Enhanced Executive Compensation Disclosure: A Summary of SEC’s 2009 Rules

 BNA PBR 8-4-09 Article Revised
to Reflect 12-23-09 Final Rules – 1/4/2010

Enhanced Executive Compensation Disclosure:
A Summary of SEC’s 2009 Rules

By Charles C. Shulman

Charles C. Shulman practices employee benefits and executive compensation law in New York and New Jersey. He can be reached at cshulman@EBEClaw.com

The Securities and Exchange Commission finalized amendments to its executive compensation and corporate governance disclosure rules that apply to proxy and information statements. This memo discusses amendments relating to disclosure of a company’s compensation policies, director and nominee qualifications, use of consultants, and method of reporting the value of stock awards in the Summary Compensation Table.

On December 23, 2009 the Securities and Exchange Commission published final rules, Proxy Disclosure and Solicitation Enhancements - Release No. 33-9052, 74 Fed. Reg. 68334 (Dec. 23, 2009).  The rules were first proposed July 17, 2009. 74 Fed. Reg. 35,076 (July 17, 2009). The rules as finalized (i) amend the proxy disclosure (S-K) rules at 17 C.F.R. § 229 and other related rules to provide enhanced proxy disclosure regarding broad-based compensation policies, director qualifications, diversity, leadership structure, and compensation consultant additional fees; (ii) amend the proxy disclosure rules to record the value of stock awards in the Summary Compensation Table based on grant-date fair market value and to describe performance goals based on probable outcome of performance; (iii) require that the shareholder vote results be reported on Form 8-K (within four business days) rather than Form 10-K; and (iv) amend the proxy rules to provide that return of a blank proxy card is not a revocation, a soliciting person can round out its short slate by soliciting persons seeking minority representation on the board and certain other changes regarding proxy solicitation.

This summary discusses the amendments in (i) and (ii) above, which relate to director and executive compensation disclosure.

1. Narrative Disclosure of  Company’s Compensation Policies and Practices and How They Relate to the Company’s Risk Management.  Under prior proxy disclosure rules, the Compensation Discussion and Analysis (CD&A) section of the proxy needed to only discuss the compensation of the named executive officers (principal executive officer, principal financial officer, and the three other most highly compensated employees). Under the new 2009 amendments, the CD&A also has to discuss the company’s overall compensation policies for its employees in general even for nonexecutives, if the policies are reasonably likely to have a material adverse effect on the company.  New Item 402(s).

In particular, discussion and analysis would typically be required for compensation policies and practices at a particular business unit that carries a significant portion of the company’s risk profile, or where compensation of a business unit is structured significantly different than other units.  Id.

Issues that may need to be discussed in the CD&A include: (i) the design philosophy of compensation policies that would have the most effect on risk, (ii) considerations in structuring the compensation policies, (iii) how compensation policies relate to short-term risk, such as through clawbacks or mandatory bonus deferrals, and (iv) adjustments to compensation policies and practices that result from changes in risk profile; and (v) monitoring of compensation policies to determine if risk management objectives are being met with respect to incentivizing employees. Id.

Note:  Smaller reporting companies that do not need CD&As are also exempt from providing this additional disclosure.

Note:  This requirement to discuss the role of risk in compensation plans is intended to make compensation committee to consider how risk may play a role in incentive compensation, and to consider company-wide compensation plans, both of which have until now generally been considered outside the scope of compensation committees.

Note:  The above rules are a clear example of how the executive compensation proxy disclosure rules have moved beyond disclosure and into shaping compensation policy.

2. Expanded Disclosure about Directors, Nominees and Executive Officers (Whether or not up for Reelection).  The 2009 amendments expand the proxy rules to provide: (i) disclosure for directors, nominees and executive officers of their employment during the past five years, (ii) whether the entity they worked at is affiliated with the company, (iii) the directors and nominees’ experience or qualifications that led to the conclusion that the person is fit to serve on the board, (iv) if material, information about the director, nominee or executive’s areas of expertise and other relevant qualifications, (iv) disclosure of directorships of public companies in the past five years, and (v) for directors, nominees and officers, any prior business experience and level of responsibility within the past five years.  Amendment to Item 401(e).

