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Secretary of Labor Thomas E. Perez
Amendment to Prohibited Transaction Exemption 93-33 (PTE 93-33) for the Receipt of Certain Services by Individuals for Whose Benefit Individual Retirement Accounts or Retirement Plans for Self-Employed Individuals Have Been Established or Maintained [Notices] [03/08/1999]

EBSA (Formerly PWBA) Federal Register Notice

Amendment to Prohibited Transaction Exemption 93-33 (PTE 93-33) for the Receipt of Certain Services by Individuals for Whose Benefit Individual Retirement Accounts or Retirement Plans for Self-Employed Individuals Have Been Established or Maintained [03/08/1999]

[PDF Version]

Volume 64, Number 44, Page 11044-11045

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application Number: D-10567]

 
Amendment to Prohibited Transaction Exemption 93-33 (PTE 93-33) 
for the Receipt of Certain Services by Individuals for Whose Benefit 
Individual Retirement Accounts or Retirement Plans for Self-Employed 
Individuals Have Been Established or Maintained

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

ACTION: Adoption of Amendment to PTE 93-33.

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SUMMARY: This document amends PTE 93-33, a class exemption that permits 
the receipt of services at reduced or no cost by an individual for 
whose benefit an individual retirement account (IRA) or, if self-
employed, a Keogh Plan, is established or maintained, or by members of 
his or her family, from a bank, provided that the conditions of the 
exemption are met. The amendment affects individuals with a beneficial 
interest in IRAs and Keogh Plans who receive such services as well as 
the banks that provide such services.

DATES: The amendment is effective January 1, 1998.

FOR FURTHER INFORMATION CONTACT: Ms. Allison Padams Lavigne, Office of 
Exemption Determinations, Pension and Welfare Benefits Administration, 
U.S. Department of Labor, (202) 219-8971 (this is not a toll-free 
number.)

SUPPLEMENTARY INFORMATION: On October 21, 1998, notice was published of 
the pendency before the Department of a proposed amendment to PTE 93-33 
(58 FR 31053, May 28, 1993, as amended, 59 FR 22686, May 2, 1994). PTE 
93-33 provides relief from the restrictions of sections 406(a)(1)(D) 
and 406(b) of the Employee Retirement Income Security Act of 1974 
(ERISA) and the sanctions resulting from the application of sections 
4975(a) and (b), 4975(c)(3) and 408(e)(2) of the Internal Revenue Code 
of 1986 (the Code) by reason of section 4975(c)(1)(D), (E) and (F) of 
the Code.<SUP>*</SUP> The amendment was requested in an exemption 
application dated January 26, 1998 filed by the American Bankers 
Association.
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    \*\ Section 102 of Reorganization Plan No. 4 of 1978 (42 FR 
47713, October 17, 1978) generally transferred the authority of the 
Secretary of the Treasury to issue administrative exemptions under 
section 4975(c)(2) of the Code to the Secretary of Labor.
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    The application was filed 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 notice of pendency gave interested persons an opportunity to 
comment or to request a hearing on the proposed amendment. No public 
comments nor requests for a hearing on the proposed amendment were 
received. For the sake of convenience, the entire text of PTE 93-33, as 
amended, has been reprinted with this notice.
    PTE 93-33, as amended, permits the receipt of services at reduced 
or no cost by an individual for whose benefit an IRA or Keogh Plan is 
established or maintained or by members of his or her family, from a 
bank pursuant to an arrangement in which the account balance of the IRA 
or Keogh Plan is taken into account for purposes of determining 
eligibility to receive such services, provided the conditions of the 
exemption are met.
    Section III (b) of PTE 93-33, as amended, defines the term ``IRA'' 
as an individual retirement account described in Code section 408(a). 
In addition, section III(b) provides that for purposes of this 
exemption, the term IRA shall not include an IRA which is an employee 
benefit plan covered by Title I of ERISA, except for a Simplified 
Employee Pension (SEP) described in section 408(k) of the Code which 
provides participants with the unrestricted authority to transfer their 
SEP balances to IRAs sponsored by different financial institutions. The 
amendment set forth in this notice modifies section III(b) of PTE 93-33 
to include Education IRAs described in section 530 of the Code and 
Simple

[[Page 11045]]

Retirement Accounts described in section 408(p) of the Code. The 
Department notes that all conditions contained in PTE 93-33 still must 
be met pursuant to the amendment.

