMB Control Number, the OMB Control Number will not appear in the active inventory. For future submissions of this information collection, reference the OMB Control Number provided. The agency will respond to comments received on the ICR in the final rule.

	Inventory as of this Action	Requested	Previously Approved
Expiration Date		36 Months From Approved
Responses	0	0	0
Time Burden (Hours)	0	0	0
Cost Burden (Dollars)	0	0	0

---

Abstract: The Department is proposing this prohibited transaction class exemption (PTE) in connection with its proposed regulation under ERISA section 3(21)(A)(ii) and Code section 4975(e)(3)(B) (Proposed Regulation). The Proposed Regulation would amend the definition of a "fiduciary" under ERISA and the Code to specify when a person is a fiduciary by reason of the provision of investment advice for a fee or other compensation regarding assets of a plan or IRA (i.e., an investment advice fiduciary). If adopted, the Proposed Regulation would replace an existing regulation dating to 1975, with the aim of more appropriately distinguishing between the sorts of advice relationships that should be treated as fiduciary in nature and those that should not. This PTE allows certain investment advice fiduciaries to receive various forms of compensation that, in the absence of an exemption, would be prohibited under ERISA and the Code. In this regard, ERISA and the Code generally prohibit fiduciaries from receiving payments from third parties and from acting on conflicts of interest, including using their authority to affect or increase their own compensation, in connection with transactions involving a plan or IRA. Certain types of fees and compensation, such as brokerage or insurance commissions, 12b-1 fees and revenue sharing payments, commonly paid to a broker-dealer, insurance agent or other fiduciary in connection with investment transactions entered into by plans or IRAs, fall within these prohibitions. This PTE would allow investment advice fiduciaries to receive compensation when plan participants or beneficiaries, IRAs, or certain small plans, purchase, hold or sell investment products based on the fiduciaries' advice, under conditions designed to safeguard the interests of these investors. Specifically, the PTE would apply when compensation is received in connection with a transaction involving a plan participant or beneficiary, an IRA, or a fiduciary of an employee benefit plan with less than 100 participants (referred to generally as "retirement investors"), in accordance with the adviser's advice. To safeguard the interests of the plans and IRAs, the exemption would require the financial institution and the adviser to contractually acknowledge fiduciary status and commit to adhere to certain impartial conduct standards when providing advice to the plans and IRAs, including providing advice in their Best Interest. The financial institution would further be required to warrant that it has adopted policies and procedures designed to mitigate the impact of conflicts of interest and ensure that the individual advisers adhere to impartial conduct standards. The exemption would also require disclosure regarding adviser and financial institution fee practices. Additional conditions would apply to financial institutions that limit products available to advisers for recommendation based on third-party payments generated or based on the fact that they are proprietary products (i.e., products offered or managed by the financial institution or its affiliates). Financial institutions relying on the exemption would be required to notify the Department in advance of doing so. Finally, financial institutions making use of the exemption would have to maintain certain data, and make it available to the Department, to help evaluate the effectiveness of the exemption in safeguarding the interests of plans and IRAs.

---

Authorizing Statute(s): US Code: 29 USC 1108 Name of Law: Employee Retirement Income Security Act of 1974
  

Citations for New Statutory Requirements: None

---

Associated Rulemaking Information
RIN:	Stage of Rulemaking:	Federal Register Citation:	Date:
1210-ZA25	Proposed rulemaking	80 FR 21960	04/20/2015

---

Federal Register Notices & Comments

Did the Agency receive public comments on this ICR? No

---

Number of Information Collection (IC) in this ICR: 1

IC Title	Form No.	Form Name
Contract Exemption Conditions

---

Burden increases because of Program Change due to Agency Discretion: Yes

Burden Increase Due to: Changing Regulations

Burden decreases because of Program Change due to Agency Discretion: No

Burden Reduction Due to:

Short Statement: The Department is proposing this prohibited transaction class exemption (PTE) in connection with its proposed regulation under ERISA section 3(21)(A)(ii) and Code section 4975(e)(3)(B) (Proposed Regulation). The Proposed Regulation would amend the definition of a "fiduciary" under ERISA and the Code to specify when a person is a fiduciary by reason of the provision of investment advice for a fee or other compensation regarding assets of a plan or IRA (i.e., an investment advice fiduciary). If adopted, the Proposed Regulation would replace an existing regulation dating to 1975, with the aim of more appropriately distinguishing between the sorts of advice relationships that should be treated as fiduciary in nature and those that should not. This PTE allows certain investment advice fiduciaries to receive various forms of compensation that, in the absence of an exemption, would be prohibited under ERISA and the Code. In this regard, ERISA and the Code generally prohibit fiduciaries from receiving payments from third parties and from acting on conflicts of interest, including using their authority to affect or increase their own compensation, in connection with transactions involving a plan or IRA. Certain types of fees and compensation, such as brokerage or insurance commissions, 12b-1 fees and revenue sharing payments, commonly paid to a broker-dealer, insurance agent or other fiduciary in connection with investment transactions entered into by plans or IRAs, fall within these prohibitions. This PTE would allow investment advice fiduciaries to receive compensation when plan participants or beneficiaries, IRAs, or certain small plans, purchase, hold or sell investment products based on the fiduciaries' advice, under conditions designed to safeguard the interests of these investors. Specifically, the PTE would apply when compensation is received in connection with a transaction involving a plan participant or beneficiary, an IRA, or a fiduciary of an employee benefit plan with less than 100 participants (referred to generally as "retirement investors"), in accordance with the adviser's advice.

---

Annual Cost to Federal Government: $0

Does this IC contain surveys, censuses, or employ statistical methods? No

Is the Supporting Statement intended to be a Privacy Impact Assessment required by the E-Government Act of 2002? No

Is this ICR related to the Affordable Care Act [Pub. L. 111-148 & 111-152]? No

Is this ICR related to the Dodd-Frank Wall Street Reform and Consumer Protection Act, [Pub. L. 111-203]? No

Is this ICR related to the American Recovery and Reinvestment Act of 2009 (ARRA)? No

Is this ICR related to the Pandemic Response? Uncollected

---

Common Form ICR:  No

---

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:

(a) It is necessary for the proper performance of agency functions;

(b) It avoids unnecessary duplication;

(c) It reduces burden on small entities;

(d) It uses plain, coherent, and unambiguous language that is understandable to respondents;

(e) Its implementation will be consistent and compatible with current reporting and recordkeeping practices;

(f) It indicates the retention periods for recordkeeping requirements;

(g) It informs respondents of the information called for under 5 CFR 1320.8 (b)(3) about:

(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;

(h) It was developed by an office that has planned and allocated resources for the efficient and effective management and use of the information to be collected.

(i) It uses effective and efficient statistical survey methodology (if applicable); and

(j) It makes appropriate use of information technology.

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.

Certification Date: 04/20/2015

---