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DOL/EBSA | RIN: 1210-AB10 | Publication ID: Spring 2007 |
Title: Section 404 Regulation--Default Investment Alternatives Under Participant Directed Individual Account Plans | |
Abstract: This rulemaking would establish a relief under which a fiduciary of a participant directed individual account pension plan will be deemed to have satisfied his or her fiduciary responsibilities with respect to investment and asset allocation decisions made on behalf of individual participants and beneficiaries who fail to give investment direction. This rulemaking will describe the types of investments that qualify as default investments in order to obtain fiduciary relief. As with other investment alternatives available under the plan, fiduciaries will continue to be responsible for the prudent selection and monitoring of qualifying default investment alternatives. | |
Agency: Department of Labor(DOL) | Priority: Economically Significant |
RIN Status: Previously published in the Unified Agenda | Agenda Stage of Rulemaking: Final Rule Stage |
Major: Yes | Unfunded Mandates: No |
CFR Citation: 29 CFR 2550 | |
Legal Authority: 29 USC 1104(c)(5) 29 USC 1135 |
Legal Deadline:
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Statement of Need: Section 404(c)(1) of ERISA provides that, where a participant or beneficiary of an employee pension benefit plan exercises control over assets in an individual account maintained for him or her under the plan, the participant or beneficiary is not considered a fiduciary by reason of his or her exercise of control and other plan fiduciaries are relieved of liability under part 4 of title I of ERISA for the results of such exercise of control. As part of the Pension Protection Act of 2006, section 404(c) was amended to provide relief accorded by section 404(c)(1) to fiduciaries that invest participant assets in certain types of investment alternatives in the absence of participant investment direction. The Pension Protection Act directed the Department to issue final default investment regulations under section 404(c)(5)(A) of ERISA no later than 6 months after the date of enactment of the Pension Protection Act. This rulemaking responds to a need on the part of plan sponsors and fiduciaries for guidance on the selection of default investments for plan participants who fail to make an investment election. Such guidance would also improve retirement savings for millions of American workers. |
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Summary of the Legal Basis: Promulgation of this regulation is authorized by sections 505 and 404(c) of ERISA. |
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Alternatives: Regulatory alternatives were considered in developing the proposed rule and published in the Federal Register. |
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Anticipated Costs and Benefits: Costs and benefits of regulatory alternatives were estimated and taken into account in developing the proposed rule and published in the Federal Register. |
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Risks: Failure to provide guidance on default investment options for individual account plans may result in diminished retirement savings for the many participants who fail to make an investment election with regard to their accounts. In addition, failure to issue final default investment regulations under section 404(c)(5)(A) of ERISA no later than 6 months after the date of enactment of the Pension Protection Act would contravene section 624 of the Pension Protection Act. |
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Timetable:
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Regulatory Flexibility Analysis Required: No | Government Levels Affected: None |
Federalism: No | |
Included in the Regulatory Plan: Yes | |
Agency Contact: Erin Sweeney Senior Pension Law Specialist, ORI Department of Labor Employee Benefits Security Administration 200 Constitution Avenue NW., Room N5669, FP Building, Washington, DC 20210 Phone:202 693-8500 |