Amendments to Safe Harbor for Distributions From Terminated
Individual Account Plans and Termination of Abandoned Individual
Account Plans To Require Inherited Individual Retirement Plans for
[02/15/2007]
Volume 72, Number 31, Page 7515-7524
[[Page 7515]]
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Part II
Department of Labor
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Employee Benefits Security Administration
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29 CFR Parts 2550 and 2578
Amendments to Safe Harbor for Distributions From Terminated Individual
Account Plans and Termination of Abandoned Individual Account Plans To
Require Inherited Individual Retirement Plans for Missing Nonspouse
Beneficiaries; Final Rule
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Parts 2550 and 2578
RIN 1210-AB16
Amendments to Safe Harbor for Distributions From Terminated
Individual Account Plans and Termination of Abandoned Individual
Account Plans To Require Inherited Individual Retirement Plans for
Missing Nonspouse Beneficiaries
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Interim final rule with request for comments.
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SUMMARY: This document contains an interim final rule amending
regulations under the Employee Retirement Income Security Act of 1974
(ERISA or the Act) that provide guidance and a fiduciary safe harbor
for the distribution of benefits on behalf of participants or
beneficiaries in terminated and abandoned individual account plans. The
Department is amending these regulations to reflect changes enacted as
part of the Pension Protection Act of 2006, Public Law 109-280, to the
Internal Revenue Code of 1986 (the Code), under which a distribution of
a deceased plan participant's benefit from an eligible retirement plan
may be directly transferred to an individual retirement plan
established on behalf of the designated nonspouse beneficiary of such
participant. Specifically, the amended regulations require as a
condition of relief under the fiduciary safe harbor that benefits for a
missing, designated nonspouse beneficiary be directly rolled over to an
individual retirement plan that fully complies with Code requirements.
This interim final rule will affect fiduciaries, plan service
providers, and participants and beneficiaries of individual account
pension plans.
DATES: Effective and Applicability Dates: The amendments made by this
rule are effective March 19, 2007. This interim final rule is
applicable to distributions made on or after March 19, 2007.
Comment Date: Written comments must be received by April 2, 2007.
ADDRESSES: To facilitate the receipt and processing of comments, the
Department encourages interested persons to submit their comments
electronically by e-mail to e-ORI@dol.gov, or by using the Federal
eRulemaking portal at http://www.regulations.gov (follow instructions for
submission of comments). Persons submitting comments electronically are
encouraged not to submit paper copies. Persons interested in submitting
comments on paper should send or deliver their comments (at least three
copies) to the Office of Regulations and Interpretations, Employee
Benefits Security Administration, Room N-5669, U.S. Department of
Labor, 200 Constitution Avenue, NW., Washington, DC 20210, Attn:
Amendments to Distribution Safe Harbor and Abandoned Plans Regulation
for Missing Nonspouse Beneficiaries. All comments received will be
available to the public, without charge, online at http://www.regulations.gov
and http://www.dol.gov/ebsa, and at the Public Disclosure Room, Employee
Benefits Security Administration, Room N-1513, U.S. Department of
Labor, 200 Constitution Avenue, NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Stephanie L. Ward, Office of
Regulations and Interpretations, Employee Benefits Security
Administration, (202) 693-8500. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
A. Background
This interim final rule amends two regulations under ERISA that
facilitate the termination of individual account plans, including
abandoned individual account plans, and the distribution of benefits
from such plans. The first regulation, codified at 29 CFR 2550.404a-3,
provides plan fiduciaries of terminated plans and qualified termination
administrators (QTAs) of abandoned plans with a fiduciary safe harbor
for making distributions on behalf of participants or beneficiaries who
fail to make an election regarding a form of benefit distribution,
commonly referred to as missing participants or beneficiaries. The
second regulation, codified at 29 CFR 2578.1, establishes a procedure
for financial institutions holding the assets of an abandoned
individual account plan to terminate the plan and distribute benefits
to the plan's participants or beneficiaries, with limited liability.\1\
Appendices to these two regulations contain model notices for notifying
participants or beneficiaries of the plan's termination and
distribution options.
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\1\ Under Sec. 2578.1(d)(2)(vii)(B), a QTA is directed to make
distributions in accordance with the safe harbor regulation.
