1210-0091 PTE 94-71 ss22 2-15-2022

Settlement Agreements Between a Plan and Party in Interest

OMB Number 1210-0091

Expiration Date: 04/30/2022

SUPPORTING STATEMENT FOR PAPERWORK REDUCTION ACT 1995 SUBMISSIONS: SETTLEMENT AGREEMENTS BETWEEN A PLAN AND PARTY IN INTEREST

This ICR seeks approval for an extension of an existing control number.

A. JUSTIFICATION

1. Explain the circumstances that make the collection of information necessary. Identify any legal or administrative requirements that necessitate the collection. Attach a copy of the appropriate section of each statute and regulation mandating or authorizing the collection of information.

Section 408(a) of the Employee Retirement Income Security Act of 1974 (ERISA) gives the Secretary of Labor the authority to "grant a conditional or unconditional exemption of any fiduciary or transaction, or class of fiduciaries or transactions, from all or part of the restrictions imposed by sections 406 and 407(a)." In order to grant an exemption under section 408, the Department of Labor (the Department) must determine that the exemption is: (1) administratively feasible; (2) in the interests of the plan and its participants and beneficiaries; and, (3) protective of the rights of the participants and beneficiaries of such plan.

Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17, 1978, effective on December 31, 1978) transferred the authority of the Secretary of the Treasury to issue exemptions under section 4975 of the Internal Revenue Code (the Code), with certain enumerated exceptions, to the Secretary of Labor. As a result, the Secretary of Labor now possesses authority under section 4975(c)(2) of the Code as well as under 408(a) of ERISA to issue individual and class exemptions from the prohibited transaction rules of ERISA and the Code.

This information collection request (ICR) relates to two prohibited transaction class exemptions (PTEs) that the Department of Labor (the Department) has granted, both of which involve settlement agreements. These two exemptions are described below:

PTE 94-71. Granted on October 7, 1994, PTE 94-71 exempts from certain restrictions of ERISA and certain taxes imposed by the Code, a transaction or activity that is authorized, prior to the execution of the transaction or activity, by a settlement agreement, to which the Department is a party, resulting from an investigation of an employee benefit plan conducted by the Department. The following information collections are among the conditions for the exemption:

• Written Notice. A party engaging in a settlement agreement arising out of a Department investigation must provide written notice to the affected participants and beneficiaries of the plan at least 30 days prior to entry into the settlement agreement. The notice must contain an objective description of the transaction or activity, the approximate date on which the transaction will occur, the address of the regional or district office of the Department that negotiated the settlement agreement, and a statement informing participants and beneficiaries of their right to forward their comments to such office.

• Pre-Approval. A copy of the notice and a description of the method by which it will be distributed must be approved in advance by the regional or district office of the Department which negotiated the settlement.

PTE 2003-39. Granted on December 31, 2003, and later amended on June 15, 2010, PTE 2003-39 exempts from certain restrictions of ERISA and certain taxes imposed by the Code, transactions arising out of the settlement of litigation that involve: the release by the plan or a plan fiduciary of legal claims against parties in interest in exchange for payment given by or on behalf of the party in interest to the plan; an extension of credit by a plan to a party interest in connection with a settlement; and the plan’s acquisition, holding, and disposition of employer securities received in settlement of litigation. The relief is granted provided certain conditions are met, such as the requirement of an independent fiduciary who has no relationship to, or interest in, any parties in the litigation to authorize the settlement and the settlement terms of the agreement and any extension of credit are reasonable and no less favorable than comparable arm’s length agreement. The other conditions include the following information collections:

• Written Agreement. The terms of the settlement must be specifically described in a written agreement or consent decree.

• Acknowledgement by Fiduciary. The fiduciary acting on behalf of the plan must acknowledge in writing that s/he is a fiduciary with respect to the settlement of the litigation.

• Recordkeeping Requirement. The plan fiduciary must maintain records of the transaction for six years and must disclose the records on request to the Department and other interested persons.

2. Indicate how, by whom, and for what purpose the information is to be used. Except for a new collection, indicate the actual use the agency has made of the information received from the current collection.

