[Federal Register Volume 75, Number 214 (Friday, November 5, 2010)]
[Notices]
[Pages 68383-68384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27994]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Hearing on Reasonable Contracts or Arrangements for Welfare
Benefit Plans Under Section 408(b)(2)--Welfare Plan Fee Disclosure
AGENCY: Employee Benefits Security Administration, U.S. Department of
Labor.
ACTION: Notice of hearing.
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SUMMARY: Notice is hereby given that the Employee Benefits Security
Administration will hold a hearing to consider issues relating to the
disclosure of fee, conflict of interest and other information by
service providers to group health, disability, severance and other
employee welfare benefit plans under section 408(b)(2) of the Employee
Retirement Income Security Act.
DATES: The hearing will be held on December 7, 2010, beginning at 9
a.m., EST.
ADDRESSES: The hearing will be held at the U.S. Department of Labor,
Room S-4215 (A-C), 200 Constitution Avenue, NW., Washington, DC 20210.
FOR FURTHER INFORMATION CONTACT: Fil Williams, Office of Regulations
and Interpretations, Employee Benefits Security Administration, U.S.
Department of Labor, at (202) 693-8500. This is not a toll-free number.
SUPPLEMENTARY INFORMATION: Section 408(b)(2) of the Employee Retirement
Income Security Act, as amended (ERISA), provides relief from the
prohibited transaction rules of section 406 for service contracts or
arrangements between a plan and a party in interest, as defined in
ERISA section 3(14), if the contract or arrangement is reasonable, the
services are necessary for the establishment or operation of the plan,
and no more than reasonable compensation is paid for the services.
Regulations, at 29 CFR 2550.408b-2, clarify the conditions of the
exemption. On July 16, 2010, the Department published an interim final
regulation amending paragraph (c) of Sec. 2550.408b-2 to require
certain service providers to employee pension benefit plans to disclose
information to assist plan fiduciaries in assessing the reasonableness
of contracts or arrangements, including the reasonableness of the
service providers' compensation and potential conflicts of interest
that may affect the service providers' performance. As proposed,
paragraph (c) of Sec. 2550.408b-2 would have applied to all pension
and welfare benefit plans. However, in response to the invitation for
comments on the proposal, the Department received a number of comments
arguing that the Department's rationales for the proposed rule apply to
pension plans, but not to welfare benefit plans. Other commenters
argued that if the Department creates a disclosure regime for welfare
benefit plan service providers, it should be promulgated separately.
Specific concerns raised by commenters relating to welfare benefit
plans included the potential for negative effects on the insurance
industry, which, they assert, is highly regulated by State laws. In
this regard, commenters asserted that, considering the high level of
State regulation, subjecting welfare benefit plans to the disclosure
regulation would be unnecessary and redundant because the disclosures
contemplated in the regulation are already made available to plan
fiduciaries through State regulatory processes. Other commenters noted
that most State insurance laws do not require the types of disclosures
addressed under the proposed rule and even where such State laws exist,
they are loosely enforced. Certain commenters asserted that there are
``transparency problems'' in general in the health and welfare
industry, and that these problems should be addressed to the extent
they affect employee welfare benefit plans. At least one commenter
addressed specific concerns of pharmacy benefit managers (PBMs), which
are intermediaries between drug manufacturers and health insurance
plans. This commenter stated that PBMs believe that the reasons for
disclosure discussed in the preamble to the proposed rule are
inapplicable to them. Other commenters disputed the idea that PBMs
should not be subject to the regulation, arguing that the discounts and
rebates they receive from drug companies are examples of undisclosed
indirect compensation.
As explained in the preamble to the interim final regulation, the
Department continues to believe that fiduciaries and service providers
to welfare benefit plans would benefit from regulatory guidance
regarding fees and conflicts of interest for the same reasons that
apply to fiduciaries and service providers to pension plans. The
Department acknowledged in the preamble, however, that, taking into
account the pubic comments on the proposal, there may be sufficient
differences between welfare and pension plan arrangements to justify
separate consideration of welfare plan-related disclosures.\1\ In this
regard, the Department has decided to begin its consideration of
welfare plan-related disclosures by holding a public hearing on
December 7, 2010. The purpose of this hearing is to obtain information,
related data and views from interested persons regarding the
application of the standards set forth in interim-final regulation
Sec. 2550.408b-2(c) to welfare benefit plans. Specifically, the
Department is interested in exploring what particular provisions of the
interim-final regulation should not apply to welfare plans and why. The
Department also is interested in exploring whether, or to what extent,
disclosure rules under section 408(b)(2) should apply to all welfare
benefit plans, e.g., group health plans, severance plans, vacation
plans, apprenticeship and training plans, etc, or to only a subset, or
whether different disclosure standards are needed for different types
of welfare benefit plans.\2\
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\1\ See 75 FR 41600, at 41603, July 16, 2010.
