[Federal Register Volume 80, Number 53 (Thursday, March 19, 2015)]
[Rules and Regulations]
[Pages 14301-14304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-06211]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2550
RIN 1210-AB68
Fiduciary Requirements for Disclosure in Participant-Directed
Individual Account Plans--Timing of Annual Disclosure
AGENCY: Employee Benefits Security Administration, Department of Labor.
ACTION: Direct final rule.
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SUMMARY: This direct final rule amends the Department of Labor's
``participant-level fee disclosure'' regulation. The amendment makes a
technical adjustment to a timing requirement in the current regulation.
As amended, the regulation provides plan administrators with
flexibility as to when they must furnish annual disclosures to
participants and beneficiaries.
DATES: Effective date: This rule is effective June 17, 2015, without
further action or notice, unless significant adverse comment is
received by April 20, 2015. If significant adverse comment is received,
the Employee Benefits Security Administration (EBSA) will publish a
timely withdrawal of the rule in the Federal Register.
Applicability date: The amendment is applicable to disclosures made
on or after June 17, 2015.
ADDRESSES: You may submit comments, identified by RIN 1210-AB68, by one
of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Email: [email protected]. Include RIN 1210-AB68 in the subject
line of the message.
Mail or personal delivery: Office of Regulations and
Interpretations, Employee Benefits Security Administration, Room N-
5655, U.S. Department of Labor, 200 Constitution Avenue NW.,
Washington, DC 20210.
Instructions: All submissions received must include the agency name
and Regulation Identifier Number (RIN) for this rulemaking. Comments
received, including any personal information provided, will be posted
without change to http://www.regulations.gov and http://www.dol.gov/ebsa, and made available for public inspection at the Public Disclosure
Room, N-1513, Employee Benefits Security Administration, 200
Constitution Avenue NW., Washington, DC 20210. Persons submitting
comments electronically are encouraged not to submit paper copies.
FOR FURTHER INFORMATION CONTACT: Eric A. Raps, Office of Regulations
and Interpretations, Employee Benefits Security Administration,
Department of Labor, at (202) 693-8532. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
In General
On October 20, 2010, the Department of Labor (Department) published
a final regulation requiring plan administrators to disclose certain
plan and investment-related information, including fee and expense
information, to participants and beneficiaries in participant-directed
individual account plans.\1\ The regulation requires certain
information to be furnished on or before the date on which a
participant can first direct his or her investments and ``at least
annually thereafter.'' The regulation defines this term as ``at least
once in any 12-month period, without regard to whether the plan
operates on a calendar or fiscal year basis.'' \2\ The regulation was
effective on December 20, 2010, but was not applicable until plan years
beginning on or after November 1, 2011.\3\
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\1\ 29 CFR 2550.404a-5; 75 FR 64910.
\2\ 29 CFR 2550.404a-5(h)(1).
\3\ The specified applicability date was subsequently delayed by
amendment published on July 19, 2011. 76 FR 42539. Under the
amendment, the initial disclosures required on or before the date on
which a participant or beneficiary can first direct his or her
investments must be furnished no later than the later of 60 days
after such applicability date or 60 days after the effective date of
29 CFR 2550.408b-2(c). 29 CFR 2550.404a-5(j)(3)(i)(A).
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On July 30, 2012, the Department's Employee Benefits Security
Administration (EBSA) issued Field Assistance Bulletin 2012-02R (FAB
2012-02R) providing guidance on frequently asked questions. Q&A 35
clarified that, for most plans, including calendar year plans, the
first initial disclosures under the new regulation were required no
later than August 30, 2012. FAB 2012-02R did not, however, specifically
address the deadline for subsequent annual disclosures.\4\
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\4\ FAB 2012-02R supersedes FAB 2012-02 issued on May 7, 2012.
Changes in the superseding bulletin did not affect Question 35.
