Prohibited Transaction Class Exemption 75-1 Security Transactions with Broker-Dealers, Reporting Dealers and Banks

Federal Register / Vol. 71, No. 23 / Friday, February 3, 2006 / Notices
inventories of explosives must be
maintained to assure employer and
blaster accountability for explosives.
Ira L. Mills,
Departmental Clearance Officer.
[FR Doc. E6–1506 Filed 2–2–06; 8:45 am]
BILLING CODE 4510–26–P

DEPARTMENT OF LABOR
Office of the Secretary
Submission for OMB Review:
Comment Request

hsrobinson on PROD1PC70 with NOTICES

January 26, 2006.

The Department of Labor (DOL) has
submitted the following public
information collection request (ICR) to
the Office of Management and Budget
(OMB) for review and approval in
accordance with the Paperwork
Reduction Act of 1995 (Pub. L. 104–13,
44 U.S.C. chapter 35). A copy of this
ICR, with applicable supporting
documentation, may be obtained by
contacting the Department of Labor
(DOL). To obtain documentation,
contact Darrin King on 202–693–4129
(this is not a toll-free number) or e-mail:
[email protected].
Comments should be sent to Office of
Information and Regulatory Affairs,
Attn: OMB Desk Officer for the
Occupational Safety and Health
Administration (OSHA), Office of
Management and Budget, Room 10235,
Washington, DC 20503, 202–395–7316
(this is not a toll-free number), within
30 days from the date of this publication
in the Federal Register.
The OMB is particularly interested in
comments which:
• Evaluate whether the proposed
collection of information is necessary
for the proper performance of 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
proposed 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 electronic submission of
responses.
Agency: Occupational Safety and
Health Administration.

VerDate Aug<31>2005

15:00 Feb 02, 2006

Jkt 208001

Type of Review: Extension of
currently approved collection.
Title: Longshoring and Marine
Terminal Operations (29 CFR Parts 1918
and 1917).
OMB Number: 1218–0196.
Frequency: On occasion; Weekly;
Monthly; and Annually.
Type of Response: Recordkeeping and
Third party disclosure.
Affected Public: Business or other forprofit; not-for-profit institutions; Federal
Government; and State, Local, or Tribal
Government.
Number of Respondents: 750.
Number of Annual Responses:
152,458.
Estimated Time per Response: Varies
from 1 minute to 1 hour and five
minutes.
Total Burden Hours: 35,948.
Total Annualized capital/startup
costs: $0.
Total Annual Costs (operating/
maintaining systems or purchasing
services): $0.
Description: The Standards on Marine
Terminals (29 CFR Part 1917) and Safety
and Health Regulations for Longshoring
(29 CFR Part 1918) contain a number of
collections of information which are
used by employers to ensure that
employees are informed properly about
the safety and health hazards associated
with marine terminals and longshoring
operations. OSHA uses the records
developed in response to the collection
of information requirements to find out
if the employer is complying adequately
with the provisions of the standards.
Ira L. Mills,
Departmental Clearance Officer.
[FR Doc. E6–1507 Filed 2–2–06; 8:45 am]
BILLING CODE 4510–26–P

DEPARTMENT OF LABOR
Employee Benefits Security
Administration
[Application No. D–11184]

Amendment to Prohibited Transaction
Exemption (PTE) 75–1, Exemptions
From Prohibitions Respecting Certain
Classes of Transactions Involving
Employee Benefit Plans and Certain
Broker-Dealers, Reporting Dealers and
Banks
Employee Benefits Security
Administration.
ACTION: Final Amendment to PTE 75–1,
Part II and Part V.
AGENCY:

SUMMARY: This document amends PTE
75–1, Part II and Part V (40 FR 50845,
October 31, 1975). PTE 75–1, Part II,

