Rule2025-11615
Selection of Annuity Providers-Safe Harbor for Individual Account Plans
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 1, 2025
Effective
September 2, 2025
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
This direct final rule (DFR) removes 29 CFR 2550.404a-4 from the Code of Federal Regulations, which is a regulation published in 2008 that provides a fiduciary safe harbor for the selection of annuity providers for the purpose of benefit distributions from individual account retirement plans covered by title I of the Employee Retirement Income Act of 1974 (ERISA). The regulatory safe harbor became unnecessary in 2019 when Congress amended ERISA to add a more streamlined fiduciary safe harbor covering the same activity. Although the statutory safe harbor did not technically nullify or repeal the regulatory safe harbor, its existence offers an unnecessary and inefficient alternative and may inadvertently be a trap for the unwary. This action improves the daily lives of the American people by reducing unnecessary, burdensome, and costly Federal regulations.
Full Text
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<title>Federal Register, Volume 90 Issue 124 (Tuesday, July 1, 2025)</title>
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[Federal Register Volume 90, Number 124 (Tuesday, July 1, 2025)]
[Rules and Regulations]
[Pages 28007-28009]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-11615]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2550
RIN 1210-AC33
Selection of Annuity Providers--Safe Harbor for Individual
Account Plans
AGENCY: Employee Benefits Security Administration, Department of Labor.
ACTION: Direct final rule; request for comments.
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SUMMARY: This direct final rule (DFR) removes 29 CFR 2550.404a-4 from
the Code of Federal Regulations, which is a regulation published in
2008 that provides a fiduciary safe harbor for the selection of annuity
providers for the purpose of benefit distributions from individual
account retirement plans covered by title I of the Employee Retirement
Income Act of 1974 (ERISA). The regulatory safe harbor became
unnecessary in 2019 when Congress amended ERISA to add a more
streamlined fiduciary safe harbor covering the same activity. Although
the statutory safe harbor did not technically nullify or repeal the
regulatory safe harbor, its existence offers an unnecessary and
inefficient alternative and may inadvertently be a trap for the unwary.
This action improves the daily lives of the American people by reducing
unnecessary, burdensome, and costly Federal regulations.
DATES: The final rule is effective September 2, 2025, unless
significant adverse comments are received by July 31, 2025. Significant
adverse comments are ones which oppose the rule and raise, alone or in
combination, a serious enough issue related to each of the independent
grounds for the rule that a substantive response is required. If
significant adverse comments are received, notification will be
published in the Federal Register before the effective date either
withdrawing the rule or issuing a new final rule which responds to
significant adverse comments.
ADDRESSES: Interested persons are encouraged to submit their comments
on this direct final rule online. You may submit comments, identified
by RIN 1210-AC33, by either of the following methods:
Federal eRulemaking Portal: <a href="http://www.regulations.gov">www.regulations.gov</a>. Follow the
instructions for submitting comments.
Mail: Office of Regulations and Interpretations, Employee Benefits
Security Administration, Room N-5655, U.S. Department of Labor, 200
Constitution Avenue NW, Washington, DC 20210, Attn: Selection of
Annuity Providers--Safe Harbor for Individual Account Plans Direct
Final Rule RIN 1210-AC33.
Instructions: All submissions must include the agency name and
Regulatory Identifier Number RIN 1210-AC33 for this rulemaking. If you
submit comments online, do not submit paper copies.
Warning: Do not include any personally identifiable or confidential
business information that you do not want publicly disclosed. Comments
are public records that are posted online as received and can be
retrieved by most internet search engines.
Docket: Comments will be available to the public, without charge,
online at the Federal eRulemaking Portal at <a href="http://www.regulations.gov">http://www.regulations.gov</a>,
on the Department's website at <a href="http://www.dol.gov/agencies/ebsa">http://www.dol.gov/agencies/ebsa</a>, and at
the Public Disclosure Room, Employee Benefits Security Administration,
Room N-1513, 200 Constitution Ave. NW, Washington, DC 20210.
FOR FURTHER INFORMATION CONTACT: Jason DeWitt, Office of Regulations
and Interpretations, Employee Benefits Security Administration, (202)
693-8500. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
I. Background
This DFR is being taken pursuant to Executive Order 14192, titled
Unleashing Prosperity Through Deregulation.\1\
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\1\ 90 FR 9065 (Feb. 6, 2025).