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In Field Assistance Bulletin 2013-02, issued July 22, 2013, the
Department made clear that the regulation requires annual disclosures
to be made no more than one year exactly (e.g., 365 days) after the
prior annual disclosures. Specifically, FAB 2013-02, in relevant part,
states ``[f]or example, a plan administrator that furnished the first
required chart on August 25, 2012, must furnish the next comparative
chart no
[[Page 14302]]
later than August 25, 2013.'' This interpretation was intended to
prevent inconsistencies, delays, and possible manipulation of the
timing of annual disclosures. It also was responsive to the views
expressed by some plan administrators, which contrary to EBSA's intent,
interpreted ``at least once in any 12-month period'' to allow the
furnishing of the annual disclosures, for example, on January 1 of one
year and December 31 of the following year, thus allowing for
approximately 24 months in between disclosures. At the same time,
however, EBSA was concerned that the requirement that disclosures be
made no more than one year exactly from the prior annual disclosures
(as interpreted in FAB 2013-02) might impose undue administrative
burdens on plans. Consequently, FAB 2013-02 solicited public comments
on whether EBSA should amend the regulation to provide plan
administrators with more flexibility as to when they must furnish the
annual disclosures.\5\ For example, instead of a permanently fixed
annual deadline set at one year exactly from the last annual
disclosure, EBSA requested comments on whether the deadline should have
some degree of elasticity, such as a 30-day or 45-day window from the
one-year anniversary of the last annual disclosure.
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\5\ FAB 2013-02 also provided a one-time ``re-set'' opportunity
under which EBSA, as an enforcement matter, would treat a plan
administrator as satisfying the ``at least annually thereafter''
requirement of the regulation if the administrator furnished certain
annual disclosures no later than 18 months from the prior annual
disclosures. This temporary relief was granted to plan
administrators so that the annual deadline for furnishing
comparative charts and other annual disclosures under the regulation
could be aligned with the furnishing of other participant notices
and disclosures. FAB 2013-02 is not affected by the direct final
regulation. Thus, to the extent it is otherwise available, an
administrator does not lose the re-set relief in FAB 2013-02 for the
second annual disclosure (described as the ``2014 comparative
chart'' in FAB 2013-02) as a result of the direct final regulation.
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The Department received comments from several organizations
representing employers, plans, recordkeepers and other service
providers who furnish annual disclosures to participants and
beneficiaries on behalf of plan administrators. These commenters raised
multiple practical and logistical concerns about the current
definition.
For instance, the commenters maintain that the current definition
may prevent them from consolidating the annual disclosures under the
regulation with other annual plan disclosures. One commenter stated
``many plan sponsors and service providers try, where possible, to
consolidate participant communications in a way that ensures effective
disclosures and avoids overloading participants with information too
frequently.'' On this point, a different commenter observed ``it is
helpful for employers to have a flexible deadline in case they need to
change the dates of their annual enrollment periods or other annual
plan-related mailings. A 45-day window would provide them with the
flexibility to timely provide the annual disclosures to participants
without concern that they may miss the deadline.''
Another concern raised by the commenters is that the current
definition requires them to track the specific date of annual
disclosures on a plan-by-plan or participant-by-participant basis, even
though large recordkeepers may have responsibility for tens of
thousands of plan clients and millions of plan participants. The
commenters also maintain that the current definition is a disincentive
or punishment to plans that provide early disclosures in a given year.
The commenters also maintain that certain investment information needed
on a comparative chart, such as a designated investment alternative's
1-year, 5-year, and 10-year performance, often comes from different
investment vendors and may not always be predictably delivered and
consolidated by the 12-month anniversary deadline.
Each of these concerns stems from the fact that the furnishing of a
required annual disclosure before the expiration of the 12-month
deadline (365th day) in any year necessarily changes and accelerates
the deadline for subsequent plan years (i.e., the deadline ``creeps''
forward for all future years when there is early compliance during the
current year). One commenter, for example, stated ``the requested
flexibility mitigates the incentive that plan sponsors and service
providers may have to delay furnishing the materials when they may
otherwise be able to send them sooner, in order to avoid accelerating
subsequent compliance deadlines.'' The commenters overwhelmingly
support a regulatory amendment that provides some flexibility as to the
timing of annual disclosures. A reasonable interpretation of their
comments is that they support a buffer zone of no less than 45 days,
and that such flexibility would abate the concerns mentioned above.
