Final regulations updating the existing procedures concerning administrative exemptions from the prohibited transaction provisions of ERISA, the Internal Revenue Code and the Federal Employees’ Retirement System could be released any day now.
The White House’s Office of Management and Budget (OMB) on Dec. 11 concluded its review of a final rule updating the prohibited transaction exemption (PTE) procedures, which essentially gives the Department of Labor the greenlight to release the final rule, provided it didn’t recommend any changes to the proposal. Review by the OMB is typically one of the last steps in the federal rulemaking process under the Administrative Procedure Act before an agency is authorized to release the respective guidance.
While details on the final rule are still not known, a summary description explains that the guidance will revise the department’s procedure for granting prohibited transaction exemptions, which was last updated in 2011.
The DOL notes that, while some of the revisions are designed to improve the “readability” of the procedure, the majority reflect changes in its exemption application review processes that have occurred since the department last updated the regulation.
Among other things, the proposed amendment would:
- clarify the types of information and documentation required for a complete application;
- revise the definitions of a qualified independent fiduciary and qualified independent appraiser to ensure their independence;
- clarify the content of specific reports and documents applicants must submit to ensure that the department receives sufficient information to make the requisite findings under ERISA Section 408(a) to issue an exemption;
- update various timing requirements to ensure clarity in the application review process;
- clarify items that are included in the administrative record for an application and when the administrative record is available for public inspection; and
- expand opportunities for applicants to submit information to the department electronically.
The OMB’s regulatory agenda shows a target release date of December 2023. One thing to keep an eye on when the final rule comes out is whether the DOL amended the proposed guidance in any way. After the proposal was published in March 2022, the DOL apparently received several comment letters suggesting that it would have a “chilling effect” on the PTE process.
Retirement Plan Disclosures
Meanwhile, the OMB also concluded its review of guidance that’s in the pre-rule stage to improve participant engagement and the effectiveness of ERISA retirement plan disclosures.
Consistent with Section 319 of the SECURE 2.0 Act, this regulatory action is to explore ways to improve the effectiveness of retirement plan disclosures required under Title I of ERISA, balanced with the cost to plans and plan participants and beneficiaries of providing such disclosures.
The DOL’s summary explanation notes that the Employee Benefits Security Administration (EBSA) intends to start by consulting with a diverse set of stakeholders, including participant representatives, employers sponsoring ERISA retirement plans, and retirement plan service and investment providers, to explore alternatives for improving the understandability and effectiveness of such disclosures.
SECURE 2.0 contains multiple reporting and disclosure provisions, including new disclosure requirements for DB and DC retirement plans covered by ERISA, as well as provisions relating more generally to effectiveness, simplification, and consolidation of applicable disclosures. DOL notes that the review undertaken by this regulatory project will consider these new provisions individually and in the aggregate.
To that end, it’s possible the DOL could release a Request for Information in the coming days that is similar to the one issued in August to gather public input about simplifying and consolidating retirement plan reporting and disclosure forms, as directed by SECURE 2.0.