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The safe harbor regulation provides that both a fiduciary and a QTA
will be deemed to have satisfied ERISA's prudence requirements under
section 404(a) of the Act if the conditions of the safe harbor are met
with respect to the distribution of benefits on behalf of missing
participants from terminated individual account plans.\2\ In general,
the regulation provides that a fiduciary or QTA qualifies for the safe
harbor if a distribution is made to an individual retirement plan
within the meaning of section 7701(a)(37) of the Code. See Sec.
2550.404a-3(d)(1)(i). However in April 2006, when the Department
published this safe harbor regulation, a distribution of benefits from
an individual account plan to a nonspouse beneficiary was not
considered an eligible rollover distribution under the provisions of
section 402(c) of the Code and, therefore, could not be rolled over
into an individual retirement plan.\3\ As a result, the safe harbor
regulation mandated, among other requirements, the distribution of
benefits on behalf of a missing nonspouse beneficiary to an account
that was not an individual retirement plan. See Sec. 2550.404a-
3(d)(1)(ii). Consequently, such distributions were subject to income
tax and mandatory tax withholding in the year distributed into the
account.\4\
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\2\ 71 FR 20830 n. 21.
\3\ See 26 CFR 1.402(c)-2, Q&A-12.
\4\ 71 FR 20828 n.14.
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The Pension Protection Act changed the characterization of certain
distributions from tax exempt plans and trusts to permit such
distributions to qualify for eligible rollover distribution
treatment.\5\ Section 829 of the Pension Protection Act amended section
402(c) of the Code to permit the direct rollover of a deceased
participant's benefit from an eligible retirement plan to an individual
retirement plan established on behalf of a designated nonspouse
beneficiary.\6\ These rollover distributions would not trigger
immediate income tax consequences and mandatory tax withholding for the
nonspouse beneficiary.
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\5\ Section 829 of the Pension Protection Act.
\6\ Section 829 of the Pension Protection Act requires that the
individual retirement plan established on behalf of a nonspouse
beneficiary must be treated as an inherited individual retirement
plan within the meaning of Code Sec. 408(d)(3)(C) and must be
subject to the applicable mandatory distribution requirements of
Code Sec. 401(a)(9)(B).
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In light of the Pension Protection Act's changes to the Code
allowing a rollover distribution on behalf of a nonspouse beneficiary
into an inherited individual retirement plan with the resulting
deferral of income tax consequences, the Department is amending the
regulatory safe harbor for distributions from a terminated
[[Page 7517]]
individual account plan, including an abandoned plan, at 29 CFR
2550.404a-3. These amendments require that a deceased participant's
benefit be directly rolled over to an inherited individual retirement
plan established to receive the distribution on behalf of a missing,
designated nonspouse beneficiary. These amendments eliminate the prior
safe harbor condition that required a distribution on behalf of a
missing nonspouse beneficiary to be made only to an account other than
an individual retirement plan. See Sec. 2550.404a-3(d)(1)(ii).
Therefore, when these amendments become applicable, a distribution on
behalf of a missing nonspouse beneficiary would satisfy this condition
of the safe harbor only if directly rolled into an individual
retirement plan that satisfies the requirements of new section
402(c)(11) of the Code.\7\
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\7\ See also I.R.S. Notice 2007-07 (January 10, 2007).
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Conforming changes are made to the content requirements of the
mandated participant and beneficiary termination notice and its model
notice under the safe harbor (at the Appendix to Sec. 2550.404a-3).
The amendments to 29 CFR 2578.1 also make conforming changes to the
content of the required participant and beneficiary termination notice
and model notice for abandoned plans (at Appendix C to Sec. 2578.1).
Concurrently with publication of this rule, the Department is
publishing proposed amendments to PTE 2006-06,\8\ which, when
finalized, will clarify that the exemption provides relief to a QTA
that designates itself or an affiliate as the provider of an inherited
individual retirement plan for a missing, designated nonspouse
beneficiary pursuant to the exemption's conditions. As noted in the
preamble to the proposed amendments, however, the Department interprets
PTE 2006-06 as currently available to the QTA for its self-selection as
an inherited individual retirement plan provider subject to the
conditions of the exemption.
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\8\ 71 FR 20856 (April 21, 2006).
