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Notice

Hearing on Reasonable Contracts or Arrangements for Welfare Benefit Plans Under Section 408(b)(2)-Welfare Plan Fee Disclosure

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Information about this document as published in the Federal Register.

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AGENCY:

Employee Benefits Security Administration, U.S. Department of Labor.

ACTION:

Notice of hearing.

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.

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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.

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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 § 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 § 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 § 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]

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 Start Printed Page 68384persons 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.

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Signed at Washington, DC, this 1st day of November 2010.

Phyllis C. Borzi,

Assistant Secretary, Employee Benefits Security Administration, Department of Labor.

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Footnotes

1.  See 75 FR 41600, at 41603, July 16, 2010.

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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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[FR Doc. 2010-27994 Filed 11-4-10; 8:45 am]

BILLING CODE 4510-29-P