10–15–09 Thursday Vol. 74 No. 198 Oct. 15, 2009

Pages 52863–53144

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Contents Federal Register Vol. 74, No. 198

Thursday, October 15, 2009

Alcohol and Tobacco Tax and Trade Bureau See Federal Energy Regulatory Commission PROPOSED RULES RULES Drawback of Internal Revenue Taxes, 52937–52941 Production Incentives for Cellulosic Biofuels: Reverse Auction Procedures and Standards, 52867–52873 Alcohol, Tobacco, Firearms, and Explosives Bureau NOTICES NOTICES Meetings: Agency Information Collection Activities; Proposals, Advanced Scientific Computing Advisory Committee, Submissions, and Approvals, 52977–52978 52954 Hydrogen and Fuel Cell Technical Advisory Committee, Centers for Disease Control and Prevention 52954–52955 NOTICES Meetings: Energy Information Administration Health Disparities Subcommittee, Advisory Committee to NOTICES the Director, 52968 Agency Information Collection Activities; Proposals, Submissions, and Approvals, 52955–52957 Civil Rights Commission NOTICES Environmental Protection Agency Meetings: RULES Missouri Advisory Committee, 52944 Approval and Promulgation of Air Quality Implementation Plans: Coast Guard Indiana; Carbon Monoxide Maintenance Plan Updates; RULES Limited Maintenance Plan, 52891–52894 Drawbridge Operation Regulations: Revisions to the California State Implementation Plan: Atlantic Intracoastal Waterway (AIWW), Elizabeth River, San Joaquin Valley Air Pollution Control District, 52894– Southern Branch, VA, 52888–52890 52895 East River, New York City, NY, 52887–52888 PROPOSED RULES Three Mile Slough, Rio Vista, CA, 52890 Approval and Promulgation of Air Quality Implementation PROPOSED RULES Plans: Standards for Living Organisms in Ships’ Ballast Water Indiana; Carbon Monoxide Maintenance Plan Updates; Discharged in U.S. Waters, 52941–52942 Limited Maintenance Plan, 52942–52943 NOTICES NOTICES Agency Information Collection Activities; Proposals, Agency Information Collection Activities; Proposals, Submissions, and Approvals, 52969–52971 Submissions, and Approvals, 52961–52963 Meetings: National Boating Safety Advisory Council, 52971–52972 Executive Office of the President See Presidential Documents Commerce Department See Industry and Security Bureau Federal Accounting Standards Advisory Board See International Trade Administration NOTICES See National Oceanic and Atmospheric Administration Renewal of FASAB Charter, 52963 NOTICES Federal Aviation Administration Agency Information Collection Activities; Proposals, Submissions, and Approvals, 52944 RULES Airworthiness Directives: Commodity Futures Trading Commission Saab AB, Saab Aerosystems Model SAAB 2000 Airplanes, NOTICES 52877–52880 Meetings: NOTICES Agricultural Advisory Committee, 52954 Consensus Standards, Light-Sport Aircraft, 52997–52999

Defense Acquisition Regulations System Federal Energy Regulatory Commission NOTICES RULES Defense Federal Acquisition Regulation Supplement: Applications: Technical Amendments, 52895–52896 Atmos Pipeline and Storage LLC, Fort Necessity Gas Storage LLC, 52958 Defense Department Swalley Irrigation District, 52957–52958 See Defense Acquisition Regulations System Combined Filings, 52958–52959 Filings: Department of Transportation Collbran Valley Gas Gathering LLC, 52960 See Pipeline and Hazardous Materials Safety Southern California Edison Co., 52959–52960 Administration Onsite Environmental Reviews: Florida Gas Transmission Company LLC, 52960–52961 Energy Department Petitions for Rate Approval: See Energy Information Administration Kinder Morgan Border Pipeline LLC, 52961

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Federal Highway Administration Interior Department NOTICES See Land Management Bureau Buy America Waiver Notification, 52997 Internal Revenue Service Federal Maritime Commission RULES NOTICES Measurement of Assets and Liabilities for Pension Funding Applicants: Purposes; Benefit Restrictions for Underfunded Pension Ocean Transportation Intermediary Licenses, 52963– Plans, 53004–53084 52964 International Trade Administration Federal Reserve System NOTICES RULES Countervailing Duty: Availability of Funds and Collection of Checks: Certain Seamless Carbon and Alloy Steel Standard, Line, Technical Amendment, 52875–52877 and Pressure Pipe from the People’s Republic of Reserve Requirements of Depository Institutions, 52873– China, 52945–52948 52875 Extension of Time Limit for the Final Results of the 2007– NOTICES 2008 Administrative Review of the Antidumping Duty Proposals to Engage in Permissible Nonbanking Activities, Order: etc., 52964 Tapered Roller Bearings and Parts Thereof, Finished and Federal Trade Commission Unfinished, from the People’s Republic of China, RULES 52948–52949 Guides Concerning the Use of Endorsements and Testimonials in Advertising, 53124–53143 International Trade Commission PROPOSED RULES NOTICES Free Annual File Disclosures: Investigations: Amendments to Rule to Prevent Deceptive Marketing of Certain Variable Speed Wind Turbines and Components Credit Reports, etc., 52915–52927 Thereof, 52975–52976 Telemarketing Sales Rule, 52914–52915 Meetings; Sunshine Act, 52976–52977 NOTICES Use of the First Sale Rule for Customs Valuation of U.S. Senior Executive Service Performance Review Board; Imports, 52977 Appointment of Members, 52964 Justice Department Food and Drug Administration See Alcohol, Tobacco, Firearms, and Explosives Bureau RULES See Justice Programs Office New Animal Drugs for Use in Animal Feeds: Monensin; Tylosin, 52885 Justice Programs Office NOTICES NOTICES Agency Information Collection Activities; Proposals, Meetings: Submissions, and Approvals, 52965–52968 Federal Advisory Committee on Juvenile Justice, 52978 Meetings: Advancing Clinical Development of Molecular and Other Labor Department Diagnostic Tests for Respiratory Tract Infections; See Mine Safety and Health Administration Workshop, 52969 NOTICES Environmental Impact Statements; Availability, etc.: Health and Human Services Department Small Wind Turbine, North Texas Job Corp Center, See Centers for Disease Control and Prevention McKinney, TX, 52978–52979 See Food and Drug Administration NOTICES Land Management Bureau Potential Monitors for Quality-of-Care Corporate Integrity NOTICES Agreements, 52964–52965 Environmental Impact Statements; Availability, etc.: Homeland Security Department Proposed China Mountain Wind Project, 52974–52975 See Coast Guard Maritime Administration See U.S. Customs and Border Protection NOTICES Housing and Urban Development Department Requested Administrative Waiver of the Coastwise Trade PROPOSED RULES Laws, 52999–53000 Refinement of Income and Rent Determination Voluntary Intermodal Sealift Agreement, 53000–53002 Requirements in Public and Assisted Housing Programs: Mine Safety and Health Administration Implementation of Enterprise Income Verification, NOTICES 52931–52937 Agency Information Collection Activities; Proposals, NOTICES Submissions, and Approvals, 52979–52980 Agency Information Collection Activities; Proposals, Submissions, and Approvals, 52972–52974 National Oceanic and Atmospheric Administration RULES Industry and Security Bureau Fisheries of the Exclusive Economic Zone Off Alaska: RULES Northern Rockfish in the Bering Sea and Aleutian Islands Encryption Simplification Rule, 52880–52885 Management Area, 52912–52913

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NOTICES Railroad Retirement Board Marine Mammals, 52949 NOTICES Meetings: Meetings; Sunshine Act, 52992 Gulf of Mexico Fishery Management Council, 52952– 52954 Securities and Exchange Commission Mid-Atlantic Fishery Management Council, 52950 PROPOSED RULES New England Fishery Management Council, 52952 Concept Release on Possible Rescission of Rule 436(g) North Pacific Fishery Management Council, 52949–52950 Under the Securities Act (of 1933), 53114–53121 Pacific Fishery Management Council, 52950–52952 Credit Ratings Disclosure, 53086–53114 South Atlantic Fishery Management Council, 52953 NOTICES Draft 2010–2015 Strategic Plan for Securities and Exchange National Science Foundation Commission, 52993 NOTICES Self-Regulatory Organizations; Proposed Rule Changes: Meetings: International Securities Exchange LLC, 52994–52995 Advisory Committee for Education and Human NYSE Amex LLC, 52993–52994 Resources, 52980 Advisory Committee Mathematical and Physical Small Business Administration Sciences, 52980 NOTICES Proposal Review Panel for Physics, 52981 Seeking Exemption Under Section 312 of Small Business Investment Act, Conflicts of Interest: Nuclear Regulatory Commission Telegraph Hill Partners SBIC, L.P. (License No. 09/79– NOTICES 0453), 52992–52993 Environmental Impact Statements; Availability, etc.: State Department EnergySolutions LLC, Clive, UT; Correction, 52981 NOTICES Waste Control Specialists, LLC., Andrews County, TX, Department of State Performance Review Board Members, 52981–52985 52995 Meetings: ACRS Subcommittee on Planning and Procedures, Surface Transportation Board 52985–52986 RULES ACRS Subcommittee on Radiation Protection and Nuclear Removal of Delegations of Authority to Secretary, 52900– Materials, 52986 52912 ACRS U.S. Evolutionary Power Reactor Subcommittee, 52986 Transportation Department Proposed Models for Plant Specific Adoption of Technical See Federal Aviation Administration Specification Task Force Traveler–508, 52986–52991 See Federal Highway Administration See Maritime Administration Pension Benefit Guaranty Corporation See Pipeline and Hazardous Materials Safety RULES Administration Benefits Payable in Terminated Single-Employer Plans: See Surface Transportation Board Interest Assumptions for Valuing and Paying Benefits, NOTICES 52886–52887 Applications for Certificates of Public Convenience and Necessity and Foreign Air Carrier Permits Filed Under Personnel Management Office Subpart B (Formerly Subpart Q), 52995–52996 NOTICES Agency Information Collection Activities; Proposals, Treasury Department Submissions, and Approvals, 52991–52992 See Alcohol and Tobacco Tax and Trade Bureau See Internal Revenue Service Pipeline and Hazardous Materials Safety Administration PROPOSED RULES Drawback of Internal Revenue Excise Tax, 52928–52931 RULES Hazardous Materials: U.S. Customs and Border Protection Chemical Oxygen Generators, 52896–52900 PROPOSED RULES NOTICES Drawback of Internal Revenue Excise Tax, 52928–52931 Agency Information Collection Activities; Proposals, Submissions, and Approvals, 52996–52997 Veterans Affairs Department NOTICES Postal Regulatory Commission Disciplinary Appeals Board Panel; Roster of Employees on PROPOSED RULES the Panel; Availability for Review and Comment, 53002 Periodic Reporting Rules, 52942

Presidential Documents Separate Parts In This Issue PROCLAMATIONS Special Observances: Part II Leif Erikson Day (Proc. 8435), 52863–52864 Treasury Department, Internal Revenue Service, 53004– ADMINISTRATIVE ORDERS 53084 Palestine Liberation Organization; Waiver of Statutory Provisions (Presidential Determination) Part III No. 2010–01 of October 8, 2009, 52865 Securities and Exchange Commission, 53086–53121

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Part IV To subscribe to the Federal Register Table of Contents Federal Trade Commission, 53124–53143 LISTSERV electronic mailing list, go to http:// listserv.access.gpo.gov and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change Reader Aids settings); then follow the instructions. Consult the Reader Aids section at the end of this page for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws.

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CFR PARTS AFFECTED IN THIS ISSUE

A cumulative list of the parts affected this month can be found in the Reader Aids section at the end of this issue.

3 CFR 40 CFR Proclamations: 52 (2 documents) ...... 52891, 8435...... 52863 52894 Administrative Orders: Proposed Rules: Preidential 52...... 52942 Determinations: 46 CFR No. 2010–01 of Proposed Rules: October 8, 2009 ...... 52865 162...... 52941 10 CFR 48 CFR 452...... 52867 204...... 52895 12 CFR 205...... 52895 204...... 52873 209...... 52895 229...... 52875 225...... 52895 241...... 52895 14 CFR 244...... 52895 39...... 52877 49 CFR 15 CFR 172...... 52896 730...... 52880 1001...... 52900 734...... 52880 1002...... 52900 736...... 52880 1003...... 52900 738...... 52880 1007...... 52900 740...... 52880 1011...... 52900 742...... 52880 1012...... 52900 744...... 52880 1016...... 52900 772...... 52880 1100...... 52900 774...... 52880 1102...... 52900 16 CFR 1103...... 52900 255...... 53124 1104...... 52900 Proposed Rules: 1105...... 52900 310...... 52914 1109...... 52900 610...... 52915 1110...... 52900 1113...... 52900 17 CFR 1114...... 52900 Proposed Rules: 1116...... 52900 220...... 53114 1118...... 52900 229...... 53086 1132...... 52900 239...... 53086 1139...... 52900 240...... 53086 1150...... 52900 249...... 53086 1152...... 52900 274...... 53086 1177...... 52900 1180...... 52900 19 CFR 1240...... 52900 Proposed Rules: 1241...... 52900 113...... 52928 1242...... 52900 191...... 52928 1243...... 52900 1245...... 52900 21 CFR 1246...... 52900 558...... 52885 1248...... 52900 24 CFR 1253...... 52900 1260...... 52900 Proposed Rules: 1261...... 52900 5...... 52931 1262...... 52900 908...... 52931 1263...... 52900 26 CFR 1264...... 52900 1...... 53004 1265...... 52900 602...... 53004 1266...... 52900 1267...... 52900 27 CFR 1268...... 52900 Proposed Rules: 1269...... 52900 28...... 52937 44...... 52937 50 CFR 679...... 52912 29 CFR 4022...... 52886 33 CFR 117 (3 documents) ...... 52887, 52888, 52890 Proposed Rules: 151...... 52941 39 CFR Proposed Rules: 3050...... 52942

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Federal Register Presidential Documents Vol. 74, No. 198

Thursday, October 15, 2009

Title 3— Proclamation 8435 of October 7, 2009

The President Leif Erikson Day, 2009

By the President of the United States of America

A Proclamation On this day in 1825, the ship Restauration landed in New York City after sailing for 3 months from Stavanger, Norway. The 52 passengers aboard represented the first organized emigration of Norwegians to America. These brave individuals set to the seas, following in the grand footsteps of the famous Scandinavian explorer Leif Erikson. Over a millennium ago, Leif Erikson—son of Iceland and grandson of Norway—arrived in North America and founded the settlement Vinland, located in modern-day Canada. Today, we celebrate his historic voyage and remember those who journeyed to America from far-away lands. Our Nation’s founding history is marked by millions of individuals who faced great hardship and difficulty as they pursued a brighter future abroad. As explorers, they did not know what they would find, but they were determined not to turn back, in order to learn what lay beyond the setting sun. This same spirit lived within Leif Erikson, and it has inspired countless others who venture from their homes in search of opportunity, uncertain of the possibilities and challenges that await them. Today, our Nation continues to welcome those descendents of Leif Erikson to our shores. Nordic Americans have contributed immeasurably to the success of America. Their cultural accomplishments have enriched the diver- sity of our country. And their pioneering spirit continues to embody our Nation’s unbounded enthusiasm for discovery and learning. To honor Leif Erikson and celebrate our Nordic-American heritage, the Con- gress, by joint resolution (Public Law 88–566) approved on September 2, 1964, has authorized the President to proclaim October 9 of each year as ‘‘Leif Erikson Day.’’ NOW, THEREFORE, I, BARACK OBAMA, President of the United States of America, do hereby proclaim October 9, 2009, as Leif Erikson Day, and I call upon all Americans to observe this day with appropriate ceremonies, activities, and programs to honor our country’s rich Nordic-American herit- age.

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IN WITNESS WHEREOF, I have hereunto set my hand this seventh day of October, in the year of our Lord two thousand nine, and of the Independ- ence of the United States of America the two hundred and thirty-fourth.

[FR Doc. E9–24953 Filed 10–14–09; 8:45 am] Billing code 3195–W9–P

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Presidential Determination No. 2010–01 of October 8, 2009

Waiver of and Certification of Statutory Provisions Regarding the Palestine Liberation Organization Office

Memorandum for the Secretary of State

Pursuant to the authority and conditions contained in section 7034(b) of the Department of State, Foreign Operations, and Related Programs Appro- priations Act, 2009 (Division H, Public Law 111–8), as carried forward by the Continuing Appropriations Resolution, 2010 (Division B, Public Law 111–68), I hereby determine and certify that it is important to the national security interest of the United States to waive the provisions of section 1003 of the Anti-Terrorism Act of 1987, Public Law 100–204. This waiver shall be effective for a period of 6 months. You are hereby authorized and directed to transmit this determination to the Congress and to publish it in the Federal Register.