PO 00000

Frm 00083

Fmt 4703

Sfmt 4703

5883

permits the purchase or sale of a
security in a principal transaction
between an employee benefit plan and
a broker-dealer, reporting dealer, or
bank. PTE 75–1, Part V, permits an
extension of credit to a plan by a brokerdealer in connection with the purchase
or sale of securities. The amendment
affects participants, beneficiaries and
fiduciaries of employee benefit plans,
and broker-dealers, reporting dealers
and banks entering into the described
transactions.
DATES: Effective Date: This amendment
is effective January 1, 1975.
FOR FURTHER INFORMATION CONTACT:
Brian Buyniski or Karen Lloyd, Office of
Exemption Determinations, Employee
Benefits Security Administration, U.S.
Department of Labor, Room N–5649,
200 Constitution Avenue, NW.,
Washington, DC 20210, 202–693–8540.
(This is not a toll free number.)
SUPPLEMENTARY INFORMATION: On April
28, 2004, notice was published in the
Federal Register (69 FR 23216) of the
pendency before the Department of
Labor (the Department) of a proposed
amendment to PTE 75–1, Part II and
Part V. PTE 75–1 provides exemptive
relief from certain of the restrictions of
section 406 of the Employee Retirement
Income Security Act of 1974 (ERISA or
the Act), and from certain taxes imposed
by section 4975(a) and (b) of the Internal
Revenue Code of 1986 (the Code), by
reason of section 4975(c)(1) of the Code.
The amendment was proposed by the
Department on its own motion,
pursuant to section 408(a) of ERISA and
section 4975(c)(2) of the Code, and in
accordance with the procedures set
forth in 29 CFR part 2570, subpart B (55
FR 32836, August 10, 1990).1
The notice gave interested persons an
opportunity to comment or to request a
hearing on the proposed amendment.
The Department received three
comments which are discussed below.
One commenter requested a public
hearing if the Department determined to
modify a specific provision of the
exemption. As the Department has not
modified that provision in the final
exemption, a public hearing will not be
held with regard to this amendment.
Executive Order 12866 Statement
Under Executive Order 12866, the
Department must determine whether the
1 Section 102 of Reorganization Plan No. 4 of
1978, 5 U.S.C. App. at 214 (2000 ed.) generally
transferred the authority of the Secretary of the
Treasury to issue exemptions under section
4975(c)(2) of the Code to the Secretary of Labor.
In the discussion of the exemption, references to
specific provisions of the Act should be read to
refer as well to the corresponding provisions of
section 4975 of the Code.

E:\FR\FM\03FEN1.SGM

03FEN1

5884

Federal Register / Vol. 71, No. 23 / Friday, February 3, 2006 / Notices

regulatory action is ‘‘significant’’ and
therefore subject to the requirements of
the Executive Order and subject to
review by the Office of Management and
Budget (OMB). Under section 3(f), the
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 $100 million
or more, or adversely and materially
affecting a sector of the economy,
productivity, competition, jobs, the
environment, public health or safety, or
State, local or tribal governments or
communities (also referred to as
‘‘economically significant’’); (2) creating
serious inconsistency or otherwise
interfering with an action taken or
planned by another agency; (3)
materially altering the budgetary
impacts of entitlement grants, user fees,
or loan programs or the rights and
obligations of recipients thereof; or (4)
raising novel legal or policy issues
arising out of legal mandates, the
President’s priorities, or the principles
set forth in the Executive Order.
This amendment has been drafted and
reviewed in accordance with Executive
Order 12866, section 1(b), Principles of
Regulation. The Department has
determined that this amendment is not
a ‘‘significant regulatory action’’ under
Executive Order 12866, section 3(f).
Accordingly, it does not require an
assessment of potential costs and
benefits under section 6(a)(3) of that
order.
Paperwork Reduction Act
The information collection request
(ICR) included in the existing PTE 75–
1 is currently approved under Office of
Management and Budget (OMB) control
number 1210–0092 (through March 31,
2007). The amendment does not modify
the information collection provisions of
the exemption. Therefore, the
Department has not submitted an ICR to
OMB in connection with this Final
Amendment to PTE 75–1.
Description of the Exemption
Part I of PTE 75–1 provides relief for
agency transactions and services; 2 Part
II for principal transactions; Part III for
underwritings; Part IV for marketmaking; and Part V for extension of
credit.