Disclosure of any legal proceedings involving directors, nominees or executive officers is lengthened by the 2009 amendments from 5 to 10 years.  Item 401(f).  The amendments also require disclosure of additional legal proceedings, including proceedings resulting from wire or mail fraud or fraud in any business proceeding based on violations of securities, banking or insurance laws, and sanctions or orders imposed by a stock exchange.  Id.

3. Disclosure Regarding Company Leadership Structure and the Board’s Role in Risk Management Process.  Under the 2009 Amendments, Item 407 as well as the proxy rules require disclosure of the company leadership structure, such as whether the CEO also serves as chairman of the board, and whether there is a lead independent director, as well as why the company believes this is the best structure.  Amendment to S-K Item 407(h) and Item 7 of Schedule 14A.  Disclosure would also be required as to the extent of the board’s role in the company’s risk management, and the effect this has had on the leadership structure. Amendment to Item 407(h).

Note: Companies, as part of their corporate governance focus, have in any event begun to separate the CEO and chairman of the board roles.

4. Disclosure re Diversity.  The 2009 amendments require disclosure as to whether and how a nominating committee considers diversity in nominating directors, and whether the committee or the board has a policy on diversity.

5. Disclosure Regarding Compensation Consultants and Fees for Additional Services. The prior rules required disclosure of any role compensation consultants serve with respect to executive or director compensation, who hired the compensation consultants, the nature and scope of their assignment and the material elements of the directions given to the consultants. Item 407 was amended in 2009 to require fee disclosure for compensation consultants retained by the board in certain circumstances.  If the board or compensation committee has engaged a consultant to advise regarding executive and director compensation, and the consultant or its affiliates provide other consulting services in excess of $120,000, fees and related disclosure (such as whether decision to engage consultant for non-executive compensation was made or recommended by management and whether the board has approved the non-executive compensation consulting services) is required.  If management has engaged a consultant for executive compensation and non-executive compensation is in excess of $120,000 fee disclosure alone is required. Services involving any broad-based nondiscriminatory plans or information not customized for the company, are not executive compensation consulting and no fee disclosure is required.  Amendment to Item 407(e)(3)(iii).

Note: The above disclosure will enable investors to assess any incentives the consultants would have in recommending generous executive compensation, as stated in the Preamble.

Note: These disclosure requirements are aimed at avoiding a conflict of interest, and in that respect is similar to restrictions on non-audit services by independent auditors.

6. Reporting of Stock or Stock Option with Full Grant-Date Value in Summary Compensation Table.  Under prior December 2006 rules, the disclosure of stock awards and option-awards in the Summary Compensation Table and in the Director Compensation Table were determined based on the dollar amount recognized for financial reporting for the fiscal year.  Items 402(c)(2) and 402(v)(2), 71 Fed. Reg. 78,338 (Dec. 29, 2006). The 2009 amendments revert to the original method used by the regulations, which is to report stock awards and option awards in the compensation tables based on the full grant-date fair value in accordance with FASB ASC Topic 718 (formerly FAS 123R). 2009 amendment to Items 402(c)(2)(v) & (vi) and 402(k)(2)(iii) and (iv).  The amendments also eliminate the requirement of reporting grant-date fair value in the Grants of Plan-Based Awards Table or in the footnote to the Director Compensation Table because such amounts would already be provided for in the compensation tables.  Amendments to Items 402(d) and 402(k)(2).

Note: This 2009 amendment is in response to numerous comments received by the SEC that the grant-date fair value is more useful than the amount recognized in the financial statements for the fiscal year because investors consider the compensation decisions made during the fiscal year, (which would be the full grant-date fair values) in making voting and investment decisions. In addition, the prior method of using the dollar amount recognized for financial reporting for the fiscal year can result in an anomaly of reporting a negative number when the stock price drops.

Note: A proposal to rescind the requirement to report the full grant date face value of each equity award in the Grants of Plan-Based Awards and Director Compensation tables was withdrawn in the final 2009 rules.

Note: The final rules adapt the proposal to have the stock and option award to the past years in order to facilitate comparison in years.

Note: Disclosure of awards is made based on awards granted during the year, and not for the year to which the performance is based.  See Preamble to Final Rules, 74 Fed. Reg. 68339.