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B. Request for Comments
The Department invites comments from interested persons on all
aspects of the interim final rule. To facilitate the receipt and
processing of comments, the Department encourages interested persons to
submit their comments electronically by e-mail to e-ORI@dol.gov, or by
using the Federal eRulemaking portal at http://www.regulations.gov (follow
instructions for submission of comments). Persons submitting comments
electronically are encouraged not to submit paper copies. Persons
interested in submitting comments on paper should send or deliver their
comments (at least three copies) to the Office of Regulations and
Interpretations, Employee Benefits Security Administration, Room N-
5669, U.S. Department of Labor, 200 Constitution Avenue, NW.,
Washington, DC 20210, Attn: Amendments to Distribution Safe Harbor and
Abandoned Plans Regulation for Missing Nonspouse Beneficiaries. All
comments will be available to the public, without charge, at
http://www.regulations.gov and www.dol.gov/ebsa, and in the Public Disclosure
Room, N-1513, Employee Benefits Security Administration, U.S.
Department of Labor, 200 Constitution Avenue, NW., Washington, DC.
C. Amendments Relating to the Safe Harbor for Distributions From
Terminated Individual Account Plans
1. Section 2550.404a-3(d)--Conditions
Paragraph (d)(1)(ii) of this section requires that the distribution
of benefits on behalf of a nonspouse beneficiary of a participant be
made to ``an account (other than an individual retirement plan)''
because historically such distribution was not eligible for rollover
into an individual retirement plan. This condition is being revised to
require that the distribution of benefits on behalf of a designated
nonspouse beneficiary be rolled over into an inherited individual
retirement plan that complies with the requirements of section
402(c)(11) of the Code, as permitted under the Pension Protection Act
for distributions occurring after December 31, 2006.
Paragraph (d)(1)(iii)(C) of this section permits as an alternative
distribution option that certain small benefits on behalf of a
nonspouse beneficiary of a participant be distributed to ``an account
(other than an individual retirement plan)'' that a financial
institution, other than the qualified termination administrator,
provides to the public at the time of the distribution. This
alternative option is similarly being revised to require the rollover
of benefits on behalf of a designated nonspouse beneficiary to an
inherited individual retirement plan.
Paragraph (d)(2)(ii)(A) of this section is being revised to
incorporate the appropriate cross references to individual retirement
plan and inherited individual retirement plan and eliminate reference
to ``other account.''
Paragraphs (d)(2)(iii), (d)(2)(iv) and (d)(3) of this section are
being revised to incorporate the appropriate cross references to
individual retirement plan and inherited individual retirement plan,
and bank or savings association accounts for certain small amounts.
2. Section 2550.404a-3(e)--Notice to Participants and Beneficiaries
Paragraphs (e)(1)(iv), (e)(1)(v) and (e)(1)(vi) of this section are
being revised to incorporate the appropriate cross references to
individual retirement plan and inherited individual retirement plan and
eliminate reference to ``other account.''
3. Section 2550.404a-3(f)--Model Notice
The appendix to this section contains a Notice of Plan Termination
for terminated individual account plans other than abandoned plans that
currently includes an optional paragraph referring to distributions to
nonspouse beneficiaries. This paragraph is being deleted because
distributions to nonspouse beneficiaries will no longer be required to
be made to accounts other than individual retirement plans. A
parenthetical is being added to the fourth paragraph to clarify that
individual retirement plans established on behalf of missing,
designated nonspouse beneficiaries are inherited individual retirement
plans.
D. Amendments Relating to the Termination of Abandoned Individual
Account Plans
1. Section 2578.1(d)(2)(vi)--Notify Participants
Paragraph (d)(2)(vi)(A)(5)(ii) of this section is being revised to
incorporate the appropriate cross reference to conditions for rollovers
on behalf of nonspouse beneficiaries in Sec. 2550.404a-3(d)(1)(ii).
Paragraphs (d)(2)(vi)(A)(5)(iii) and (d)(2)(vi)(A)(6) of this
section are being revised to incorporate the appropriate cross
references to individual retirement plan and inherited individual
retirement plan in Sec. 2550.404a-3(d)(1)(i) and (d)(1)(ii) and
eliminate reference to ``account.''
Paragraphs (d)(2)(vi)(A)(7) and (d)(2)(vi)(A)(8) of this section
are being revised to incorporate the appropriate cross references to
individual retirement plan and inherited individual retirement plan in
Sec. 2550.404a-3(d)(1)(i) and (d)(1)(ii).