Commenters also identified special or irregular events that warrant
flexibility, including corporate mergers and changes in recordkeepers,
investment lineups, plan years (e.g., from fiscal to calendar year), or
law.
No commenter objected to giving plan administrators some
flexibility, or suggested that flexibility would harm participants and
beneficiaries or hinder their ability to direct their investments. Two
commenters, in fact, suggested just the opposite. One of them observed
that ``[r]esolving this concern will also benefit plan participants
because it will facilitate expedited furnishing of the materials when
it is feasible for providers and plan sponsors to do so.'' The other
observed ``it is common for plans to periodically change the menu of
investment options available to participants and, in such
circumstances, a plan may find it helpful to slightly delay
distribution of an otherwise due comparative chart until the new
investment options are set.''
The overall objective of the ``participant-level fee disclosure''
regulation is to make sure participants and beneficiaries in
participant-directed individual account plans are furnished the
information they need, on a regular and periodic basis, to make
informed decisions about the management of their individual accounts
and the investment of their retirement savings. While deadlines are
needed to avoid irregular and non-periodic disclosures, flexible
deadlines alone do not undermine the overall objective of the
regulation.
Based on the foregoing, the Department has decided to replace the
definition contained in paragraph (h)(1) of the current regulation with
a new definition that provides a buffer requested by the commenters.
The current regulatory language states that the term at least annually
thereafter ``means at least once in any 12-month period, without regard
to whether the plan operates on a calendar or fiscal year basis.''
Today's direct final rule replaces ``12-month period'' with ``14-month
period.'' Thus, the definition, as amended by this rulemaking, states
that the term at least annually thereafter ``means at least once in any
14-month period, without regard to whether the plan operates on a
calendar year or fiscal year basis.'' It is the Department's view that
this definition achieves the correct balance by ensuring that
participants and beneficiaries will receive annual disclosures on a
consistent and regular basis, and without unwarranted delays in-between
disclosures, while at the same time offering plan administrators some
flexibility.
The Department also requests comments on whether a similar
adjustment is needed for the ``at least quarterly'' definition in
paragraph (h)(2) of the regulation.\6\ Today's direct final
[[Page 14303]]
rule has no effect on the definition contained in paragraph (h)(2). No
commenter identified problems with this definition or requested an
adjustment similar to the adjustment being made to the ``at least
annually'' definition. Consequently, the Department today has no basis
to make any change to this definition. The lack of comment on this
definition may be due, in whole or in part, to EBSA Field Assistance
Bulletin 2006-03 (providing a 45-day window for furnishing quarterly
pension benefit statements required under section 105 of ERISA) and
paragraph (e)(2) of 29 CFR 2550.404a-5 (which allows quarterly fee
disclosures to be furnished with quarterly pension benefit statements).
Commenters are encouraged to consider FAB 2006-03 if making a comment.
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\6\ The ``at least quarterly'' timing requirement in paragraph
(h)(2) applies to disclosures detailing administrative and
individual expenses ``actually charged'' to individual accounts.
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Temporary Enforcement Policy
The Department is adopting an enforcement policy, effective
immediately, under which plan administrators may rely on the new
definition in paragraph (h)(1) prior to the effective date of the
amendment. Some plans may be preparing their next set of annual
disclosures, which may be due before the effective date of the
amendment. Accordingly, EBSA, as an enforcement matter, will treat a
plan administrator as satisfying the timing requirement in paragraph
(h)(1) of the regulation if the plan administrator complies with the
new definition establishing a 2-month grace period for annual
disclosures, provided that the plan administrator reasonably determines
that doing so will benefit participants and beneficiaries. This
enforcement policy expires on the effective date of the direct final
rule without notice or any other action by the Department. If the
direct final rule is withdrawn because of significant adverse comment,
EBSA will provide further guidance on this enforcement policy in the
Federal Register notice announcing the withdrawal of the rule. The
relief under this policy is in addition to the relief previously
granted under FAB 2013-02 and is available regardless of whether a plan
has used the relief in such FAB 2013-02 to reset the first or second
applicable annual disclosure.