7. Salary or Bonus Foregone. There had been a proposal for salary and bonus columns in the Summary Compensation Table to not require reporting salary or bonus foregone at the election of the executive but the cash awards received instead or of salary or bonus would be reported in the column applicable to that form of award.  However, as noted in the Preamble to the final 2009 rules the SEC decided not to adopt this change.

Note: The Preamble to the 2009 rules notes that disclosing the amounts or salary or bonus that the Compensation Committee awarded better enables investors to understand salary and bonus.  See Instruction 2 to Item 402(c)(2)(iii) & (iv).

11. Disclosure of Target Performance Goals.  The final 2009 rules require that grant date fair value of performance awards be reported in the Summary Compensation, Grants of Plan-Based Awards and Director Compensation tables based on the probable outcome of the performance conditions, consistent with the recognition criteria in FASB ASC Topic 718.  The final 2009 rules do require footnote disclosure of the maximum value assuming the highest level of performance conditions is probable.  See Instruction 3 to Item 402(c)(2)(v) and (vi), and Instruction 3 to Item 402(n)(2)(v) and (vi).

Note:  This change was in response to comments that reporting the aggregate grant date fair value of performance awards based on maximum performance could discourage companies from granting these awards. As stated in the Preamble to the final 2009 rules, requiring disclosure of an award’s value to always be based on maximum performance would overstate the intended level of compensation and result in investor misinterpretation of compensation decisions.  Item 402(n)(2)(v) and (vi).

The amendments are effective February 28, 2010.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this document.

SUMMARY OF FOUR DIFFERENT RULES (OR PROPOSED RULES) RELATING TO 401(K) FEE DISCLOSURE OR INVESTMENT ADVICE GUIDANCE

Charles C. Shulman, Esq., LLC
Employee Benefits, Employment & Executive Compensation Law
www.ebeclaw.com  – www.EmployeeBenefitsLaw.info

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EBEC (Employee Benefits / Executive Compensation) Law Update

Revised
October , 2010

SUMMARY OF FOUR DIFFERENT RULES (OR PROPOSED RULES) RELATING
TO 401(K) FEE DISCLOSURE OR INVESTMENT ADVICE GUIDANCE

            Recent guidance – some proposed and some final – relate to 401(k) plan fee disclosure and investment advice, as described further below:

• Service provider disclosure on Form 5500 Schedule C is now required for both direct and indirect compensation.  This became effective with the 5500s for the 2009 plan years.
• Fee disclosure by service providers to responsible plan fiduciaries to show reasonableness of contract (required by service-provider exemption of ERISA § 408(b)(2)) as specified in interim final DOL regulations published in July of this year will become effective July 16, 2011.
• Fee disclosure by fiduciaries to participants for participant-directed 401(k) plans regarding investment options with a comparative chart of investment options and with the administrative expenses of each option would be required under proposed DOL regulations issued in July of 2008.  However, these regulations have to date not been finalized.  [FINALIZED OCT 2010]
• Regulations regarding investment advice arrangements that are permitted by the Pension Protection Act where there is level-fee or computer model arrangements have been reproposed in March 2010.  They were originally finalized in January 2009 but were later withdrawn.  The reproposed regulations are similar to the original regulations but with certain changes as described below.
  
  

      1.  Schedule C Service Provider Reporting – Effective for 2009 Plan Years  

            Final guidance for revised Form 5500 Schedule C disclosure provides for expanded requirements for service providers reporting of direct and indirect compensation, and requires fiduciaries to review and approve expenses, effective for 5500s relating to plan years beginning in 2009. 

• For Schedule C purposes, reportable compensation includes cash and any other items of value (e.g., gifts or awards) received from the plan (including fees charged as a percentage of assets and deducted from investment returns) in connection with services rendered to the plan.  
• Indirect compensation is compensation received from sources other than the plan or plan sponsor, in connection with services rendered to the plan, and would include, for example, fees and expense reimbursement payments received from a mutual fund, account maintenance fees, 12b–1 distribution fees, etc.[1]
  
  

2.  Fee Disclosure for Service Providers – Interim Final Regulations Effective July 16, 2011

ERISA § 406 generally prohibits transactions between an ERISA plan and a party in interest.  A service provider to a plan would be a party in interest, making the arrangement a prohibited transaction.  However, under the service-provider exception, ERISA § 408(b)(2) exempts service contracts or arrangements between a plan and a party in interest if (i) the contract or arrangement is reasonable, (ii) the services are necessary for the establishment or operation of the plan, and (iii) no more than reasonable compensation is paid for the services.[2]

DOL interim final regulations § 2550.408b-2, proposed in December 2007[3] and substantially revised as interim regulations in July 2010[4]  amends DOL Reg. § 2550.408b–2 to clarify the meaning of a ‘‘reasonable’’ contract or arrangement.