THE WHITE HOUSE, Washington, October 8, 2009

[FR Doc. E9–24955 Filed 10–14–09; 8:45 am] Billing code 4710–10–P

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Rules and Regulations Federal Register Vol. 74, No. 198

Thursday, October 15, 2009

This section of the FEDERAL REGISTER B. National Environmental Policy Act billion gallons of annual cellulosic contains regulatory documents having general C. Regulatory Flexibility Act biofuel production by the statutory applicability and legal effect, most of which D. Paperwork Reduction Act deadline, and establishment of a are keyed to and codified in the Code of E. Unfunded Mandates Reform Act of 1995 F. Treasury and General Government biofuels industry that is cost Federal Regulations, which is published under competitive with gasoline and diesel. 50 titles pursuant to 44 U.S.C. 1510. Appropriations Act, 1999 G. Executive Order 13132 The post-auction standards are thus The Code of Federal Regulations is sold by H. Executive Order 12988 intended to ensure that successful the Superintendent of Documents. Prices of I. Treasury and General Government bidders make real and meaningful new books are listed in the first FEDERAL Appropriations Act, 2001 progress toward the production of REGISTER issue of each week. J. Executive Order 13211 cellulosic biofuels in commercially K. Consultation significant quantities. DOE believes that L. Congressional Notification IV. Approval of the Office of the Secretary as successive auctions yield more and DEPARTMENT OF ENERGY more production of cellulosic biofuels, I. Background and Overview the nation will move closer to achieving Office of Energy Efficiency and section 942’s long-term national goal of Renewable Energy Section 942 of the Energy Policy Act of 2005, Pub. L. 109–58 (August 8, a commercially viable production capability after 2015. In addition, by 10 CFR Part 452 2005), requires the Secretary of Energy (Secretary), in consultation with the setting forth clear pre-auction and post- RIN 1904–AB73 Secretary of Agriculture, the Secretary auction standards, DOE believes that of Defense, and the Administrator of the only the most serious entities will seek Production Incentives for Cellulosic Environmental Protection Agency, to to participate in each reverse auction. Biofuels; Reverse Auction Procedures establish an incentive program for the and Standards II. Discussion of Comments and production of cellulosic biofuels and to Modifications of Proposed Rule AGENCY: Office of Energy Efficiency and implement that program by means of a Renewable Energy, U.S. Department of ‘‘reverse auction.’’ Section 942(a) states A. Comments of Dupont Danisco Energy. that the purposes of the program are to: Cellulosic Ethanol, LLC ACTION: Final rule. ‘‘(1) Accelerate deployment and On December 23, 2008, DOE commercialization of biofuels; (2) published a Notice of Proposed SUMMARY: The Department of Energy deliver the first one billion gallons of Rulemaking (NOPR) in the Federal (DOE) today publishes a final rule annual cellulosic biofuel production by Register, 73 FR 78663, proposing the establishing the procedures and 2015; (3) ensure biofuels produced after issuance of this rule and inviting public standards for reverse auctions of 2015 are cost competitive with gasoline comment on the proposal. In response, production incentives for cellulosic and diesel; and (4) ensure that small DOE received only one set of biofuels pursuant to section 942 of the feedstock producers and rural small comments—from Dupont Danisco Energy Policy Act of 2005 (EPAct 2005). businesses are full participants in the Cellulosic Ethanol, LLC (Dupont DATES: This final rule is effective development of the cellulosic biofuels Danisco). November 16, 2009. industry.’’ In order to achieve these Dupont Danisco offered the following FOR FURTHER INFORMATION CONTACT: purposes, the Secretary is to award recommendations: Lawrence J. Russo, Jr., Office of Biomass production incentives on a per gallon Æ Eligibility Criteria. Tighten the Program, U.S. Department of Energy, basis to eligible entities by means of a eligibility criteria for bidders, including Mailstop EE–2E, Room 5H021, 1000 reverse auction. Under section 942, the the addition of requirement that a Independence Avenue, SW., auction is conducted annually until the bidder must have previously Washington, DC 20585; (202) 586–5618 earlier of the first year that annual demonstrated its refining technology in or [email protected]; or Mr. production of cellulosic biofuels in the a pilot plant; that DOE employ a review Edward Myers, Office of the General United States reaches one billion panel to qualify bidders; and that Counsel, U.S. Department of Energy, gallons or 10 years after enactment of putative bidders must submit pro forma Mailstop GC–72, Room 6B–256, 1000 EPAct 2005. financial statements. Independence Avenue, SW., In order to implement section 942, Æ Bidding Process. Adopt an Washington, DC 20585; (202) 586–3397 DOE is promulgating this final rule anonymous iterative, open bidding or [email protected]. establishing procedures for the reverse process and clarify whether bids are to auction and standards for making cover one year or multiple years and/or SUPPLEMENTARY INFORMATION: production incentive awards. The total volume production for a specific I. Background and Overview eligibility standards include both pre- site or multiple sites for a single entity. II. Discussion of Comments and auction requirements which must be The comments recommend that the rule Modifications of Proposed Rule met prior to an entity’s participation in should permit incentive awards that are A. Comments of Dupont Danisco Cellulosic a reverse auction under section 942 and site specific and for multiple years and Ethanol, LLC several post-auction standards which that a bidder also should be able to bid B. Energy Independence and Security Act must be met as a condition of receiving of 2007 in subsequent years for uncovered an award. The post-auction standards production volumes at the same site. C. Heating Value Æ D. Commercial Suitability are especially necessary if the nation is Bidder Defaults. Where the bidder III. Regulatory Review to achieve the long-term goals of section defaults due to a failure to fulfill annual A. Executive Order 12866 942, including delivery of the first one production obligations, (a) only the

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shortfall should be considered to be in With respect to whether a bid is site Protection Agency (EPA) to revise that default and only the dollar value of the specific and/or entity specific, or agency’s regulations implementing shortfall should be added to the amount whether a bid is to cover only a single section 211(o)(1) of the Clean Air Act, of incentives eligible in the next auction year or multiple years, DOE intends that 42 U.S.C. 7545(o), to ensure, inter alia, round; or, in the alternative, (b) each bid should identify a projected that transportation fuel sold or defaulted monies should be allocated to level of production on a per gallon, site, introduced into commerce in the United the next lowest 1 non-winning bidder in entity, and year specific basis for a six States on an annual average basis, the auction in which the defaulting year production period. Bids thus must contains at least a specified minimum bidder won its award. contain projections of anticipated volume of renewable fuel, advanced Æ Force Majeure. DOE should provide production volumes for each of the six biofuel, cellulosic biofuel, or biomass- a reasonable time extension for years covered by the bid. The final rule based diesel. Pursuant to EISA section performance by the successful bidder provides clarification of these matters in 202, the minimum volume requirement where there has been a delay due to a section 452.5(b). Additionally, DOE for cellulosic biofuel, as defined in force majeure event. intends that a bidder should be able to EISA, is 1 billion gallons by the year Æ Transfer of Awards. Awards should bid for additional incentives for 2013. The term ‘‘cellulosic biofuel’’ is be site specific but transferable to uncovered production volumes in defined in section 201 of EISA as entities producing at that site. subsequent years at the same site where ‘‘renewable fuel derived from any DOE agrees with the commenter that, an award has already been made. Also cellulose, hemicellulose, or lignin that as a condition of eligibility for see, section 452.5(b). is derived from renewable biomass and participation in reverse auctions under DOE has revised section 452.6 to that has lifecycle greenhouse gas the rule, bidders should have to address the question of force majeure emissions, as determined by the demonstrate that the technologies which events. Section 452.6(b) contains Administrator, that are at least 60 they employ have been first language that would allow a reasonable percent less than the baseline lifecycle demonstrated as effective processes for extension of time to be granted at DOE’s greenhouse gas emissions.’’ biofuels refining, and the final rule discretion to winning bidders to fulfill To date, the Administrator of the EPA incorporates this recommendation in their obligations under their production has not issued the regulations required the definition of ‘‘eligible cellulosic agreements with DOE. under section 202 of EISA. Nonetheless, biofuels production facility’’ in section Absent a force majeure event, DOE is mindful that the EPA 452.2. Likewise, DOE agrees that however, the final rule provides, in regulations, once promulgated, could bidders must submit audited or pro section 452.6(c) that a winning bidder affect reverse auctions established by forma financial statements as a must produce at least 50 percent of its this final rule. In particular, if the condition of eligibility, as reflected in annual obligation under the production renewable fuel standard for ‘‘cellulosic section 452.4(a)(2). These two agreement in order to avoid a default biofuel’’ under EISA is achieved, the modifications of the NOPR should help and the revocation of its award. last reverse auction required under to ensure that only capable and Assuming that at least 50 percent of its section 942 of EPAct 2005 may occur in financially fit entities participate in the annual obligation is produced in any 2013, rather than 2015, the target reverse auctions. On the other hand, the calendar year covered by the production provided under EPAct for refining 1 rule does not adopt the commenter’s agreement, any shortfall will be added billion gallons of cellulosic biofuels on recommendation for the establishment to the production obligation for the an annual basis. However, this of a review panel. The review of following year. presupposes that the ‘‘cellulosic bidders’ qualifications is a governmental The final rule, however, adopts the biofuel’’ used to meet the renewable fuel function. While DOE may employ a commenter’s alternate recommendation standard under EISA also qualifies as panel to assist it in this review, in the as regards defaults, i.e., if there is still ‘‘cellulosic biofuels’’ for purposes of this manner suggested by the commenter, a shortfall at the end of the last calendar final rule. DOE is not convinced of the need for it year covered by the production That may not be the case, however. in this situation. agreement, the shortfall will be The definition of ‘‘cellulosic biofuel’’ in DOE appreciates the commenter’s allocated to the next best (lowest) bidder section 201 of EISA is different from the recommendation for the adoption of an in the auction round won by the bidder definition used in EPAct and this final anonymous, iterative bidding process. that is party to the production rule. The final rule defines ‘‘cellulosic However, it is not clear at this time that agreement. If, however, the next best biofuel’’ as ‘‘any liquid fuel produced an iterative bidding process would bidder fails to enter into a production from cellulosic feedstocks’’ and improve the bidding process or the agreement with DOE within 30 days ‘‘cellulosic feedstock means any quality of the bids received. It warrants after being notified of its award, the lignocellulosic feedstock as defined by noting that DOE had specifically shortfall will be allocated instead to the EPAct, section 932(a)(2).’’ Thus the final solicited public comment on the next reverse auction. See, section rule attempts to be consistent with the question of potential benefits from use 452.5(d). definition used elsewhere in EPAct. In of such an open iterative bidding As proposed in the NOPR, DOE also the absence of final regulations process but, other than the single agrees with the commenter that awards implementing the renewable fuel recommendation described above, should be site specific but transferable standard of EISA, the definitions received none. Accordingly, DOE will to eligible entities that succeed to established in the later-enacted carefully monitor the procedures ownership of the site. Section 452.5(g) legislation cannot be imported to this adopted in this final rule. Over time, has been revised to clarify this intent. final rule without the possibility that the EPA regulations may further refine DOE may reconsider whether an open B. Energy Independence and Security iterative bidding scheme would be the statutory definitions. Act of 2007 Nevertheless, DOE retains discretion helpful. Title II of the Energy Independence to later modify the definition used in 1 The commenter uses the term ‘‘next highest bid’’ and Security Act of 2007, Pub. L. 110– this final rule in order to make it but, given the context of a reverse auction, we 140 (December 19, 2007) (EISA), directs consistent with the regulations understand him to mean ‘‘next lowest bid.’’ the Administrator of the Environmental implementing EISA, if sound public

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policy considerations support such a • Establishing a distribution/ EISA authorized funding for research modification within the parameters dispensing infrastructure. and development of advanced biofuels established by EPAct. After EPA Additionally, the pre-auction eligibility and cellulosic biofuel. Current research promulgates its regulations submissions must estimate the costs and and development efforts, in implementing section 202 of EISA, DOE discuss the activities required for combination with various will review this final rule to determine eventually commercializing the methodologies that could be funded whether it is feasible and appropriate to proposed cellulosic biofuel. using the procedures established in this reconcile the terms and definitions of regulation, have the potential to realize both rules. III. Regulatory Review alternatives that DOE believes can achieve the production goals set in C. Heating Value A. Executive Order 12866 section 942 of EPAct 2005 and EISA. In an effort to treat all potential Today’s rule has been determined to biofuels equally, section 452.5 of this be a significant regulatory action under B. National Environmental Policy Act final rule modifies the proposed rule by Executive Order 12866, ‘‘Regulatory DOE has determined that this rule is requiring bidders to set forth their Planning and Review,’’ 58 FR 51735 covered under the Categorical Exclusion calculation of the fuel selected for their (October 4, 1993). Accordingly, this found in the DOE’s National bids on a gasoline equivalent volumetric action was subject to review under that Environmental Policy Act (NEPA) basis using the lower heating Btu value Executive Order by the Office of regulations at paragraph A6 of (LHV) of the fuel compared to the LHV Information and Regulatory Affairs of Appendix A to Subpart D, 10 CFR part of gasoline. Awards similarly shall be the Office of Management and Budget 1021, which applies to rulemakings that issued on a gasoline equivalent (OMB). are strictly procedural. DOE notes that volumetric basis. The gasoline Section 942 of EPAct 2005 provides the procedures proposed in this rule do equivalent volumes are to be calculated that awards under the program shall be not afford DOE discretion to determine by multiplying the gallons of biofuels limited to not more than $100 million whether or how a facility will be times the LHV of the fuel divided by in any one year. 42 U.S.C. 16251(d)(4). constructed or operated. DOE’s 116,090 Btu per gallon (the LHV of The possibility of awards at the $100 prescribed role under section 942, that gasoline). An example, in the case of million level makes this rulemaking is, awarding production incentives to ethanol, would be 1 gallon of ethanol economically significant under the the lowest bidder in a reverse auction, times 76,330 Btu per gallon (the LHV of Executive Order. However, the level of is strictly procedural. Accordingly, ethanol) divided by 116,090 (the LHV of funding provided by Congress for this neither an environmental assessment gasoline). Consequently, 1 gallon of program, thus far, suggests it is unlikely nor an environmental impact statement ethanol would be 0.6575 gasoline DOE will award $100 million in any one is required for the rule or for an award equivalent gallons. A table with most year. In fiscal year 2008, Congress that DOE gives or proposes to give to a common fuels heating values can be appropriated $5.0 million to initiate the successful bidder. If DOE subsequently found at: http://cta.ornl.gov/bedb/ program. The President has requested proposes to take any additional actions appendix_a/Lower Higher_ no funding for this program in his Fiscal with respect to successful bidders, Heating_Values_for_Various_Fuels.xls. Year 2010 budget. separate from the award of funds under The incentives awarded for the section 942 of EPAct 2005, DOE will D. Commercial Suitability production of cellulosic biofuels under separately evaluate the need for NEPA This final rule modifies section this program constitute transfer review of those new proposed actions. 452.4(a)(2) of the proposed rule by payments. In this case, the payments are C. Regulatory Flexibility Act clarifying that bidders must demonstrate from the Government to private entities, in their pre-auction eligibility and they do not affect total resources The Regulatory Flexibility Act (5 submissions that, in addition to other available to society. These transfers do U.S.C. 601 et seq.) requires preparation requirements set forth in section 452.4, not involve costs and benefits, and thus of an initial regulatory flexibility they will produce a cellulosic biofuel no assessment of costs and benefits is analysis for any rule that by law must which either currently is suitable for required by Executive Order 12866. See be proposed for public comment, unless widespread general use as a OMB Circular A–4, at 38 and 46. DOE the agency certifies that the rule, if transportation fuel or, alternatively, that expects the first auction will be held in promulgated, will not have a significant the cellulosic biofuel will be suitable for late 2009 or 2010 and the last auction economic impact on a substantial such use in a timeframe and in no later than 2015. As discussed in number of small entities. As required by sufficient volumes to significantly section II. B. of this notice, the Executive Order 13272, ‘‘Proper contribute to the goal of 1 billion gallons Renewable Fuel Standard administered Consideration of Small Entities in of refined cellulosic biofuel by the by EPA was amended by EISA to call for Agency Rulemaking,’’ 67 FR 53461 statutory deadline. Those pre-auction the production of 1 billion gallons of (August 16, 2002), DOE published eligibility submissions proposing fuels cellulosic biofuel by the year 2013. If procedures and policies on February 19, that are not currently widely accepted that goal is met, then the last auction 2003, to ensure that the potential and available as a transportation fuel would occur in 2013. impacts of its rules on small entities are also must describe a clear path to The EPAct 2005 program for properly considered during the achieving the status of an acceptable conducting reverse auctions to provide rulemaking process (68 FR 7990). DOE liquid transportation cellulosic biofuel. incentives for production of cellulosic has made its procedures and policies This description may include, but is not biofuels is one of several actions available on the Office of General limited to the following: Congress has taken to encourage the Counsel’s Web site: http:// • Obtaining vehicle manufacturer(s) production of cellulosic biofuels. As www.gc.doe.gov. approval; discussed, Congress has amended the DOE has reviewed today’s rule under • Obtaining EPA fuel registration(s); Renewable Fuel Standard to set specific the provisions of the Regulatory • Establishing standards for use, targets for the production of cellulosic Flexibility Act and the procedures and production, storage, transportation, and biofuel, including 1 billion gallons by policies published on February 19, retail dispensing; and, 2013. Congress also in EPAct 2005 and 2003. The rule will only affect biofuels