Good Cause Finding That Proposed Rulemaking Unnecessary
Rulemaking under section 553 of the Administrative Procedure Act (5
U.S.C. 551 et seq.) ordinarily involves publication of a notice of
proposed rulemaking in the Federal Register and provides the public
with the opportunity to comment on the proposed rule. However, an
agency may issue a rule without prior notice and comment if it
determines for good cause that prior notice and comment is
impracticable, unnecessary, or contrary to the public interest.
The Department finds it unnecessary to publish a notice of proposed
rulemaking. The Department, in FAB 2013-02, already solicited public
comment on the issue of flexible timing for annual disclosures.
Additional notice and comment is not likely to change the Department's
conclusion that there is a need for greater flexibility, but it will
delay the relief sought by the affected parties. Such delay also makes
ordinary notice and comment procedures impracticable for those plan
administrators who would benefit from the new definition in paragraph
(h)(1) in connection with disclosures that must be furnished in the
early part of 2015.
The Department is concurrently publishing a notice of proposed
rulemaking in the ``Proposed Rules'' section of today's Federal
Register that will serve as a notice of proposal to amend part 2550 as
described in this direct final rule. If the Department receives
significant adverse comment during the comment period, it will withdraw
this direct final rule. The Department will then address public
comments in a subsequent final rule. The Department does not intend to
institute a second comment period on this rule. Any parties interested
in commenting must do so during this comment period.
Regulatory Impact Analysis
Executive Orders 12866
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility.
Section 3(f) of Executive Order 12866 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. Pursuant to the terms
of the Executive Order, OMB has determined that this regulatory action
is significant within the meaning of section 3(f)(4) of the Executive
Order, and therefore it will be reviewed by OMB. As discussed in the
Paperwork Reduction Act section below, the Department expects this
amendment to benefit plan administrators by providing flexibility when
the annual disclosures are furnished with no additional cost impact.
Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the APA (5
U.S.C. 551 et seq.) and that are likely to have a significant economic
impact on a substantial number of small entities. Under Section 553(b)
of the APA, a general notice of proposed rulemaking is not required
when an agency, for good cause, finds that notice and public comment
thereon are impracticable, unnecessary, or contrary to the public
interest. This direct final regulation is exempt from the APA's notice
and comment requirements because the Department made a good cause
finding earlier in this preamble that a general notice of proposed
rulemaking is not necessary. Therefore, the RFA does not apply and the
Department is not required to either certify that this regulation would
not have a significant economic impact on a substantial number of small
entities or conduct a regulatory flexibility analysis.
Paperwork Reduction Act
As part of its continuing effort to reduce paperwork and respondent
burden, the Department of Labor conducts a preclearance consultation
program to provide the general public and federal agencies with an
opportunity to comment on proposed and continuing collections of
information in accordance with the
[[Page 14304]]
Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)). This
helps to ensure that requested data can be provided in the desired
format, reporting burden (time and financial resources) is minimized,
collection instruments are clearly understood, and the impact of
collection requirements on respondents can be properly assessed.
In accordance with the requirements of the PRA (44 U.S.C.
3506(c)(2)), the Department submitted an information collection request
(ICR) to OMB in accordance with 44 U.S.C. 3507(d) for the current rule
that was published on October 20, 2010. The information collection
request was approved by OMB on October 5, 2010, under OMB Control
Number 1210-0090, which currently is scheduled to expire on April 30,
2017.
Currently, the Department has submitted an information collection
for the ICR as revised by the direct final rule under the emergency
procedures for review and clearance contained in 5 CFR 1320.13. A copy
of the ICR may be obtained by contacting the PRA addressee shown below.