Under the interim DOL regulations, to be a reasonable contract, a “covered service provider” (as defined below) must disclose in writing to the “responsible plan fiduciary” (the fiduciary with authority to cause the plan to enter into or renew the contract) certain information. 

·         This disclosure is in order for the fiduciary to be able to determine that the services are reasonable. .   

A “covered service provider” is a service provider that enters into a contract or arrangement with a covered plan (which is defined as an ERISA pension plan) and reasonably expects $1,000 or more in direct or indirect compensation to be received in connection with providing certain enumerated services, which are services provided as a fiduciary to an investment contract or other entity holding plan assets, services provided as an investment advisor  to the plan, certain recordkeeping and brokerage services and other services for which service provider, affiliate or subcontractor expect to receive indirect compensation . DOL Reg. § 2550.408b-2(c)(1)(iii).

The disclosure must describe:

·         services to be provided (but not including non-fiduciary services to an investment contract or plan investment);

·         if applicable, status as a fiduciary or investment advisor;

·         any direct or indirect compensation the service provider, affiliate, or subcontractor expects to receive, or in certain cases any compensation that will be paid among the service provider, affiliate and a subcontractor in connection with the services (e.g., bundled services such as commissions, 12b-1 fees, soft dollar fees, etc.);

·         compensation expected in connection with termination of the contract;

·         with regard to recordkeeping services a description of direct and indirect compensation that is expected to be received;

·         whether the plan will be billed or the compensation will be deducted directly from the plan’s individual accounts;

·         for fiduciary service providers with respect to plan assets, any compensation that will be charged directly against the amount invested in connection with the acquisition, sale, or withdrawal of the investment (e.g., sales charges, loads, redemption fees, surrender charges, etc.) and operating expenses; and

·         for certain recordkeeping and brokerage services with respect to each designated investment alternative, current accurate disclosure materials of the issuer of the designated investment alternative that includes the information in the previous bullet.[5] 

The service provider must disclose any additional information relating to compensation to the responsible plan fiduciary within the following time periods: (i) reasonably in advance of the date of contract or renewed, (ii) within 30 days of when the investment holds plan assets, and (iii) as soon as an investment alternative is designated.[6]  Changes in the disclosed information must be communicated no later than 60 days for the date of change.[7]  

Upon request, the service provider must furnish other information relating to the compensation received in connection with the contract.[8]  Good faith errors or omission in disclosing the information required will not cause there to be a failure, as long as the service provider discloses the correct information as soon as practicable and no later than 30 days after the service provider knows of such error or omission.[9]

There is an exemption in the form of a prohibited transaction class exemption, and also incorporated into the interim regulations, for the responsible plan fiduciary from the prohibited transaction restrictions for a party in interest providing goods and services to or receiving assets from the plan, for any failure by a covered service provider to disclose the information required above, provided that the following conditions are met: (i) the plan fiduciary did not know that the service provider failed or would fail to make required disclosures and reasonably believed that the covered service provider disclosed the information required above, (ii) the plan fiduciary requests the additional information in writing and notifies  the DOL, and (iii) the service provider terminates the arrangement or complies with the request within 90 days.  DOL Reg. § 2550.408b-2(c)(1)(ix).  The above administrative class exemption was proposed in December 2007[10] and finalized in July 2010.[11]

                The interim regulations also require that for the contract to be reasonable, it must permit termination of the contract without penalty other than for reasonable start-up costs and expenses.[12]  

The interim regulations will not be effective until July 16, 2011. The rules will then apply to all contracts or arrangements, regardless of whether entered into before or after the effective date.