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producers if they choose to participate defines a Federal intergovernmental States, on the relationship between the in the reverse auction. Moreover, the mandate to include any regulation that national government and the States, or rule will provide an economic benefit would impose upon State, local, or on the distribution of power and without imposing any regulatory tribal governments an enforceable duty, responsibilities among the various requirements on producers of cellulosic except a condition of Federal assistance levels of government. No further action biofuels. On the basis of the foregoing, or a duty arising from participating in a is required by Executive Order 13132. DOE certifies that this rule will not have voluntary federal program. Title II of H. Executive Order 12988 a significant economic impact on a that law requires each Federal agency to substantial number of small entities. assess the effects of Federal regulatory With respect to the review of existing Accordingly, DOE has not prepared a actions on State, local, and tribal regulations and the promulgation of regulatory flexibility analysis for this governments, in the aggregate, or to the new regulations, section 3(a) of rulemaking. This certification and private sector, other than to the extent Executive Order 12988, ‘‘Civil Justice supporting statement of factual basis such actions merely incorporate Reform,’’ 61 FR 4729 (February 7, 1996), will be provided to the Chief Counsel requirements specifically set forth in a imposes on Executive agencies the for Advocacy of the Small Business statute. Section 202 of that title requires general duty to adhere to the following Administration pursuant to 5 U.S.C. a Federal agency to perform a detailed requirements: (1) Eliminate drafting 605(b). assessment of the anticipated costs and errors and ambiguity; (2) write benefits of any rule that includes a regulations to minimize litigation; and D. Paperwork Reduction Act Federal mandate which may result in (3) provide a clear legal standard for Section 452.4(a) provides that entities costs to State, local, or tribal affected conduct rather than a general that intend to participate in a reverse governments, or to the private sector, of standard and promote simplification auction must file a pre-auction $100 million or more in any one year and burden reduction. With regard to eligibility submission. The pre-auction (adjusted annually for inflation). 2 the review required by section 3(a), eligibility submission must contain U.S.C. 1532(a) and (b). Section 204 of section 3(b) of Executive Order 12988 certain information, including an that title requires each agency that specifically requires that Executive implementation plan, as described proposes a rule containing a significant agencies make every reasonable effort to above. This information will be used by Federal intergovernmental mandate to ensure that the regulation: (1) Clearly DOE to determine if an entity that files develop an effective process for specifies the preemptive effect, if any; a pre-auction eligibility submission will obtaining meaningful and timely input (2) clearly specifies any effect on be accepted to participate in the reverse from elected officers of State, local, and existing Federal law or regulation; (3) auction. tribal governments. 2 U.S.C. 1534. provides a clear legal standard for In addition, section 452.4(c) provides This rule will not impose a Federal affected conduct while promoting that a bidder must submit a progress mandate on State, local, or tribal simplification and burden reduction; (4) report. The progress report must contain governments or on the private sector. specifies the retroactive effect, if any; (5) the additional information described Accordingly, no assessment or analysis adequately defines key terms; and (6) above. DOE will use this information to is required under the Unfunded addresses other important issues evaluate the bidder’s progress in the Mandates Reform Act of 1995. affecting clarity and general production of cellulosic biofuels. DOE draftsmanship under any guidelines has submitted this collection of F. Treasury and General Government issued by the Attorney General. Section information to the Office of Appropriations Act, 1999 3(c) of Executive Order 12988 requires Management and Budget for approval Section 654 of the Treasury and Executive agencies to review regulations pursuant to the Paperwork Reduction General Government Appropriations in light of applicable standards in Act of 1995 (44 U.S.C. 3501 et seq.) and Act, 1999 (Pub. L. 105–277) requires section 3(a) and section 3(b) to the procedures implementing that Act, 5 Federal agencies to issue a Family determine whether they are met or it is CFR 1320.1 et seq. Policymaking Assessment for any rule unreasonable to meet one or more of DOE estimates that the annual that may affect family well being. The them. DOE has completed the required reporting and recordkeeping burden for rule will not have any impact on the review and determined that, to the this collection of information will be 30 autonomy or integrity of the family as extent permitted by law, the rule meets hours per year (10 bidders × 3 hours) at an institution. Accordingly, DOE has the relevant standards of Executive a total annual cost of $2250 (10 bidders concluded that it is not necessary to Order 12988. × $225 per auction). Burden means the prepare a Family Policymaking total time, effort, or financial resources Assessment. I. Treasury and General Government expended by persons to generate, Appropriations Act, 2001 G. Executive Order 13132 maintain, retain, or disclose or provide The Treasury and General information to or for a federal agency. Executive Order 13132, ‘‘Federalism,’’ Government Appropriations Act, 2001 An agency may not conduct or sponsor, 64 FR 43255 (August 4, 1999) imposes (44 U.S.C. 3516 note) provides for and a person is not required to respond certain requirements on agencies agencies to review most disseminations to a collection of information unless it formulating and implementing policies of information to the public under displays a currently valid OMB control or regulations that preempt State law or guidelines established by each agency number. that have federalism implications. pursuant to general guidelines issued by Agencies are required to examine the OMB. E. Unfunded Mandates Reform Act of constitutional and statutory authority OMB’s guidelines were published at 1995 supporting any action that would limit 67 FR 8452 (February 22, 2002), and The Unfunded Mandates Reform Act the policymaking discretion of the DOE’s guidelines were published at 67 of 1995 (Pub. L. 104–4) generally States and carefully assess the necessity FR 62446 (October 7, 2002). DOE has requires Federal agencies to examine for such actions. DOE has examined this reviewed today’s rule under the OMB closely the impacts of regulatory actions rule and has determined that it would and DOE guidelines and has concluded on State, local, and tribal governments. not preempt State law and would not that it is consistent with applicable Subsection 101(5) of title I of that law have a substantial direct effect on the policies in those guidelines.

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J. Executive Order 13211 Issued in Washington, DC, on September (2) Which meets all applicable 11, 2009. Federal and State permitting Executive Order 13211, ‘‘Actions Cathy Zoi, requirements; Concerning Regulations That Assistant Secretary, Energy Efficiency and (3) Employs a demonstrated refining Significantly Affect Energy Supply, Renewable Energy. technology; and Distribution, or Use,’’ 66 FR 28355 (May ■ For the reasons stated in the preamble, (4) Meets any relevant financial 22, 2001) requires Federal agencies to DOE is amending chapter II of title 10 criteria established by the Secretary. prepare and submit to OMB, a of the Code of Federal Regulations by EPAct 2005 means the Energy Policy Statement of Energy Effects for any adding a new part 452 as set forth Act of 2005, Public Law 109–58 (August proposed significant energy action. A below: 8, 2005). ‘‘significant energy action’’ is defined as Open window means the period any action by an agency that PART 452—PRODUCTION INCENTIVES during each reverse auction, as specified promulgated or is expected to lead to FOR CELLULOSIC BIOFUELS in an associated solicitation, during promulgation of a final rule, and that: which DOE accepts bids for production (1) Is a significant regulatory action Sec. incentives under this part. 452.1 Purpose and scope. under Executive Order 12866, or any Secretary means the Secretary of 452.2 Definitions. Energy. successor order; and (2) is likely to have 452.3 Solicitations. a significant adverse effect on the 452.4 Eligibility requirements. § 452.3 Solicitations. supply, distribution, or use of energy, or 452.5 Bidding procedures. The reverse auction process (3) is designated by the Administrator of 452.6 Incentive award terms and limitations. commences with the issuance of a OIRA as a significant energy action. For solicitation by DOE. DOE will publish a any proposed significant energy action, Authority: 42 U.S.C. 7101 et seq.; 42 solicitation in the Federal Register and the agency must give a detailed U.S.C. 16251. shall post the solicitation on its website statement of any adverse effects on § 452.1 Purpose and scope. at www.eere.energy.gov no later than 60 energy supply, distribution, or use (a) This part sets forth the standards, days before the bidding in a reverse should the proposal be implemented, auction under this part commences. The and of reasonable alternatives to the policies, and procedures that the Department of Energy uses for receiving, solicitation shall: action and their expected benefits on evaluating, and awarding bids in reverse (a) Invite interested persons and energy supply, distribution, and use. auctions of production incentive businesses to submit pre-qualification Today’s regulatory action would not payments for cellulosic biofuels under statements; have a significant adverse effect on the section 942 of the Energy Policy Act of (b) Set forth the terms on which bids supply, distribution, or use of energy 2005 (42 U.S.C. 16251). will be accepted; and is therefore not a significant energy (c) Specify the open window for (b) Part 1024 of chapter X of title 10 action. Accordingly, DOE has not bidding; and of the Code of Federal Regulations shall prepared a Statement of Energy Effects. (d) Specify the date by which not apply to actions taken under this successful bidders will be required to K. Consultation part. file pre-auction eligibility submissions. § 452.2 Definitions. Pursuant to section 942(c)(1) of EPAct § 452.4 Eligibility requirements. 2005, DOE has consulted with the As used in this part: (a) Pre-auction eligibility submissions. Secretary of Agriculture, the Secretary Cellulosic biofuel means any liquid (1) Entities that intend to participate in of Defense, and the Administrator of the fuel produced from cellulosic a reverse auction, within the time Environmental Protection Agency prior feedstocks. period stated in the relevant solicitation, to issuing today’s rule. Cellulosic feedstock means any must file a pre-auction eligibility lignocellulosic feedstock as defined by L. Congressional Notification. submission that provides all EPAct, section 932(a)(2). information requested in the applicable As required by 5 U.S.C. 801, DOE will Commercially significant quantity solicitation to which it is responding, report to Congress promulgation of this means 10 million gallons or more of including an implementation plan. rule prior to its effective date. The cellulosic biofuels produced in one (2) Each pre-auction eligibility report will state that it has been year. submission’s implementation plan determined that the rule is not a ‘‘major DOE means the U.S. Department of must, at a minimum: rule’’ as defined by 5 U.S.C. 804(2). DOE Energy. (i) Demonstrate that the filing party will submit the supporting analysis to Eligible biofuels producer means a owns and operates or plans to own and the Comptroller General in the U.S. business association, including but not operate an eligible cellulosic biofuels Government Accountability Office and limited to a sole proprietorship, production facility; make it available to each House of partnership, joint venture, corporation, (ii) Identify the site or proposed site Congress. or other business entity that owns and for the filing party’s eligible cellulosic operates, or plans to own and operate, biofuels production facility; IV. Approval of the Office of the an eligible cellulosic biofuels (iii) Demonstrate that the cellulosic Secretary production facility and that meets all biofuel to be produced for purposes of other eligibility requirements that are receiving an award either currently is The issuance of this rule has been conditions on the receipt of production suitable for widespread general use as a approved by the Office of the Secretary. incentives under this part. transportation fuel or will be suitable for List of Subjects in 10 CFR Part 452 Eligible cellulosic biofuels production such use in a timeframe and in facility means a facility— sufficient volumes to significantly Fuel, Grant programs, Recordkeeping (1) Located in the United States contribute to the goal of 1 billion gallons and reporting requirements, Renewable (including U.S. territories and of refined cellulosic biofuel by August energy. possessions); 2015.

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(iv) Provide audited or pro forma part must demonstrate that it has names of the successful bidders and the financial statements for the latest 12 fulfilled the terms of its production terms of their bids. month period; and agreement entered into with DOE (2) DOE shall issue awards for the bid (v) Identify one or more proposed pursuant to paragraph (d) of this production amounts beginning with the sources of financing for the construction section. bidder that submitted the bid for the or expansion of the filing party’s eligible (2) As a condition of continuing to lowest level of production incentive on cellulosic biofuels production facility. receive production incentive payments a per gallon basis. (b) Notification of pre-auction under this part, a bidder that has (3) In the event of a tie among the eligibility status. DOE shall notify each entered into a production agreement lowest bids, preference will be given to entity that files a pre-auction eligibility with DOE must annually submit to DOE, the lowest tied bidder based on DOE’s submission of its acceptance or rejection by a commercially reasonable date evaluation of the extent to which the no later than 15 days before the reverse specified by DOE, verification of the tied bids meet the following criteria: auction for which the submission was bidder’s production volumes for the (i) Demonstrates outstanding potential made. A DOE decision constitutes final prior calendar year. Within 90 days of for local and regional economic agency action and is conclusive. the submission of such verification, development; (c) Progress reports. Within one year DOE shall notify the successful bidder (ii) Includes agricultural producers or after the reverse auction in which a whether the bidder has fulfilled the cooperatives of agricultural producers as bidder successfully competed, the terms of the production agreement and equity partners in the ventures; and bidder must submit a progress report shall make payment of any production (iii) Has a strategic agreement in place that includes all additional information incentive awards then outstanding for to fairly reward feedstock suppliers. required by the solicitation in which the the one year period covered by the (4) In the event more than one lowest bidder submitted a successful bid and verified data submission. tied bid equally meets the standards in which demonstrates that the bidder has: paragraph (c)(3) of this section, the (1) Acquired the site where its § 452.5 Bidding procedures. award will be distributed equally on a proposed eligible cellulosic biofuels DOE shall conduct an electronic per capita basis among those lowest tied production facility is or will be located; reverse auction through a limited bidders meeting the standards. (2) Obtained secure financing duration single bid per producer auction § 452.6 Incentive award terms and commitments for the plant or expansion process open only to pre-auction thereof, as necessary to produce limitations. eligible cellulosic biofuels producers. (a) Amount of incentive. Subject to the cellulosic biofuels; and The following procedures shall be used: (3) Entered into a written engineering, availability of appropriated funds and (a) DOE shall accept only electronic procurement, and construction (EPC) the limitations in paragraph (c) of this bids received from pre-auction eligible contract for design and construction of section, an eligible cellulosic biofuels cellulosic biofuels producers during the the eligible cellulosic biofuels producer selected to receive an award open window established in the production facility; such EPC contract shall receive the amount of the solicitation. The open window shall must provide for completion of production incentive on the per gallon consist of a single continuous period of construction of the eligible cellulosic basis requested in the auction at least four hours for each auction. biofuels production facility such that solicitation for each gallon produced operations at the plant or plant (b) Bids shall identify an estimated and sold by the entity during the first expansion will commence within three annual production amount from an six years of operation of its eligible years of the reverse auction in which the eligible cellulosic biofuels production cellulosic biofuels production facility. bidder successfully competed. facility on a per gallon, site, entity, and (b) Failure to commence production. (d) Production agreement. Within 90 year specific basis for a consecutive six Except in the circumstance of a force days after submission of its progress year production period. A bid also may majeure event, as solely determined by report under paragraph (c) of this be submitted for additional incentives DOE, failure by an eligible cellulosic section, the successful bidder must for uncovered production volumes at a biofuels producer that made a enter into an agreement with DOE site where an award was made in an successful bid to commence production which requires the bidder to begin earlier auction round. of cellulosic biofuels, at the eligible production of commercially significant (c) All bids must set forth the cellulosic biofuels production facility quantities of cellulosic biofuels, at the methodology used to derive the that was the subject of the successful eligible cellulosic biofuels production estimates of annual production volumes bid, by the end of the third year after the facility that was the subject of the covered by the bid and the bid shall be close of submission of the open window relevant bid, not later than three years calculated on a gasoline equivalent of bids for the reverse auction in which from the date of the acceptance of the volumetric basis using the lower heating it submitted a successful bid, shall successful bid. Btu value of the fuel compared to the result in immediate revocation of DOE’s (e) Confirmation of continuing lower heating Btu value of gasoline. award to that producer. eligibility. After receiving the progress (d) All bids will be confidential until (c) Failure of the successful bidder to report described in the paragraph (e) of 45 days after the close of the window for meet annual production obligations. the section and upon confirmation by submission of bids for the reverse Except in the circumstance of a force DOE that the successful bidder has auction. majeure event, as solely determined by entered into a production agreement (e) Bid evaluation and incentive DOE, a successful bidder’s failure to with DOE, as described in paragraph (d) awards selection procedures include the produce at least 50 percent of the of this section, DOE will confirm to the following: volumes specified in its production bidder that it continues to meet the (1) After DOE evaluates the bids agreement by December 31 of any year eligibility requirements of this part. received during the open window, it covered by the bid shall result in (f) Contractual condition on eligibility. shall, within 45 days following the close immediate revocation of DOE’s award; if (1) As a condition of the receipt of an of the open window for submission of the successful bidder produces 50 award under this part, a successful bids for the reverse auction, announce percent or more of the volumes set forth bidder in a reverse auction under this on DOE’s website and by direct mail the in the production agreement on an

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annual basis by December 31 of any year with DOE to commence production of reserve tranche and reserve requirement covered by the agreement, any cellulosic biofuels in commercially exemption amount will apply to the production shortfall will be carried significant quantities not later than seven-day reserve computation period forward and added to the successful three years of the date that bidding that begins Tuesday, December 15, bidder’s production obligations for next closes on the reverse auction in which 2009, and the corresponding seven-day year covered by the agreement. the predecessor entity submitted a reserve maintenance period that begins (d) Shortfalls remaining at the end of successful bid. Thursday, January 14, 2010. For all the production period. If, for any reason, [FR Doc. E9–24778 Filed 10–14–09; 8:45 am] depository institutions, these new by December 31 of the last year of the BILLING CODE 6450–01–P values of the nonexempt deposit cutoff production agreement, the bidder has level, the reserve requirement failed to produce the total production exemption amount, and the reduced volumes for all years covered by the FEDERAL RESERVE SYSTEM reporting limit will be used to agreement, any such remaining shortfall determine the frequency at which a shall be awarded to the bidder with the 12 CFR Part 204 depository institution submits deposit next lowest bid in the auction round for reports effective in either June or which the award was made. If, however, [Regulation D; Docket No. R–1373] September 2010. the next best bidder is unable to enter Reserve Requirements of Depository FOR FURTHER INFORMATION CONTACT: into a production agreement with DOE Institutions Sophia Allison, Senior Counsel (202/ within 30 days after being notified of its 452–3565), Legal Division, or Mary- award, the shortfall shall be allocated AGENCY: Board of Governors of the Frances Styczynski, Financial Analyst instead to the next reverse auction. Federal Reserve System. (202/452–3303), Division of Monetary (e) Incentive award limitations. The ACTION: Final rule. Affairs; for users of following limits shall apply to awards of Telecommunications Device for the Deaf cellulosic biofuels production SUMMARY: The Board is amending (TDD) only, contact (202/263–4869); incentives under this part: Regulation D, Reserve Requirements of Board of Governors of the Federal (1) During the first four years after the Depository Institutions, to reflect the Reserve System, 20th and C Streets, commencement of the program, the annual indexing of the reserve NW., Washington, DC 20551. incentive shall be limited to $1.00 per requirement exemption amount and the SUPPLEMENTARY INFORMATION: Section gallon. For purposes of this limitation, low reserve tranche for 2010. The 19(b)(2) of the Federal Reserve Act (12 the program shall be deemed to have Regulation D amendments set the U.S.C. 461(b)(2)) requires each commenced on the date that the first amount of total reservable liabilities of depository institution to maintain solicitation for a reverse auction is each depository institution that is reserves against its transaction accounts issued; subject to a zero percent reserve and nonpersonal time deposits, as (2) A per gallon cap over the requirement in 2010 at $10.7 million, up prescribed by Board regulations, for the remaining lifetime of the program of from $10.3 million in 2009. This purpose of implementing monetary $.95 per gallon provided that— amount is known as the reserve policy. Section 11(a)(2) of the Federal (i) This cap shall be lowered by $.05 requirement exemption amount. The Reserve Act (12 U.S.C. 248(a)(2)) each year commencing the first year Regulation D amendments also set the authorizes the Board to require reports after annual cellulosic biofuels amount of net transaction accounts at of liabilities and assets from depository production in the United States exceeds each depository institution that is institutions to enable the Board to 1 billion gallons; subject to a three percent reserve conduct monetary policy. The Board’s (ii) Not more than 25 percent of the requirement in 2010 at $55.2 million, up actions with respect to each of these funds committed within each reverse from $44.4 million in 2009. This provisions are discussed in turn below. auction shall be awarded to any single amount is known as the low reserve project; tranche. The adjustments to both of 1. Reserve Requirements (iii) Not more than $100 million in these amounts are derived using Pursuant to section 19(b) of the production incentives shall be awarded statutory formulas specified in the Federal Reserve Act (Act), transaction in any one calendar year; and Federal Reserve Act. The Board is also account balances maintained at each (iv) Not more than $1 billion in announcing changes in two other depository institution are subject to production incentives shall be awarded amounts, the nonexempt deposit cutoff reserve requirement ratios of zero, three, over the lifetime of the program. level and the reduced reporting limit, or ten percent. Section 19(b)(11)(A) of (f) Participation in subsequent that are used to determine the frequency the Act (12 U.S.C. 461(b)(11)(A)) auctions. A successful bidder in a at which depository institutions must provides that a zero percent reserve reverse auction under this part may submit deposit reports. requirement shall apply at each participate in subsequent reverse DATES: Effective Date: November 16, depository institution to total reservable auctions if the incentives sought will 2009. liabilities that do not exceed a certain assist the addition of plant production Compliance Dates: For depository amount, known as the reserve capacity for the eligible cellulosic institutions that report deposit data requirement exemption amount. Section biofuels production facility associated weekly, the new low reserve tranche 19(b)(11)(B) provides that, before with its previously successful bid. and reserve requirement exemption December 31 of each year, the Board (g) Transferability of awards. A amount will apply to the fourteen-day shall issue a regulation adjusting the production incentive award under this reserve computation period that begins reserve requirement exemption amount part may be transferred to a successor Tuesday, December 1, 2009, and the for the next calendar year if total entity at the same production facility for corresponding fourteen-day reserve reservable liabilities held at all which the award was made, provided maintenance period that begins depository institutions increase from that the successor entity meets all Thursday, December 31, 2009. For one year to the next. No adjustment is eligibility requirements of this part, depository institutions that report made to the reserve requirement including execution of an agreement deposit data quarterly, the new low exemption amount if total reservable