hsrobinson on PROD1PC70 with NOTICES

PTE 75–1, Part II
Part II of PTE 75–1 provides relief
from the restrictions of 406(a) of ERISA
and the taxes imposed by section
4975(a) and (b) of the Code, by reason
2 Part

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

VerDate Aug<31>2005

15:00 Feb 02, 2006

Jkt 208001

of section 4975(c)(1)(A) through (D) of
the Code, for the purchase or sale of a
security between an employee benefit
plan and: (1) A broker-dealer registered
under the Securities Exchange Act of
1934 (the 1934 Act); (2) a reporting
dealer who makes primary markets in
securities of the U.S. Government or of
any agency thereof and reports daily to
the Federal Reserve Bank of New York
its positions with respect to Government
securities and borrowings thereon; or (3)
a bank supervised by the United States
or a State.3
The exemption further provides relief
from the restrictions of section 406(b) of
ERISA and the taxes imposed by section
4975(a) and (b) of the Code, by reason
of section 4975(c)(1)(E) and (F) of the
Code, for the purchase or sale by a plan
of securities issued by an open-end
investment company registered under
the Investment Company Act of 1940,
provided that a fiduciary with respect to
the plan is not a principal underwriter
for, or affiliated with, such investment
company within the meaning of sections
2(a)(29) and 2(a)(3) of the Investment
Company Act of 1940 (the Mutual Fund
Exemption).
The conditions of PTE 75–1, Part II,
require that a broker-dealer must
customarily purchase and sell securities
for its own account in the ordinary
course of its business as a broker-dealer.
The conditions further require that
reporting dealers and banks must
customarily purchase and sell
Government securities for their own
accounts in the ordinary course of their
businesses, and that any purchase or
sale between the plan and such
reporting dealer or bank be limited to a
purchase or sale of Government
securities.
All transactions entered into pursuant
to Part II must be at least as favorable
to the plan as an arm’s length
transaction with an unrelated party
would be, and must not be, at the time
of the transaction, a prohibited
transaction within the meaning of
section 503(b) of the Code.
Except with respect to the Mutual
Fund Exemption, Part II as originally
granted provided that the broker-dealer,
reporting dealer or bank may not be a
fiduciary with respect to the plan, and
such broker-dealer, reporting dealer or
bank may be a party in interest or
disqualified person with respect to the
plan solely by reason of section 3(14)(B)
of the Act or section 4975(e)(2)(B) of the
Code or a relationship to a person
3 The exemption defines the terms ‘‘brokerdealer,’’ ‘‘reporting dealer’’ and ‘‘bank’’ to include
such entities and any affiliate thereof. The term
‘‘affiliate’’ is defined as in 29 CFR 2510.3–21(e) and
26 CFR 54.4975–9(e).

PO 00000

Frm 00084

Fmt 4703

Sfmt 4703

described in those sections. For
purposes of this condition, a brokerdealer, reporting dealer or bank is not
deemed to be a fiduciary with respect to
a plan solely by reason of providing
securities custodial services for a plan.
Lastly, the exemption for principal
transactions also contains certain
recordkeeping requirements.
PTE 75–1, Part V
Part V of PTE 75–1 provides relief
from the restrictions of section 406 of
ERISA and the related excise taxes
imposed by section 4975(a) and (b) of
the Code, by reason of section 4975(c)(1)
of the Code, for any extension of credit
to a plan by a broker or dealer registered
under the 1934 Act.4 As originally
granted, Part V provided that the brokerdealer extending credit may not be a
fiduciary with respect to any assets of
the plan, unless no interest or other
consideration is received by such
fiduciary or any affiliate in connection
with the extension of credit.
Under Part V, the extension of credit
must be made in connection with the
purchase or sale of securities, must be
lawful under the 1934 Act, and may not
be a prohibited transaction within the
meaning of section 503(b) of the Code.
Lastly, the exemption for extensions of
credit also contains certain
recordkeeping requirements.
Amendment
As part of the proposed amendment,
the Department repositioned the
following language found in section (d)
of Part II of the exemption:
Neither the restrictions of this paragraph
nor (if the other conditions of this exemption
are met) the restrictions of section 406(b) of
the Act and the taxes imposed by section
4975(a) and (b) of the Code, by reason of
section 4975(c)(1)(E) and (F) of the Code,
shall apply to the purchase or sale by the
plan of securities issued by an open-end
investment company registered under the
Investment Company Act of 1940 (15 U.S.C.
80a–1 et seq.), provided that a fiduciary with
respect to the plan is not a principal
underwriter for, or affiliated with, such
investment company within the meaning of
sections 2(a)(29) and 2(a)(3) of the Investment
Company Act of 1940 (15 U.S.C. 80a–2(a)(29)
and 80a–2(a)(3)).