      3.  Fee Disclosure for Participants – Proposed Regulations Not Yet Finalized [FINALIZED OCT  2010]   FINALIZED AT http://www.dol.gov/ebsa/pdf/frparticipantfeerule.pdf  ]

In 2008 the Department of Labor issued proposed regulations requiring fiduciaries of individual account plans to provide specific disclosures to participants concerning plan investment options including fee and expense information.[13]  Under the proposed rules, fiduciaries would have to provide participants in self-directed individual account plans:

• general information about the plan;
• information about administrative expenses charged to the plan and to individual participant accounts;
• investment-related information to participants (such as name and category of investment alternatives, average annual return on the investments for one, five, and 10-year periods); and
• a model comparative chart of  investment options.[14]  

            The proposed regulations would also integrate new disclosure requirements for qualified default investment alternatives (QDIAs) with the existing requirements of § 404(c).[15]  As stated in the Preamble to the proposed regulations, this proposal is intended to ensure that all participants and beneficiaries in participant-directed individual account plans have the information they need to make informed decisions about the management of their individual accounts and the investment of their retirement savings.  

            The proposed regulations had been put on hold in connection with President Obama’s January 2009 sixty day regulatory moratorium for proposed regulations and regulations not yet effective.[16]  As of yet, these regulations have not yet been finalized.

      4.  Eligible Investment Advice Arrangements by Fiduciary Advisors Under Pension Protection Act  –Regulations Withdrawn and then Reproposed

Under ERISA § 408, as amended by the Pension Protection Act of 2006, a prohibited transaction statutory exemption is added for the provision of investment advice by a “fiduciary advisor” to participants of participant-directed plans through an “eligible investment advice arrangement.”  ERISA §§ 408(b)(14) & 408(g). 

In January 2009 the Department of Labor finalized regulations implementing the provisions of the statutory exemption for eligible investment advice arrangements for level-fee or computer model arrangements (as described below).[17]  The DOL also provided an administrative class exemption in DOL Reg. § 2550.408g-1(d), pursuant to which the fee-leveling or computer model requirements would be liberalized.  The effective date was to have been March 23, 2009.   The effective date was delayed several times.[18]  The DOL withdrew these regulations entirely effective January 19, 2010 (before the extended effective date of the regulations).[19]

The regulations were reproposed in March of 2010.[20]  Reproposed DOL Reg. § 2550.408g–1 provide guidance on the requirements of ERISA § 408(g) that must be satisfied in order for the investment advice-related arrangements to be exempt from the prohibited transaction restrictions of § 406.  

“Eligible investment advice arrangements” must either:  (i) be based on generally accepted investment theories, taking into account fees and expenses and the participants’ age, other assets, risk tolerance and preferences, and must also provide that fees received by fiduciary advisors providing investment advice do not vary on the basis of the investments chosen (level fee arrangements);[21] or (ii) use a computer model that provides generally accepted investment theories, use relevant information about participants, take into account fees and expenses, use appropriate objective criteria, not favor investment options of the advisor and take into account all of the investment options of the plan, and in addition, the computer model must be certified by an eligible investment expert.[22] 

A plan fiduciary must expressly authorize the investment advice program, and an annual audit of the arrangement must be made.[23]  

The fiduciary advisor must disclose to participants prior to the initial investment advice the following: (i) the role of any party that has a material affiliation, (ii) past performance of the investment options, (iii) fees or compensation that the advisor or affiliate receives for the advice or for a transaction or rollover involving the investment, (iv) any material affiliation the fiduciary or affiliate has in the funds, and (v) certain other matters.[24]  The Appendix to Prop. DOL Reg. § 2550.408g-1 contains a model disclosure form that may be used to satisfy this disclosure requirement. 

A “fiduciary advisor” is a registered investment advisor, bank, insurance company, registered broker dealer or an affiliate or employee of any of the above.[25]   

The proposed regulations address the requirements for electing to be treated as the only fiduciary and fiduciary adviser by reason of developing or marketing a computer model or an investment advice program used in an eligible investment advice arrangement. [26] 

A prohibited transaction class exemption in the original 2009 regulations would have permitted follow-up individual advice subsequent to the computer model, and would have also permitted varying fees as long as the individual employee providing the advice met the level fee requirements.  However, in response to comments questioning the potential for self-dealing, the class exemption has been eliminated in the reproposed regulations.

The regulations will most likely be effective 60 days after finalization and publication of the final regulations in the Federal Register.[27] 

            IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this document.

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[1]      72 Fed. Reg. 64710 (Nov.16, 2007), amending DOL Reg. §§ 2520.103-1 & 2520.104-46. 

