['Retirement Benefits']
['Employee Retirement Income Security Act (ERISA)']
05/30/2024
Copyright 2024 J. J. Keller & Associate, Inc. For re-use options please contact copyright@jjkeller.com or call 800-558-5011.
...
(a) All applications for exemptions must contain the following information:
(1) The name(s), address(es), phone number(s), and email address(es) of the applicant(s);
(2) A detailed description of the exemption transaction, including the identification of all the parties in interest involved, a description of any larger integrated transaction of which the exemption transaction is a part, and a chronology of the events leading up to the exemption transaction;
(3) The identity, address, phone number, and email address of any representatives for the affected plan(s) and parties in interest and what individuals or entities they represent;
(4) A description of:
(i) The reason(s) for engaging in the exemption transaction;
(ii) Any material benefit that may be received by a party in interest (or its affiliates) as a result of the exemption transaction (including the avoidance of any materially adverse outcome by a party in interest (or its affiliates) as a result of engaging in the exemption transaction); and
(iii) The costs and benefits of the exemption transaction to the affected plan(s), participants, and beneficiaries, including quantification of those costs and benefits to the extent possible;
(5) A description of the alternatives to the exemption transaction that did not involve a prohibited transaction that were considered or evaluated by the applicant before submitting its exemption application and the reason(s) why those alternatives were not pursued;
(6) The prohibited transaction provisions from which exemptive relief is requested and the reason(s) why the exemption transaction would violate each such provision;
(7) A description of each conflict of interest or potential instance of self-dealing that would be permitted if the exemption is granted;
(8) Whether the exemption transaction is or has been the subject of an investigation or enforcement action by the Department, the Internal Revenue Service, or any other regulatory authority; and
(9) The hardship or economic loss, if any, which would result to the person or persons on behalf of whom the exemption is sought, to affected plans, and to their participants and beneficiaries from denial of the exemption.
(10) With respect to the exemption transaction's definition of affiliate, if applicable, either a statement that the definition of affiliate set forth in §2570.31(a) is applicable or a statement setting forth why a different affiliate definition should be applied.
(b) All applications for exemption must also contain the following:
(1) A statement explaining why the requested exemption would meet the requirements of ERISA section 408(a) by being—
(i) Administratively feasible for the Department;
(ii) In the interests of affected plans and their participants and beneficiaries; and
(iii) Protective of the rights of participants and beneficiaries of affected plans.
(2) A statement that either:
(i)(A) The exemption transaction will be in the best interest of the plan and its participants and beneficiaries;
(B) That all compensation received, directly or indirectly, by a party in interest (and its affiliates) involved in the exemption transaction does not exceed reasonable compensation within the meaning of ERISA section 408(b)(2) and Code section 4975(d)(2); and
(C) That all statements to the Department, the plan, or, if applicable, the qualified independent fiduciary or qualified independent appraiser about the exemption transaction and other relevant matters are not materially misleading at the time the statements are made; or
(ii) Explains why the exemption standards in paragraphs (b)(2)(i)(A) through (C) of this section are not applicable to the exemption transaction.
(iii) For purposes of this paragraph (b)(2), an exemption transaction is in the best interest of a plan if the plan fiduciary causing the plan to enter into the exemption transaction determines, with the care, skill, prudence, and diligence under the circumstances then prevailing, that a prudent person acting in a like capacity and familiar with such matters would, in the conduct of an enterprise of a like character and with like aims, enter into the exemption transaction based on the circumstances and needs of the plan. Such fiduciary shall not place the financial or other interests of itself, a party in interest, or any affiliate ahead of the interests of the plan or subordinate the plan's interests to itself, or any other party or affiliate.
(3) With respect to the notification of interested persons required by §2570.43:
(i) A description of the interested persons to whom the applicant intends to provide notice;
(ii) The manner in which the applicant will provide such notice; and
(iii) An estimate of the time the applicant will need to furnish notice to all interested persons following publication of a notice of the proposed exemption in the Federal Register.
(4) If any party to the exemption transaction has requested either an advisory opinion from the Department or any similar opinion or guidance from another Federal, state, or regulatory body with respect to any issue relating to the exemption transaction—
(i) A copy of the opinion, letter, or similar document concluding the Department's or other entity's action on the request; or
(ii) If the Department or other entity has not yet concluded its action on the request:
(A) A copy of the request or the date on which it was submitted and, solely with respect to an advisory opinion request to the Department, the Department's correspondence control number as indicated in the acknowledgment letter; and
(B) An explanation of the effect the issuance of an advisory opinion by the Department or similar opinion or guidance from another Federal, state, or regulatory body would have upon the exemption transaction.