The Department included the relief
provided by this provision in a new
paragraph (2) of Part II of the exemption
for principal transactions. The
Department also proposed to amend the
language of this section to clarify that
the fiduciary referenced therein is the
4 The exemption defines the terms ‘‘broker’’ and
‘‘dealer’’ to include such entities and any affiliate
thereof. The term ‘‘affiliate’’ is defined as in 29 CFR
2510.3–21(e) and 26 CFR 54.4975–9(e).

E:\FR\FM\03FEN1.SGM

03FEN1

Federal Register / Vol. 71, No. 23 / Friday, February 3, 2006 / Notices
fiduciary who makes the decision on
behalf of the plan to enter into the
transaction. The Department also
requested public comment on the
current utility of this exemption.
The Department additionally
proposed to amend another provision of
section (d) of Part II, which stated, in
relevant part, that:
Such broker-dealer, reporting dealer or
bank is not a fiduciary with respect to the
plan, and such broker-dealer, reporting
dealer or bank is a party in interest or
disqualified person with respect to the plan
solely by reason of section 3(14)(B) of the Act
or section 4975(e)(2)(B) of the Code or a
relationship to a person described in such
sections. For purposes of this paragraph, a
broker-dealer, reporting dealer, or bank shall
not be deemed to be a fiduciary with respect
to a plan solely by reason of providing
securities custodial services for a plan.

Under the proposed amendment, the
exemption permits plans to engage in
transactions with broker-dealers,
reporting dealers, banks and their
affiliates except where the brokerdealer, reporting dealer, bank or an
affiliate has or exercises any
discretionary authority or control
(except as a directed trustee) with
respect to the investment of plan assets
involved in the transaction, or renders
investment advice (within the meaning
of 29 CFR 2510.3–21(c)) with respect to
the investment of those assets.5
The Department likewise proposed to
amend condition (a)(2) of PTE 75–1,
Part V, which required that the party in
interest or disqualified person providing
the extension of credit to the plan:
[i]s not a fiduciary with respect to any
assets of such plan, unless no interest or
other consideration is received by such
fiduciary or any affiliate thereof in
connection with such extension of credit.

Under the proposed amendment,
section (a)(2) states that the party in
interest or disqualified person extending
credit to the plan:

hsrobinson on PROD1PC70 with NOTICES

does not have or exercise any discretionary
authority or control (except as a directed
trustee) with respect to the investment of the
plan assets involved in the transaction, nor
does it render investment advice (within the
meaning of 29 CFR section 2510.3–21(c))
with respect to those assets, unless no
interest or other consideration is received by
the party in interest or disqualified person or
any affiliate thereof in connection with such
extension of credit.
5 Nothing herein should be construed to imply
that a directed trustee is not a fiduciary under the
Act. See 29 U.S.C. 103(a)(1). A plan may expressly
provide that a trustee is subject to the direction of
a named fiduciary who is not a trustee, in which
case the trustee shall be subject to proper directions
of such fiduciary which are made in accordance
with the terms of the plan and which are not
contrary to the Act.