The Department is hereby soliciting comments concerning the revision to
the ICR currently approved under OMB Control Number 1210-0090. The
Department and OMB are interested particularly in comments that:
Evaluate whether the 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 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.
Comments should be sent to the PRA Addressee within the same 30-day
comment period that applies for comments on the direct final rule. Any
comments received will be considered when the Department submits an
extension request for the emergency ICR to OMB.
PRA Addressee: Address requests for copies of the ICR to G.
Christopher Cosby, Office of Policy and Research, U.S. Department of
Labor, Employee Benefits Security Administration, 200 Constitution
Avenue NW., Room N-5718, Washington, DC 20210. Telephone (202) 693-
8410; Fax: (202) 219-5333. These are not toll-free numbers. ICRs
submitted to OMB also are available at http://www.RegInfo.gov.
The Department expects this amendment to have no impact on the cost
or hour burden associated with the ICR, because it solely determines
when the disclosures are distributed but does not affect the content of
the disclosures. The timing flexibility provided by the amendment will
benefit plan administrators by allowing them to combine and distribute
annual disclosures with other employment and annual employee benefits
communication materials, which may result a small decrease in burden;
however, the Department does not have sufficient data to estimate this
decrease. The Department welcomes comments regarding this assessment.
Congressional Review Act
This direct final rule is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and will be transmitted to Congress and the
Comptroller General for review.
Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), as well as Executive Order 12875, the direct final rule does
not include any Federal mandate that may result in expenditures by
State, local, or tribal governments in the aggregate of more than $100
million, adjusted for inflation, or increase expenditures by the
private sector of more than $100 million, adjusted for inflation.
Federalism Statement
Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism, and requires the adherence to specific
criteria by Federal agencies in the process of their formulation and
implementation of policies that have substantial direct effects on the
States, the relationship between the national government and States, or
on the distribution of power and responsibilities among the various
levels of government. The direct final rule does not have federalism
implications because it has no substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Section 514 of ERISA provides, with certain
exceptions specifically enumerated, that the provisions of Titles I and
IV of ERISA supersede any and all laws of the States as they relate to
any employee benefit plan covered under ERISA.
List of Subjects in 29 CFR Part 2550
Employee benefit plans, Fiduciaries, Pensions, Disclosure.
For the reasons set forth in the preamble, the Department is
amending Subchapter F, Part 2550 of Title 29 of the Code of Federal
Regulations as follows:
PART 2550--RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY
0
1. The authority citation for part 2550 is revised to read as follows:
Authority: 29 U.S.C. 1135 and Secretary of Labor's Order No. 1-
2011, 77 FR 1088 (January 9, 2012). Sec. 102, Reorganization Plan
No. 4 of 1978, 5 U.S.C. App. at 727 (2012). Sec. 2550.401c-1 also
issued under 29 U.S.C. 1101. Sec. 2550.404a-1 also issued under sec.
657, Pub. L. 107-16, 115 Stat 38. Sec. 2550.404a-2 also issued under
sec. 657 of Pub. L. 107-16, 115 Stat. 38. Sections 2550.404c-1 and
2550.404c-5 also issued under 29 U.S.C. 1104. Sec. 2550.408b-1 also
issued under 29 U.S.C. 1108(b)(1). Sec. 2550.408b-19 also issued
under sec. 611, Pub. L. 109-280, 120 Stat. 780, 972. Sec. 2550.412-1
also issued under 29 U.S.C. 1112.
0
2. In Sec. 2550.404a-5, revise paragraph (h)(1) to read as follows:
Sec. 2550.404a-5 Fiduciary requirements for disclosure in
participant-directed individual account plans.
* * * * *
(h) * * *
(1) At least annually thereafter means at least once in any 14-
month period, without regard to whether the plan operates on a calendar
year or fiscal year basis.
* * * * *
Signed at Washington, DC, this 12th day of March 2015.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, U.S.
Department of Labor.
[FR Doc. 2015-06211 Filed 3-18-15; 8:45 am]
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