00-13250. Rules and Regulations For the Allocation of Fiduciary Responsibility, Federal Retirement Thrift Investment Board

AGENCY:

Pension and Welfare Benefits Administration, Labor.

ACTION:

Direct final rule.

SUMMARY:

This document includes amendments authorizing the Executive Director of the Federal Retirement Thrift Investment Board (Board) to allocate certain fiduciary responsibilities for two new investment funds to investment managers. It also provides definitions for the two new funds, updates the definition of investment manager and makes other miscellaneous corrections to the regulations.

DATES:

This rule is effective on July 14, 2000 without further notice, unless the Department receives significant adverse written comment by July 29, 2000. If the Department receives such comments, it will publish a timely withdrawal of the direct final rule in the Federal Register and inform the public that the rule will not take effect.

ADDRESSES:

Written comments (preferably at least three copies) should be submitted to the Office of Regulations and Interpretations, Pension and Welfare Benefits Administration, Room N-5671, U.S. Department of Labor, Washington, DC 20210, and marked “Attention: FERSA Allocation Regulation.” All submissions will be available for public inspection in the Public Documents Room, Pension and Welfare Benefits Administration, Room N-5507, 200 Constitution Avenue NW, Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT:

Rudy Nuissl, Pension and Welfare Benefits Administration, U.S. Department of Labor, Rm 5669, 200 Constitution Ave., N.W., Washington, DC 20210, tel. [phone]. This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

Subchapter III of the Federal Employees' Retirement System Act of 1986 (FERSA), Pub. L. No. 99-335, 100 Stat. 514, codified largely at 5 U.S.C. 8351 and 8401-8479, created a retirement savings plan for Federal employees known as the Thrift Savings Plan (TSP). As provided at 5 U.S.C. 8437, the TSP is funded by the Thrift Savings Fund (Fund).

Pursuant to 5 U.S.C. 8474(b)(5) and (c)(1), the Executive Director of the Board is granted authority to prescribe such regulations as may be necessary for the administration of the Fund. However, these statutory provisions expressly prohibit the Executive Director from prescribing any regulations relating to fiduciary responsibilities with respect to the Fund. Instead, at 5 U.S.C. 8477(e)(1)(E), the Secretary of Labor is directed to prescribe, in regulations, procedures by which fiduciary responsibilities may be allocated among fiduciaries, including investment managers. The Secretary of Labor published regulations setting forth such procedures in final form in the Federal Register on December 29, 1988 (53 FR 52664). These regulations comprise 29 CFR part 2584.

Pursuant to 29 CFR 2584.8477(e)-2(b), the Executive Director may allocate certain fiduciary responsibilities in connection with the management and investment of the Fixed Income Investment Fund (F Fund) to a qualified professional asset manager(s). Section 2584.8477(e)-2(c) of title 29, Code of Federal Regulations, provides that the Executive Director may also allocate certain fiduciary responsibilities in connection with the management and investment of the Government Securities Investment Fund (G Fund) and the Common Stock Index Investment Fund (C Fund) to an investment manager(s). Section 2584.8477(e)-6 of title 29, Code of Federal Regulations, provides definitions for these investment funds.

The Thrift Savings Investment Funds Act of 1996, Pub. L. 104-208, 110 Stat. 3009-372, authorized the creation of two new investment funds. The new funds are the Small Capitalization Stock Index Investment Fund (S Fund) and the International Stock Index Investment Fund (I Fund).

This document provides in § 2584.8477(e)-2 that, in addition to the G, C, and F Funds, the Executive Director may allocate certain fiduciary responsibilities in connection with the management and investment of the two new funds (S and I Funds) to an investment manager(s). The rule also provides definitions for these two new funds in § 2584.8477(e)-6, which conform to the definitions in sections of the Thrift Savings Investment Funds Act of 1996.

Because part 2584 originally adopted the definition of investment manager provided in the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. 93-406, 88 Stat. 829, 29 U.S.C. 1002, which was later amended by Act of November 10, 1997, § 1(a), Pub. L. 105-72, 111 Stat. 1457, this document replaces the old definition of investment manager in 29 CFR 2584.8477(e)-6 with the amended definition as currently provided in ERISA.

Furthermore, this rule adds the word “Fund” to § 2584.8477(e)-2(c), which was inadvertently omitted from “Common Stock Index Investment Fund” in the final rule, and updates the United States Code citation for FERSA in § 2584.8477(e)-6(a).

Direct Final Rulemaking Procedure

The Department has determined that this rule shall be effective as a final rule 45 days after publication in the Federal Register. As explained more fully above, the purpose of this rulemaking is to conform the existing regulation with the creation of two new investment funds authorized by the Thrift Savings Investment Funds Act of 1996, and to make certain other minor changes and corrections.

As a result, the Department anticipates that this regulation will not result in adverse or negative comment and, therefore, is issuing it as a direct final rule. The amendment will enhance the ability of federal employees to diversify their account balances in the Thrift Investment Fund. In accordance with 5 U.S.C. 553(b), the Department for good cause finds that notice and public procedure on this rule are unnecessary.

Unless a written adverse or negative comment is received within the comment period, the regulation will become effective on the date specified above. If the Department does receive, within the comment period, an adverse or negative comment, a document withdrawing the direct final rule will be published in the Federal Register, and a notice of proposed rulemaking may be published with a new comment period.