VerDate Aug<31>2005

15:00 Feb 02, 2006

Jkt 208001

Discussion of Comments
The Department received one
comment concerning the effective date
of the proposed amendments. The
commenter requested that, with respect
to the proposed amendments to
condition (d) of Part II and condition
(a)(2) of Part V, the Department state
that it was the intention of the
Department at the time of the granting
of the final exemption in 1975 to focus
only on fiduciaries with respect to the
plan assets involved in the transaction,
as opposed to any fiduciary of the plan.
The commenter referenced the
following language in the preamble of
the proposed exemption in August 1975
regarding proposed regulations under
the definition of fiduciary at section
3(21) of the Act:
It should be noted, moreover, that under
the regulations proposed in conjunction with
these proposed exemptions relating to the
definition of the term ‘‘fiduciary,’’ a person
who is a plan fiduciary would be deemed to
be a fiduciary only with respect to those plan
assets with respect to which he exercises
those functions which make him a fiduciary.

40 FR 33566. The Department received
a follow up submission from this
commenter requesting that, in order to
avoid confusion and uncertainty, this
amendment to PTE 75–1 be made
retroactive to October 31, 1975. The
Department also has been urged
informally to adopt a retroactive
effective date.
While the Department acknowledges
that some confusion may have arisen
from the fact that two conditions of PTE
75–1, Part II and Part V, regarding
fiduciaries, were broader than the
Department’s regulations regarding the
definition of a fiduciary under section
3(21) of the Act, the Department is
unable to concur with the commenter
that its original intent with respect to
such conditions was in fact to limit
them to fiduciaries with respect to the
plan assets involved in the transaction.6
The conditions contained in the
Department’s administrative exemptions
are designed to ensure that the
Department can make findings required
pursuant to section 408(a) of ERISA and
4975(c)(2) of the Code that the
exemption is administratively feasible,
and in the interests of, and protective of
the rights of, plan participants and
beneficiaries. The Department’s
regulations do not govern the scope of
the conditions of its administrative
exemptions. Therefore, the fact that a
regulation defining the term ‘‘fiduciary’’
6 The Department notes that the language quoted
by the commenter appeared in the preamble to Part
III of PTE 75–1, which is not the subject of this
amendment.

PO 00000

Frm 00085

Fmt 4703

Sfmt 4703

5885

may have focused on the plan assets
with respect to which a person exercises
fiduciary functions does not necessarily
govern the meaning of a condition of an
administrative exemption. Prior to this
amendment, the conditions in PTE 75–
1, Part II and V, clearly referred to a
fiduciary with respect to a plan.
Nevertheless, in the Department’s
view, an interpretation of the conditions
of PTE 75–1, Part II and Part V, which
focused on fiduciaries with respect to
the plan assets involved in the
transaction would not have created an
undue risk of loss of plan assets. As the
Department has concluded that the
amendments are sufficiently protective
of plan assets on a prospective basis, the
Department believes a similar
conclusion would dictate in favor of
granting the amendments on a
retroactive basis. Accordingly, the
Department has determined to make
these amendments to PTE 75–1
retroactive to January 1, 1975, which is
the effective date of PTE 75–1.
The Department received three
comments on the current utility of the
Mutual Fund Exemption. Based on the
information received, the Department
believes that additional time is needed
to more fully consider the issues raised
by the commenters. However, the
Department does not wish to unduly
delay finalization of the other
amendments to PTE 75–1. Accordingly,
this document contains final
amendments to Parts II and V of PTE
75–1 and adopts the repositioning of the
Mutual Fund Exemption to paragraph
(2) of PTE 75–1, Part II, and adopts the
clarifying language. As a result, the
Mutual Fund Exemption remains in
effect pending further action by the
Department.
General Information
The attention of interested persons is
directed to the following:
(1) The fact that a transaction is the
subject of an exemption granted under
section 408(a) of the Act and section
4975(c)(2) of the Code does not relieve
a fiduciary or other party in interest or
disqualified person with respect to a
plan to which the exemption is
applicable from certain other provisions
of the Act and the Code, including any
prohibited transaction provisions to
which the exemption does not apply
and the general fiduciary responsibility
provisions of section 404 of the Act
which, among other things, require a
fiduciary to discharge his duties
respecting the plan solely in the interest
of the plan’s participants and
beneficiaries and in a prudent fashion in
accordance with subsection (a)(1)(B) of
section 404 of the Act; nor does it affect

