Skip to page content
Employee Benefits Security Administration

EBSA Federal Register Notice

Hearing on Computer Model Investment Advice Programs for IRAs [06/20/2007]

[PDF Version]

Volume 72, Number 118, Page 34043-34044

-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Hearing on Computer Model Investment Advice Programs for IRAs

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

ACTION: Notice of hearing.

-----------------------------------------------------------------------

SUMMARY: Notice is hereby given that the Department of Labor will hold 
a hearing regarding the feasibility of the application of computer 
model investment advice programs for Individual Retirement Accounts and 
similar types of plans.

DATES: The hearing will be held on July 31, 2007 beginning at 9:30 
a.m., EST.

ADDRESSES: The hearing will be held at the U.S. Department of Labor, 
Rooms N-4437B, C and D, 200 Constitution Avenue, NW., Washington, DC 
20210.

FOR FURTHER INFORMATION CONTACT: Chris Motta, Office of Exemption 
Determinations, Employee Benefits Security Administration, U.S. 
Department of Labor, telephone (202) 693-8540 (this is not a toll-free 
number).

SUPPLEMENTARY INFORMATION: Section 601(b) of the Pension Protection Act 
of 2006 (the PPA) (Pub. L. 109-280) amended section 4975 of the 
Internal Revenue Code of 1986 (the Code) to add an exemption from 
certain taxes imposed by the Code for the provision of ``investment 
advice'' to participants and beneficiaries of covered employee benefit 
plans, and certain related transactions, if the investment advice is 
provided under an ``eligible investment advice arrangement.'' \1\ One 
such arrangement involves the use of a computer model which meets the 
requirements of the exemption.\2\ The

[[Page 34044]]

PPA directed the Secretary of Labor, in consultation with the Secretary 
of the Treasury, to solicit information regarding the feasibility of 
the application of computer model investment advice programs to 
Individual Retirement Accounts and similar types of plans (hereinafter, 
collectively, IRAs).\3\ The PPA further directed that the Secretary of 
Labor, in consultation with the Secretary of the Treasury, determine, 
based on the information received from the solicitation, whether there 
is any computer model investment advice program which may be utilized 
to provide investment advice to IRA beneficiaries, where such program: 
(1) Utilizes relevant information about the account beneficiary, which 
may include age, life expectancy, retirement age, risk tolerance, other 
assets or sources of income, and preferences as to certain types of 
investments; (2) takes into account the full range of investments, 
including equities and bonds, in determining the options for the 
investment portfolios of the beneficiary; and (3) allows the 
beneficiary, in directing the investment, sufficient flexibility in 
obtaining advice to evaluate and select investment options[0].
---------------------------------------------------------------------------

    \1\ See Code section 4975(d)(17). The PPA also amended section 
408 of the Employee Retirement Income Security Act of 1974 (ERISA) 
to add a parallel exemption from certain prohibited transaction 
restrictions of ERISA.
    \2\ See Code section 4975(f)(8)(C)(ii). The computer model must: 
(1) Apply generally accepted investment theories that take into 
account the historic returns of different asset classes over defined 
periods of time; (2) utilize relevant information about the 
participant, which may include age, life expectancy, retirement age, 
risk tolerance, other assets or sources of income, and preferences 
as to certain types of investments; (3) utilize prescribed objective 
criteria to provide asset allocation portfolios comprised of 
investment options available under the plan; (4) operate in a manner 
that is not biased in favor of investments offered by the fiduciary 
adviser or a person with a material affiliation or contractual 
relationship with the fiduciary adviser; and (5) take into account 
all investment options under the plan in specifying how a 
participant's account balance should be invested and not be 
inappropriately weighted with respect to any investment option.
    \3\ See PPA section 601(b)(3)(A)(i). These plans are: (1) An 
individual retirement account described in section 408(a) of the 
Code; (2) an individual retirement annuity described in section 
408(b) of the Code; (3) an Archer MSA described in section 220(d) of 
the Code; (4) a health savings account described in section 223(d) 
of the Code; (5) a Coverdell education savings account described in 
Code section 530; or (6) a trust, plan, account, or annuity which, 
at any time, has been determined by the Secretary of the Treasury to 
be described in any preceding subparagraph of this paragraph 
[i.e.,(1) through (5) above].
---------------------------------------------------------------------------