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liabilities held at all depository the seven-day reserve computation level to $243.1 million for 2010. The institutions should decrease during the period beginning Tuesday, December Board is also increasing the reduced applicable time period. The Act requires 15, 2009, and for the corresponding reporting limit to $1.362 billion for the percentage increase in the reserve seven-day reserve maintenance period 2010.2 requirement exemption amount to be 80 beginning Thursday, January 14, 2010. Beginning in 2010, the boundaries of the four deposit reporting panels will be percent of the increase in total 2. Deposit Reports reservable liabilities of all depository defined as follows. Those depository institutions over the one-year period Section 11(b)(2) of the Federal institutions with net transaction that ends on the June 30 prior to the Reserve Act authorizes the Board to accounts over $10.7 million (the reserve adjustment. require depository institutions to file requirement exemption amount) or with Total reservable liabilities of all reports of their liabilities and assets as total transaction accounts, savings depository institutions increased 5.0 the Board may determine to be deposits, and small time deposits percent (from $4,770 billion to $5,011 necessary or desirable to enable it to greater than or equal to $1.362 billion billion) between June 30, 2008, and June discharge its responsibility to monitor (the reduced reporting limit) are subject 30, 2009. Accordingly, the Board is and control the monetary and credit to detailed reporting, and must file a amending Regulation D to increase the aggregates. The Board screens Report of Transaction Accounts, Other reserve requirement exemption amount depository institutions each year and Deposits and Vault Cash (FR 2900 by $0.4 million, from $10.3 million for assigns them to one of four deposit report) either weekly or quarterly. Of 2009 to $10.7 million for 2010.1 reporting panels (weekly reporters, this group, those with total transaction Pursuant to Section 19(b)(2) of the Act quarterly reporters, annual reporters, or accounts, savings deposits, and small (12 U.S.C. 461(b)(2)), transaction nonreporters). The panel assignment for time deposits greater than or equal to account balances maintained at each annual reporters is effective in June of $243.1 million (the nonexempt deposit depository institution over the reserve the screening year; the panel assignment cutoff level) are required to file the FR requirement exemption amount and up for weekly and quarterly reporters is 2900 report each week, while those with to a certain amount, known as the low effective in September of the screening total transaction accounts, savings reserve tranche, are subject to a three year. deposits, and small time deposits less percent reserve requirement. In order to ease reporting burden, the than $243.1 million are required to file Transaction account balances over the Board permits smaller depository the FR 2900 report each quarter. Those low reserve tranche are subject to a ten institutions to submit deposit reports depository institutions with net less frequently than larger depository percent reserve requirement. Section transaction accounts less than or equal institutions. The Board permits 19(b)(2) also provides that, before to $10.7 million (the reserve depository institutions with net December 31 of each year, the Board requirement exemption amount) and transaction accounts above the reserve shall issue a regulation adjusting the with total transaction accounts, savings requirement exemption amount but total low reserve tranche for the next deposits, and small time deposits less transaction accounts, savings deposits, calendar year. The Act requires the than $1.362 billion (the reduced and small time deposits below a adjustment in the low reserve tranche to reporting limit) are eligible for reduced specified level (the ‘‘nonexempt deposit be 80 percent of the percentage increase reporting, and must either file a deposit cutoff’’) to report deposit data quarterly. or decrease in total transaction accounts report annually or not at all. Of this Depository institutions with net group, those with total deposits greater of all depository institutions over the transaction accounts above the reserve one-year period that ends on the June 30 requirement exemption amount but than $10.7 million (but with total prior to the adjustment. with total transaction accounts, savings transaction accounts, savings deposits, Net transaction accounts of all deposits, and small time deposits above and small time deposits less than $1.362 depository institutions increased 31.0 the nonexempt deposit cutoff are billion) are required to file the Annual percent (from $665 billion to $868 required to report deposit data weekly. Report of Deposits and Reservable billion) between June 30, 2008 and June The Board requires certain large Liabilities (FR 2910a) report annually, 30, 2009. Accordingly, the Board is depository institutions to report weekly while those with total deposits less than amending Regulation D to increase the regardless of the level of their net or equal to $10.7 million are not low reserve tranche for net transaction transaction accounts if the depository required to file a deposit report. A accounts by $10.8 million, from $44.4 institution’s total transaction accounts, depository institution that adjusts million for 2009 to $55.2 million for savings deposits, and small time reported values on its FR 2910a report 2010. deposits exceeds a specified level (the in order to qualify for reduced reporting For depository institutions that file ‘‘reduced reporting limit’’). The will be shifted to an FR 2900 reporting deposit reports weekly, the new low nonexempt deposit cutoff level and the panel. reserve tranche and reserve requirement reduced reporting limit are adjusted Notice and Regulatory Flexibility Act. exemption amount will be effective for annually, by an amount equal to 80 The provisions of 5 U.S.C. 553(b) the fourteen-day reserve computation percent of the increase, if any, in total relating to notice of proposed period beginning Tuesday, December 1, transaction accounts, savings deposits, rulemaking have not been followed in 2009, and for the corresponding and small time deposits of all connection with the adoption of these fourteen-day reserve maintenance depository institutions over the one-year amendments. The amendments involve period beginning Thursday, December period that ends on the June 30 prior to expected, ministerial adjustments 31, 2009. For depository institutions the adjustment. prescribed by statute and by the Board’s that report quarterly, the new low From June 30, 2008 to June 30, 2009, policy concerning reporting practices. reserve tranche and reserve requirement total transaction accounts, savings The adjustments in the reserve exemption amount will be effective for deposits, and small time deposits at all requirement exemption amount, the low depository institutions increased 10 1 Consistent with Board practice, the low reserve 2 Consistent with Board practice, the nonexempt tranche and reserve requirement exemption percent (from $6,461 billion to $7,126 deposit cutoff level has been rounded to the nearest amounts have been rounded to the nearest $0.1 billion). Accordingly, the Board is $0.1 million, and the reduced reporting limit has million. increasing the nonexempt deposit cutoff been rounded to the nearest $1 million.

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reserve tranche, the nonexempt deposit ■ For the reasons set forth in the § 204.4 Computation of required reserves. cutoff level, and the reduced reporting preamble, the Board is amending 12 * * * * * limit serve to reduce regulatory burdens CFR part 204 as follows: (f) For all depository institutions, on depository institutions. Accordingly, the Board finds good cause for PART 204—RESERVE Edge and Agreement corporations, and determining, and so determines, that REQUIREMENTS OF DEPOSITORY United States branches and agencies of notice in accordance with 5 U.S.C. INSTITUTIONS (REGULATION D) foreign banks, required reserves are 553(b) is unnecessary. Consequently, computed by applying the reserve the provisions of the Regulatory ■ 1. The authority citation for part 204 requirement ratios below to net Flexibility Act, 5 U.S.C. 601, do not continues to read as follows: transaction accounts, nonpersonal time deposits, and Eurocurrency liabilities of apply to these amendments. Authority: 12 U.S.C. 248(a), 248(c), 371a, 461, 601, 611, and 3105. the institution during the computation List of Subjects in 12 CFR Part 204 period. Banks, banking, Reporting and ■ 2. Section 204.4(f) is revised to read as recordkeeping requirements. follows:

Reservable liability Reserve requirement ratio

NET TRANSACTION ACCOUNTS: $0 to reserve requirement exemption amount ($10.7 million) ...... 0 percent of amount. Over reserve requirement exemption amount ($10.7 million) and up to low reserve tranche ($55.2 mil- 3 percent of amount. lion). Over low reserve tranche ($55.2 million) ...... $1,335,000 plus 10 percent of amount over $55.2 million. Nonpersonal time deposits ...... 0 percent. Eurocurrency liabilities ...... 0 percent.

By order of the Board of Governors of the advance notice about anticipated future check.’’ A check is considered local if it Federal Reserve System, October 9, 2009. amendments in connection with the is payable by or at or through a bank Jennifer J. Johnson, Reserve Banks’ restructuring such that located in the same Federal Reserve Secretary of the Board. by early next year there will only be a check-processing region as the [FR Doc. E9–24767 Filed 10–14–09; 8:45 am] single check-processing region for depositary bank. BILLING CODE 6210–01–P purposes of Regulation CC. Accordingly, Appendix A to Regulation CC at that time there will no longer be any contains a routing number guide that checks that would be considered assists banks in identifying local and FEDERAL RESERVE SYSTEM nonlocal. nonlocal banks and thereby determining DATES: the maximum permissible hold periods 12 CFR Part 229 The amendments to appendix A to part 229 in amendatory instruction 2 for most deposited checks. The [Regulation CC; Docket No. R–1372] are effective October 17, 2009. appendix includes a list of each Federal The amendments to appendix A to Reserve check-processing office and the Availability of Funds and Collection of part 229 in amendatory instruction 3 are first four digits of the routing number, Checks effective November 14, 2009. known as the Federal Reserve routing AGENCY: Board of Governors of the FOR FURTHER INFORMATION CONTACT: symbol, of each bank that is served by Federal Reserve System. Jeffrey S. H. Yeganeh, Financial Services that office for check-processing purposes. Banks whose Federal Reserve ACTION: Final rule; technical Manager (202/728–5801), or Joseph P. amendment. Baressi, Financial Services Project routing symbols are grouped under the Leader (202/452–3959), Division of same office are in the same check- SUMMARY: The Board of Governors Reserve Bank Operations and Payment processing region and thus are local to (Board) is amending the routing number Systems; or Dena L. Milligan, Attorney one another. (202/452–3900), Legal Division. For guide to next-day availability checks Final Amendments to Appendix A and local checks in Regulation CC to users of Telecommunications Devices delete the reference to the head office of for the Deaf (TDD) only, contact 202/ On October 17, 2009, the Reserve the Federal Reserve Bank of Dallas and 263–4869. Banks will transfer the check-processing to reassign the Federal Reserve routing SUPPLEMENTARY INFORMATION: operations of the head office of the symbols currently listed under that Federal Reserve Bank of Dallas to the Background office to the head office of the Federal head office of the Federal Reserve Bank Reserve Bank of Cleveland. The Board is Regulation CC establishes the of Cleveland. On November 14, 2009, also amending the routing number guide maximum period a depositary bank may the Reserve Banks will transfer the to delete the reference to the Los wait between receiving a deposit and check-processing operations of the Los Angeles branch office of the Federal making the deposited funds available Angeles branch office of the Federal Reserve Bank of San Francisco and to for withdrawal.1 A depositary bank Reserve Bank of San Francisco to the reassign the routing symbols currently generally must provide faster head office of the Federal Reserve Bank listed under that office to the head office availability for funds deposited by a of Cleveland. As a result of these of the Federal Reserve Bank of ‘‘local check’’ than by a ‘‘nonlocal changes, some checks that are drawn on Cleveland. These amendments reflect and deposited at banks located in the the restructuring of check-processing 1 For purposes of Regulation CC, the term ‘‘bank’’ Dallas, Los Angeles, and Cleveland refers to any depository institution, including operations within the Federal Reserve commercial banks, savings institutions, and credit check-processing regions and that System. The Board is also providing unions. currently are nonlocal checks will

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become local checks subject to faster there will no longer be any checks that Paperwork Reduction Act availability schedules. To assist banks would be considered nonlocal. In accordance with the Paperwork in identifying local and nonlocal checks Administrative Procedure Act Reduction Act of 1995 (44 U.S.C. 3506; and making funds availability decisions, 5 CFR 1320 Appendix A.1), the Board the Board is amending the lists of The public comment requirements of has reviewed the final rule under routing symbols in appendix A section 553(b) of the Administrative authority delegated to the Board by the associated with the Federal Reserve Procedure Act do not apply to these Office of Management and Budget. The Banks of Dallas, San Francisco, and amendments to Appendix A of technical amendments to Appendix A of Cleveland to reflect the transfer of Regulation CC because the amendments Regulation CC will delete the references check-processing operations from the involve matters of agency organization. to the head office of the Federal Reserve Dallas head office and the Los Angeles The Monetary Control Act requires cost Bank of Dallas and the Los Angeles branch office to the head office of the recovery for Federal Reserve Bank branch office of the Federal Reserve Federal Reserve Bank of Cleveland. To priced services over the long term, Bank of San Francisco and reassign the coincide with the effective date of the routing symbols listed under those underlying check-processing changes, which from time to time necessitates changes in the internal organization of offices to the head office of the Federal the amendments to appendix A are Reserve Bank of Cleveland. The effective October 17 and November 14, Reserve Bank services in order to meet the statutory mandate. The rapid depository institutions that are located 2009, respectively. The Board is in the affected check-processing regions providing notice of the amendments at decline in paper check volumes, generally, and the decline in paper and that include the routing numbers in this time to give affected banks ample their disclosure statements would be checks sent to the Reserve Banks for time to make any needed processing required to notify customers of the collection have significantly reduced changes. Early notice also will enable resulting change in availability under the need for Federal Reserve check- affected banks to amend their § 229.18(e). However, the Board believes availability schedules and related processing locations and the ability of that all procedures for notifying disclosures if necessary and provide Reserve Banks to recover the costs of customers of any change in funds their customers with notice of these maintaining those locations. In order to availability are in place, and therefore, 2 changes. achieve the Monetary Control Act the Board anticipates that no additional requirement of long-run full cost Information About Anticipated Future burden will be imposed as a result of recovery, the Reserve Banks have Changes to Regulation CC this rulemaking. adjusted their check service The Federal Reserve Banks initially infrastructure to reduce the number of List of Subjects in 12 CFR Part 229 announced in November 2008 that check-processing regions. In light of the Banks, Banking, Reporting and decreases in check volume necessitated fact that the Reserve Banks are receiving recordkeeping requirements. transition to a single paper-check- a high percentage of checks Authority and Issuance processing site in order to comply with electronically, the consolidation of the cost recovery provisions of the check processing centers and the ■ For the reasons set forth in the 3 Monetary Control Act. On July 31, accompanying amendments to preamble, the Board is amending 12 2009, the Reserve Banks reaffirmed that Appendix A of Regulation CC are CFR part 229 to read as follows: decreasing check-processing volume required by law. As a result of the was likely to necessitate the transition consolidation of Federal Reserve check- PART 229—AVAILABILITY OF FUNDS to a single check-processing center by AND COLLECTION OF CHECKS processing offices, amendments to the first quarter of 2010.4 The Reserve (REGULATION CC) Appendix A are necessary because the Banks are taking these steps in response statutory and regulatory terms ‘‘local’’ ■ to the continued nationwide decline in 1. The authority citation for part 229 and ‘‘nonlocal’’ are defined in terms of check usage, as well as the rapidly continues to read as follows: increasing use of electronic check- ‘‘check-processing regions’’—the Authority: 12 U.S.C. 4001–4010, 12 U.S.C. clearing methods, and to meet the cost geographic areas served by a Federal 5001–5018. Reserve check-processing office. recovery requirements of the Monetary ■ 2. Effective October 17, 2009, the Control Act of 1980. For the information In addition, the Board finds, in Fourth and Eleventh District routing and planning needs of banks, the Board accordance with APA section 553(d), symbol lists in appendix A are amended is today providing notice that, assuming good cause for making the amendments by removing the headings and listings check volumes continue to evolve in to Appendix A relating to the transfer of for the Eleventh Federal Reserve District line with the Reserve Banks’ check-processing operations from Dallas and revising the listings for the Fourth expectations, the Reserve Banks intend to Cleveland effective without 30 days Federal Reserve District to read as to change their check-processing advance publication. On August 14, follows: infrastructure such that by early next 2009, the Federal Reserve Banks, by year there will be only a single check- letter, informed depository institutions APPENDIX A To Part 229—Routing processing region for purposes of within Dallas’s check-processing region Number Guide To Next-Day Regulation CC. Accordingly, at that time of the October 17 transfer of check- Availability Checks and Local Checks processing operations from Dallas to * * * * * 2 Section 229.18(e) of Regulation CC requires that Cleveland. That letter was then banks notify account holders who are consumers Fourth Federal Reserve District within 30 days after implementing a change that published on the Federal Reserve improves the availability of funds. Financial Services’ Web site. [Federal Reserve Bank of Cleveland] 3 See http://www.frbservices.org/files/ Accordingly, the affected depository Head Office communications/pdf/check/ _ _ institutions are aware of and making 0220–2220 110608 restructure announcement.pdf. preparations for the transfer of paper 4 See http://www.frbservices.org/files/ 0223–2223 communications/pdf/check/ check-processing operations from Dallas 0410–2410 073109_check_restructure_acceleration.pdf. to Cleveland. 0412–2412