E:\FR\FM\03FEN1.SGM

03FEN1

5886

Federal Register / Vol. 71, No. 23 / Friday, February 3, 2006 / Notices

hsrobinson on PROD1PC70 with NOTICES

the requirement of section 401(a) of the
Code that a plan must operate for the
exclusive benefit of employees of the
employer maintaining the plan and their
beneficiaries;
(2) The Department finds that the
amended exemption is administratively
feasible, in the interests of the plan and
of its participants and beneficiaries, and
protective of the rights of participants
and beneficiaries of the plan;
(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 the Act and
the Code, including statutory and other
exemptions and transitional rules.
Furthermore, the fact that a transaction
is the subject of an exemption is not
dispositive of whether the transaction
would have been a prohibited
transaction in the absence of such
exemption.
Amendment
Accordingly, PTE 75–1 is amended as
follows under the authority of section
408(a) of the Act and section 4975(c)(2)
of the Code, and in accordance with the
procedures set forth in 29 CFR part
2570, subpart B (55 FR 32836, 32847,
August 10, 1990).
I. PTE 75–1, Part II, is amended in its
entirety to read as follows:
(1) The restrictions of section 406(a)
of the Employee Retirement Income
Security Act of 1974 (the Act) and the
taxes imposed by section 4975(a) and (b)
of the Internal Revenue Code of 1986
(the Code), by reason of section
4975(c)(1)(A) through (D) of the Code,
shall not apply to any purchase or sale
of a security between an employee
benefit plan 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
(‘‘Government securities’’) 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, and
(2) The restrictions of section 406(a)
and 406(b) of the Act and the taxes
imposed by section 4975(a) and (b) of
the Code, by reason of section
4975(c)(1)(A) through (F) of the Code,
shall not apply to the purchase or sale
by a plan of securities issued by an
open-end investment company
registered under the Investment

VerDate Aug<31>2005

15:00 Feb 02, 2006

Jkt 208001

Company Act of 1940 (15 U.S.C. 80a–1
et seq.), provided that no fiduciary with
respect to the plan who makes the
decision on behalf of the plan to enter
into the transaction is a principal
underwriter for, or affiliated with, such
investment company within the
meaning of sections 2(a)(29) and 2(a)(3)
of the Investment Company Act of 1940
(15 U.S.C. 80a–2(a)(29) and 80a–2(a)(3)).
The exemptions set forth in (1) and (2)
above are subject to the following
conditions:
(a) In the case of such broker-dealer,
it customarily purchases and sells
securities for its own account in the
ordinary course of its business as a
broker-dealer.
(b) In the case of such reporting dealer
or bank, it customarily purchases and
sells Government securities for its own
account in the ordinary course of its
business and such purchase or sale
between the plan and such reporting
dealer or bank is a purchase or sale of
Government securities.
(c) Such transaction is at least as
favorable to the plan as an arm’s length
transaction with an unrelated party
would be, and it was not, at the time of
such transaction, a prohibited
transaction within the meaning of
section 503(b) of the Code.
(d) Except with respect to transactions
described in section (2) above, neither
the broker-dealer, reporting dealer,
bank, nor any affiliate thereof has or
exercises any discretionary authority or
control (except as a directed trustee)
with respect to the investment of the
plan assets involved in the transaction,
or renders investment advice (within
the meaning of 29 CFR 2510.3–21(c))
with respect to those assets.
(e) The plan 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) Such broker-dealer, reporting
dealer, or bank shall not 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
plan fiduciaries, such records are lost or
destroyed prior to the end of such sixyear period.
(f) Notwithstanding anything to the
contrary in subsections (a)(2) and (b) of