The information collections are intended to protect participants and beneficiaries under the plans that engage in settlement agreements. Without the required disclosures and recordkeeping (Under 2003-39), the Department would be unable to enforce effectively the terms of the exemptions and ensure transactional compliance. The information collections allow the Department to monitor the settlement activities (under PTE 94-71) undertaken in connection with its own investigations and to review other settlement agreements within the scope of its investigations. The information collection under PTE 94-71 also provides participants and beneficiaries with important information about transactions affecting their plan.

3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses, and the basis for the decision for adopting this means of collection. Also describe any consideration for using information technology to reduce burden.

The information collections are third-party disclosures, and respondents may use electronic methods of communication pursuant to the standards established in the Department’s regulation at 29 CFR 2520.104b-1 concerning plans’ use of electronic communication media to satisfy ERISA disclosure requirements. The regulation provides that plan sponsors may distribute notices to employees who have access to e-mail at the place of business (note that access does not include a kiosk-based system). In addition, notices may be distributed electronically to employees or their family members who are beneficiaries if they have electronic access at their homes and give prior approval for this type of distribution. The Department generally encourages affected entities to distribute required notices electronically whenever possible, provided that these regulatory standards are met. For the purposes of paperwork burden analysis, the Department has developed a set of assumptions concerning the use of electronic technology generally for distribution of information to participants and beneficiaries. Based on these regulations, the Department has assumed in this analysis that 58.2 percent of the required disclosures will be made electronically.¹

4. Describe efforts to identify duplication. Show specifically why any similar information already available cannot be used or modified for use for the purposes described in Item 2 above.

The information is not available elsewhere. If the required writings (written settlement agreement, consent decree) are created for other purposes, they may be used to satisfy the requirements of these class exemptions.

5. If the collection of information impacts small businesses or other small entities describe any methods used to minimize burden.

Neither class exemption will have a significant economic impact on a substantial number of small entities. Participants and beneficiaries of small plans are entitled to receive information involving transactions based on a settlement agreement with the Department under PTE 94-71; PTE 2003-39 requires written evidence of settlement transactions and fiduciary status. The information to be provided is readily available to a plan in documents provided by the parties during settlement agreement negotiations.

6. Describe the consequence to Federal program or policy activities if the collection is not conducted or is conducted less frequently, as well as any technical or legal obstacles to reducing burden.

PTE 94-71. If PTE 94-71 did not contain notification requirements, affected participants and beneficiaries of the plan may not find out important information regarding the settlement agreement such as an objective description of the transaction or activity, the approximate date on which the transaction will occur, the address of the regional or district office of the Department that negotiated the settlement agreement, and their right to forward their comments to such office.

PTE 2003-39. The written agreement and recordkeeping requirements in PTE 2003-39 will ensure that all settlements are memorialized in a written agreement that describe the transactions and that records necessary to enable certain persons (the Department, participants and beneficiaries) to determine whether the conditions of the exemption had been met are maintained and made available for inspection.

7. Explain any special circumstances that would cause an information collection to be conducted in a manner:

• requiring respondents to report information to the agency more often than quarterly;

• requiring respondents to prepare a written response to a collection of information in fewer than 30 days after receipt of it;

• requiring respondents to submit more than an original and two copies of any document;

• requiring respondents to retain records, other than health, medical, government contract, grant-in-aid, or tax records for more than three years;

• in connection with a statistical survey, that is not designed to produce valid and reliable results that can be generalized to the universe of study;

• requiring the use of a statistical data classification that has not been reviewed and approved by OMB;

• that includes a pledge of confidentiality that is not supported by authority established in statute or regulation, that is not supported by disclosure and data security policies that are consistent with the pledge, or which unnecessarily impedes sharing of data with other agencies for compatible confidential use; or

• requiring respondents to submit proprietary trade secret, or other confidential information unless the agency can demonstrate that it has instituted procedures to protect the information's confidentiality to the extent permitted by law.

PTE 94-71. There are no special circumstances that would require the collection to be conducted in any manner described above.

PTE 2003-39. The exemption requires a plan fiduciary to maintain for a period of six years the records necessary to enable certain persons (the Department, participants and beneficiaries) to determine whether the conditions of the exemption had been met. The six-year recordkeeping requirement is consistent with the requirements in section 107 of ERISA, as well as general recordkeeping requirements for tax information under the Code.