(5) If the application is to be signed by anyone other than the party in interest seeking exemptive relief on their own behalf, a statement which—
(i) Identifies the individual signing the application and their position or title; and
(ii) Briefly explains the basis of their familiarity with the matters discussed in the application.
(6)(i) A declaration in the following form:
I certify that I am familiar with the matters discussed in this application and, to the best of my knowledge and belief, the representations made in this application are true and correct.
(ii) This certification must be dated and signed by:
(A) The applicant, in its individual capacity, in the case of an individual party in interest seeking exemptive relief on their own behalf;
(B) A corporate officer or partner if the applicant is a corporation or partnership;
(C) A designated officer or official if the applicant is an association, organization, or other unincorporated enterprise; or
(D) The plan fiduciary that has the authority, responsibility, and control with respect to the exemption transaction if the applicant is a plan.
(7) If an applicant communicated with the Department either orally or in writing before submitting an exemption application for the exemption transaction, a statement setting forth the date(s) and with whom the applicant communicated before submitting the application.
(c) Statements and documents from a qualified independent appraiser, auditor, or accountant, such as appraisal reports, analyses of market conditions, audits, or financial documents submitted to support an application for exemption must be accompanied by a statement of consent from such appraiser, auditor, or accountant acknowledging that the statement is being submitted to the Department as part of an exemption application. The statements by the qualified independent appraiser, auditor, or accountant must also contain the following written information:
(1) A signed and dated certification stating that, to the best of the qualified independent appraiser's, auditor's, or accountant's knowledge and belief, the representations made in such statement are true and correct;
(2) A copy of the qualified independent appraiser's, auditor's, or accountant's engagement letter and, if applicable, contract with the plan describing the specific duties the appraiser, auditor, or accountant shall undertake. The letter or contract may not:
(i) Include any provision that provides for the direct or indirect indemnification or reimbursement of the independent appraiser, auditor, or accountant by the plan or another party for any failure to adhere to its contractual obligations or to Federal and state laws applicable to the appraiser's, auditor's, or accountant's work. However, the letter or contract may include a provision providing for reimbursement of legal expenses with respect to claims for any failure to adhere to the appraiser's, auditor's, or accountant's contractual obligations or to Federal and state laws applicable to the appraiser's, auditor's, or accountant's work, provided that:
(A) The plan determines that the reimbursement is prudent following a good faith determination that the appraiser, auditor, or accountant likely did not fail to adhere to the independent fiduciary's contractual obligations or to Federal and state laws applicable to the appraiser's, auditor's, or accountant's work and will be able to repay the plan; and
(B) The letter or contract requires the appraiser, auditor, or accountant to repay all of the reimbursements, in a timely fashion, in the event the appraiser, auditor, or accountant enters into a settlement agreement regarding any asserted failure to adhere to its contractual obligations, or to state or Federal laws, or has been found liable for breach of contract or violation of any Federal or state laws applicable to the appraiser's, auditor's, or accountant's work; or
(ii) Waive any rights, claims, or remedies of the plan or its participants and beneficiaries under ERISA, the Code, or other Federal and state laws against the independent appraiser, auditor, or accountant with respect to the exemption transaction;
(3) A summary of the qualified independent appraiser's, auditor's, or accountant's qualifications to serve in such capacity;
(4) A detailed description of any relationship that the qualified independent appraiser, auditor, or accountant has had or may have with the plan or any party in interest involved in the exemption transaction or its affiliates that may influence the appraiser, auditor, or accountant, including a description of any past engagements with the appraiser, auditor, or accountant;
(5) A written appraisal report prepared by the qualified independent appraiser, which determines, to the best of the qualified independent appraiser's ability and in accordance with professional appraisal standards, the fair market value of the subject asset(s), without bias towards the plan's counterparty in the transaction or other interested parties:
(i) The report must describe the method(s) used in determining the fair market value of the subject asset(s) and an explanation of why such method best reflects the fair market value of the asset(s);
(ii) The report must consider any special benefit that a party in interest involved in the exemption transaction may derive from control of the asset(s), such as from owning an adjacent parcel of real property or gaining voting control over a company; and
(iii) The report must be current and not more than one year old from the date of the exemption transaction, and a written update must be prepared by the qualified independent appraiser affirming the accuracy of the appraisal as of the date of the exemption transaction;
(6) If the subject of the appraisal report is real property, the qualified independent appraiser shall submit a written representation that they are a member of a professional organization of appraisers that can sanction its members for misconduct;
(7) If the subject of the appraisal report is an asset other than real property, the qualified independent appraiser shall submit a written representation describing the appraiser's prior experience in valuing assets of the same type; and
(8) The qualified independent appraiser shall submit a written representation disclosing the percentage of its current revenue that is derived from any party in interest (or its affiliates) involved in the exemption transaction; in general, such percentage shall be computed with respect to the two separate disclosures by comparing, in fractional form:
(i) The amount of the appraiser's projected revenues from the current Federal income tax year (including amounts received from preparing the appraisal report) that will be derived from any party in interest (or its affiliates) involved in the exemption transaction (expressed as a numerator); and
(ii) The appraiser's revenues from all sources for the prior Federal income tax year (expressed as a denominator).