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Individual account retirement plans such as 401(k) plans typically
provide benefit distributions in the form of a lump sum payment.
However, under certain circumstances, these plans are required to
provide payments in the form of an annuity, and some plan sponsors
offer an annuity as a matter of voluntary plan design.\2\ For
individual account retirement plans covered by title I of the Employee
Retirement Income Security Act (ERISA) that offer an annuity, the
selection of annuity provider is a fiduciary act governed by the
standards in ERISA section 404.\3\ ERISA section 404(a)(1)(B) requires
fiduciaries to discharge their duties with the care, skill, prudence,
and diligence under the prevailing circumstances that a reasonable
person acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with like
aims.
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\2\ See ERISA section 205.
\3\ 29 U.S.C. 1104.
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In the Pension Protection Act of 2006, Congress directed the
Department to clarify that the selection of an annuity contract as an
optional form of distribution from an individual account retirement
plan is not subject to the safest available annuity standard under
Interpretive Bulletin 95-1 but is subject to all otherwise applicable
fiduciary standards.\4\ The Department responded in 2008 by issuing a
regulatory safe harbor for the selection of annuity providers for the
purpose of benefit distributions from individual account retirement
plans, codified at 29 CFR 2550.404a-4.\5\ The safe harbor made clear
that it did not establish minimum requirements or the exclusive means
for satisfying the responsibilities.
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\4\ Pension Protection Act of 2006 section 625, Public Law 109-
280, 120 Stat. 780 (2006).
\5\ 73 FR 58447 (Oct. 7, 2008).
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More recently, in the Setting Every Community Up for Retirement
Enhancement Act of 2019 (SECURE Act), Congress made several amendments
to ERISA related to lifetime income options.\6\ SECURE Act section 204
added a statutory safe harbor in a new paragraph (e) of ERISA section
404 for fiduciaries selecting an annuity provider for an individual
account retirement plan.
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\6\ Division O of the Further Consolidated Appropriations Act,
2020, Public Law 116-94, 133 Stat. 2534 (2019).
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II. Discussion
This DFR removes the regulatory safe harbor (29 CFR 2550.404a-4)
because the statutory safe harbor in ERISA section 404(e) provides a
more streamlined, less costly safe harbor than the regulation, but with
the same level of safe harbor relief. Unlike the regulatory safe
harbor, the statutory safe harbor streamlines compliance by allowing
the plan fiduciary to rely on a written representation of the annuity
provider's compliance with applicable state insurance law regarding the
financial capability of the insurer.\7\ This provision both streamlines
the safe harbor \8\ and offers a level of certainty
[[Page 28008]]
not available under the regulatory safe harbor. Moreover, removing the
regulatory safe harbor also eliminates situations in which a plan
fiduciary might waste time and resources in analyzing and comparing the
pros and cons of the two safe harbors to determine which safe harbor is
best. Finally, allowing the regulatory safe harbor to remain in the
Code of Federal Regulations presents a risk that an unwary fiduciary
may inadvertently rely on it instead of seeking out the more
streamlined, less costly, and more certain safe harbor in the statute.
Put differently, the continued appearance in the CFR could mislead
interested parties into believing that no other safe harbor exists or
that there are benefits to using the regulatory safe harbor rather than
the statutory safe harbor. The regulatory safe harbor is removed
prospectively as of the effective date and has no effect on its legal
effectiveness prior to that date.\9\ The Department welcomes comments
on the conclusions in this DFR.
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\7\ 29 U.S.C. 1104(e)(2).
\8\ Permitting a fiduciary to rely on written representations
from the insurer as consideration of the insurer's financial
capability streamlines the fiduciary's process as compared to the
regulatory safe harbor, which requires the fiduciary to
``appropriately consider[ ] information sufficient to assess the
ability of the annuity provider to make all future payments under
the annuity contract.'' See 29 CFR 2550.404a-4 (b)(2). The statutory
safe harbor further streamlines the process by omitting the expert
consultation provision contained in the regulatory safe harbor. See
29 CFR 2550.404a-4(b)(5).
\9\ As is the case with legal safe harbors generally, the
statutory safe harbor in section 404(e) of ERISA is not the
exclusive method a fiduciary could use to comply with their
statutory duty of prudence in section 404(a)(1)(B) of ERISA.
