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Securities Act of 1933 — Rule 482
American Retirement Association
February 18, 2015
Response of the Office of Chief Counsel
Division of Investment Management
Our Ref. No. 2012127934
File No. 132-3
In the Staff No-Action Letter to the U.S. Department of Labor (“DOL”), dated October 26, 2011 (“DOL Letter”),[1] we agreed to treat specified investment-related information provided by a plan administrator, or a person designated by a plan administrator to act on its behalf, to participants and beneficiaries in participant-directed individual account plans, that is required by and complies with the disclosure requirements set forth in Rule 404a-5(d) (“DOL Rule”)[2] under the Employee Retirement Income Security Act of 1974 (“ERISA,” and such information, “DOL Required Investment Information”), as if it were a communication that satisfies the requirements of Rule 482 under the Securities Act of 1933 (“Securities Act”). The DOL Rule is designed to ensure that plan participants are provided with sufficient information regarding the plan and designated investment alternatives, in a comparative format, to make informed decisions when managing their accounts.
Your letter dated February 9, 2015 requests that we extend our position in the DOL Letter concerning Rule 482 to certain information furnished to participants and beneficiaries in certain retirement savings plans under Section 403(b) of the Internal Revenue Code of 1986 (“Code”) that are not subject to ERISA (“Non-ERISA 403(b) Plans”).[3]
Discussion
You state that participants in Non-ERISA 403(b) Plans, through payroll contributions, may invest in annuity contracts or in custodial accounts limited to open-end management investment companies (“funds”) registered under the Investment Company Act of 1940 (“Investment Company Act”). You state that a Non-ERISA 403(b) Plan is maintained under a written plan that, among other things, designates a party responsible for administration of the plan. You explain that it is common for employers to allow multiple insurance company and custodial account vendors (together, “Investment Vendors”) to offer annuity contracts and funds (each, an “Investment Option”) to participants under their Non-ERISA 403(b) Plans pursuant to an agreement with each Investment Vendor. You state that employers offering Non-ERISA 403(b) Plans typically enter into written agreements with Investment Vendors to address administrative requirements, information sharing, and compliance with the terms of the written plans and other requirements applicable to Non-ERISA 403(b) Plans.
You state that, although the DOL Rule does not apply in the context of Non-ERISA 403(b) Plans, participants would benefit from receiving the DOL Required Investment Information about Investment Options under Non-ERISA 403(b) Plans. You note that the DOL Required Investment Information would be in addition to any information that a participant in a Non-ERISA 403(b) Plan may be required to receive under the federal securities laws, such as a prospectus and annual and semi-annual shareholder reports. You also represent as follows:
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Each Investment Vendor[4] will provide the DOL Required Investment Information to participants in the Non-ERISA 403(b) Plan[5] pursuant to a written agreement with the employer (or its designee)[6] that requires the Investment Vendor to provide the DOL Required Investment Information for each Investment Option that the Investment Vendor offers under the Non-ERISA 403(b) Plan and also, to the extent available to the Investment Vendor,[7] all fee and expense information as specified in Rules 404a-5(c)(2)(i)(A) and 404a-5(c)(3)(i)(A) under ERISA (together, the “Information”). Each written agreement will specify a date on or before which the Investment Vendor will provide the Information to all current participants in the Non-ERISA 403(b) Plan.
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Each Investment Vendor under the Non-ERISA 403(b) Plan will (i) provide the Information to participants initially on or before the date specified in the written agreement with the employer (or its designee), (ii) update the Information at least annually, (iii) update on at least a quarterly basis, or more frequently if required by other applicable law, the performance information to be disclosed at an Internet web site address listed pursuant to the DOL Required Investment Information, and (iv) require the contact person designated by the Investment Vendor as a source of additional information in the DOL Required Investment Information to provide upon request the information specified in the DOL Rule.[8]
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The Information will be furnished to (i) new participants in the Non-ERISA 403(b) Plan prior to their initial investment, and (ii) each participant at least annually in accordance with the timing requirements in the DOL Rule.[9]
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Information provided by an Investment Vendor as DOL Required Investment Information will include no information other than information that would be required to comply with the DOL Rule if the Non-ERISA 403(b) Plan were subject to the DOL Rule.[10]
Conclusion
Based on the facts and representations in your letter, we agree to treat DOL Required Investment Information furnished, in the manner described above, to Non-ERISA 403(b) Plans and participants and beneficiaries in such plans, as if it were a communication that satisfies the requirements of Rule 482 under the Securities Act.