General Information

    The attention of interested persons is directed to the following:
    (1) In accordance with section 408(a) of ERISA and section 
4975(c)(2) of the Code, and based upon the entire record, the 
Department finds that the amendment is administratively feasible, in 
the interests of the IRAs and Keogh Plans and their participants and 
beneficiaries and protective of the rights of the participants and 
beneficiaries of such plans.
    (2) The amendment is 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.
    (3) The exemption is applicable to a transaction only if the 
conditions specified in the class exemption are met.

Exemption

    Accordingly, PTE 93-33 is amended under the authority of 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).

Section I: Covered Transactions

    Effective January 1, 1998, the restrictions of sections 
406(a)(1)(D) and 406(b) of ERISA and the sanctions resulting from the 
application of section 4975 of the Code, including the loss of 
exemption of an individual retirement account (IRA) pursuant to section 
408(e)(2)(A) of the Code, by reason of section 4975(c)(1)(D), (E) and 
(F) of the Code, shall not apply to the receipt of services at reduced 
or no cost by an individual for whose benefit an IRA, or, if self-
employed, a Keogh Plan, is established or maintained, or by members of 
his or her family, from a bank pursuant to an arrangement in which the 
account balance in the IRA or Keogh Plan is taken into account for 
purposes of determining eligibility to receive such services, provided 
that each condition of Section II of this exemption is satisfied.

Section II: Conditions

    (a) The IRA or Keogh Plan, the balance of which is taken into 
account for purposes of determining eligibility to receive services at 
reduced or no cost, is established and maintained for the exclusive 
benefit of the participant covered under the IRA or Keogh Plan, his or 
her spouse or their beneficiaries.
    (b) The services must be of the type that the bank itself could 
offer consistent with applicable federal and state banking law.
    (c) The services are provided by the bank (or an affiliate of the 
bank) in the ordinary course of the bank's business to customers who 
qualify for reduced or no cost banking services but do not maintain 
IRAs or Keogh Plans with the bank.
    (d) For the purpose of determining eligibility to receive services 
at reduced or no cost, the account balance required by the bank for the 
IRA or Keogh Plan is equal to the lowest balance required for any other 
type of account which the bank includes to determine eligibility to 
receive reduced or no cost services.
    (e) The rate of return on the IRA or Keogh Plan investment is no 
less favorable than the rate of return on an identical investment that 
could have been made at the same time at the same branch of the bank by 
a customer of the bank who is not eligible for (or who does not 
receive) reduced or no cost services.

Section III: Definitions

    The following definitions apply to this exemption:
    (a) The term bank means a bank described in section 408(n) of the 
Code.
    (b) The term IRA means an individual retirement account described 
in Code section 408(a) or an education individual retirement account 
described in section 530 of the Code. For purposes of this exemption, 
the term IRA shall not include an IRA which is an employee benefit plan 
covered by Title I of ERISA, except for a Simplified Employee Pension 
(SEP) described in section 408(k) of the Code or a Simple Retirement 
Account described in section 408(p) of the Code which provides 
participants with the unrestricted authority to transfer their balances 
to IRAs or Simple Retirement Accounts sponsored by different financial 
institutions.
    (c) The term Keogh Plan means a pension, profit sharing, or stock 
bonus plan qualified under Code section 401(a) and exempt from taxation 
under Code section 501(a) under which some or all of the participants 
are employees described in section 401(c) of the Code. For purposes of 
this exemption, the term Keogh Plan shall not include a Keogh Plan 
which is an employee benefit plan covered by title I of ERISA.
    (d) The term account balance means deposits as that term is defined 
under 29 CFR 2550.408b-4(c)(3), or investments in securities for which 
market quotations are readily available. For purposes of this 
exemption, the term account balance shall not include investments in 
securities offered by the bank (or its affiliate) exclusively to IRAs 
and Keogh Plans.
    (e) An affiliate of a bank includes any person directly or 
indirectly controlling, controlled by, or under common control with a 
bank. The term control means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (f) The term members of his or her family refers to beneficiaries 
of the individual for whose benefit the IRA or Keogh Plan is 
established or maintained, who would be members of the family as that 
term is defined in Code section 4975(e)(6), or a brother, a sister, or 
spouse of a brother or a sister.
    (g) The term service includes incidental products of a de minimis 
value provided by third persons pursuant to an arrangement with the 
bank, which are directly related to the provision of banking services 
covered by the exemption.

    Signed at Washington, DC this 26th day of February 1999.
Alan D. Lebowitz,
Deputy Assistant Secretary for Program Operations, Pension and Welfare 
Benefits Administration, U.S. Department of Labor.
[FR Doc. 99-5572 Filed 3-5-99; 8:45 am]
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