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0420–2420 Federal Reserve District to read as 1113–3113 0421–2421 follows: 1119–3119 0422–2422 1120–3120 0423–2423 APPENDIX A TO PART 229— 1122–3122 0430–2430 ROUTING NUMBER GUIDE TO NEXT- 1123–3123 0432–2432 DAY AVAILABILITY CHECKS AND 1130–3130 0433–2433 LOCAL CHECKS 1131–3131 0434–2434 1140–3140 0440–2440 * * * * * 1149–3149 0441–2441 Fourth Federal Reserve District 1163–3163 0442–2442 1210–3210 0515–2515 [Federal Reserve Bank of Cleveland] 1211–3211 0519–2519 1212–3212 Head Office 0710–2710 1213–3213 0711–2711 0220–2220 1220–3220 0712–2712 0223–2223 1221–3221 0719–2719 0410–2410 1222–3222 0720–2720 0412–2412 1223–3223 0724–2724 0420–2420 1224–3224 0730–2730 0421–2421 1230–3230 0739–2739 0422–2422 1231–3231 0740–2740 0423–2423 1232–3232 0749–2749 0430–2430 1233–3233 0750–2750 0432–2432 1240–3240 0759–2759 0433–2433 1241–3241 0813–2813 0434–2434 1242–3242 0830–2830 0440–2440 1243–3243 0839–2839 0441–2441 1250–3250 0863–2863 0442–2442 1251–3251 0910–2910 0515–2515 1252–3252 0911–2911 0519–2519 * * * * * 0912–2912 0710–2710 0913–2913 0711–2711 By order of the Board of Governors of the 0914–2914 0712–2712 Federal Reserve System, acting through the 0915–2915 0719–2719 Secretary of the Board under delegated 0918–2918 0720–2720 authority, October 8, 2009. 0919–2919 0724–2724 Jennifer J. Johnson, 0920–2920 0730–2730 Secretary of the Board. 0921–2921 0739–2739 0929–2929 0740–2740 [FR Doc. E9–24634 Filed 10–14–09; 8:45 am] 0960–2960 0749–2749 BILLING CODE 6210–01–P 1010–3010 0750–2750 1011–3011 0759–2759 1012–3012 0813–2813 DEPARTMENT OF TRANSPORTATION 1019–3019 0830–2830 1020–3020 0839–2839 Federal Aviation Administration 1021–3021 0863–2863 1022–3022 0910–2910 14 CFR Part 39 1023–3023 0911–2911 1030–3030 0912–2912 [Docket No. FAA–2009–0909; Directorate 1031–3031 0913–2913 Identifier 2009–NM–172–AD; Amendment 1039–3039 0914–2914 39–16045; AD 2007–23–05 R1] 1040–3040 0915–2915 1041–3041 0918–2918 RIN 2120–AA64 1049–3049 0919–2919 1070–3070 0920–2920 Airworthiness Directives; Saab AB, 1110–3110 0921–2921 Saab Aerosystems Model SAAB 2000 1111–3111 0929–2929 Airplanes 1113–3113 0960–2960 1119–3119 1010–3010 AGENCY: Federal Aviation 1120–3120 1011–3011 Administration (FAA), Department of 1122–3122 1012–3012 Transportation (DOT). 1123–3123 1019–3019 ACTION: Final rule; request for 1130–3130 1020–3020 comments. 1131–3131 1021–3021 1140–3140 1022–3022 SUMMARY: We are adopting a new 1149–3149 1023–3023 airworthiness directive (AD) for the 1163–3163 1030–3030 products listed above that would revise * * * * * 1031–3031 an existing AD. This AD results from ■ 3. Effective November 14, 2009, the 1039–3039 mandatory continuing airworthiness 1040–3040 Fourth and Twelfth District routing 1041–3041 information (MCAI) originated by an symbol lists in appendix A are amended 1049–3049 aviation authority of another country to by removing the headings and listings 1070–3070 identify and correct an unsafe condition for the Twelfth Federal Reserve District 1110–3110 on an aviation product. The MCAI and revising the listings for the Fourth 1111–3111 describes the unsafe condition as:

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Subsequent to accidents involving Fuel Engineer, International Branch, ANM– country, and is approved for operation Tank System explosions in flight * * * and 116, Transport Airplane Directorate, in the United States. on ground, * * * Special Federal Aviation FAA, 1601 Lind Avenue, SW., Renton, Differences Between the AD and the Regulation 88 (SFAR88) * * * required a Washington 98057–3356; telephone safety review of the aircraft Fuel Tank MCAI or Service Information System * * *. (425) 227–1112; fax (425) 227–1149. SUPPLEMENTARY INFORMATION: We have reviewed the MCAI and * * * * * related service information and, in Fuel Airworthiness Limitations are items Discussion arising from a systems safety analysis that general, agree with their substance. But have been shown to have failure mode(s) On October 27, 2007, we issued AD we might have found it necessary to use associated with an ‘unsafe condition’ * * *. 2007–23–05, Amendment 39–15251 (72 different words from those in the MCAI These are identified in Failure Conditions for FR 62564, November 6, 2007). That AD to ensure the AD is clear for U.S. which an unacceptable probability of ignition applied to all Saab Model SAAB 2000 operators and is enforceable. In making risk could exist if specific tasks and/or airplanes. That AD required revising the these changes, we do not intend to differ practices are not performed in accordance substantively from the information with the manufacturers’ requirements. Airworthiness Limitations Section (ALS) of the Instructions for Continued provided in the MCAI and related This AD requires actions that are Airworthiness. service information. intended to address the unsafe Critical design configuration control We might also have required different condition described in the MCAI. limitations (CDCCLs) are limitation actions in this AD from those in the DATES: This AD becomes effective requirements to preserve a critical MCAI in order to follow FAA policies. October 30, 2009. ignition source prevention feature of the Any such differences are highlighted in On December 11, 2007 (72 FR 62564, fuel tank system design that is necessary a note within the AD. November 6, 2007), the Director of the to prevent the occurrence of an unsafe FAA’s Justification and Determination Federal Register approved the condition. The purpose of a CDCCL is incorporation by reference of certain of the Effective Date to provide instruction to retain the publications listed in the AD. This revision merely clarifies the critical ignition source prevention We must receive comments on this intended effect on spare and on-airplane AD by November 30, 2009. feature during configuration change that fuel tank system components, and may be caused by alterations, repairs, or ADDRESSES: You may send comments by makes no substantive change to the maintenance actions. A CDCCL is not a AD’s requirements. For this reason, it is any of the following methods: periodic inspection. • Federal eRulemaking Portal: Go to found that notice and opportunity for Since we issued that AD, we have http://www.regulations.gov. Follow the prior public comment for this action are instructions for submitting comments. determined that it is necessary to clarify unnecessary, and good cause exists for • Fax: (202) 493–2251. the AD’s intended effect on spare and making this amendment effective in less • Mail: U.S. Department of on-airplane fuel tank system than 30 days. Transportation, Docket Operations, M– components, regarding the use of 30, West Building Ground Floor, Room maintenance manuals and instructions Comments Invited W12–140, 1200 New Jersey Avenue, SE., for continued airworthiness. This AD is a final rule that involves Washington, DC 20590. Section 91.403(c) of the Federal requirements affecting flight safety, and • Hand Delivery: U.S. Department of Aviation Regulations (14 CFR 91.403(c)) we did not precede it by notice and Transportation, Docket Operations, M– specifies the following: opportunity for public comment. We 30, West Building Ground Floor, Room No person may operate an aircraft for invite you to send any written relevant W12–40, 1200 New Jersey Avenue, SE., which a manufacturer’s maintenance manual data, views, or arguments about this AD. Washington, DC, between 9 a.m. and 5 or instructions for continued airworthiness Send your comments to an address p.m., Monday through Friday, except has been issued that contains an listed under the ADDRESSES section. Federal holidays. airworthiness limitation section unless the Include ‘‘Docket No. FAA–2009–0909; For service information identified in mandatory * * * procedures * * * have Directorate Identifier 2009–NM–172– been complied with. this AD, contact Saab Aircraft AB, AD’’ at the beginning of your comments. SAAB Aerosystems, SE 581 88, Some operators have questioned We specifically invite comments on the Linko¨ping, Sweden; telephone +46 13 whether existing components affected overall regulatory, economic, 18 5591; fax +46 13 18 4874; e-mail by the new CDCCLs must be reworked. environmental, and energy aspects of [email protected]; We did not intend for the AD to this AD. We will consider all comments Internet http://www.saabgroup.com. retroactively require rework of received by the closing date and may components that had been maintained Examining the AD Docket amend this AD because of those using acceptable methods before the comments. You may examine the AD docket on effective date of the AD. Owners and We will post all comments we the Internet at http:// operators of the affected airplanes receive, without change, to http:// www.regulations.gov; or in person at the therefore are not required to rework www.regulations.gov, including any Docket Operations office between 9 a.m. affected components identified as personal information you provide. We and 5 p.m., Monday through Friday, airworthy or installed on the affected will also post a report summarizing each except Federal holidays. The AD docket airplanes before the required revisions substantive verbal contact we receive contains this AD, the regulatory of the ALS. But once the CDCCLs are about this AD. evaluation, any comments received, and incorporated into the ALS, future other information. The street address for maintenance actions on components Authority for This Rulemaking the Docket Operations office (telephone must be done in accordance with those Title 49 of the United States Code (800) 647–5527) is in the ADDRESSES CDCCLs. specifies the FAA’s authority to issue section. Comments will be available in rules on aviation safety. Subtitle I, the AD docket shortly after receipt. FAA’s Determination section 106, describes the authority of FOR FURTHER INFORMATION CONTACT: This product has been approved by the FAA Administrator. ‘‘Subtitle VII: Shahram Daneshmandi, Aerospace the aviation authority of another Aviation Programs,’’ describes in more

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detail the scope of the Agency’s Docket No. FAA–2009–0909; Directorate have been shown to have failure mode(s) authority. Identifier 2009–NM–172–AD. associated with an ‘unsafe condition’ as defined in FAA’s memo 2003–112–15 ‘SFAR We are issuing this rulemaking under Effective Date 88—Mandatory Action Decision Criteria’. the authority described in ‘‘Subtitle VII, (a) This airworthiness directive (AD) Part A, Subpart III, Section 44701: These are identified in Failure Conditions for becomes effective October 30, 2009. which an unacceptable probability of ignition General requirements.’’ Under that Affected ADs risk could exist if specific tasks and/or section, Congress charges the FAA with practices are not performed in accordance promoting safe flight of civil aircraft in (b) This AD revises AD 2007–23–05. with the manufacturers’ requirements. air commerce by prescribing regulations Applicability This EASA Airworthiness Directive mandates the Fuel System Airworthiness for practices, methods, and procedures (c) This AD applies to all Saab AB, Saab the Administrator finds necessary for Limitations (comprising maintenance/ Aerosystems Model SAAB 2000 airplanes, inspection tasks and Critical Design safety in air commerce. This regulation certificated in any category, all serial is within the scope of that authority Configuration Control Limitations (CDCCL)) numbers. for the type of aircraft, that resulted from the because it addresses an unsafe condition Note 1: This AD requires revisions to design reviews and the JAA recommendation that is likely to exist or develop on certain operator maintenance documents to and EASA policy statement mentioned products identified in this rulemaking include new inspections. Compliance with above. action. these inspections is required by 14 CFR The corrective action is revising the 91.403(c). For airplanes that have been Airworthiness Limitations Section (ALS) of Regulatory Findings previously modified, altered, or repaired in the Instructions for Continued Airworthiness We determined that this AD will not the areas addressed by these inspections, the to incorporate new limitations for fuel tank operator may not be able to accomplish the systems. have federalism implications under inspections described in the revisions. In this Executive Order 13132. This AD will situation, to comply with 14 CFR 91.403(c), Restatement of AD 2007–23–05, With No not have a substantial direct effect on the operator must request approval for an Changes alternative method of compliance according the States, on the relationship between Actions and Compliance the national government and the States, to paragraph (g) of this AD. The request or on the distribution of power and should include a description of changes to (f) Unless already done, do the following actions. responsibilities among the various the required inspections that will ensure the continued operational safety of the airplane. (1) Within 3 months after December 11, levels of government. 2007 (the effective date of AD 2007–23–05), For the reasons discussed above, I Subject revise the ALS of the Instructions for certify this AD: (d) Air Transport Association (ATA) of Continued Airworthiness to incorporate the 1. Is not a ‘‘significant regulatory America Code 28: Fuel. maintenance and inspection instructions in action’’ under Executive Order 12866; Part 1 of Saab Fuel Airworthiness Limitations 2. Is not a ‘‘significant rule’’ under the Reason 2000 LKS 009032, dated February 14, 2006. DOT Regulatory Policies and Procedures (e) The mandatory continuing For all tasks identified in Part 1 of Saab Fuel (44 FR 11034, February 26, 1979); and airworthiness information (MCAI) states: Airworthiness Limitations 2000 LKS 009032, 3. Will not have a significant Subsequent to accidents involving Fuel dated February 14, 2006, the initial economic impact, positive or negative, Tank System explosions in flight * * * and compliance times start from December 11, on a substantial number of small entities on ground, the FAA published Special 2007, and the repetitive inspections must be Federal Aviation Regulation 88 (SFAR 88) in accomplished thereafter at the interval under the criteria of the Regulatory June 2001. SFAR 88 required a safety review specified in Part 1 of Saab Fuel Flexibility Act. of the aircraft Fuel Tank System to determine Airworthiness Limitations 2000 LKS 009032, We prepared a regulatory evaluation that the design meets the requirements of dated February 14, 2006. of the estimated costs to comply with FAR (Federal Aviation Regulation) § 25.901 (2) Within 12 months after December 11, this AD and placed it in the AD docket. and § 25.981(a) and (b). 2007, revise the ALS of the Instructions for A similar regulation has been Continued Airworthiness to incorporate the List of Subjects in 14 CFR Part 39 recommended by the JAA (Joint Aviation CDCCLs as defined in Part 2 of Saab Fuel Air transportation, Aircraft, Aviation Authorities) to the European National Airworthiness Limitations 2000 LKS 009032, safety, Incorporation by reference, Aviation Authorities in JAA letter 04/00/02/ dated February 14, 2006. Safety. 07/03–L024 of 3 February 2003. The review (3) Except as provided by paragraph (g) of was requested to be mandated by NAA’s this AD: After accomplishing the actions Adoption of the Amendment (National Aviation Authorities) using JAR specified in paragraphs (f)(1) and (f)(2) of this (Joint Aviation Regulation) § 25.901(c), AD, no alternative inspection, inspection ■ Accordingly, under the authority § 25.1309. intervals, or CDCCLs may be used. delegated to me by the Administrator, In August 2005 EASA (European Aviation (4) Where Saab Fuel Airworthiness the FAA amends 14 CFR part 39 as Safety Agency) published a policy statement Limitations 2000 LKS 009032, dated follows: on the process for developing instructions for February 14, 2006, allows for exceptional maintenance and inspection of Fuel Tank short-term extensions, an exception is PART 39—AIRWORTHINESS System ignition source prevention (EASA D acceptable to the FAA if it is approved by the DIRECTIVES 2005/CPRO, www.easa.eu.int/home/ appropriate principal inspector in the FAA cert_policy_statements_en.html) that also Flight Standards Certificate Holding District ■ 1. The authority citation for part 39 included the EASA expectations with regard Office. continues to read as follows: to compliance times of the corrective actions on the unsafe and the not unsafe part of the New Information: Authority: 49 U.S.C. 106(g), 40113, 44701. harmonised design review results. On a Explanation of CDCCL Requirements global scale the TC (type certificate) holders § 39.13 [Amended] committed themselves to the EASA Note 2: Notwithstanding any other ■ 2. The FAA amends § 39.13 by published compliance dates (see EASA maintenance or operational requirements, removing amendment 39–15251 (72 FR policy statement). The EASA policy components that have been identified as 62564, November 6, 2007) and adding statement has been revised in March 2006: airworthy or installed on the affected the date of 31–12–2005 for the unsafe related airplanes before the revision of the the following new AD: actions has now been set at 01–07–2006. airworthiness limitations section (ALS), as 2007–23–05 R1 Saab AB, Saab Fuel Airworthiness Limitations are items required by paragraph (f) of this AD, do not Aerosystems: Amendment 39–16045. arising from a systems safety analysis that need to be reworked in accordance with the