PO 00000

Frm 00086

Fmt 4703

Sfmt 4703

section 504 of the Act, the records
referred to in paragraph (e) are
unconditionally available for
examination during normal business
hours by duly authorized employees of
(1) the Department of Labor, (2) the
Internal Revenue Service, (3) plan
participants and beneficiaries, (4) any
employer of plan participants and
beneficiaries, and (5) any employee
organization any of whose members are
covered by such plan. For purposes of
this exemption, the terms ‘‘brokerdealer,’’ ‘‘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).
II. PTE 75–1, Part V, is amended in its
entirety to read as follows:
The restrictions of section 406 of the
Employee Retirement Income Security
Act of 1974 (the Act) and the taxes
imposed by section 4975(a) and (b) of
the Internal Revenue Code of 1986 (the
Code), by reason of section 4975(c)(1) of
the Code, shall not apply to any
extension of credit to an employee
benefit plan by a party in interest or a
disqualified person with respect to the
plan, provided that the following
conditions are met:
(a) The party in interest or
disqualified person:
(1) Is a broker or dealer registered
under the Securities Exchange Act of
1934; and
(2) Does not have or exercise any
discretionary authority or control
(except as a directed trustee) with
respect to the investment of the plan
assets involved in the transaction, nor
does it render investment advice (within
the meaning of 29 CFR 2510.3–21(c))
with respect to those assets, unless no
interest or other consideration is
received by the party in interest or
disqualified person or any affiliate
thereof in connection with such
extension of credit.
(b) Such extension of credit:
(1) Is in connection with the purchase
or sale of securities;
(2) Is lawful under the Securities
Exchange Act of 1934 and any rules and
regulations promulgated thereunder;
and
(3) Is not a prohibited transaction
within the meaning of section 503(b) of
the Code.
(c) The plan 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 (d) of
this exemption to determine whether

E:\FR\FM\03FEN1.SGM

03FEN1

Federal Register / Vol. 71, No. 23 / Friday, February 3, 2006 / Notices
the conditions of this exemption have
been met, except that:
(1) If such party in interest or
disqualified person is not a fiduciary
with respect to any assets of the plan,
such party in interest or disqualified
person shall not 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
(d) below; and
(2) A prohibited transaction will not
be deemed to have occurred if, due to
circumstances beyond the control of the
plan fiduciaries, such records are lost or
destroyed prior to the end of such sixyear period.
(d) Notwithstanding anything to the
contrary in subsections (a)(2) and (b) of
section 504 of the Act, the records
referred to in paragraph (c) are
unconditionally available for
examination during normal business
hours by duly authorized employees of
(1) the Department of Labor, (2) the
Internal Revenue Service, (3) plan
participants and beneficiaries, (4) any
employer of plan participants and
beneficiaries, and (5) any employee
organization any of whose members are
covered by such plan. For purposes of
this exemption, the terms ‘‘party in
interest’’ and ‘‘disqualified person’’
shall include such party in interest or
disqualified person 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).
Signed at Washington DC, this 30th day of
January, 2006.
Ivan L. Strasfeld,
Director, Office of Exemption Determinations,
Employee Benefits Security Administration,
Department of Labor.
[FR Doc. E6–1484 Filed 2–2–06; 8:45 am]

hsrobinson on PROD1PC70 with NOTICES

BILLING CODE 4520–29–P

DEPARTMENT OF LABOR
Employee Benefits Security
Administration
[Exemption Application D–11069]

Amendment to Prohibited Transaction
Exemption 84–24 (PTE 84–24) For
Certain Transactions Involving
Insurance Agents and Brokers,
Pension Consultants, Insurance
Companies, Investment Companies
and Investment Company Principal
Underwriters
Employee Benefits Security
Administration, U.S. Department of
Labor.
ACTION: Adoption of Amendment to PTE
84–24.
AGENCY:

SUMMARY: This document amends PTE
84–24, a class exemption that provides
relief for certain transactions relating to
the purchase, with plan assets, of
investment company securities or
insurance or annuity contracts, and the
payment of associated sales
commissions to insurance agents or
brokers, pension consultants, or
investment company principal
underwriters that are parties in interest
with respect to such plan. The
amendment extends relief to purchase
transactions involving insurance agents
and brokers, pension consultants, and
investment company principal
underwriters whose affiliates exercise
investment discretion over plan assets
that are not involved in the transaction.
DATES: The amendment is effective
February 3, 2006.
FOR FURTHER INFORMATION CONTACT:
Christopher Motta, Office of Exemption
Determinations, Employee Benefits
Security Administration, U.S.
Department of Labor, (202) 693–8540
(this is not a toll-free number).
SUPPLEMENTARY INFORMATION: On
September 14, 2004, notice was
published in the Federal Register (69
FR 55463) of the pendency before the
Department of a proposed amendment
to PTE 84–24 (49 FR 13208 (April 3,
1984) as corrected at 49 FR 24819 (June
15, 1984)). PTE 84–24 provides an
exemption from the restrictions of
section 406(a)(1)(A) through (D) and
section 406(b) of the Employee
Retirement Income Security Act of 1974
(ERISA or the Act) and from the taxes
imposed by section 4975(a) and (b) of
the Code, by reason of section
4975(c)(1)(A) through (F) of the Code.1
1 References to section 406 of ERISA as they
appear throughout this amendment should be read
to refer as well to the corresponding provisions of
section 4975 of the Internal Revenue Code of 1986,
as amended (the Code).

VerDate Aug<31>2005

15:00 Feb 02, 2006

Jkt 208001

PO 00000

Frm 00087

Fmt 4703

Sfmt 4703

5887

The amendment to PTE 84–24 was
proposed by the Department on its own
motion, pursuant to section 408(a) of
ERISA and section 4975(c)(2) of the
Code and in accordance with the
procedures set forth in 29 CFR part
2570, subpart B (55 FR 32836, 32847,
August 10, 1990).2 The notice of
pendency gave interested persons an
opportunity to comment or to request a
hearing on the proposed amendment.
The Department received one comment
on the proposed amendment. That
comment, from the Investment
Company Institute, supported the
amendment as proposed. The
Department did not receive a request for
a public hearing.
For the sake of convenience, the
entire text of PTE 84–24, as amended,
has been reprinted in this notice.
Executive Order 12866 Statement
Under Executive Order 12866, the
Department must determine whether a
regulatory action is ‘‘significant’’ and
therefore subject to the requirements of
the Executive Order and subject to
review by the Office of Management and
Budget (OMB). Under section 3(f), the
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 $100 million
or more, or adversely and materially
affecting a sector of the economy,
productivity, competition, jobs, the
environment, public health or safety, or
State, local or tribal governments or
communities (also referred to as
‘‘economically significant’’); (2) creating
serious inconsistency or otherwise
interfering with an action taken or
planned by another agency; (3)
materially altering the budgetary
impacts of entitlement grants, user fees,
or loan programs or the rights and
obligations of recipients thereof; or (4)
raising novel legal or policy issues
arising out of legal mandates, the
President’s priorities, or the principles
set forth in the Executive Order.
This amendment has been drafted and
reviewed in accordance with Executive
Order 12866, section 1(b), Principles of
Regulation. The Department has
determined that this amendment is not
a ‘‘significant regulatory action’’ under
Executive Order 12866, section 3(f).
Accordingly, it does not require an
assessment of potential costs and
benefits under section 6(a)(3) of that
order.
2 Section 102 of the Reorganization Plan No. 4 of
1978 (5 U.S.C. App. at 214, 2000 ed.) generally
transferred the authority of the Secretary of the
Treasury to issue administrative exemptions under
section 4975 of the Code to the Secretary of Labor.

E:\FR\FM\03FEN1.SGM

03FEN1