(d) For those exemption transactions requiring the retention of a qualified independent appraiser, the applicant must include:
(1) A representation that the independent fiduciary prudently selected the appraiser after diligent review of the appraiser's technical training and proficiency with respect to the type of valuation at issue, the appraiser's independence from the plan's counterparties in the exemption transaction, and the absence of any material conflicts of interest with respect to the exemption transaction;
(2) A representation that the appraiser is independent within the meaning of §2571.31(i); and
(3) A representation that the independent appraiser has appropriate technical training and proficiency with respect to the specific details of the exemption transaction.
(e) For those exemption transactions requiring the retention of a qualified independent fiduciary to represent the interests of the plan, the applicant must include:
(1) A representation that an appropriate fiduciary, without material conflicts of interest, prudently selected the independent fiduciary after diligent review of the independent fiduciary's technical training and proficiency with respect to ERISA, the Code, and the specific details of the exemption transaction, as well as the sufficiency of the independent fiduciary's fiduciary liability insurance;
(2) A representation that the fiduciary retained to act as the independent fiduciary is independent within the meaning of §2570.31(j);
(i) ERISA and the Code; and
(ii) The(3) A representation that the independent fiduciary has appropriate technical training and proficiency with respect to:
specific details of the exemption transaction.
(f) For exemption transactions requiring the retention of a qualified independent fiduciary to represent the interests of the plan, a statement must be submitted by such independent fiduciary that contains the following written information:
(1) A signed and dated certification that, to the best of the qualified independent fiduciary's knowledge and belief, all the representations made in such statement are true and correct;
(2) A copy of the qualified independent fiduciary's engagement letter and, if applicable, contract with the plan describing the fiduciary's specific duties. The letter or contract may not:
(i) Contain any provisions that violate ERISA section 410;
(ii) Include any provision that provides for the direct or indirect indemnification or reimbursement of the independent fiduciary by the plan or other party for any failure to adhere to its contractual obligations or to state or Federal laws applicable to the independent fiduciary's work, except that the letter or contract may include a provision providing for reimbursement of legal expenses with respect to claims for any failure to adhere to the independent fiduciary's contractual obligations or to Federal and state laws applicable to the independent fiduciary's work, provided that:
(A) The plan determines that the provision is prudent following a good faith determination that the independent fiduciary likely did not fail to adhere to the independent fiduciary's contractual obligations or to Federal and state laws applicable to the independent fiduciary's work and will be able to repay the plan; and
(B) The letter or contract requires the independent fiduciary to repay all of the reimbursements, in a timely fashion, if the independent fiduciary enters into a settlement agreement regarding any asserted failure to adhere to its contractual obligations, or to state or Federal law, or has been found liable for breach of contract or violation of any Federal or state laws applicable to the independent fiduciary's work; or
(iii) Waive any rights, claims, or remedies of the plan under ERISA, state, or Federal law against the independent fiduciary with respect to the exemption transaction;
(3)(i) A description of any fiduciary liability insurance policy maintained by the independent fiduciary that includes:
(A) The amount of coverage available to indemnify the plan for damages resulting from a breach by the independent fiduciary of either ERISA, the Code, or any other Federal or state law or its contract or engagement letter; and
(B) Whether the insurance policy contains an exclusion for actions brought by the Secretary or any other Federal, state, or regulatory body; the plan; or plan participants or beneficiaries;
(4) An explanation of the bases for the conclusion that the fiduciary is a qualified independent fiduciary, which also must include a summary of that person's or entity's qualifications to serve in such capacity and a description of any prior experience by that person or entity or other demonstrated characteristics of the fiduciary (such as special areas of expertise) that render that person or entity suitable to perform its duties as a qualified independent fiduciary on behalf of the plan with respect to the exemption transaction;
(5) A detailed description of any relationship that the qualified independent fiduciary has had or may have with the plan and any party in interest involved in the exemption transaction (or its affiliates);
(6) An acknowledgement by the qualified independent fiduciary that it understands its duties and responsibilities under ERISA; is acting as a fiduciary of the plan with respect to the exemption transaction; has no material conflicts of interest with respect to the exemption transaction; and is not acting as an agent or representative of the plan sponsor;
(7) The qualified independent fiduciary's opinion on whether the exemption transaction would be in the interests of the plan and its participants and beneficiaries, protective of the rights of participants and beneficiaries of the plan, and in compliance with the standards set forth in paragraphs (b)(2)(i)(A) through (C) of this section, if applicable, along with a statement of the reasons on which the opinion is based;