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CDCCLs. However, once the airworthiness (3) You may review copies of the service (202) 482–2440 or e-mail: limitations section has been revised, future information at the FAA, Transport Airplane [email protected]. maintenance actions on these components Directorate, 1601 Lind Avenue, SW., Renton, For questions of a technical nature must be done in accordance with the Washington. For information on the contact: The Information Technology CDCCLs. availability of this material at the FAA, call Division, Office of National Security 425–227–1221 or 425–227–1152. FAA AD Differences (4) You may also review copies of the and Technology Transfer Controls at 202–482–0707 or e-mail: C. Randall Note 3: This AD differs from the MCAI service information that is incorporated by and/or service information as follows: No reference at the National Archives and Pratt at [email protected]. differences. Records Administration (NARA). For SUPPLEMENTARY INFORMATION: information on the availability of this Other FAA AD Provisions material at NARA, call 202–741–6030, or go Background _ (g) The following provisions also apply to to: http://www.archives.gov/federal register/ BIS published the interim final rule this AD: code_of_federal_regulations/ entitled ‘‘Encryption Simplification’’ on (1) Alternative Methods of Compliance ibr_locations.html. October 3, 2008 (73 FR 57495). This rule (AMOCs): The Manager, International Issued in Renton, Washington, on removed section 744.9 of the EAR, Branch, ANM–116, Transport Airplane September 18, 2009. which set forth requirements for Directorate, FAA, has the authority to authorization from BIS for U.S. persons approve AMOCs for this AD, if requested Ali Bahrami, using the procedures found in 14 CFR 39.19. Manager, Transport Airplane Directorate, to provide technical assistance Send information to ATTN: Shahram Aircraft Certification Service. (including training) to foreign persons Daneshmandi, Aerospace Engineer, [FR Doc. E9–24542 Filed 10–14–09; 8:45 am] with the intent to aid a foreign person International Branch, ANM–116, Transport BILLING CODE 4910–13–P in the development or manufacture Airplane Directorate, FAA, 1601 Lind outside the United States of encryption Avenue, SW., Renton, Washington 98057– commodities or software that, if of U.S.- 3356; telephone (425) 227–1112; fax (425) origin, would be ‘‘EI’’ controlled under 227–1149. Before using any approved AMOC DEPARTMENT OF COMMERCE ECCNs 5A002 or 5D002. Section 744.9 on any airplane to which the AMOC applies, notify your principal maintenance inspector Bureau of Industry and Security was added to the EAR in 1996 when (PMI) or principal avionics inspector (PAI), jurisdiction over dual-use encryption as appropriate, or lacking a principal 15 CFR Parts 730, 734, 738, 740, 742, items was transferred from the inspector, your local Flight Standards District 744, 772 and 774 Department of State to the Department Office. The AMOC approval letter must of Commerce. However, other parts of specifically reference this AD. [Docket No. 080211163–9110–02] the EAR that referred to section 744.9 (2) Airworthy Product: For any requirement were inadvertently not removed. in this AD to obtain corrective actions from RIN 0694–AE18 a manufacturer or other source, use these Therefore, this rule removes these actions if they are FAA-approved. Corrective Encryption Simplification Rule: Final references in § 730.5(d), § 734.5(c), actions are considered FAA-approved if they § 736.2(b)(7)(ii), and § 744.1(a)(1). In are approved by the State of Design Authority AGENCY: Bureau of Industry and addition, other corrections are made to (or their delegated agent). You are required Security, Commerce. harmonize with revisions made in the to assure the product is airworthy before it ACTION: Final rule. ‘‘Encryption Simplification’’ rule is returned to service. published on October 3, 2008. Some of (3) Reporting Requirements: For any SUMMARY: The Bureau of Industry and the revisions in this rule are the results reporting requirement in this AD, under the provisions of the Paperwork Reduction Act, Security (BIS) published the interim of requests for clarification from the the Office of Management and Budget (OMB) final rule entitled ‘‘Encryption public on the October 3 encryption has approved the information collection Simplification’’ on October 3, 2008 (73 simplification rule. requirements and has assigned OMB Control FR 57495). This rule finalizes that rule, Part 730 Number 2120–0056. corrects errors published in the October The last sentence in paragraph (d) of Related Information 3, 2008 interim final rule, and resolves inconsistencies in that rule identified by section 730.5 is removed, because it (h) Refer to MCAI European Aviation makes reference to technical assistance Safety Agency Airworthiness Directive 2006– the public. 0199, dated July 11, 2006; and Saab Fuel DATES: Effective Dates: This rule is in section 744.9, which was removed by Airworthiness Limitations 2000 LKS 009032, effective October 15, 2009. the October 3 encryption simplification dated February 14, 2006; for related rule. ADDRESSES: information. Written comments on this final rule may be sent by e-mail to Part 734 Material Incorporated by Reference [email protected]. Include Section 734.4 is amended to revise (i) You must use Saab Fuel Airworthiness ‘‘Encryption rule’’ in the subject line of paragraphs (b)(1) and (b)(2) in order to Limitations 2000 LKS 009032, dated the message. Comments may also be harmonize with the October 3 February 14, 2006, to do the actions required submitted by mail or hand delivery to encryption simplification rule and by this AD, unless the AD specifies Sharron Cook, Office of Exporter otherwise. corrections thereto. Paragraph (b)(1)(iv) (1) The Director of the Federal Register Services, Regulatory Policy Division, is added to conform with the previously approved the incorporation by Bureau of Industry and Security, clarifications in this correction by reference of this service information on Department of Commerce, 14th St. & making it clear that section 740.17(b)(4) December 11, 2007 (72 FR 62564, November Pennsylvania Avenue, NW., Room 2705, is a separate authorization. Paragraph 6, 2007). Washington, DC 20230, ATTN: (b)(2) is revised to simply state that all (2) For service information identified in Encryption rule; or by fax to (202) 482– items classified under ECCNs 5A992, this AD, contact Saab Aircraft AB, SAAB 3355. 5D992, or 5E992 are eligible for Aerosystems, SE 581 88, Linko¨ping, Sweden; telephone +46 13 18 5591; fax +46 13 18 FOR FURTHER INFORMATION CONTACT: For consideration under the de minimis 4874; e-mail questions of a general nature contact rules. Paragraph (c) of section 734.5 is [email protected]; Sharron Cook, Office of Exporter removed because it refers to technical Internet http://www.saabgroup.com. Services, Regulatory Policy Division at assistance in section 744.9, which was

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removed by the October 3 encryption under (b)(4), it was no longer clear that authorized by sections 740.17(a) and simplification rule. (b)(2) items were not authorized for 740.17(b)(1)(i), or for certain encryption immediate export to ‘‘government end- items as authorized by section Part 736 users’’ outside the Supplement 3 740.17(b)(1)(ii). Paragraph (b)(7)(ii) of section 736.2 is countries. The added language This rule also makes slight editorial removed and reserved, because it refers implemented by this rule makes clear corrections to sections 740.9(c)(3), to technical assistance in section 744.9, that this continues to be true. Products 740.13(d)(2), 740.17(b)(2)(ii) and which was removed by the October 3 that would not be authorized for 740.17(e)(1)(i)(C). encryption simplification rule. permanent export to certain Part 742 Part 738 ‘‘government end-users’’ should not be authorized for temporary export to those The second sentence in paragraph Paragraph (a)(2)(ii)(B) of section 738.4 end-users. (b)(1) of section 742.15 is revised and is amended by removing a reference to This rule revises section the fourth sentence removed to conform the mass market review requirements in 740.17(b)(1)(i) of the EAR to remove the to the new mandatory SNAP–R section 742.15(b) for 5A992 and 5D992, phrase ‘‘(excluding source code),’’ procedures (published August 21, 2008, and replacing it with an instruction that because BIS has received a number of effective October 20, 2008, 73 FR 49323) the export may be executed under the inquires from the public who are for submission of review requests. No License Required (NLR) principle confused by this phrase appearing in Supplement No. 6 to part 742 unless the License Requirement section this paragraph. This paragraph describes ‘‘Guidelines for Submitting Review refers the reader to another section of exports and reexports to government Requests for Encryption Items’’ is the EAR. E.g., in ECCN 5A002 the end-users and non-government end- amended by removing the fourth and License Requirement section not only users located in a country listed in fifth sentences of the introductory refers the reader to the Commerce Supplement No. 3 of section 740.17 of paragraph to harmonize with the new Country Chart in Supplement No. 1 of the EAR that are eligible for License mandatory SNAP–R procedures part 738, but it also refers the reader to Exception ENC once a review request is (published August 21, 2008, effective section 742.15 of the EAR to determine registered with BIS, including October 20, 2008, 73 FR 49323) for license requirements. commodities and software that are submission of review requests. This rule Part 740 pending review (under section adds text to introductory paragraph (a), 742.15(b)) for mass market treatment which was inadvertently omitted in the Section 740.17(b)(1)–(3): paragraph (b) (ECCNs 5A992.c and 5D992.c). October 3 rule, explaining that is changed for clarity, transparency, and Encryption source code is not eligible appropriate technical information must simplification of language authorizing for such mass market treatment. This is accompany the review request. This export after review. Authorization what the phrase ‘‘(excluding source language was in the introductory language to Supplement 3 countries code)’’ refers to. Although this phrase paragraph to Supplement 6 prior to the under the subparagraphs of (b)(1) was only refers to software that is pending October 3 publication. The intent was to complex and confusing to exporters. review for mass market treatment (under move it to paragraph (a) where it would Under the reorganization of License section 742.15(b)), and thus does not be more visible. Instead it was Exception ENC, there is no need to pertain to any other License Exception inadvertently removed. Also, paragraph exclude exports to countries listed in ENC-eligible encryption source code (c)(6) is corrected to refer to ECC Supplement 3 from authorization under (e.g., as described in section (elliptic curve cryptography), as paragraphs (b)(2) and (b)(3). Such 740.17(b)(2)(ii)), it has nonetheless opposed to ECCN (Export Control exclusions are removed here. Once a proven confusing and so is being Classification Number). review has been submitted, Paragraph removed. (b)(1)(i) is intended to authorize This rule revises section 740.17(b)(4) Part 744 immediate export to the Supplement 3 to fix an incorrect citation and clarify The fifth sentence in paragraph (a)(1) countries of all encryption items (except concerning what is authorized by each of section 744.1 of the EAR is removed, ‘‘cryptanalytic items’’ to ‘‘government subsection of paragraph (b)(4). because it refers to section 744.9, which end-users’’). After the review is Paragraph (b)(4) should contain specific was removed by the October 3 complete, all items except technology authorization language like all other encryption simplification rule. and Open Cryptographic Interfaces License Exception ENC paragraphs. The Part 772 (OCIs) are authorized by paragraphs addition of the introductory sentence (b)(2), (b)(3), or (b)(4). As the language accomplishes this. The second sentence Exporters have been confused by the has been revised, four sets of makes it clear that paragraph (b)(4)(ii) Nota Bene to the ‘‘personal area authorization language will cover does not authorize subsequent export network’’ (PAN) definition. This rule almost all items authorized for export from the United States of the foreign deletes some of the text in that note for and reexport. The four authorizations developed products. clarity. In one of the deleted sentences, will be: This rule adds text to sections the words ‘‘enterprise’’ and ‘‘long (a) and (b)(1)(i) technology and OCI; 740.17(b)(4)(ii) and 742.15(b)(2) to range’’ in the absence of a specific 30 (a) and (b)(2) ENC restricted provide clarification to the regulated meter range limitation could be read to commodities and software; community that foreign products include intermediate-range devices. (a) and (b)(3) ENC unrestricted developed with or incorporating U.S.- What is authorized by section commodities and software; and origin encryption source code 740.17(b)(4)(iii) are certain ‘‘PAN’’ items (b)(4) ENC commodities and software as authorized for export under License with nominal operating ranges not described. Exception TSU (section 740.13(e)) that exceeding 30 meters. This rule deletes Prior to the implementation of this final are subject to the EAR are also excluded other text where the language could also rule, paragraph (b)(4) authorized from review requirements and that after be misunderstood to describe items immediate export under (b)(2) or (b)(3) a mass market review request is clearly not eligible for section for source code and key length limited submitted, there is no waiting period for 740.17(b)(4)(iii) treatment. ‘‘PAN’’ items items. However, with the authorization export to certain end-users as are not necessarily eligible for section

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740.17(b)(4)(iii). Eliminating the submission. The other collection has 15 CFR Parts 738 and 772 confusing examples should help the been approved by OMB under control Exports. public understand why a ‘‘data capable number 0694–0104, ‘‘Commercial wireless telephone’’, for example, is not Encryption Items Under the Jurisdiction 15 CFR Part 740 eligible for section 740.17(b)(4)(iii) self- of the Department of Commerce,’’ and Administrative practice and classification. carries a burden hour estimate of 7 procedure, Exports, Reporting and In addition, this rule revises the Nota hours for a manual or electronic recordkeeping requirements. Bene for the term ‘‘ancillary submission. Send comments regarding cryptography’’ by making editorial these burden estimates or any other 15 CFR Part 742 clarifications, as well as adding a aspect of these collections of Exports, Terrorism. footnote to clarify that for the purpose information, including suggestions for of this definition, the term reducing the burden, to Jasmeet Seehra, 15 CFR Part 744 ‘transportation systems’ does not OMB Desk Officer, by e-mail at Exports, Reporting and recordkeeping include any Automatic Identification [email protected] or by fax to (202) requirements, Terrorism. System (AIS)/Vessel Traffic Service 395–7285; and to the Office of 15 CFR Part 774 (VTS). Secure AIS/VTS and their Administration, Bureau of Industry and maritime applications are not Security, Department of Commerce, Exports, Reporting and recordkeeping considered ‘‘ancillary cryptography’’. 14th and Pennsylvania Avenue, NW., requirements. ■ Supplement No. 1 to Part 774— Room 6622, Washington, DC 20230. Accordingly, parts 730, 734, 738, 740, Commerce Control List 3. This rule does not contain policies 742, 744, 772, and 774 of the Export with Federalism implications as that Administration Regulations (15 CFR ECCN 5B002 is amended by adding term is defined under Executive Order parts 730–774) are amended as follows: License Exception ENC to the License 13132. Exception section to clarify that this 4. The provisions of the PART 730—[AMENDED] ECCN may be considered for License Administrative Procedure Act (5 U.S.C. ■ Exception ENC eligibility. 1. The authority citation for part 730 553) requiring notice of proposed continues to read as follows: ECCN 5E002 is amended by adding rulemaking, the opportunity for public License Exception ENC to the License participation, and a delay in effective Authority: 50 U.S.C. app. 2401 et seq.; 50 Exception section to clarify that this date, are inapplicable because this U.S.C. 1701 et seq.; 10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c; 22 U.S.C. 2151 note; ECCN may be considered for License regulation involves a military and Exception ENC eligibility. 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; 30 foreign affairs function of the United U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42 ECCN 5E992 is amended by inserting States (5 U.S.C. 553(a)(1)). Further, no ‘‘according to the General Technology U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. other law requires that a notice of 466c; 50 U.S.C. app. 5; 22 U.S.C. 7201 et seq.; Note’’ into the heading to more clearly proposed rulemaking and an 22 U.S.C. 7210; E.O. 11912, 41 FR 15825, 3 define the scope of this ECCN. opportunity for public comment be CFR, 1976 Comp., p. 114; E.O. 12002, 42 FR Although the Export Administration given for this final rule. Because a 35623, 3 CFR, 1977 Comp., p. 133; E.O. Act expired on August 20, 2001, the notice of proposed rulemaking and an 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. President, through Executive Order opportunity for public comment are not 179; E.O. 12214, 45 FR 29783, 3 CFR, 1980 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 256; E.O. 12851, 58 FR 33181, 3 required to be given for this rule under Comp., p. 783 (2002), as extended by the CFR, 1993 Comp., p. 608; E.O. 12854, 58 FR the Administrative Procedure Act or by Notice of August 13, 2009 (74 Fed. Reg. 36587, 3 CFR, 1993 Comp., p. 179; E.O. any other law, the analytical 41,325 (August 14, 2009)), has 12918, 59 FR 28205, 3 CFR, 1994 Comp., p. requirements of the Regulatory continued the Export Administration 899; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Flexibility Act (5 U.S.C. 601 et seq.) are Comp., p. 950; E.O. 12947, 60 FR 5079, 3 Regulations in effect under the not applicable. Therefore, this CFR, 1995 Comp., p. 356; E.O. 12981, 60 FR International Emergency Economic correction regulation is issued in final 62981, 3 CFR, 1995 Comp., p. 419; E.O. Powers Act. form. Although there is no formal 13020, 61 FR 54079, 3 CFR, 1996 Comp., p. Rulemaking Requirements comment period, public comments on 219; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13099, 63 FR 45167, 3 1. This final correction rule has been this regulation are welcome on a CFR, 1998 Comp., p. 208; E.O. 13222, 66 FR determined to be significant for continuing basis. Comments should be 44025, 3 CFR, 2001 Comp., p. 783; E.O. purposes of Executive Order 12866. submitted to Sharron Cook, Office of 13224, 66 FR 49079, 3 CFR, 2001 Comp., p. 2. Notwithstanding any other Exporter Services, Bureau of Industry 786; E.O. 13338, 69 FR 26751, May 13, 2004; provision of law, no person is required and Security, Department of Commerce, Notice of August 13, 2009, 74 FR 41,325 to respond to, nor shall any person be 14th and Pennsylvania Ave., NW., (August 14, 2009); November 10, 2008, 73 FR subject to a penalty for failure to comply Room 2705, Washington, DC 20230. 67097 (November 12, 2008). with a collection of information subject List of Subjects § 730.5 [Amended] to the requirements of the Paperwork ■ 2. Section 730.5 is amended by Reduction Act of 1995 (44 U.S.C. 3501 15 CFR Part 730 removing the last sentence in paragraph et seq.) (PRA), unless that collection of Administrative practice and (d). information displays a currently valid procedure, Advisory committees, Office of Management and Budget Exports, Reporting and recordkeeping PART 734—[AMENDED] (OMB) Control Number. This rule requirements, Strategic and critical involves two collections of information materials. ■ 3. The authority citation for part 734 subject to the PRA. One of the continues to read as follows: 15 CFR Part 734 collections has been approved by OMB Authority: 50 U.S.C. app. 2401 et seq.; 50 under control number 0694 0088, Administrative practice and U.S.C. 1701 et seq.; E.O. 12938, 59 FR 59099, ‘‘Multi Purpose Application,’’ and procedure, Exports, Inventions and 3 CFR, 1994 Comp., p. 950; E.O. 13020, 61 carries a burden hour estimate of 58 patents, Research Science and FR 54079, 3 CFR, 1996 Comp., p. 219; E.O. minutes for a manual or electronic technology. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p.