      Note that the various references to regulations or proposed regulations in the footnotes below are hyperlinked to the original texts in the Federal Register.

[2]     A related rule also added by the Pension Protection Act of 2006 adds ERISA § 408(b)(17) providing that if a person  is a party-in-interest solely by reason of providing services to the plan, and is not an investment advisor to the plan, then transactions under ERISA § 406(a)(i)(A), (B) or (D) (sale, exchange, lease or loan) will not be prohibited, so long as the plan pays no more than, and receives no less than adequate consideration.  There are currently no regulations regarding § 408(b)(17).

[3]      72 Fed. Reg. 70988 (Dec 13, 2007).

[4]      75 Fed. Reg. 41600 (July 16, 2010).

[5]      DOL Reg. § 2550.408b-2(c)(1)(iv).

[6]     DOL Reg. § 2550.408b-2(c)(1)(v). 

[7]     Id.

[8]     DOL Reg. § 2550.408b-2(c)(1)(vi).

[9]     DOL Reg. § 2550.408b-2(c)(1)(vii).

[10]    72 Fed. Reg. 70893 (Dec. 13, 2007).

[11]    75 Fed. Reg. 41600 (July 16, 2010). 

[12]    DOL Reg. § 2550.408b-2(c)(3).

[13]     Prop. DOL Reg. §§ 2550.404a-5 and 2550.404c-1, 73 Fed. Reg. 43014 (July 23, 2008). 

[14]     Prop. DOL Reg. § 2550.404a-5. 

[15]     Prop. DOL Reg. § 2550.404a-5 & Proposed Amendment to DOL Reg. § 2550.404c-1.

[16]     74 Fed. Reg. 4435 (Jan. 26, 2009).  

[17]    74 Fed. Reg. 3822 (Jan. 21, 2009) (DOL Reg. § 2550.408g-1 & -2), originally proposed in 73 Fed. Reg. 49896 (Aug 22, 2008).

[18]    It was delayed 60 days to May 22, 2009, 74 Fed. Reg. 11847 (March 20, 2009), per President Obama’s regulatory moratorium (74 Fed. Reg. 4435 (Jan. 26, 2009)), it was deferred another 180 days to November 18, 2009, 74 Fed. Reg. 23951 (May 20, 2009), and it was deferred another 180 days until May 17, 2010, 74 Fed. Reg. 59092 (Nov. 17, 2009).

[19]    74 Fed. Reg. 60156 (Nov. 20, 2009).

[20]    75 Fed. Reg. 9360 (March 2, 2010).

[21]    Prop. DOL Reg. § 2550.408g-1(b)(3). See similarly, ERISA § 408(g)(2). 

      The reproposed regulations provide that, as stated in DOL Field Assistance Bulletin 2007-01 (Feb. 2, 2007),  the receipt by a fiduciary adviser of any payment from any party or used for the benefit of such fiduciary adviser that is based on investments selected by participants would be inconsistent with the fee-leveling requirement of the exemption.

[22]    Prop. DOL Reg. § 2550.408g-1(b)(4). See similarly, ERISA § 408(g)(3).

      The reproposed regulation also provide, in connection with investment advice arrangements that use computer models, that a computer model shall be designed and operated to avoid investment recommendations that inappropriately distinguish among investment options within a single asset class on the basis of a factor that cannot confidently be expected to persist in the future.

[23]    Prop. DOL Reg. § 2550.408g-1(b)(5) & (6).  See similarly, ERISA § 408(g)(4) & (5).

[24]    Prop. DOL Reg. § 2550.408g-1(b)(7).  See similarly, ERISA § 408(g)(6).

[25]    Prop. DOL Reg. § 2550.408g-1(c)(2).  See similarly, ERISA § 408(g)(11).

[26]    Prop. DOL Reg. § 2550.408g–2.

[27]     Pending final regulations the statutory exemption for investment advice provided by the PPA is still in effect (for advice after 2006), and a good faith compliance should suffice until regulations are refinalized.     The withdrawal of the regulations and exemption does not negate the statutory exemption in ERISA §§ 408(b)(14) & 408(g) provided for by the PPA for eligible investment advice arrangements.  Note that the guidance in DOL Field Assistance Bulletin 2007-01 can also be be relied upon pending final regulations.