2. Section 2578.1(i)--Model notices
Appendix C to this section contains a Notice of Plan Termination
for abandoned plans that currently includes an optional paragraph
(``Option 2'') referring to distributions to nonspouse
[[Page 7518]]
beneficiaries. This optional paragraph is being deleted because
distributions to nonspouse beneficiaries will no longer be required to
be made to accounts other than individual retirement plans. To conform
to this change, the instructions for ``Option 1'' are being revised to
delete reference to ``participant's spouse.'' ``Option 3'' is
renumbered as ``Option 2'' and the instructions are revised to
eliminate reference to ``(or special account for non-spousal
beneficiaries if you are a beneficiary other than the participant's
spouse)'' and ``(or special non-spousal account).'' A parenthetical is
being added to Option 1 and Option 2 to clarify that individual
retirement plans established on behalf of missing, designated nonspouse
beneficiaries are inherited individual retirement plans. ``Option 4''
is renumbered as ``Option 3.''
E. Good Cause Finding That Proposed Rulemaking Unnecessary
Rulemaking under section 553 of the Administrative Procedure Act
(APA) ordinarily involves publication of a notice of proposed
rulemaking in the Federal Register and the public is given an
opportunity to comment on the proposed rule. The APA authorizes
agencies to dispense with proposed rulemaking procedures, however, if
they find both good cause that such procedures are impracticable,
unnecessary, or contrary to the public interest, and incorporate a
statement of the finding with the underlying reasons in the interim
final rule issued.
In this case, the Department finds that it is unnecessary to
undertake proposed rulemaking with regard to the amendments to the
regulatory safe harbor for distributions from a terminated individual
account plan, including an abandoned plan. The Department believes such
rulemaking is unnecessary because it views these amendments to an
existing regulatory scheme as technical, noncontroversial and merely
adaptive of recent Code changes allowing distributions on behalf of
missing nonspouse beneficiaries of deceased participants to be rolled
over into tax-advantaged individual retirement plans. The Department
therefore finds for good cause that notice and public procedure is
unnecessary. It is publishing these amendments as an interim final rule
and is including a request for comment.
F. Regulatory Impact Analysis
Summary
By conforming regulations pertaining to distributions from certain
terminated plans with recent changes to the Code, this interim final
rule preserves for certain nonspouse beneficiaries of deceased
participants the opportunity to take advantage of preferential tax
treatment newly permitted by the Pension Protection Act for
distributions after December 31, 2006. Nonspouse beneficiaries will
benefit from the preservation, on their behalf, of tax-favored savings
set aside for retirement. This interim final rule also will affect plan
fiduciaries, including QTAs, by altering the procedures applicable to
certain termination distributions. The Department anticipates that,
rather than increasing costs, these amendments will reduce compliance
costs modestly for plan fiduciaries and QTAs. Because the rule's new
distribution procedures for terminated plans apply only to the narrow
group of nonspouse beneficiaries who have not returned a distribution
election, the Department believes that the rule's economic impact will
be small, overall, but positive.\9\
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\9\ As described earlier, the Department is publishing,
concurrently with publication of this rule, proposed amendments to
PTE 2006-06, which will establish under the conditions of the
exemption that a QTA may designate itself or an affiliate as the
provider of an inherited individual retirement plan for a nonspouse
beneficiary who has not returned a distribution election. In
assessing the economic costs and benefits of this interim final
rule, the Department has taken into account the proposed amendments
to PTE 2006-06, which will make explicit the availability of the
conditional relief to parties that follow the amended rules with
respect to nonspouse distributions, a result that the Department
believes will assist in the achievement of the purposes underlying
the regulations.
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Executive Order 12866 Statement
Under Executive Order 12866, the Department must determine whether
a regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the Office
of Management and Budget (OMB). Under section 3(f) of the Executive
Order, a ``significant regulatory action'' is 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. The
Department has determined that this regulatory action is not
economically significant within the meaning of section 3(f)(1) of the
Executive Order. However, the Office of Management and Budget (OMB) has
determined that the action is significant within the meaning of section
3(f)(4) of the Executive Order, and the Department, accordingly,
provides the following assessment of its potential costs and benefits.
Costs
Plan fiduciaries and QTAs generally are not expected to change
their use of service providers in connection with the termination and
winding-up of plans as a result of the amendments made by this interim
final rule. In addition, costs related to selecting institutions and
establishing appropriate accounts and investments for benefits directly
transferred to an inherited individual retirement plan are expected to
be the same as costs related to establishing other types of accounts on
behalf of nonspouse beneficiaries. The safeguards included in the safe
harbor regulation to preserve assets, such as requiring that fees and
expenses do not exceed certain limits, apply to both individual
retirement plans and other accounts. Fiduciaries and QTAs that
currently select separate institutions for making tax-deferred and
taxable distributions may have modest administrative cost savings as a
result of this rule because they will be able to distribute nonspouse
benefits to inherited individual retirement plans with the same
institutions to which other tax-deferred distributions are made.