8. If applicable, provide a copy and identify the date and page number of publication in the Federal Register of the agency's notice, required by 5 CFR 1320.8(d), soliciting comments on the information collection prior to submission to OMB. Summarize public comments received in response to that notice and describe actions taken by the agency in response to these comments. Specifically address comments received on cost and hour burden.

Describe efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instructions and recordkeeping, disclosure, or reporting format (if any), and on the data elements to be recorded, disclosed, or reported.

Consultation with representatives of those from whom information is to be obtained or those who must compile records should occur at least once every 3 years -- even if the collection of information activity is the same as in prior periods. There may be circumstances that may preclude consultation in a specific situation. These circumstances should be explained.

The Department’s notice for the Federal Register as required by 5 CFR 1320.8(d) was published on November 9, 2021 (86 FR 62208) and solicited public comments on renewal of the ICR during a 60-day comment period. No comments were received.

9. Explain any decision to provide any payment or gift to respondents, other than remuneration of contractors or grantees.

No payments or gifts are provided to respondents.

10. Describe any assurance of confidentiality provided to respondents and the basis for the assurance in statute, regulation, or agency policy.

There is no promise of confidentiality of the information. The class exemptions require that the information concerning the transactions be made available to interested parties.

11. Provide additional justification for any questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private. This justification should include the reasons why the agency considers the questions necessary, the specific uses to be made of the information, the explanation to be given to persons from whom the information is requested, and any steps to be taken to obtain their consent.

There are no questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private.

12. Provide estimates of the hour burden of the collection of information. The statement should:

• Indicate the number of respondents, frequency of response, annual hour burden, and an explanation of how the burden was estimated. Unless directed to do so, agencies should not conduct special surveys to obtain information on which to base hour burden estimates. Consultation with a sample (fewer than 10) of potential respondents is desirable. If the hour burden on respondents is expected to vary widely because of differences in activity, size, or complexity, show the range of estimated hour burden, and explain the reasons for the variance. Generally, estimates should not include burden hours for customary and usual business practices

• If this request for approval covers more than one form, provide separate hour burden estimates for each form and aggregate the hour burdens in Item 13

• Provide estimates of annualized cost to respondents for the hour burdens for collections of information, identifying and using appropriate wage rate categories.

• The cost of contracting out or paying outside parties for information collection activities should not be included here.

PTE 94-71. A party that seeks to rely on the relief provided in the exemption must provide written notice to the affected participants and beneficiaries prior to entering into a settlement agreement that has been negotiated by the Department and the plan. Additionally, the party must obtain approval of the notice to participants and beneficiaries and the method by which it will be distributed from the regional or district office of the Department that negotiated the settlement. The notice, at a minimum, must include an objective description of the transaction or activity, the approximate date on which the transaction will occur, the address of the regional or district office of the department that negotiated the settlement, and a statement informing participants and beneficiaries of their right to forward comments to such office.

Data from the EBSA Office of Enforcement shows that approximately 19 plans with an average of 270 participants and beneficiaries have made use of the exemption annually.

It is assumed that in-house staff of the entities involved will prepare the notice and that each notice will require one hour of professional staff time at $100.64 per hour² and 30 minutes of clerical time at $55.23 per hour³. The total burden hour attributable to preparation of the required notices is estimated to be approximately 29 hours (19 responses x 1 ½ hours of preparation per response). The total equivalent cost of the hour burden is $2,437 ($1,912 for professional time ($100.64 per hour x19 hours) + $525 for clerical time ($55.23/hour x 9.5 hours)).

In addition, the Department estimates that reproduction and distribution of the notice to each participant and beneficiary will require an additional 2 minutes per notice. Because some notices will be distributed electronically with no additional preparation cost, the Department assumes that only a subset of the notices will require this additional preparation time. Based on current practices in the employee benefits field pursuant to regulations published by the Department regarding electronic distribution of notices, the Department has assumed that 58.2 percent of the notices will be distributed electronically at no additional hour or cost burden.⁴ For the estimated 2,144 notices that will be mailed annually (41.8 percent of 5,130 notices⁵ annually), we estimate an additional hour burden for distribution of approximately 71.5 hours (2,144 notices x 2 minutes). The equivalent cost of this additional hour burden at $55.23 per hour is $3,947 (71.5 hours x $55.23/hour).