    On December 4, 2006, the Department of Labor published a request 
for information (RFI) regarding the feasibility of computer model 
investment advice programs for IRAs (71 FR 70427). On December 12 and 
13, 2006, the Department solicited comments, by mail, from certain 
trustees and other persons offering computer model investment advice 
programs. The Department received over 60 comments in response to these 
solicitations.
    The RFI posed several questions that focused on the specific 
statutory requirements imposed by the PPA for computer model investment 
advice programs for beneficiaries of IRAs. Many of the comments took 
differing views as to the existence of such programs depending on the 
meaning of the term ``full range of investments'' in PPA section 
601(b)(3)(B).
    After carefully reviewing the information received to date, the 
Department has decided that it would be beneficial to solicit 
additional information by means of a public hearing. The Department is 
interested in obtaining information on all aspects of computer model 
based investment advice programs for IRAs that would help in making the 
required determination, including additional information relating to 
the questions posed in the RFI. In particular, the Department is 
interested in understanding what particular types of investments or 
asset classes a computer model program should take into account in 
order to provide appropriate advice to IRA beneficiaries. In addition, 
the Department seeks additional information on the manner in which such 
programs could operate without bias as to investments offered by the 
fiduciary advisor or an affiliate, if the particular advice program 
allocates IRA assets among only such investments.
    The Department is also interested in knowing whether the scope of 
relief from ERISA's prohibited transaction provisions afforded by the 
statute is adequate to facilitate the use of computer-based programs 
for IRAs should the Department determine that such programs are 
feasible. Conversely, the Department seeks information concerning the 
scope of relief that would be necessary, and the conditions that would 
be appropriate, if it were necessary to issue the class exemption 
described in PPA section 601(b)(3)(C)(ii).
    The hearing will be held on July 31, 2007 beginning at 9:30 a.m., 
EST, in Rooms N-4437 B, C and D at the U.S. Department of Labor, 200 
Constitution Avenue, NW., Washington, DC. Any interested person who 
wishes to be assured of an opportunity to present oral comments at the 
hearing should submit by 3:30 p.m., EST, July 19, 2007: (1) A request 
to be heard; and (2) a copy of an outline of the topics to be 
discussed. To facilitate the receipt and processing of responses, EBSA 
encourages interested persons to submit their request and outline 
electronically either: (1) By e-mail to e-OED@dol.gov; or (2) by using 
the Federal eRulemaking portal at http://www.regulations.gov (follow 

the instructions for submission of comments), using docket number: 
EBSA-2007-0021. All requests and outlines submitted to the Department, 
including those submitted by e-mail, will be posted on 
http://www.regulations.gov in the above-referenced docket. Persons submitting 

requests and outlines electronically are encouraged not to submit paper 
copies. Persons interested in submitting written requests and outlines 
on paper should send or deliver their requests and outlines to the 
Office of Exemption Determinations, Employee Benefits Security 
Administration, Room N-5700, U.S. Department of Labor, 200 Constitution 
Avenue, NW., Washington, DC 20210, Attention: Computer Model Investment 
Advice Programs For IRAs--Hearing. The Department will prepare an 
agenda indicating the order of presentation of oral comments. In the 
absence of special circumstances, each commenter will be allotted 
fifteen minutes in which to complete his or her presentation. 
Information about the agenda will be posted on or after July 25, 2007 
on http://www.regulations.gov in docket number: EBSA-2007-0021 or may be 

obtained by contacting Chris Motta, Office of Exemption Determinations, 
Employee Benefits Security Administration, U.S. Department of Labor, 
telephone (202) 693-8540 (this is not a toll-free number). Those 
individuals who make oral comments at the hearing should be prepared to 
answer questions regarding their comments. The hearing will be 
transcribed.

    Signed at Washington, DC, this 14th day of June, 2007.
Ivan L. Strasfeld,
Director, Office of Exemption Determinations,Employee Benefits Security 
Administration,U.S. Department of Labor.
 [FR Doc. E7-11885 Filed 6-19-07; 8:45 am]

BILLING CODE 4510-29-P