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EBSA Notices

Hearing on Reasonable Contracts or Arrangements for Welfare Benefit Plans Under Section 408(b)(2)--Welfare Plan Fee Disclosure   [11/5/2010]
[PDF]
FR Doc 2010-27994
[Federal Register: November 5, 2010 (Volume 75, Number 214)]
[Notices]               
[Page 68383-68384]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05no10-120]                         

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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 e-ORI@dol.gov. 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]
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