Total hour burden for the notice is estimated at 100 hours (19 hours professional time + 9.5 hours clerical time for preparation + 71.5 hours clerical time for distribution) and the total equivalent cost is $6,384 ($1,912 + $525 + $3,947).⁶

PTE 2003-39. The exemption requires the terms of the settlement to be described in a written document. Because it is usual and customary business practice to express the terms of a settlement in writing, there is no additional hour burden attributed to this provision.

The exemption also requires that a fiduciary representing the plan in settlement negotiations acknowledge in writing his/her fiduciary status with respect to the settlement of the litigation on behalf of the plan. It is anticipated that the acknowledgement will be incorporated into the investment management or trustee agreement outlining the terms and conditions of the fiduciary’s retention as a plan service provider, which should already be in existence as part of usual and customary business practice. The additional hour burden attributable to this acknowledgement is negligible and the Department has not increased the overall hour burden for this provision of the exemption.

Burden Table

Activity	Number of Respondents	Number of Responses per Respondent	Total Annual Responses	Time Per Response	Total Annual Burden (Hours)	Hourly Rate	Monetized Value of Respondent Time
Prepare notice: Professional Staff	19	1	19	1	19	$100.64	$1,912
Prepare notice: Clerical Staff	19	1	19	30/60	9.5	$55.23	$525
Distribute notice	2,144	1	2,144	2/60	71.5	$55.23	$3,947
Total	19	270	5,130*	0.0195	100	-	$6,384

*As previously discussed, data from the EBSA Office of Enforcement shows that approximately 19 plans with an average of 270 participants and beneficiaries have made use of the exemption annually. Thus the Department estimates that there are 5,130 responses (19 plans x 270 participants).

13. Provide an estimate of the total annual cost burden to respondents or recordkeepers resulting from the collection of information. (Do not include the cost of any hour burden shown in Items 12 or 14).

• The cost estimate should be split into two components:  (a) a total capital and start up cost component (annualized over its expected useful life); and (b) a total operation and maintenance and purchase of service component.  The estimates should take into account costs associated with generating, maintaining, and disclosing or providing the information.  Include descriptions of methods used to estimate major cost factors including system and technology acquisition, expected useful life of capital equipment, the discount rate(s), and the time period over which costs will be incurred.  Capital and start-up costs include, among other items, preparations for collecting information such as purchasing computers and software; monitoring, sampling, drilling and testing equipment; and record storage facilities. 

• If cost estimates are expected to vary widely, agencies should present ranges of cost burdens and explain the reasons for the variance.  The cost of purchasing or contracting out information collection services should be a part of this cost burden estimate.  In developing cost burden estimates, agencies may consult with a sample of respondents (fewer than 10), utilize the 60-day pre-OMB submission public comment process and use existing economic or regulatory impact analysis associated with the rulemaking containing the information collection, as appropriate. 

• Generally, estimates should not include purchases of equipment or services, or portions thereof, made: (1) prior to October 1, 1995, (2) to achieve regulatory compliance with requirements not associated with the information collection, (3) for reasons other than to provide information or keep records for the government, or (4) as part of customary and usual business or private practices. 

As explained in the answer to question 12, the Department assumes that all work to prepare and distribute the notices will be performed in-house. The additional costs that will be paid by respondents to satisfy this information collection, which consist of printing and mailing costs, are described here.

This estimate assumes that 58.2 percent of the plan administrator’s notices will be provided to participants and beneficiaries electronically. Because the respondents will utilize existing electronic communications systems and integrated participant/beneficiary address databases, the Department has assumed that the additional costs of distributing electronic notices will be de minimis. For the remaining 41.8 percent of the notices, the Department has assumed a mailing cost of $0.63 per notice ($0.58 for postage+ $0.05 for one page of paper), for a total annual cost of $1,351 to mail an estimated 2,144 paper notices (270 participants x 19 plans x 41.8 percent of notices mailed).

Because the department requires no further notices to be filed, there are no additional costs involved and the total annual cost burden of the information collection is $1,351.

