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Secretary of Labor Thomas E. Perez
[Application Number: D-10616] [Notices] [10/29/2001]

EBSA (Formerly PWBA) Federal Register Notice

[Application Number: D-10616] [10/29/2001]

[PDF Version]

Volume 66, Number 209, Page 54541-54543

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application Number: D-10616]

 
Proposed Amendment To Prohibited Transaction Exemption (PTE) 79-
15 (44 FR 26979, May 8, 1979); PTE 80-26 (45 FR 28545, April 29, 1980); 
PTE 80-83 (45 FR 73189, November 4, 1980); PTE 81-6 (45 FR 7527, 
January 23, 1981 (as amended at 52 FR 18754, May 19, 1987)); PTE 81-8 
(46 FR 7511, January 23, 1981 (as amended by 50 FR 14043, April 9, 
1985)); PTE 82-63 (47 FR 14804, April 6, 1982); PTE 83-1 (48 FR 895, 
January 7, 1983); PTE 84-14 (49 FR 9494, March 13, 1984) PTE 88-59 (53 
FR 24811, June 30, 1988); PTE 91-38 (56 FR 31966, July 12, 1991); PTE 
95-60 (60 FR 35925, July 12, 1995); PTE 96-62 (61 FR 39988, July 31, 
1996)

AGENCY: Pension and Welfare Benefits Administration, Department of 
Labor.

ACTION: Notice of proposed amendment to certain class exemptions.

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SUMMARY: This document contains a notice of pendency before the 
Department of Labor (the Department) of a proposed amendment to certain 
class exemptions. The proposed amendment would define the term 
``employee benefit plan'', as such term is used in certain class 
exemptions, to include plans described in section 4975(e)(1) of the 
Internal Revenue Code of 1986 (the Code). If adopted, the proposed 
amendment would affect individuals with beneficial interests in such 
plans, as well as the financial institutions that provide services and 
products to the plans.

DATES: Written comments and requests for a public hearing should be 
received by the Department on or before December 13, 2001. If adopted, 
the proposed amendment would be effective as of: May 1, 1979 with 
respect to PTE 79-15; January 1, 1975 with respect to PTE 80-26; 
December 1, 1980 with respect to Section I(B) of PTE 80-83 (the 
amendment would be effective January 1, 1975 with respect to the 
remainder of PTE 80-83); January 23, 1981 with respect to PTE 81-6; 
January 1, 1975 with respect to PTE 81-8; April 6, 1982 with respect to 
PTE 82-63; January 1, 1975 with respect to PTE 83-1; December 21, 1982 
with respect to PTE 84-14; January 1, 1975 with respect to PTE 88-59; 
July 1, 1990 with respect to PTE 91-38; January 1, 1975 with respect to 
PTE 95-60; and July 31, 1996 with respect to PTE 96-62.

ADDRESSES: All written comments and requests for a public hearing 
(preferably three copies) should be addressed to the U.S. Department of 
Labor, Office of Exemption Determinations, Pension and Welfare Benefits 
Administration, Room N-5649, 200 Constitution Avenue, NW, Washington, 
DC 20210, (Attention: D-10616).

FOR FURTHER INFORMATION CONTACT: Christopher J. Motta, Office of 
Exemption Determinations, Pension and Welfare Benefits Administration, 
U.S. Department of Labor, (202) 219-8971, (this is not a toll-free 
number); or Paul Mannina, Plan Benefits Security Division, Office of 
the Solicitor, U.S. Department of Labor (202) 693-5600. (This is not a 
toll-free number).