Consequently, the removal of the regulatory safe harbor by the
Department is not to be construed as the Department's disavowal of
its principles. Thus, if a fiduciary were to satisfy (intentionally
or otherwise) the conditions in the regulatory safe harbor
notwithstanding its removal from the CFR, the Department would not
challenge the selection of the annuity under section 404(a)(1)(B) of
ERISA.
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III. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866
Executive Order (E.O.) 12866, ``Regulatory Planning and Review,''
58 FR 51735 (Oct. 4, 1993), requires agencies, to the extent permitted
by law, to (1) propose or adopt a regulation only upon a reasoned
determination that its benefits justify its costs (recognizing that
some benefits and costs are difficult to quantify); (2) tailor
regulations to impose the least burden on society, consistent with
obtaining regulatory objectives, taking into account, among other
things, and to the extent practicable, the costs of cumulative
regulations; (3) select, in choosing among alternative regulatory
approaches, those approaches that maximize net benefits; (4) to the
extent feasible, specify performance objectives, rather than specifying
the behavior or manner of compliance that regulated entities must
adopt; and (5) identify and assess available alternatives to direct
regulation, including providing economic incentives to encourage the
desired behavior, such as user fees or marketable permits, or providing
information upon which choices can be made by the public.
Section 6(a) of E.O. 12866 also requires agencies to submit
``significant regulatory actions'' to OIRA for review. OIRA has
determined that this direct final rule does not constitute a
``significant regulatory action'' under section 3(f) of E.O. 12866.
Accordingly, this direct final rule was not submitted to OIRA for
review under E.O. 12866.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis (IRFA) and a
final regulatory flexibility analysis (FRFA) for any rule that by law
must be proposed for public comment, unless the agency certifies that
the rule, if promulgated, will not have a significant economic impact
on a substantial number of small entities.
The Department reviewed this rescission under the provisions of the
Regulatory Flexibility Act. This rule eliminates a duplicative safe
harbor in favor of one that is less burdensome and that offers greater
certainty. Therefore, the Department has concluded that the impacts of
the rescission would not have a ``significant economic impact on a
substantial number of small entities,'' and that the preparation of an
FRFA is not warranted. The Department will transmit this certification
and supporting statement of factual basis to the Chief Counsel for
Advocacy of the Small Business Administration for review under 5 U.S.C.
605(b).
C. Review Under the Paperwork Reduction Act
This rescission imposes no new information or record-keeping
requirements. Accordingly, OMB clearance is not required under the
Paperwork Reduction Act. (44 U.S.C. 3501 et seq.).
D. Review Under Executive Order 13132
E.O. 13132, ``Federalism,'' 64 FR 43255 (August 10, 1999), imposes
certain requirements on Federal agencies formulating and implementing
policies or regulations that preempt State law or that have federalism
implications. The Executive Order requires agencies to examine the
constitutional and statutory authority supporting any action that would
limit the policymaking discretion of the States and to carefully assess
the necessity for such actions. The Executive Order also requires
agencies to have an accountable process to ensure meaningful and timely
input by State and local officials in the development of regulatory
policies that have federalism implications.
The Department has examined this rescission and has determined that
it would not have a substantial direct effect on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.
E. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of E.O. 12988, ``Civil
Justice Reform,'' imposes on Federal agencies the general duty to
adhere to the following requirements: (1) eliminate drafting errors and
ambiguity, (2) write regulations to minimize litigation, (3) provide a
clear legal standard for affected conduct rather than a general
standard, and (4) promote simplification and burden reduction. 61 FR
4729 (Feb. 7, 1996). Regarding the review required by section 3(a),
section 3(b) of E.O. 12988 specifically requires that Executive
agencies make every reasonable effort to ensure that the regulation:
(1) clearly specifies the preemptive effect, if any, (2) clearly
specifies any effect on existing Federal law or regulation, (3)
provides a clear legal standard for affected conduct while promoting
simplification and burden reduction, (4) specifies the retroactive
effect, if any, (5) adequately defines key terms, and (6) addresses
other important issues affecting clarity and general draftsmanship
under any guidelines issued by the Attorney General.