Executive Order 12866 Statement

The regulation set forth in this document is not classified as a “significant regulatory action” under Executive Order 12866 because it is not likely to result in: (1) An annual effect on the economy of $100 million or more; (2) a major increase in costs or prices for consumers, individual industries, Federal, state, or local government agencies, or geographic regions; or (3) significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises in domestic or export markets. As a result this rule is not subject to review by the Office of Management and Budget.

Regulatory Flexibility Act Statement

Because this rule is being promulgated without a notice of proposed rulemaking it is not covered by the Regulatory Flexibility Act. Nevertheless, the Department has determined that it will not have a significant economic impact on a substantial number of small entities. The rule merely makes changes necessary to permit the operation of two new investment funds authorized under the Thrift Savings Investment Funds Act of 1996 in the same manner as the existing investment funds.

Paperwork Reduction Act

The rule being issued here is not subject to the requirements of the Paperwork Reduction Act of 1996 (44 U.S.C. 3501 et seq.) because it does not contain an information collection request as defined in 44 U.S.C. 3502(3).

Executive Order 13132 Federalism

This rule affects only the authority of the Executive Director of the Thrift Investment Board and has no federalism implications.

Unfunded Mandates Reform Act of 1995

Pursuant to the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4, § 201, 109 Stat. 48, 64, the effects of this regulation on state, local, and tribal governments and the private sector have been assessed. This regulation will not compel the expenditure in any one year of $100 million or more by state, local, and tribal governments, in the aggregate, or by the private sector. Therefore, a statement under § 202, 109 Stat. 48, 64-65, is not required.

Small Business Regulatory Enforcement Fairness Act—Congressional Review

The rule being issued here is subject to the provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and has been transmitted to Congress and the Comptroller General for review. The rule is not a “major rule” as that term is defined in 5 U.S.C. 804, because it is not likely to result in (1) an annual effect on the economy of $100 million or more: (2) a major increase in costs or prices for consumers, individual industries, or federal, State or local government agencies, or geographic regions; or (3) significant adverse effects on competition, employment, investment, productivity, innovations, or on the ability of the United States-based enterprises to compete with foreign-based enterprises in domestic or export markets.

Statutory Authority

The regulation set forth herein is issued pursuant to 5 U.S.C. 8477(e)(1)(E) and under Secretary of Labor's Order No. 1-87.

List of Subjects in 29 CFR Part 2584

• Employee benefit plans
• Fiduciary
• Government employees
• Pensions
• Retirement
• Trusts and trustees

In view of the foregoing, the Department of Labor amends 29 CFR part 2584 as follows:

PART 2584—[AMENDED]

1. The authority citation for part 2584 continues to read as follows:

Authority: 5 U.S.C. 8477(e)(1)(E) and Secretary of Labor's Order 1-87, 52 FR 13139 (April 21, 1987).

2. Section 2584.8477(e)-(2) is amended by revising paragraph (c) to read as follows:

§ 2584.8477(e)-2

Allocation of fiduciary duties.

* * * * *

(c) The Executive Director may allocate authority and responsibility for the investment and management of the Government Securities Investment Fund, the Common Stock Index Investment Fund, the International Stock Index Investment Fund and the Small Capitalization Stock Index Investment Fund to an investment manager(s).

* * * * *

3. Section 2584.8477(e)-6 is amended as follows:

a. by redesignating paragraphs (h), (i) and (j) as (i), (j) and (l), respectively;

b. by removing the periods in paragraph (e)(2) and the newly redesignated paragraph (j), and by inserting semicolons in their places; and

c. by revising paragraph (a) and the newly redesignated paragraph (i)(2) and inserting new paragraphs (h) and (k) to read as follows:

§ 2584.8477(e)-6

Definitions.

* * * * *

(a) Act means the Federal Employees' Retirement System Act of 1986, 5 U.S.C. 8401 et seq. (Supp. III 1997);

* * * * *

(i) * * *

(1) * * *

(2) Is:

(i) Registered as an investment adviser under the Investment Advisers Act of 1940 (15 U.S.C. 80b-1),

(ii) Not registered as an investment adviser under such Act by reason of paragraph (1) of section 203A(a) of such Act (15 U.S.C. 80b-3a) but is registered as an investment adviser under the laws of the state (referred to in such paragraph (1)) in which it maintains its principal office and place of business, and, at the time the fiduciary last filed the registration form most recently filed by the fiduciary with such state in order to maintain the fiduciary's registration under the laws of such state, also filed a copy of such form with the Secretary of Labor,

(iii) A bank, as defined in that Act, or

(iv) An insurance company qualified to perform services described in paragraph (i)(1) of this section under the laws of more than one state, and

(3) * * *

* * * * *

(h) International Stock Index Investment Fund means the fund established under 5 U.S.C. 8438(b)(1)(E);

* * * * *

(k) Small Capitalization Stock Index Investment Fund means the fund established under 5 U.S.C. 8438(b)(1)(D);

* * * * *

Signed at Washington, DC , this 22nd day of March, 2000.

Leslie Kramerich,

Acting Assistant Secretary, Pension and Welfare Benefits Administration, Department of Labor.