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency 
before the Department of a proposed amendment to PTE 79-15; PTE 80-26; 
PTE 80-83; PTE 81-6; PTE 81-8; PTE 82-63; PTE 83-1; PTE 84-14; PTE 88-
59; PTE 91-38; PTE 95-60; and PTE 96-62. These class exemptions provide 
relief from certain of the restrictions described in section 406 of the 
Employee Retirement Income Security Act of 1974 (ERISA), and the taxes 
imposed by sections 4975(a) and (b) of the Code, by reason of a 
parallel provision described in section 4975(c)(1)(A) through (F) of 
the Code, provided that the conditions of the relevant exemption have 
been met. The Department is proposing to amend the above-described 
exemptions 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).
    The class exemptions described in this proposed amendment do not 
define the term ``employee benefit plan''. As a result, the Department 
has become increasingly aware of uncertainty regarding the scope of 
these class exemptions. To address this uncertainty, the Department has 
determined to amend each exemption in order to define the term 
``employee benefit plan'' and ``plan'' as used therein.
    Prior to the effective date of Reorganization Plan No. 4 of 1978 (5 
U.S.C. App. 1 (1996)) (the Reorganization Plan), exemptions granted 
pursuant to section 408(a) of ERISA and section 4975(c)(2) of the Code 
were issued jointly by the Department of Labor (the Department) and the 
Internal Revenue Service (the Service). A number of class exemptions 
issued jointly by the Department and Service did not define the term 
``employee benefit plan'' and ``plan'' as contained therein. Given the 
dual nature of the authority used to grant these exemptions, a number 
of practitioners believed that references to ``employee benefit plan'' 
and ``plan'' in these pre-Reorganization Plan class exemptions included 
employee benefit plans described in section 3(3) of ERISA \1\ and plans 
described in section 4975(e)(1) of the Code.\2\
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    \1\ Section 3(3) of ERISA provides that the term ``employee 
benefit plan'' or ``plan'' means an employee welfare benefit plan or 
an employee pension benefit plan or a plan which is both an employee 
welfare benefit plan and an employee pension benefit plan.
    \2\ Section 4975(e)(1) of the Code provides that, for purposes 
of that Code section, the term ``plan'' means: (A) A trust described 
in Code section 401(a) which forms a part of a plan, or a plan 
described in Code section 403(a), which trust or plan is exempt from 
tax under section 501(a); (B) an individual retirement account 
described in Code section 408(a); (C) an individual retirement 
annuity described in section Code 408(b); (D) a medical savings 
account described in Code section 220(d); (E) an education 
individual retirement account described in Code section 530, or (f) 
a trust, plan, account, or annuity which, at any time, has been 
determined by the Secretary to be described in any preceding 
subparagraph of this paragraph.
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    After consultation with the Service, the Department has determined 
that plans described in section 4975(e)(1) of the Code are included 
within the scope of relief provided by the following class exemptions:

PTE 75-1, 40 FR 50845 (1975);
PTE 77-4, 42 FR 18732 (1977);
PTE 77-7, 42 FR 31575 (1977), amended and redesignated as PTE 92-5 
by 57 FR 5019 (1992); PTE 77-8, 42 FR 31574 (1977), amended and 
redesignated as PTE 92-6, 57

[[Page 54542]]

FR 5189 (1992); PTE 77-9, 42 FR 32395 (1977), amended and 
redesignated as PTE 84-24, 49 FR 13208 (1984); and PTE 78-19, 43 FR 
59915 (1978), amended and redesignated as PTE 90-1, 55 FR 2891 
(1990).

    Exemptions issued subsequent to the effective date of the 
Reorganization Plan, however, were not issued pursuant to the dual 
authority of the Department and the Service. In this regard, section 
102 of the Reorganization Plan 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. As a result, class 
exemptions granted after the effective date of the Reorganization Plan 
were issued pursuant to the sole authority of the Department.
    Practitioners have noted that the Department, when issuing post-
Reorganization Plan class exemptions, did not always expressly define 
the term ``employee benefit plan'' and ``plan'', as used therein. The 
practitioners noted that, given that such exemptions were issued solely 
by the Department, it remains unclear whether the term ``employee 
benefit plan'' includes a ``plan'' which is not subject to Title I of 
ERISA but is otherwise described in section 4975(e)(1) of the Code.
    For example, practitioners cite uncertainty regarding whether IRAs 
and Keogh Plans are within the scope of the above-referenced 
exemptions. In this regard, the practitioners note that, while most 
IRAs and Keogh Plans are excluded from the term ``employee benefit 
plan'' for purposes of ERISA section 3(3),\3\ such entities may be 
includable within the term ``plan'' for purposes of Code section 
4975(e)(1). The practitioners, therefore, seek clarification as to 
whether IRAs and Keogh Plans are ``employee benefit plans'' for 
purposes of the relevant class exemptions.
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    \3\ See 29 CFR 2510.3-2(d) and 29 CFR 2510.3-3(b).
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    In consideration of this uncertainty, the Department is proposing 
to clarify the scope of relief provided by the aforementioned class 
exemptions by defining the terms ``employee benefit plan'' and ``plan'' 
to include plans described in Code section 4975(e)(1). The Department 
notes that such clarification is consistent with the Department's 
longstanding intent to include IRA and Keogh Plans within the meaning 
of the terms ``employee benefit plan'' and ``plan'' with respect to the 
enumerated class exemptions.

Notice to Interested Persons

    Because many participants in plans described in section 4975(e)(1) 
of the Code, as well as financial institutions, could conceivably be 
considered interested persons, the only practical form of notice is 
publication in the Federal Register.

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 section 408(a) of ERISA and section 4975(c)(2) of the Code does 
not relieve a fiduciary or other party in interest or disqualified 
person 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 section 
404 of the Act which require, among other things, that a fiduciary 
discharge his duties with respect to the plan solely in the interests 
of the participants and beneficiaries of the plan and in a prudent 
fashion in accordance with section 404(a)(1)(B) of ERISA; nor does it 
affect the requirement of section 401(a) of the Code that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries.
    (2) Before an exemption may be granted under section 408(a) of 
ERISA and section 4975(c)(2) of the Code, the Department must find that 
the exemption is administratively feasible, in the interest of plans 
and their participants and beneficiaries and protective of the rights 
of the participants and beneficiaries of such plans.
    (3) The proposed amendment, if granted, will be 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 exemption is not dispositive of whether the transaction 
is in fact a prohibited transaction.
    (4) If granted, the proposed amendment will be applicable to a 
transaction only if the conditions specified in the class exemption are 
met.