Section 3(c) of E.O. 12988 requires Executive agencies to review
regulations in light of applicable standards in section 3(a) and
section 3(b) to determine whether they are met or it is unreasonable to
meet one or more of them. The Department has completed the required
review and determined that, to the extent permitted by law, this
rescission meets the relevant standards of E.O. 12988.
F. Review Under the Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and Tribal governments and the
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private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531).
For a regulatory action likely to result in a rule that may cause the
expenditure by State, local, and Tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year
(adjusted annually for inflation), section 202 of UMRA requires a
Federal agency to publish a written statement that estimates the
resulting costs, benefits, and other effects on the national economy. 2
U.S.C. 1532(a), (b)). The UMRA also requires a Federal agency to
develop an effective process to permit timely input by elected officers
of State, local, and Tribal governments on a ``significant
intergovernmental mandate,'' and requires an agency plan for giving
notice and opportunity for timely input to potentially affected small
governments before establishing any requirements that might
significantly or uniquely affect them.
The Department examined this rescission according to UMRA and its
statement of policy and determined that the rescission does not contain
a Federal intergovernmental mandate, nor is it expected to require
expenditures of $100 million or more in any one year by State, local,
and Tribal governments, in the aggregate, or by the private sector. As
a result, the analytical requirements of UMRA do not apply.
G. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any rule that may affect family well-being.
This rescission would not have any impact on the autonomy or integrity
of the family as an institution. Accordingly, the Department has
concluded that it is not necessary to prepare a Family Policymaking
Assessment.
H. Review Under Executive Order 12630
Pursuant to E.O. 12630, ``Governmental Actions and Interference
with Constitutionally Protected Property Rights,'' 53 FR 8859 (March
18, 1988), the Department has determined that this rescission would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
I. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to
review most disseminations of information to the public under
information quality guidelines established by each agency pursuant to
general guidelines issued by OMB. OMB's guidelines were published at 67
FR 8452 (Feb. 22, 2002). The Department has reviewed this rescission
under the OMB and has concluded that it is consistent with applicable
policies in those guidelines.
J. Review Under Additional Executive Orders and Presidential Memoranda
The Department has examined this rescission and has determined that
it is consistent with the policies and directives outlined in E.O.
14154, ``Unleashing American Energy,'' E.O. 14192, ``Unleashing
Prosperity Through Deregulation,'' and Presidential Memorandum,
``Delivering Emergency Price Relief for American Families and Defeating
the Cost-of-Living Crisis.'' This rescission is expected to be an
Executive Order 14192 deregulatory action.
K. Congressional Notification
As required by 5 U.S.C. 801, the Department will report to Congress
on the promulgation of this rule before its effective date. The report
will state that it has been determined that the rule is not a ``major
rule'' as defined by 5 U.S.C. 804(2).
List of Subjects in 29 CFR Part 2550
Employee benefit plans, Fiduciaries, Foreign investments in U.S.,
Investments, Pensions, Reporting and recordkeeping requirements,
Securities, Surety bonds, Trusts and Trustees.
For the reasons set forth in the preamble, the Department amends 29
CFR part 2550 as follows:
PART 2550--RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY
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1. The authority citation for Part 2550 is revised to read as follows:
Authority: 29 U.S.C. 1135, sec. 102, Reorganization Plan No. 4
of 1978, 5 U.S.C. App. at 727 (2012) and Secretary of Labor's Order
No. 1-2011, 77 FR 1088 (Jan. 9, 2012). Sections 2550.404a-2 and
2550.404a-3 also issued under sec. 657, Pub. L. 107-16, 115 Stat.
38. Sections 2550.404a-5, 2550.404c-1 and 2550.404c-5 also issued
under 29 U.S.C. 1104. Sec. 2550.408b-1 also issued under 29 U.S.C.
1108(b)(1). 2550.408b-19 also issued under sec. 611, Pub. L. 109-
280, 120 Stat. 780, 972. Sec. 2550.412-1 also issued under 29 U.S.C.
1112.
Sec. 2550.404a-4 [Removed]
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2. Section 2550.404a-4 is removed.
Signed at Washington, DC, this 18th day of June, 2025.
Timothy D. Hauser,
Employee Benefits Security Administration, Department of Labor.
[FR Doc. 2025-11615 Filed 6-30-25; 8:45 am]
BILLING CODE 4510-29-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.