14. Provide estimates of annualized cost to the Federal government. Also, provide a description of the method used to estimate cost, which should include quantification of hours, operational expenses (such as equipment, overhead, printing, and support staff), and any other expense that would not have been incurred without this collection of information. Agencies also may aggregate cost estimates from Items 12, 13, and 14 in a single table.

Because there is no requirement to file notices with the Department for either PTE 94-71 or PTE 2003-39, there are no direct costs to the Department for the information collection. PTE 2003-39 does not require any action from the Department or impose any costs. The Department’s oversight of the settlement process and its review of the notice for PTE 94-71 may require some small additional time for the regional office of the Department involved in the settlement, but the amount of additional time, over and above time otherwise devoted to the investigation, will be minimal, and the availability of exemptive relief under PTE 94-71 will not alter the basic nature of the Department’s course of conduct in its investigative activities. Thus, there should be no addition or reduction to program costs as a result of this exemption.

15. Explain the reasons for any program changes or adjustments reporting in Items 13 or 14.

The burden estimates reflect increase in the number of settlement agreements each year and an increase in wage rates and postage rates. The burden estimates also reflect an increase in the electronic disclosure rate.

16. For collections of information whose results will be published, outline plans for tabulation, and publication. Address any complex analytical techniques that will be used. Provide the time schedule for the entire project, including beginning and ending dates of the collection of information, completion of report, publication dates, and other actions.

There are no plans to publish the results of this collection of information.

17. If seeking approval to not display the expiration date for OMB approval of the

information collection, explain the reasons that display would be inappropriate.

The OMB expiration date will be published in the Federal Register following OMB approval.

18. Explain each exception to the certification statement identified in Item 19.

Not applicable; no exceptions to the certification statement.

B. COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS

Not applicable. The use of statistical methods is not relevant to this collection of information.

1 According to data from the National Telecommunications and Information Agency (NTIA), 40.0% of individuals age 25 and over have access to the Internet at work. According to a Greenwald & Associates survey, 84% of plan participants find it acceptable to make electronic delivery the default option, which is used as the proxy for the number of participants who will not opt-out of electronic disclosure that are automatically enrolled (for a total of 33.6% receiving electronic disclosure at work). Additionally, the NTIA reports that 40.4% of individuals age 25 and over have access to the internet outside of work. According to a Pew Research Center survey, 61.0% of internet users use online banking, which is used as the proxy for the number of internet users who will affirmatively consent to receiving electronic disclosures (for a total of 24.7% receiving electronic disclosure outside of work). Combining the 33.6% who receive electronic disclosure at work with the 24.7% who receive electronic disclosure outside of work produces a total of 58.2% who will receive electronic disclosure overall.

2 Internal DOL calculation based on 2020 labor cost data. For a description of the Department’s methodology for calculating wage rates, see https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/technical-appendices/labor-cost-inputs-used-in-ebsa-opr-ria-and-pra-burden-calculations-june-2019.pdf

3 Internal DOL calculation based on 2020 labor cost data. For a description of the Department’s methodology for calculating wage rates, see https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/rules-and-regulations/technical-appendices/labor-cost-inputs-used-in-ebsa-opr-ria-and-pra-burden-calculations-june-2019.pdf

4According to data from the National Telecommunications and Information Agency (NTIA), 40.0% of individuals age 25 and over have access to the Internet at work. According to a Greenwald & Associates survey, 84% of plan participants find it acceptable to make electronic delivery the default option, which is used as the proxy for the number of participants who will not opt-out of electronic disclosure that are automatically enrolled (for a total of 33.6% receiving electronic disclosure at work). Additionally, the NTIA reports that 40.4% of individuals age 25 and over have access to the internet outside of work. According to a Pew Research Center survey, 61.0% of internet users use online banking, which is used as the proxy for the number of internet users who will affirmatively consent to receiving electronic disclosures (for a total of 24.7% receiving electronic disclosure outside of work). Combining the 33.6% who receive electronic disclosure at work with the 24.7% who receive electronic disclosure outside of work produces a total of 58.2% who will receive electronic disclosure overall. .

5 Data from the EBSA Office of Enforcement shows that approximately 19 plans with an average of 270 participants and beneficiaries have made use of the exemption annually. Thus, the Department estimates that there are 5,130 notices (19 plans x 270 participants).

6 Any calculation discrepancies are a byproduct of rounding.

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