Plan fiduciaries and QTAs also will have reduced administrative
costs as a result of not having to comply with otherwise applicable
mandatory tax withholding requirements under the Code. The distribution
of benefits to an account other than an individual retirement plan is
considered a lump sum distribution under the Code, requiring a plan
administrator to withhold a percentage of the taxable amount and send
the withheld amount to the Internal Revenue Service as income tax
withholding. This requirement to withhold does not apply to
distributions made to inherited individual retirement plans. As the
safe harbor regulation requires the rollover of distributions, except
for certain small benefits, the administrative costs associated with
mandatory tax withholding will be reduced.
[[Page 7519]]
Benefits
When the Department published the safe harbor regulation for
distributions from terminated individual account plans in April 2006,
it was designed, in part, to prevent participants and beneficiaries of
terminated plans, insofar as then possible under the Code, from losing
the favorable tax treatment otherwise accorded distributions from
qualified plans. As a result, the safe harbor regulation generally
mandated that benefits on behalf of a participant or spouse be
distributed to an individual retirement plan. Tax laws then in effect
prevented the Department from extending this favorable tax treatment to
nonspouse beneficiaries. This interim final rule, which takes into
account the Pension Protection Act change enabling a nonspouse
beneficiary to be treated as inheriting an individual retirement plan,
will benefit nonspouse beneficiaries by enabling them to have continued
tax-deferral of retirement savings, similar to that available to
participants and spouses.
As described earlier in the preamble, nonspouse beneficiaries will
benefit from continued deferral of income taxes and distributions that
are not subject to mandatory tax withholding. Under the new tax rules,
distributions from an inherited individual retirement plan will have to
be made under the Code's minimum distribution rules. While these
distribution rules are generally more restrictive than what is allowed
for participants and spouses, the Department believes that the
additional period of tax deferral permitted under the new tax rules
will be a significant benefit to nonspouse beneficiaries. Because
benefits will continue to be held in tax-advantaged retirement
vehicles, the interim final rule also serves to preserve retirement
savings. At the same time, nonspouse beneficiaries retain the benefit
of being able to make a distribution election and to elect a lump sum
distribution if they choose.
Based on the foregoing assessment, the Department concludes that
promulgation of this interim final rule will provide substantial
benefits without imposing additional costs.
Paperwork Reduction Act
The information collections included in this interim final rule,
together with information collections included in PTE 2006-06, are
currently approved by the Office of Management and Budget (OMB) under
OMB control number 1210-0127. This approval is currently scheduled to
expire on April 30, 2008. The interim final rule makes minor changes to
the content requirements of the participant and beneficiary termination
notices, as described earlier in the preamble. These conforming
changes, which involve the deletion or substitution of a small number
of words in each notice, do not increase the burden of the information
collections and do not constitute a substantive or material
modification of the existing information collection request approved
under OMB control number 1210-0127. Accordingly, the Department has not
made a submission for OMB approval of a revision in the burden
estimates in connection with this interim final rule or the proposed
amendments to PTE 2006-06, published simultaneously with this interim
final rule.
Regulatory Flexibility Act
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
Administrative Procedure Act (5 U.S.C. 551 et seq.) and are likely to
have a significant economic impact on a substantial number of small
entities. Because these amendments are being published as an interim
final rule, without prior notice and comment, the Regulatory
Flexibility Act does not apply. Furthermore, because the interim final
rule imposes no additional costs on employers or plans, the Department
believes that it would not have a significant impact on a substantial
number of small entities. Accordingly, the Department believes that no
regulatory flexibility analysis would be required in any case under the
RFA.
Congressional Review Act Statement
The interim final rule being issued here is subject to the
provisions of 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. The interim final rule is not a ``major rule'' as that term
is defined in 5 U.S.C. 804, because it does not result in (1) An annual
effect on the economy of $100 million or more; (2) a major increase in
costs or prices for consumers, individual industries, or Federal,
State, or local government agencies, or geographic regions; or (3)
significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based
enterprises to compete with foreign-based enterprises in domestic and
export markets.
Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), the interim final rule does not include any Federal mandate
that may result in expenditures by State, local, or tribal governments,
or impose an annual burden exceeding $100 million on the private
sector.
Federalism Statement
Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism and requires Federal agencies to adhere to
specific criteria 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 the
States, or on the distribution of power and responsibilities among the
various levels of government. This interim 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. The
requirements implemented in the interim rule do not alter the
fundamental provisions of the statute with respect to employee benefit
plans, and as such would have no implications for the States or the
relationship or distribution of power between the national government
and the States.
List of Subjects
29 CFR Part 2550
Employee benefit plans, Employee Retirement Income Security Act,
Employee stock ownership plans, Exemptions, Fiduciaries, Investments,
Investments foreign, Party in interest, Pensions, Pension and Welfare
Benefit Programs Office, Prohibited transactions, Real estate,
Securities, Surety bonds, Trusts and Trustees.
29 CFR Part 2578
Employee benefit plans, Pensions, Retirement.
0
For the reasons set forth in the preamble, the Department of Labor
amends 29 CFR chapter XXV as follows:
[[Page 7520]]
Title 29--Labor
Subchapter F--Fiduciary Responsibility Under the Employee
Retirement Income Security Act of 1974
PART 2550--RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY
0
1. The authority citation for part 2550 continues to read as follows:
Authority: 29 U.S.C. 1135; and Secretary of Labor's Order No. 1-
2003, 68 FR 5374 (Feb. 3, 2003). Sec. 2550.401b-1 also issued under
sec. 102, Reorganization Plan No. 4 of 1978, 43 FR 47713 (Oct. 17,
1978), 3 CFR, 1978 Comp. 332, effective Dec. 31, 1978, 44 FR 1065
(Jan. 3, 1978), 3 CFR, 1978 Comp. 332. Sec. 2550.401c-1 also issued
under 29 U.S.C. 1101. Sec. 2550.404c-1 also issued under 29 U.S.C.
1104. Sec. 2550.407c-3 also issued under 29 U.S.C. 1107. Sec.
2550.404a-2 also issued under 26 U.S.C. 401 note (sec. 657, Pub. L.
107-16, 115 Stat. 38). Sec. 2550.408b-1 also issued under 29 U.S.C.
1108(b)(1) and sec. 102, Reorganization Plan No. 4 of 1978, 3 CFR,
1978 Comp. p. 332, effective Dec. 31, 1978, 44 FR 1065 (Jan. 3,
1978), and 3 CFR, 1978 Comp. 332, Sec. 2550.412-1 also issued under
29 U.S.C. 1112.
0
2. Amend Sec. 2550.404a-3 by revising (d)(1)(ii), (d)(1)(iii)(C),
(d)(2)(ii)(A), (d)(2)(iii), (d)(2)(iv), (d)(3), (e)(1)(iv), (e)(1)(v),
(e)(1)(vi) and the appendix to read as follows:
Sec. 2550.404a-3 Safe Harbor for Distributions from Terminated
Individual Account Plans.
* * * * *
(d) * * *
(1) * * *
(ii) In the case of a distribution on behalf of a designated
beneficiary (as defined by section 401(a)(9)(E) of the Code) who is not
the surviving spouse of the deceased participant, to an inherited
individual retirement plan (within the meaning of section 402(c)(11) of
the Code) established to receive the distribution on behalf of the
nonspouse beneficiary; or
(iii) * * *
* * * * *
(C) An individual retirement plan (described in paragraph (d)(1)(i)
or (d)(1)(ii) of this section) offered by a financial institution other
than the qualified termination administrator to the public at the time
of the distribution.
(2) * * *
(ii) * * *
(A) Seek to maintain, over the term of the investment, the dollar
value that is equal to the amount invested in the product by the
individual retirement plan (described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section), and
* * * * *
(iii) All fees and expenses attendant to the transferee plan
(described in paragraph (d)(1)(i) or (d)(1)(ii) of this section) or
account (described in paragraph (d)(1)(iii)(A) of this section),
including investments of such plan, (e.g., establishment charges,
maintenance fees, investment expenses, termination costs and surrender
charges), shall not exceed the fees and expenses charged by the
provider of the plan or account for comparable plans or accounts
established for reasons other than the receipt of a distribution under
this section; and
(iv) The participant or beneficiary on whose behalf the fiduciary
makes a distribution shall have the right to enforce the terms of the
contractual agreement establishing the plan (described in paragraph
(d)(1)(i) or (d)(1)(ii) of this section) or account (described in
paragraph (d)(1)(iii)(A) of this section), with regard to his or her
transferred account balance, against the plan or account provider.