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228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 transaction and the License ■ d. Removing the phrase ‘‘encryption Comp., p. 783; Notice of August 13, 2009, 74 Requirement section does not refer you source code that is not otherwise FR 41,325 (August 14, 2009); November 10, to any other part of the EAR to eligible’’ and adding the phrase 2008, 73 FR 67097 (November 12, 2008). determine license requirements. For ‘‘encryption source code is not ■ 4. Section 734.4 is amended by: example, any applicable review otherwise eligible’’ in its place in ■ a. Revising paragraphs (b)(1)(ii), and requirements described in § 742.15(b) of paragraph (b)(2)(ii); (b)(1)(iii); the EAR must be met for certain mass ■ e. Removing the phrase ‘‘Supplement ■ b. Adding a new paragraph (b)(1)(iv); market encryption items to effect your No. 3 to this part or’’ in paragraph (b)(3); and shipment using the symbol ‘‘NLR.’’ ■ f. Adding a new first sentence to ■ c. Revising paragraph (b)(2) and the Proceed to parts 758 and 762 of the EAR paragraph (b)(4) introductory text; note to paragraph (b) to read as follows: for information on export clearance ■ g. Revising paragraph (b)(4)(ii); and ■ h. Adding a comma after ‘‘open § 734.4 De Minimis U.S. Content. procedures and recordkeeping requirements. Note that although you cryptographic interface’’, and removing * * * * * may stop after determining a license is the phrase ‘‘exported to a foreign (b) * * * required based on the first Reason for developer’’ and adding the phrase ‘‘to a (1) * * * Control, it is best to work through each foreign developer’’ in its place in (ii) Authorized for License Exception applicable Reason for Control. A full paragraph (e)(1)(i)(C). ENC by BIS after a review pursuant to The revisions and additions read as analysis of every possible licensing § 740.17(b)(3) of the EAR; follows: (iii) Authorized for License Exception requirement based on each applicable ENC by BIS after a review pursuant to Reason for Control is required to § 740.17 Encryption Commodities, Software and Technology (ENC). § 740.17(b)(2), and the foreign made determine the most advantageous product will not be sent to any License Exception available for your * * * * * destination in Country Group E:1 in particular transaction and, if a license is (b) * * * (1) * * * Supplement No. 1 to part 740 of the required, ascertain the scope of review (ii) Export and reexport to countries EAR; or conducted by BIS on your license not listed in Supplement No. 3 of this (iv) Authorized for License Exception application. part. License Exception ENC authorizes ENC pursuant to § 740.17(b)(4). * * * * * the export and reexport of the following (2) U.S. origin encryption items commodities and software (except classified under ECCNs 5A992, 5D992, PART 740—[AMENDED] certain exports and reexports to or 5E992. ■ 8. The authority citation for part 740 ‘‘government end-users’’ as further Note to paragraph (b): See supplement No. continues to read as follows: described in paragraph (b)(2) of this 2 to this part for de minimis calculation Authority: 50 U.S.C. app. 2401 et seq.; 50 section, or any ‘‘open cryptographic procedures and reporting requirements. U.S.C. 1701 et seq.; 22 U.S.C. 7201 et seq.; interface’’ item): * * * * * E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., * * * * * p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 (2) Review required with 30 day wait § 734.5 [Amended] Comp., p. 783; Notice of August 13, 2009, 74 (non-‘‘government end-users’’ only). Fed. Reg. 41325 (August 14, 2009). ■ 5. Section 734.5 is amended by Thirty (30) days after your review removing paragraph (c). § 740.9 [Amended] request is registered with BIS in ■ accordance with paragraph (d) of this PART 738—[AMENDED] 9. Section 740.9 is amended by revising the citation ‘‘742.15(b)(2)’’ to section and subject to the reporting requirements in paragraph (e) of this ■ 6. The authority citation for part 738 read ‘‘742.15(b)’’ in paragraph (c)(3). ■ section, License Exception ENC continues to read as follows: 10. Section 740.13 is amended by authorizes the export or reexport of the revising the last two sentences of Authority: 50 U.S.C. app. 2401 et seq.; 50 following commodities and software to U.S.C. 1701 et seq.; 10 U.S.C. 7420; 10 U.S.C. paragraph (d)(2) to read as follows: ‘‘government end-users’’ located or 7430(e); 22 U.S.C. 287c; 22 U.S.C. 3201 et § 740.13 Technology and Software— headquartered in a country listed in seq.; 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); Unrestricted (TSU). Supplement 3 to this part, and also to 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. non-‘‘government end-users’’ located in 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; * * * * * 22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. (d) * * * a country not listed in Country Group 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. (2) Exclusions. * * * (Once such E:1 of Supplement No. 1 to part 740 of 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 mass market encryption software has the EAR: Comp., p. 783; Notice of August 13, 2009, 74 been reviewed by BIS and released from * * * * * FR 41,325 (August 14, 2009). ‘‘EI’’ and ‘‘NS’’ controls pursuant to (4) Items excluded from review ■ 7. Section 738.4 is amended by § 742.15(b) of the EAR, it is controlled requirements. License Exception ENC revising paragraph (a)(2)(ii)(B) to read as under ECCN 5D992.c and is thus authorizes the export and reexport of follows: outside the scope of License Exception the commodities and software described TSU.) See § 742.15(b) of the EAR for in this paragraph (b)(4) without review § 738.4 Determining whether a license is exports and reexports of mass market (for encryption reasons) by BIS, except required. encryption products controlled under that paragraph (b)(4)(ii) of this section (a) * * * ECCN 5D992.c. does not authorize exports from the (2) * * * * * * * * United States of foreign products (ii) * * * ■ 11. Section 740.17 is amended by: developed with or incorporating U.S.- (B) If no, a license is not required ■ a. Removing the phrase ‘‘(excluding origin encryption source code, based on the particular Reason for source code)’’ from paragraph (b)(1)(i); components, or toolkits. Control and destination. Provided that ■ b. Revising paragraph (b)(1)(ii); * * * * * General Prohibitions Four through Ten ■ c. Revising the introductory paragraph (ii) Foreign products developed with do not apply to your proposed to (b)(2); or incorporating U.S.-origin encryption

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source code, components, or toolkits. Exception ENC to certain end users as 13224, 66 FR 49079, 3 CFR, 2001 Comp., p. Foreign products developed with or authorized by §§ 740.17(a) and (b)(1)(i), 786; Notice of August 13, 2009, 74 FR 41,325 incorporating U.S.-origin encryption or for certain items as authorized by (August 14, 2009); November 10, 2008, 73 FR source code, components or toolkits that § 740.17(b)(1)(ii), while the mass market 67097 (November 12, 2008). are subject to the EAR, provided that the request is pending review with BIS.) § 744.1 [Amended] U.S.-origin encryption items have *** ■ 16. Section 744.1 is amended by previously been reviewed and * * * * * authorized by BIS (or else authorized for removing the fifth sentence in paragraph ■ 14. Supplement No. 6 to part 742 is (a)(1). export under License Exception TSU amended by: upon meeting the notification ■ a. Revising the introductory text; PART 772—[AMENDED] requirements of section 740.13(e) of the ■ b. Adding paragraph (a) introductory EAR, without need for further review) text; and ■ 17. The authority citation for part 772 and the cryptographic functionality has ■ c. Revising the acronym ‘‘ECCN’’ to continues to read as follows: not been changed. Such products read ‘‘ECC’’ in paragraph (c)(6). Authority: 50 U.S.C. app. 2401 et seq.; 50 include foreign-developed products that The revision and addition read as U.S.C. 1701 et seq.; E.O. 13222, 66 FR 44025, are designed to operate with U.S. follows: 3 CFR, 2001 Comp., p. 783; Notice of August products through a cryptographic Supplement No. 6 to Part 742— 13, 2009, 74 FR 41,325 (August 14, 2009). interface. Guidelines for Submitting Review ■ 18. In section 772.1 the definition for * * * * * Requests for Encryption Items ‘‘ancillary cryptography’’ is amended by PART 742—[AMENDED] Review requests for encryption items must revising the Nota Bene (N.B.) and the include all of the documentation described in definition for ‘‘personal area network’’ ■ 12. The authority citation for part 742 this supplement and be submitted to BIS in is amended by revising the Nota Bene to continues to read as follows: accordance with §§ 748.1 and 748.3 of the read as follows: EAR. To ensure that your review request is Authority: 50 U.S.C. app. 2401 et seq.; 50 properly routed, insert the phrase ‘‘Mass § 772.1 Definitions of terms as used in the U.S.C. 1701 et seq.; 22 U.S.C. 3201 et seq.; market encryption’’, ‘‘License Exception Export Administration Regulations (EAR). 42 U.S.C. 2139a; 22 U.S.C. 7201 et seq.; 22 ENC’’ or ‘‘Other Encryption’’ (whichever is U.S.C. 7210; Sec 1503, Pub. L. 108–11, 117 * * * * * applicable) in Block 9 (Special Purpose) of ‘‘Ancillary cryptography’’.*** Stat. 559; E.O. 12058, 43 FR 20947, 3 CFR, the application form and place an ‘‘X’’ in the 1978 Comp., p. 179; E.O. 12851, 58 FR 33181, box marked ‘‘Classification Request’’ in Block N.B. Examples of commodities and 3 CFR, 1993 Comp., p. 608; E.O. 12938, 59 5 (Type of Application)—Block 5 does not software that perform ‘‘ancillary FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. provide a separate item to check for the cryptography’’ are items specially designed 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. submission of encryption review requests. and limited to: Piracy and theft prevention 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Failure to properly complete these items may for software, music, etc.; games and gaming; Comp., p. 783; Presidential Determination delay consideration of your review request. household utilities and appliances; printing, 2003–23 of May 7, 2003, 68 FR 26459, May In addition, you must send a copy of your reproduction, imaging and video recording or 16, 2003; Notice of August 13, 2009, 74 Fed. review request and all support documents to: playback (but not videoconferencing); Reg. 41,325 (August 14, 2009); November 10, Attn: ENC Encryption Request Coordinator, business process modeling and automation 2008, 73 FR 67097 (November 12, 2008). 9800 Savage Road, Suite 6940, Fort Meade, (e.g., supply chain management, inventory, ■ 13. Section 742.15 is amended by: MD 20755–6000. scheduling and delivery); industrial, ■ a. Revising the second sentence and If you intend to rely on the 30 day manufacturing or mechanical systems removing the fourth sentence in registration provisions of the regulations, (including robotics, other factory or heavy paragraph (b)(1); and express mail certification of these documents equipment, and facilities systems controllers, ■ b. Adding a Note in parentheses after is needed. such as fire alarms and HVAC); automotive, (a) For all review requests of encryption aviation and other transportation systems.1 the first sentence in paragraph (b)(2). items, you must provide brochures or other Commodities and software included in this The revision and addition read as documentation or specifications related to description are not limited to wireless follows: the technology, commodity or software, communication and are not limited by range relevant product descriptions, architecture or key length. § 742.15 Encryption items. specifications, and as necessary for the * * * * * * * * * * technical review, source code. In addition, ‘‘Personal area network’’.*** (b) * * * you must provide the following information (1) Procedures for requesting review. in a cover letter accompanying your review N.B. ‘‘Personal area network’’ items * * * Review requests must be request: include but are not limited to items designed submitted to BIS in accordance with * * * * * to comply with the Institute of Electrical and §§ 748.1 and 748.3 of the EAR. See Electronic Engineers (IEEE) 802.15.1 paragraph (r) of Supplement No. 2 to PART 744—[AMENDED] standard, class 2 (10 meters) and class 3 (1 meter), but not class 1 (100 meters) items. part 748 of the EAR for special IEEE 802.15.1 class 2 and class 3 devices instructions about this submission. ■ 15. The authority citation for part 744 continues to read as follows: include hands-free headsets, wireless mice, Submissions to the ENC Encryption keyboards and printers, bar code scanners Request Coordinator should be directed Authority: 50 U.S.C. app. 2401 et seq.; 50 and game console wireless controllers, as to the mailing address indicated in U.S.C. 1701 et seq.; 22 U.S.C. 3201 et seq.; well as devices or software for transfer of § 740.17(e)(1)(ii) of the EAR. BIS will 42 U.S.C. 2139a; 22 U.S.C. 7201 et seq.; 22 files between devices using Object Exchange notify you if there are any questions U.S.C. 7210; E.O. 12058, 43 FR 20947, 3 CFR, (OBEX). concerning your request for review (e.g., 1978 Comp., p. 179; E.O. 12851, 58 FR 33181, * * * * * 3 CFR, 1993 Comp., p. 608; E.O. 12938, 59 because of missing or incompatible FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 1 support documentation). * * * 12947, 60 FR 5079, 3 CFR, 1995 Comp., p. For the purpose of this definition, the term (2) Action by BIS. * * * (Note that ‘‘transportation systems’’ does not include any 356; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Automatic Identification System (AIS)/Vessel once a mass market review request is Comp., p. 228; E.O. 13099, 63 FR 45167, 3 Traffic Service (VTS). Secure AIS/VTS and their submitted, there is no waiting period for CFR, 1998 Comp., p. 208; E.O. 13222, 66 FR maritime applications are not considered ‘‘ancillary export or reexport under License 44025, 3 CFR, 2001 Comp., p. 783; E.O. cryptography’’.

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PART 774—[AMENDED] Dated: October 7, 2009. information. Therefore, a freedom of Matthew S. Borman, information summary is not required. ■ 19. The authority citation for part 774 Acting Assistant Secretary for the Bureau of The agency has determined under 21 continues to read as follows: Industry and Security. CFR 25.33 that this action is of a type Authority: 50 U.S.C. app. 2401 et seq.; 50 [FR Doc. E9–24697 Filed 10–14–09; 8:45 am] that does not individually or U.S.C. 1701 et seq.; 10 U.S.C. 7420; 10 U.S.C. BILLING CODE 3510–33–P cumulatively have a significant effect on 7430(e); 22 U.S.C. 287c, 22 U.S.C. 3201 et seq., 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); the human environment. Therefore, 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. neither an environmental assessment 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; DEPARTMENT OF HEALTH AND nor an environmental impact statement 22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. HUMAN SERVICES is required. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. This rule does not meet the definition 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Food and Drug Administration Comp., p. 783; Notice of August 13, 2009, 74 of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because FR 41,325 (August 14, 2009). 21 CFR Part 558 it is a rule of ‘‘particular applicability.’’ Therefore, it is not subject to the ■ [Docket No. FDA–2009–N–0665] 20. In Supplement No. 1 to part 774 congressional review requirements in 5 (the Commerce Control List), Category 5 U.S.C. 801–808. Telecommunications and ‘‘Information New Animal Drugs for Use in Animal Security’’, Part 2 Information Security, Feeds; Monensin; Tylosin List of Subjects in 21 CFR Part 558 Export Control Classification Number AGENCY: Food and Drug Administration, Animal drugs, Animal feeds. (ECCN) 5B002 is amended by revising HHS. the License Exception section to read as ACTION: Final rule. ■ Therefore, under the Federal Food, follows: Drug, and Cosmetic Act and under the 5B002 Information Security—test, SUMMARY: The Food and Drug authority delegated to the Commissioner inspection and ‘‘production’’ equipment. Administration (FDA) is amending the of Food and Drugs and redelegated to * * * * * animal drug regulations to reflect the Center for Veterinary Medicine, 21 approval of a supplemental new animal CFR part 558 is amended as follows: License Exceptions drug application (NADA) filed by LVS: N/A Elanco Animal Health, A Division of Eli PART 558—NEW ANIMAL DRUGS FOR GBS: N/A Lilly & Co. The supplemental NADA USE IN ANIMAL FEEDS CIV: N/A revises limitations for liquid Type B ENC: Yes for certain EI controlled medicated cattle feeds containing ■ 1. The authority citation for 21 CFR equipment, see § 740.17 of the EAR for tylosin phosphate. eligibility. part 558 continues to read as follows: DATES: This rule is effective October 15, * * * * * 2009. Authority: 21 U.S.C. 360b, 371. ■ 21. In Supplement No. 1 to part 774 FOR FURTHER INFORMATION CONTACT: ■ 2. In § 558.355, revise paragraph (the Commerce Control List), Category 5 Cindy L. Burnsteel, Center for (f)(3)(ii)(b) to read as follows: Telecommunications and ‘‘Information Veterinary Medicine (HFV–130), Food Security’’, Part 2 Information Security, and Drug Administration, 7500 Standish § 558.355 Monensin. Export Control Classification Number Pl., Rockville, MD 20855, 240–276– * * * * * (ECCN) 5E002 is amended by revising 8341, e-mail: (f) * * * the License Exception section to read as [email protected]. (3) * * * follows: SUPPLEMENTARY INFORMATION: Elanco 5E002 ‘‘Technology’’ according to the Animal Health, A Division of Eli Lilly (ii) * * * General Technology Note for the & Co., Lilly Corporate Center, (b) Limitations. Feed only to cattle ‘‘development’’, ‘‘production’’ or ‘‘use’’ of Indianapolis, IN 46285, filed a being fed in confinement for slaughter. equipment controlled by 5A002 or 5B002 or supplement to NADA 12–491 for use of Feed continuously as sole ration at the ‘‘software’’ controlled by 5D002. TYLAN (tylosin phosphate) Type A rate of 50 to 480 milligrams of monensin * * * * * medicated article. For liquid Type B and 60 to 90 milligrams of tylosin per License Exceptions medicated cattle feeds containing head per day. Combination drug liquid CIV: N/A tylosin phosphate, the supplement Type B medicated feeds may be used to TSR: N/A removes the presolubilization manufacture dry Type C medicated ENC: Yes for certain EI controlled instructions previously required for feeds as in § 558.625(c) of this chapter. technology, see § 740.17 of the EAR for manufacture and reduces the expiry * * * * * eligibility. from 8 weeks to 31 days. The * * * * * supplemental NADA is approved as of § 558.625 [Amended] September 8, 2009, and the regulations ■ 22. In Supplement No. 1 to part 774 in 21 CFR 558.625 are amended to ■ 3. In § 558.625, remove and reserve (the Commerce Control List), Category 5 reflect the approval. In addition, the paragraph (c)(2)(i); and in paragraph Telecommunications and ‘‘Information limitations for two-way combination (c)(3), remove ‘‘8 weeks’’ and in its Security’’, Part 2 Information Security, drug medicated liquid feeds containing place add ‘‘31 days’’. Export Control Classification Number tylosin and monensin in 21 CFR Dated: September 25, 2009. (ECCN) 5E992 is amended by revising 558.355 are amended to reflect the the Heading to read as follows: revised limitations for tylosin liquid Steven D. Vaughn, 5E992 ‘‘Information Security’’ feeds. Director, Office of New Animal Drug ‘‘technology’’ according to the General Approval of this supplemental NADA Evaluation, Center for Veterinary Medicine. Technology Note, not controlled by 5E002. did not require review of additional [FR Doc. E9–24716 Filed 10–14–09; 8:45 am] * * * * * safety or effectiveness data or BILLING CODE 4160–01–S

