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Employee Benefits Security Administration

EBSA Proposed Rule

Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure [02/27/2008]

[PDF Version]

Volume 73, Number 39

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2550

 
Hearing on Reasonable Contracts or Arrangements Under Section 
408(b)(2)--Fee Disclosure

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

ACTION: Notice of hearing.

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SUMMARY: Notice is hereby given that the Department of Labor will hold 
a hearing on the Department's proposed regulation under section 
408(b)(2) of the Employee Retirement Income Security Act of 1974 
(ERISA) and the related proposed class exemption.

DATES: The hearing will be held on March 20, 2008, and March 21 (if 
necessary), beginning at 9 a.m., EST.

ADDRESSES: The hearing will be held at the U.S. Department of Labor, 
Room S-4215 A-C, 200 Constitution Avenue, NW., Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: Fil Williams, Office of Regulations 
and Interpretations, Employee Benefits Security Administration, (202) 
693-8510. This is not a toll-free number.

SUPPLEMENTARY INFORMATION: On December 13, 2007, notice was published 
in the Federal Register (72 FR 70988) that the Department of Labor (the 
Department) has under consideration a proposal to amend its regulation 
29 CFR 2550.408b-2(c) under ERISA section 408(b)(2) relating to the 
provision of services to employee benefit plans. The proposed 
regulation would provide that a ``reasonable'' contract or arrangement 
under ERISA section 408(b)(2) \1\ between an employee benefit plan and 
certain service providers must include, among other things, certain 
disclosures concerning service provider compensation and conflicts of 
interest.\2\
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    \1\ Section 408(b)(2) of ERISA provides relief from the 
prohibited transaction rules for service contracts or arrangements 
between a plan and a party in interest if the contract or 
arrangement is reasonable, the services are necessary for the 
establishment or operation of the plan, and no more than reasonable 
compensation is paid for the services. Regulations issued by the 
Department clarify each of these conditions to the exemption. See 29 
CFR Sec.  2550.408b-2.
    \2\ Currently, the regulation at 29 CFR Sec.  2550.408b-2(c) 
states only that a contract or arrangement is not reasonable unless 
it permits the plan to terminate without penalty on reasonably short 
notice.
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    Specifically, upon adoption, the proposal would require contracts 
and arrangements between employee benefit plans and certain providers 
of services to such plans to be in writing and to include provisions to 
ensure certain disclosures to enable the plan fiduciary to assess the 
reasonableness of compensation or fees that the service provider would 
receive (from the plan and third parties) in connection with services 
rendered to the plan. The disclosures are also designed to enable the 
plan fiduciary to evaluate potential conflicts of interest that may 
affect the service provider's performance under the contract or 
arrangement.
    In the notice of proposed regulation, the Department invited all 
interested persons to submit written comments on or before February 11, 
2008. To date, the Department has received approximately 90 written 
comments on the proposal, many of which were from major industry groups 
and plan fiduciaries. All written comments are available to the public, 
without charge, online at http://www.dol.gov/ebsa and at the Public 
Disclosure Room, N-1513, Employee Benefits Security Administration, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210.
    In addition, the Department published in the Federal Register on 
December 13, 2007 (72 FR 70893), a notice of proposed class exemption 
that would provide relief from certain prohibited transaction 
restrictions of ERISA. The proposed class exemption would relieve the 
responsible plan fiduciary from any liability for a prohibited 
transaction that would result from entering into a contract or 
arrangement for the provision of services when the service provider 
failed to comply with the

[[Page 10406]]

proposed regulation. The Department proposed the class exemption on its 
own motion pursuant to section 408(a) of ERISA, and in accordance with 
the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 
August 10, 1990).
    In the notice of proposed exemption, the Department invited 
interested persons to submit written comments on or before February 11, 
2008. The Department has received separate written comments on the 
proposed exemption, in addition to those comments made as part of 
information received from the public on the proposed regulation.
    In view of the importance of these initiatives and their potential 
for significantly affecting the provision of services to employee 
benefit plans, the Department has decided to hold a public hearing. The 
primary purpose of this hearing is to further develop the public record 
regarding the regulation and the class exemption and to assist the 
Department to understand the issues involved. The hearing will be held 
on March 20, 2008, and March 21, if necessary, beginning at 9 a.m. and 
ending at 5 p.m., EST, in Room S-4215 A-C of the Department of Labor, 
Francis Perkins Building, at 200 Constitution Avenue, NW., Washington, 
DC 20210.
    Persons interested in presenting testimony and answering questions 
at this public hearing must submit, by 3:30 p.m., EST, March 10, 2008, 
the following information: (1) A written request to be heard; and (2) 
An outline of the topics to be discussed, indicating the time allocated 
to each topic. To facilitate the receipt and processing of responses, 
EBSA encourages interested persons to submit their requests and 
outlines electronically by e-mail to e-ORI@dol.gov. Persons submitting 
requests and outlines electronically are encouraged not to submit paper 
copies. Persons submitting requests and outlines on paper should send 
or deliver their requests and outlines (preferably at least three 
copies) to the Office of Regulations and Interpretations, Employee 
Benefits Security Administration, Attn: 408(b)(2) Hearing, Rooms N-
5655, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Washington, DC 20210. All requests and outlines submitted to the 
Department will be available to the public, without charge, online at 
http://www.dol.gov/ebsa and at the Public Disclosure Room, N-1513, 
Employee Benefits Security Administration, U.S. Department of Labor, 
200 Constitution Avenue, NW., Washington, DC 20210.
    The Department will prepare an agenda indicating the order of 
presentation of oral comments and testimony. In the absence of special 
circumstances, each presenter will be allotted ten (10) minutes in 
which to complete his or her presentation.
    Any individuals with disabilities who may need special 
accommodations should notify Fil Williams on or before March 10, 2008.
    Information about the agenda will be posted on http://www.dol.gov/ebsa 
on or after March 10, 2008, or may be obtained by contacting Fil 
Williams, Office of Regulations and Interpretations, Employee Benefits 
Security Administration, U.S. Department of Labor, telephone (202) 693-
8510 (this is not a toll-free number).
    Those individuals who make oral comments and testimonies at the 
hearing should be prepared to answer questions regarding their 
information and/or comments. The hearing will be transcribed.

Notice of Public Hearing

    Notice is hereby given that a public hearing will be held on March 
20, 2008, and March 21, if necessary, concerning the Department's 
proposed regulation under section 408(b)(2) of ERISA and the related 
proposed class exemption. The hearing will be held beginning at 9 a.m. 
in Room S-4215 A-C of the U.S. Department of Labor, Francis Perkins 
Building, 200 Constitution Avenue, NW., Washington, DC 20210.

    Signed at Washington, DC, this 21st day of February 2008.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.
 [FR Doc. E8-3601 Filed 2-26-08; 8:45 am]

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