Written Comments and Hearing Request

    All interested persons are invited to submit written comments or 
requests for a public hearing on the proposed amendment to the address 
and within the time period set forth above. All comments will be made a 
part of the record. Comments and requests for a hearing should state 
the reasons for the writer's interest in the proposed amendment. 
Comments received will be available for public inspection with the 
referenced application at the above address.

Proposed Amendment

    Under 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), the Department proposes to 
amend the following class exemptions as set forth below:
    1. PTE 79-15 is amended by adding the following paragraph at the 
end of the exemption to read as follows: For purposes of this 
exemption, the terms ``employee benefit plan'' and ``plan'' refer to an 
employee benefit plan described in ERISA section 3(3) and/or a plan 
described in section 4975(e)(1) of the Code.
    2. PTE 80-26 is amended by adding the following paragraph at the 
end of the exemption to read as follows: For purposes of this 
exemption, the terms ``employee benefit plan'' and ``plan'' refer to an 
employee benefit plan described in ERISA section 3(3) and/or a plan 
described in section 4975(e)(1) of the Code.
    3. PTE 80-83 is amended by adding the following paragraph 4. to 
Section II. b. to read as follows: 4. For purposes of this exemption, 
the terms ``employee benefit plan'' and ``plan'' refer to an employee 
benefit plan described in section 3(3) of ERISA and/or a plan described 
in section 4975(e)(1) of the Code.
    4. PTE 81-6 is amended by adding the following paragraph at the end 
of the exemption to read as follows: For purposes of this exemption, 
the terms ``employee benefit plan'' and ``plan'' refer to an employee 
benefit plan described in ERISA section 3(3) and/or a plan described in 
section 4975(e)(1) of the Code.
    5. PTE 81-8 is amended by adding the following paragraph at the end 
of the exemption to read as follows: For purposes of this exemption, 
the terms ``employee benefit plan'' and ``plan'' refer to an employee 
benefit plan described in ERISA section 3(3) and/or a plan described in 
section 4975(e)(1) of the Code.
    6. PTE 82-63 is amended by adding the following paragraph (4) to 
section II. Definitions to read as follows: (4) For purposes of this 
exemption, the terms ``employee benefit plan'' and ``plan''

[[Page 54543]]

refer to an employee benefit plan described in ERISA section 3(3) and/
or a plan described in section 4975(e)(1) of the Code.
    7. PTE 83-1 is amended by adding the following paragraph I. to 
Section III. Definitions to read as follows: I. For purposes of this 
exemption, the terms ``employee benefit plan'' and ``plan'' refer to an 
employee benefit plan described in ERISA section 3(3) and/or a plan 
described in section 4975(e)(1) of the Code.
    8. PTE 84-14 is amended by adding the following paragraph (n) to 
Part V--Definitions and General Rules to read as follows: (n) The terms 
``employee benefit plan'' and ``plan'' refer to an employee benefit 
plan described in section 3(3) of ERISA and/or a plan described in 
section 4975(e)(1) of the Code.
    9. PTE 88-59 is amended by adding the following paragraph (F) to 
Section III. Definitions to read as follows: (F) The terms ``employee 
benefit plan'' and ``plan'' refer to an employee benefit plan described 
in section 3(3) of ERISA and/or a plan described in section 4975(e)(1) 
of the Code.
    10. PTE 91-38 is amended by adding the following paragraph (k) to 
Section IV--Definitions and General Rules to read as follows: The terms 
``employee benefit plan'' and ``plan'' refer to an employee benefit 
plan described in section 3(3) of ERISA and/or a plan described in 
section 4975(e)(1) of the Code.
    11. PTE 95-60 is amended by adding the following paragraph (j) to 
Section V--Definitions to read as follows: (j) The terms ``employee 
benefit plan'' and ``plan'' refer to an employee benefit plan described 
in section 3(3) of ERISA and/or a plan described in section 4975(e)(1) 
of the Code.
    12. PTE 96-62 is amended by adding paragraph (g) to Section IV: 
Definitions to read as follows: (g) For purposes of this exemption, the 
terms ``employee benefit plan'' and ``plan'' refer to an employee 
benefit plan described in section 3(3) of ERISA and/or a plan described 
in section 4975(e)(1) of the Code.

    Signed at Washington, DC, this 23rd day of October 2001.
Ivan L. Strasfeld,
Director, Office of Exemption Determinations, Pension and Welfare 
Benefits Administration, Department of Labor.
[FR Doc. 01-27062 Filed 10-26-01; 8:45 am]
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