(8) If the exemption transaction is continuing in nature, a declaration by the qualified independent fiduciary that it is authorized to take all appropriate actions to safeguard the interests of the plan, and will, during the pendency of the exemption transaction:
(i) Monitor the exemption transaction on behalf of the plan and its participants and beneficiaries on a continuing basis;
(ii) Ensure that the exemption transaction remains in the interests of the plan and its participants and beneficiaries and, if not, take any appropriate actions available under the particular circumstances; and
(iii) Enforce compliance with all conditions and obligations imposed on any party dealing with the plan with respect to the exemption transaction;
(9) The qualified independent fiduciary shall submit a written representation disclosing the percentage of its current revenue that is derived from any party in interest involved in the exemption transaction (or its affiliates) with respect to both the prior Federal income tax year and current Federal income tax year; in general, such percentage shall be computed with respect to the two disclosures by comparing in fractional form:
(i) The amount of the independent fiduciary's projected revenues from the current Federal income tax year that will be derived from parties in interest involved in the exemption transaction and their affiliates (expressed as a numerator); and
(ii) The independent fiduciary's revenues from all sources (excluding fixed, non-discretionary retirement income) for the prior Federal income tax year (expressed as a denominator);
(10) A statement that the independent fiduciary has no conflicts of interest with respect to the exemption transaction that could affect the exercise of its best judgment as a fiduciary;
(11) Either:
(i) A statement that, within the last five years, the independent fiduciary has not been under investigation or examination by, and has not engaged in litigation, or a continuing controversy with the Department, the Internal Revenue Service, the Justice Department, the Pension Benefit Guaranty Corporation, the Federal Retirement Thrift Investment Board, or any other Federal or state entity involving:
(A) Compliance with provisions of ERISA or FERSA;
(B) Its representation of or position or employment with any employee benefit plan, including investigations or controversies involving ERISA or the Code, or any other Federal or state law;
(C) Conduct of the business of a broker, dealer, investment adviser, bank, insurance company, or fiduciary;
(D) Income tax evasion; or
(E) Any felony or conspiracy involving the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds or securities; or
(ii) A statement describing the applicable investigation, examination, litigation, or controversy; and
(12)(i)(A) Either a statement that, within the last 13 years, the independent fiduciary has not been:
(1) Convicted or released from imprisonment, whichever is later, as a result of any felony involving abuse or misuse of such person's position or employment with an employee benefit plan or a labor organization; any felony arising out of the conduct of the business of a broker, dealer, investment adviser, bank, insurance company, or fiduciary; income tax evasion; any felony involving the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds or securities; conspiracy or attempt to commit any such crimes or a crime of which any of the foregoing crimes is an element; or any crime identified in ERISA section 411, regardless of whether the conviction occurred in a U.S. or foreign jurisdiction; or
(2) Convicted by a foreign court of competent jurisdiction or released from imprisonment, whichever is later, as a result of any crime that is substantially equivalent to an offense described in paragraph (f)(12)(i)(A)(1) of this section; or
(B) A statement describing a conviction or release from imprisonment described in paragraph (f)(12)(i)(A) of this section.
(ii) For purposes of this paragraph (f), a person shall be deemed to have been “convicted” from the date of the judgment of the trial court (or the date of the judgment of any court in a foreign jurisdiction that is the equivalent of a U.S. Federal or state trial court), regardless of whether that judgment remains under appeal, and regardless of whether the foreign jurisdiction considers a trial court judgment final while under appeal.
(g) Statements, as applicable, from other third-party experts, including but not limited to economists or market specialists, submitted on behalf of the plan to support an exemption application must be accompanied by a statement of consent from such expert acknowledging that the statement prepared on behalf of the plan is being submitted to the Department as part of an exemption application. Such statements must also contain the following written information:
(1) A copy of the expert's engagement letter and, if applicable, contract with the plan describing the specific duties the expert will undertake;
(2) A summary of the expert's qualifications to serve in such capacity; and
(3) A detailed description of any relationship that the expert has had or may have with any party in interest (or its affiliates) involved in the exemption transaction that may influence the actions of the expert.
(h) An application for exemption may also include a draft of the requested exemption which describes the exemption transaction and parties in interest for which exemptive relief is sought and the specific conditions under which the exemption would apply.
[76 FR 66646 Oct. 27, 2011; 89 FR 4691, Jan. 24, 2024]
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['Retirement Benefits']
['Employee Retirement Income Security Act (ERISA)']
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Copyright 2024 J. J. Keller & Associate, Inc. For re-use options please contact copyright@jjkeller.com or call 800-558-5011.