\2\ Section 3(1) of ERISA defines the term ``employee welfare
plan'' and ``welfare plan'' to mean any plan, fund, or program which
was heretofore or is hereafter established or maintained by an
employer or by an employee organization, or by both, to the extent
that such plan, fund, or program was established or is maintained
for the purpose of providing for its participants or their
beneficiaries, through the purchase of insurance or otherwise, (A)
medical, surgical, or hospital care or benefits, or benefits in the
event of sickness, accident, disability, death or unemployment, or
vacation benefits, apprenticeship or other training programs, or day
care centers, scholarship funds, or prepaid legal services, or (B)
any benefit described in section 302(c) of the Labor Management
Relations, 1947 (other than pensions on retirement or death, and
insurance to provide such pensions).
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The hearing will be held on December 7, 2010, beginning at 9 a.m.
at the Department of Labor, Francis Perkins Building, Room S-4215 (A-
C), 200 Constitution Avenue, NW., Washington, DC 20210.
Persons interested in presenting testimony and answering questions
at this public hearing must submit, by 3:30 p.m., EST, November 17,
2010, the following information: (1) A written request to be heard; and
(2) An outline of the topics to be discussed, indicating the time
allocated to each topic. To facilitate the receipt and processing of
responses, EBSA encourages interested
[[Page 68384]]
persons to submit their requests and outlines electronically by e-mail
to [email protected]. Persons submitting requests and outlines
electronically are encouraged not to submit paper copies. It should be
noted that, while reasonable efforts will be made to accommodate
requests to testify on the specified issues, it may be necessary to
limit the number of those testifying in order to adhere to the
hearing's format. Any persons not afforded an opportunity to testify
will nonetheless have an opportunity to submit a written statement on
the specified issues for the record. The hearing will be open to the
general public.
Persons submitting requests and outlines on paper should send or
deliver their requests and outlines to the Office of Regulations and
Interpretations, Employee Benefits Security Administration, Attn:
408(b)(2) Hearing on Fee Disclosures to Welfare Benefit Plans, Rooms N-
5655, U.S. Department of Labor, 200 Constitution Avenue, NW.,
Washington, DC 20210. All requests and outlines submitted to the
Department will be available to the public, without charge, online at
http://www.dol.gov/ebsa and at the Public Disclosure Room, N-1513,
Employee Benefits Security Administration, U.S. Department of Labor,
200 Constitution Avenue, NW., Washington, DC 20210.
The Department will prepare an agenda indicating the order of
presentation of oral comments and testimony. In the absence of special
circumstances, each presenter will be allotted ten (10) minutes in
which to complete his or her presentation. Any individuals with
disabilities who may need special accommodations should notify Fil
Williams on or before November 17, 2010.
Information about the agenda will be posted on http://www.dol.gov/ebsa on or after November 17, 2010, or may be obtained by contacting
Fil Williams, Office of Regulations and Interpretations, Employee
Benefits Security Administration, U.S. Department of Labor, telephone
(202) 693-8500 (this is not a toll-free number). Those individuals who
make oral comments and testimonies at the hearing should be prepared to
answer questions regarding their information and/or comments. The
hearing will be transcribed.
Notice of Public Hearing
Notice is hereby given that a public hearing will be held on
December 7, 2010, concerning issues related to the transparency of
service provider compensation and potential conflicts of interest in
the welfare benefit plan industry. The hearing will be held beginning
at 9 a.m. at the U.S. Department of Labor, Frances Perkins Building,
Room S-4215 (A-C), 200 Constitution Avenue, NW., Washington, DC 20210.
Signed at Washington, DC, this 1st day of November 2010.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
[FR Doc. 2010-27994 Filed 11-4-10; 8:45 am]
BILLING CODE 4510-29-P