(3) Both the fiduciary's selection of a transferee plan (described
in paragraph (d)(1)(i) or (d)(1)(ii) of this section) or account
(described in paragraph (d)(1)(iii)(A) of this section) and the
investment of funds would not result in a prohibited transaction under
section 406 of the Act, unless such actions are exempted from the
prohibited transaction provisions by a prohibited transaction exemption
issued pursuant to section 408(a) of the Act.
(e) * * *
(1) * * *
(iv) A statement explaining that, if a participant or beneficiary
fails to make an election within 30 days from receipt of the notice,
the plan will distribute the account balance of the participant or
beneficiary to an individual retirement plan (i.e., individual
retirement account or annuity described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section) and the account balance will be invested in
an investment product designed to preserve principal and provide a
reasonable rate of return and liquidity;
(v) A statement explaining what fees, if any, will be paid from the
participant or beneficiary's individual retirement plan (described in
paragraph (d)(1)(i) or (d)(1)(ii) of this section), if such information
is known at the time of the furnishing of this notice;
(vi) The name, address and phone number of the individual
retirement plan (described in paragraph (d)(1)(i) or (d)(1)(ii) of this
section) provider, if such information is known at the time of the
furnishing of this notice; and
* * * * *
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[[Page 7521]]
[GRAPHIC] [TIFF OMITTED] TR15FE07.000
[[Page 7522]]
Subchapter G--Administration and Enforcement Under the Employee
Retirement Income Security Act of 1974
PART 2578--RULES AND REGULATIONS FOR ABANDONED PLANS
0
3. The authority citation for part 2578.1 continues to read as follows:
Authority: 29 U.S.C. 1135; 1104(a); 1103(d)(1).
0
4. Amend Sec. 2578.1 by revising (d)(2)(vi)(A)(5)(ii),
(d)(2)(vi)(A)(5)(iii), (d)(2)(vi)(A)(6), (d)(2)(vi)(A)(7),
(d)(2)(vi)(A)(8) and Appendix C to read as follows:
Sec. 2578.1 Termination of Abandoned Individual Account Plans
* * * * *
(d) * * *
(2) * * *
(vi) * * *
(A) * * *
(5) * * *
(ii) To an inherited individual retirement plan described in Sec.
2550.404a-3(d)(1)(ii) of this chapter (in the case of a distribution on
behalf of a distributee other than a participant or spouse),
(iii) In any case where the amount to be distributed meets the
conditions in Sec. 2550.404a-3(d)(1)(iii), to an interest-bearing
federally insured bank account, the unclaimed property fund of the
State of the last known address of the participant or beneficiary, or
an individual retirement plan (described in Sec. 2550.404a-3(d)(1)(i)
or (d)(1)(ii) of this chapter) or
* * * * *
(6) In the case of a distribution to an individual retirement plan
(described in Sec. 2550.404a-3(d)(1)(i) or (d)(1)(ii) of this chapter)
a statement explaining that the account balance will be invested in an
investment product designed to preserve principal and provide a
reasonable rate of return and liquidity;
(7) A statement of the fees, if any, that will be paid from the
participant or beneficiary's individual retirement plan (described in
Sec. 2550.404a-3(d)(1)(i) or (d)(1)(ii) of this chapter) or other
account (described in Sec. 2550.404a-3(d)(1)(iii)(A) of this chapter),
if such information is known at the time of the furnishing of this
notice;
(8) The name, address and phone number of the provider of the
individual retirement plan (described in Sec. 2550.404a7-3(d)(1)(i) or
(d)(1)(ii) of this chapter), qualified survivor annuity, or other
account (described in Sec. 2550.404a-3(d)(1)(iii)(A) of this chapter),
if such information is known at the time of the furnishing of this
notice; and
* * * * *
[[Page 7523]]
[GRAPHIC] [TIFF OMITTED] TR15FE07.001
[[Page 7524]]
[GRAPHIC] [TIFF OMITTED] TR15FE07.002
Signed at Washington, DC, this 5th day of February, 2007.
Bradford P. Campbell,
Acting Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
[FR Doc. 07-597 Filed 2-14-07; 8:45 am]
BILLING CODE 4510-29-C
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