Our views expressed in this letter also extend to retirement savings plans that similarly are not subject to ERISA and that are governmental 457(b) plans, governmental 401(a) plans, 415(m) plans, church 401(a) plans, non-governmental 457(b) plans, and 409A plans or 457(f) plans of governmental or tax-exempt entities, as described in your letter (“Other Non-ERISA Plans”).[11]
Laura L. Solomon
Senior Counsel
[2] See Rule 404a-5 under ERISA, 29 CFR §2550.404a-5. See also interpretative guidance subsequently issued by the DOL, including Field Assistance Bulletin Nos. 2012-02R (July 30, 2012) and 2013-02 (July 22, 2013).
[3] Non-ERISA 403(b) Plans include plans pursuant to Code sections 403(b)(1), 403(b)(7) and 403(b)(9), as described in your letter.
[4] The term Investment Vendor does not include vendors of so called “frozen options” that were available under a 403(b) program before January 1, 2009, but not available for new employer contributions or employee salary reduction contributions on or after January 1, 2009 and does not enter into a written agreement to provide the DOL Required Investment Information; such vendors may not rely on the relief in this letter. You state that, historically, 403(b) programs have been operated as a collection of individual contracts with respect to which employees could engage in a range of actions without the consent or involvement of the employer. Therefore, you state that many employers did not maintain written agreements with insurance company and custodial account vendors until the implementation of the written plan requirements under the regulations issued by the Department of the Treasury/Internal Revenue Service in 2007, 26 C.F.R. § 1.403(b)-0, et seq.
[5] Information provided by an Investment Vendor as DOL Required Investment Information shall not include information about an Investment Option prior to the effective date of the registration statement for that Investment Option.
[6] Investment Vendors may satisfy this “written agreement” condition by providing written notice to the employer (or its designee) on or after the date of this letter that the Investment Vendor is complying with this condition as a term of an existing written agreement.
[7] You state that Investment Vendors usually will have information about all of the administrative expenses and individual expenses required to be disclosed pursuant to Rules 404a-5(c)(2)(i)(A) and 404a-5(c)(3)(i)(A) under ERISA because the participant account balances from which such expenses are paid must be held by one or more Investment Vendors, but it cannot be ruled out that an Investment Vendor will not have information about expenses (if any) when paid by a participant other than from the participant’s account with the Investment Vendor.
[8] See Rule 404a-5(d)(4).
[9] See Rules 404a-5(c)(2)(i)(A), 404a-5(c)(3)(i)(A) and 404a-5(d)(4)(1), and DOL Field Assistance Bulletin 2013-02 (July 22, 2013).
[10] The DOL Required Investment Information may be accompanied by a plan enrollment form that includes, among other things, instructions as to how a participant in a Non-ERISA 403(b) Plan may direct his or her investments among the Investment Options. To the extent that Investment Vendors provide participants in Non-ERISA 403(b) Plans with information other than information provided by such Investment Vendors as DOL Required Investment Information, except as set forth above (“Other Information”), you have not requested, and we do not express, any views on the applicability of Rule 482 to such Other Information.
[11] Other Non-ERISA Plans may make other investment alternatives available to plan participants to the extent allowed by law. With respect to such Other Non-ERISA Plans, the term “Investment Option” includes any such other lawful investment alternative, provided that it meets the definition of “designated investment alternative” in the DOL Rule. See Rule 404a-5(h)(4).
Incoming Letter
The Incoming Letter is in Acrobat format.
Related Letter
Staff Letter (Securities Act of 1933 — Rule 482), November 16, 2015
http://www.sec.gov/divisions/investment/noaction/2015/american-retirement-sssociation-021815-482.htm
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