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PENSION BENEFIT GUARANTY 4022) and the regulation on Allocation PBGC has determined that notice and CORPORATION of Assets in Single-Employer Plans (29 public comment on this amendment are CFR part 4044). Assumptions under the impracticable and contrary to the public 29 CFR Part 4022 asset allocation regulation are updated interest. This finding is based on the quarterly; assumptions under the benefit need to determine and issue new Benefits Payable in Terminated Single- payments regulation are updated interest assumptions promptly so that Employer Plans; Interest Assumptions monthly. This final rule updates only the assumptions can reflect current for Valuing and Paying Benefits the assumptions under the benefit market conditions as accurately as AGENCY: Pension Benefit Guaranty payments regulation. possible. Corporation. Two sets of interest assumptions are Because of the need to provide prescribed under the benefit payments ACTION: Final rule. immediate guidance for the valuation regulation: (1) A set for PBGC to use to and payment of benefits in plans with SUMMARY: Pension Benefit Guaranty determine whether a benefit is payable valuation dates during November 2009, Corporation’s regulation on Benefits as a lump sum and to determine lump- PBGC finds that good cause exists for Payable in Terminated Single-Employer sum amounts to be paid by PBGC (found making the assumptions set forth in this Plans prescribes interest assumptions in Appendix B to Part 4022), and (2) a amendment effective less than 30 days for valuing and paying certain benefits set for private-sector pension after publication. practitioners to refer to if they wish to under terminating single-employer PBGC has determined that this action use lump-sum interest rates determined plans. This final rule amends the benefit is not a ‘‘significant regulatory action’’ using PBGC’s historical methodology payments regulation to adopt interest under the criteria set forth in Executive (found in Appendix C to Part 4022). assumptions for plans with valuation Order 12866. dates in November 2009. Interest This amendment (1) adds to Appendix B to Part 4022 the interest Because no general notice of proposed assumptions are also published on rulemaking is required for this PBGC’s Web site (http://www.pbgc.gov). assumptions for PBGC to use for its own lump-sum payments in plans with amendment, the Regulatory Flexibility DATES: Effective November 1, 2009. valuation dates during November 2009, Act of 1980 does not apply. See 5 U.S.C. FOR FURTHER INFORMATION CONTACT: and (2) adds to Appendix C to Part 4022 601(2). Catherine B. Klion, Manager, Regulatory the interest assumptions for private- List of Subjects in 29 CFR Part 4022 and Policy Division, Legislative and sector pension practitioners to refer to if Regulatory Department, Pension Benefit they wish to use lump-sum interest rates Employee benefit plans, Pension Guaranty Corporation, 1200 K Street, determined using PBGC’s historical insurance, Pensions, Reporting and NW., Washington, DC 20005, 202–326– methodology for valuation dates during recordkeeping requirements. 4024. (TTY/TDD users may call the November 2009. ■ In consideration of the foregoing, 29 Federal relay service toll-free at 1–800– The interest assumptions that PBGC CFR part 4022 is amended as follows: 877–8339 and ask to be connected to will use for its own lump-sum payments 202–326–4024.) (set forth in Appendix B to part 4022) PART 4022—BENEFITS PAYABLE IN SUPPLEMENTARY INFORMATION: PBGC’s will be 2.25 percent for the period TERMINATED SINGLE–EMPLOYER regulations prescribe actuarial during which a benefit is in pay status PLANS assumptions—including interest and 4.00 percent during any years assumptions—for valuing and paying preceding the benefit’s placement in pay ■ 1. The authority citation for part 4022 plan benefits of terminating single- status. In comparison with the interest continues to read as follows: employer plans covered by title IV of assumptions in effect for October 2009, Authority: 29 U.S.C. 1302, 1322, 1322b, the Employee Retirement Income these interest assumptions represent a 1341(c)(3)(D), and 1344. Security Act of 1974. The interest decrease of 0.25 percent in the ■ 2. In appendix B to part 4022, Rate Set assumptions are intended to reflect immediate annuity rate and are 193, as set forth below, is added to the current conditions in the financial and otherwise unchanged. For private-sector table. annuity markets. payments, the interest assumptions (set These interest assumptions are found forth in Appendix C to part 4022) will APPENDIX B TO PART 4022—LUMP in two PBGC regulations: the regulation be the same as those used by PBGC for SUM INTEREST RATES FOR PBGC on Benefits Payable in Terminated determining and paying lump sums (set PAYMENTS Single-Employer Plans (29 CFR part forth in Appendix B to part 4022). * * * * *

For plans with a Immediate Deferred annuities Rate set valuation date annuity rate (percent) (percent) On or after Before i1 i2 i3 n1 n2

******* 193 11–1–09 12–1–09 2.25 4.00 4.00 4.00 7 8

■ 3. In appendix C to part 4022, Rate Set APPENDIX C TO PART 4022—LUMP 193, as set forth below, is added to the SUM INTEREST RATES FOR table. PRIVATE-SECTOR PAYMENTS * * * * *

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For plans with a Immediate Deferred annuities Rate set valuation date annuity rate (percent) (percent) On or after Before i1 i2 i3 n1 n2

******* 193 11–1–09 12–1–09 2.25 4.00 4.00 4.00 7 8

Issued in Washington, DC, on this 6th day [email protected]. If you have Regulatory Analyses of October 2009. questions on viewing the docket, call We developed this rule after Vincent K. Snowbarger, Renee V. Wright, Program Manager, considering numerous statutes and Acting Director, Pension Benefit Guaranty Docket Operations, telephone 202–366– executive orders related to rulemaking. Corporation. 9826. Below we summarize our analyses [FR Doc. E9–24732 Filed 10–14–09; 8:45 am] SUPPLEMENTARY INFORMATION: based on 13 of these statutes or BILLING CODE 7709–01–P executive orders. Regulatory Information Regulatory Planning and Review On August 13, 2009, we published a DEPARTMENT OF HOMELAND notice of proposed rulemaking (NPRM) This rule is not a significant SECURITY entitled Drawbridge Operation regulatory action under section 3(f) of Regulation; East River, New York City, Executive Order 12866, Regulatory Coast Guard NY, in the Federal Register (74 FR Planning and Review, and does not 40802). We received no comments on require an assessment of potential costs 33 CFR Part 117 the proposed rule. No public meeting and benefits under section 6(a)(3) of that [Docket No. USCG–2009–0348] was requested, and none was held. Order. The Office of Management and Budget has not reviewed it under that RIN 1625–AA09 Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for Order. This conclusion is based upon Drawbridge Operation Regulation; East making this rule effective in less than 30 the fact that vessel traffic will still be River, New York City, NY days after publication in the Federal able to transit the East River using the Register. A delay or cancellation of this alternate route around the island. AGENCY: Coast Guard, DHS. ongoing bridge rehabilitation project is Small Entities ACTION: Temporary final rule. not in the public interest and would further disrupt the flow of vehicular and Under the Regulatory Flexibility Act SUMMARY: The Coast Guard has maritime traffic. The rehabilitation (5 U.S.C. 601–612), we have considered temporarily changed the drawbridge project is necessary to ensure the whether this rule would have a operating regulations governing the continued safe and reliable operation of significant economic impact on a operation of the Roosevelt Island Bridge, the bridge. substantial number of small entities. mile 6.4, across the East River at New The term ‘‘small entities’’ comprises York City, New York. This temporary Background and Purpose small businesses, not-for-profit final rule allows the Roosevelt Island The Roosevelt Island Bridge has a organizations that are independently Bridge to remain in the closed position vertical clearance of 40 feet at mean owned and operated and are not for eleven months to facilitate a major high water, and 47 feet at mean low dominant in their fields, and rehabilitation of the bridge. water in the closed position. The governmental jurisdictions with DATES: This rule is effective October 15, existing drawbridge operating populations of less than 50,000. The Coast Guard certifies under 5 2009 through August 31, 2010. regulations listed at 33 CFR 117.781, U.S.C. 605(b) that this rule will not have ADDRESSES: Comments and related require the bridge to open on signal if a significant economic impact on a materials received from the public, as at least a two hour advance notice is substantial number of small entities. well as documents mentioned in this given. This conclusion is based upon the fact preamble as being available in the The bridge owner, New York City that vessel traffic will still be able to docket, are part of docket USCG–2009– Department of Transportation, has transit the East River using the alternate 0348 and are available online by going requested a temporary rule to facilitate route round the island. to http://www.regulations.gov, inserting electrical and mechanical rehabilitation USCG–2009–0348 in the ‘‘Keyword’’ at the Roosevelt Island Bridge. Assistance for Small Entities box, and then clicking ‘‘Search.’’ This Under this temporary final rule the Under section 213(a) of the Small material is also available for inspection Roosevelt Island Bridge will remain in Business Regulatory Enforcement or copying at the Docket Management the closed position from October 1, 2009 Fairness Act of 1996 (Pub. L. 104–121), Facility (M–30), U.S. Department of through August 31, 2010. Vessel traffic in the NPRM we offered to assist small Transportation, West Building Ground may transit the East River utilizing the entities in understanding the rule so Floor, Room W12–140, 1200 New Jersey alternate route around the other side of that they could better evaluate its effects Avenue, SE., Washington, DC 20590, the island. on them and participate in the between 9 a.m. and 5 p.m., Monday rulemaking process. through Friday, except Federal holidays. Discussion of Comments and Changes FOR FURTHER INFORMATION CONTACT: If The Coast Guard received no Collection of Information you have questions on this temporary comment letters in response to the This rule calls for no new collection rule, call or e-mail Mr. Joe Arca, Project notice of proposed rulemaking. As a of information under the Paperwork Officer, First Coast Guard District Bridge result, no changes have been made to Reduction Act of 1995 (44 U.S.C. 3501– Branch, 212–668–7165, this temporary final rule. 3520).

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Federalism Significantly Affect Energy Supply, PART 117—DRAWBRIDGE A rule has implications for federalism Distribution, or Use. We have OPERATION REGULATIONS determined that it is not a ‘‘significant under Executive Order 13132, ■ energy action’’ under that order because 1. The authority citation for part 117 Federalism, if it has a substantial direct continues to read as follows: effect on State or local governments and it is not a ‘‘significant regulatory action’’ would either preempt State law or under Executive Order 12866 and is not Authority: 33 U.S.C. 499; 33 CFR 1.05–1; impose a substantial direct cost of likely to have a significant adverse effect Department of Homeland Security Delegation No. 0170.1. compliance on them. We have analyzed on the supply, distribution, or use of this rule under that Order and have energy. The Administrator of the Office ■ 2. From, October 15, 2009 through determined that it does not have of Information and Regulatory Affairs August 31, 2010, § 117.781 is amended implications for federalism. has not designated it as a significant by suspending paragraph (c) and adding energy action. Therefore, it does not a temporary paragraph (d) to read as Unfunded Mandates Reform Act require a Statement of Energy Effects follows: The Unfunded Mandates Reform Act under Executive Order 13211. § 117.781 East River. of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of Technical Standards * * * * * (d) The draw of the Roosevelt Island their discretionary regulatory actions. In The National Technology Transfer particular, the Act addresses actions Bridge at mile 6.4, at New York City, and Advancement Act (NTTAA) (15 need not open for the passage of vessel that may result in the expenditure by a U.S.C. 272 note) directs agencies to use State, local, or tribal government, in the traffic from October 1, 2009 through voluntary consensus standards in their August 31, 2010. aggregate, or by the private sector of regulatory activities unless the agency $100,000,000 or more in any one year. provides Congress, through the Office of Dated: September 28, 2009. Though this rule will not result in such Management and Budget, with an Joseph L. Nimmich, an expenditure, we do discuss the explanation of why using these Rear Admiral, U.S. Coast Guard Commander, effects of this rule elsewhere in this standards would be inconsistent with First Coast Guard District. preamble. applicable law or otherwise impractical. [FR Doc. E9–24744 Filed 10–14–09; 8:45 am] Taking of Private Property Voluntary consensus standards are BILLING CODE 4910–15–P technical standards (e.g., specifications This rule will not affect a taking of of materials, performance, design, or private property or otherwise have operation; test methods; sampling DEPARTMENT OF HOMELAND taking implications under Executive procedures; and related management SECURITY Order 12630, Governmental Actions and systems practices) that are developed or Interference with Constitutionally Coast Guard adopted by voluntary consensus Protected Property Rights. standards bodies. 33 CFR Part 117 Civil Justice Reform This rule does not use technical This rule meets applicable standards standards. Therefore, we did not [Docket No. USCG–2009–0814] in sections 3(a) and 3(b)(2) of Executive consider the use of voluntary consensus Order 12988, Civil Justice Reform, to standards. RIN 1625–AA09 minimize litigation, eliminate Drawbridge Operation Regulation; ambiguity, and reduce burden. Environment Atlantic Intracoastal Waterway (AIWW), Protection of Children We have analyzed this rule under Elizabeth River, Southern Branch, VA Department of Homeland Security We have analyzed this rule under Management Directive 023–01 and AGENCY: Coast Guard, DHS. Executive Order 13045, Protection of Commandant Instruction M16475.lD, ACTION: Final rule. Children from Environmental Health which guides the Coast Guard in Risks and Safety Risks. This rule is not complying with the National SUMMARY: The Coast Guard is removing an economically significant rule and Environmental Policy Act of 1969 the existing drawbridge operation would not create an environmental risk (NEPA) (42 U.S.C. 4321–4370f), and regulation for the Jordan (S337) Bridge, to health or risk to safety that might have concluded that this action is one at AIWW mile 2.8, across the Elizabeth disproportionately affect children. of a category of actions which do not River (Southern Branch) in Chesapeake, Indian Tribal Governments individually or cumulatively have a VA, because the vertical-lift span has been removed. This rule does not have tribal significant effect on the human implications under Executive Order environment. This rule is categorically DATES: This rule is effective October 15, 13175, Consultation and Coordination excluded, under figure 2–1, paragraph 2009. with Indian Tribal Governments, (32)(e), of the Instruction. ADDRESSES: Documents indicated in this because it does not have a substantial Under figure 2–1, paragraph (32)(e), of preamble as being available in the direct effect on one or more Indian the Instruction, an environmental docket, are part of docket USCG–2009– tribes, on the relationship between the analysis checklist and a categorical 0814 and are available by going to Federal Government and Indian tribes, exclusion determination are not http://www.regulations.gov, inserting or on the distribution of power and required for this rule. USCG–2009–0814 in the ‘‘Keyword’’ responsibilities between the Federal box, and then clicking ‘‘Search.’’ This Government and Indian tribes. List of Subjects in 33 CFR Part 117 material is also available for inspection or copying at the Docket Management Bridges. Energy Effects Facility (M–30), U.S. Department of We have analyzed this rule under ■ For the reasons discussed in the Transportation, West Building Ground Executive Order 13211, Actions preamble, the Coast Guard amends 33 Floor, Room W12–140, 1200 New Jersey Concerning Regulations That CFR part 117 as follows: Avenue, SE., Washington, DC 20590,

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between 9 a.m. and 5 p.m., Monday Boulevard (US 17), S168, Albemarle & and participate in the rulemaking through Friday, except Federal holidays. Chesapeake Railroad, and Centerville process. Turnpike (SR170) along the AIWW, FOR FURTHER INFORMATION CONTACT: If Collection of Information you have questions on this rule, call or South Branch of the Elizabeth River to e-mail Waverly W. Gregory, Jr., Bridge the Albemarle and Chesapeake Canal. This rule calls for no new collection of information under the Paperwork Administrator, Fifth Coast Guard Regulatory Analyses District; telephone (757) 398–6222, e- Reduction Act of 1995 (44 U.S.C. 3501– mail [email protected]. We developed this rule after 3520.). considering numerous statutes and If you have questions on viewing the Federalism docket, call Renee V. Wright, Program executive orders related to rulemaking. Manager, Docket Operations, telephone Below we summarize our analyses A rule has implications for federalism 202–366–9826. based on 13 of these statutes or under Executive Order 13132, SUPPLEMENTARY INFORMATION: executive orders. Federalism, if it has a substantial direct effect on State or local governments and Regulatory Information Regulatory Planning and Review would either preempt State law or The Coast Guard is issuing this final This rule is not a significant impose a substantial direct cost of rule without prior notice and regulatory action under section 3(f) of compliance on them. We have analyzed opportunity to comment pursuant to Executive Order 12866, Regulatory this rule under that Order and have authority under section 4(a) of the Planning and Review, and does not determined that it does not have Administrative Procedure Act (APA) (5 require an assessment of potential costs implications for federalism. and benefits under section 6(a)(3) of that U.S.C. 553(b)). This provision Unfunded Mandates Reform Act authorizes an agency to issue a rule Order. The Office of Management and without prior notice and opportunity to Budget has not reviewed it under that The Unfunded Mandates Reform Act comment when the agency for good Order. This rule is not ‘‘significant’’ of 1995 (2 U.S.C. 1531–1538) requires cause finds that those procedures are under the regulatory policies and Federal agencies to assess the effects of ‘‘impracticable, unnecessary, or contrary procedures of the Department of their discretionary regulatory actions. In to the public interest.’’ Under 5 U.S.C. Homeland Security (DHS). We expect particular, the Act addresses actions 553(b)(B), the Coast Guard finds that the economic impact of this rule to be that may result in the expenditure by a good cause exists for not publishing a so minimal that a full Regulatory State, local, or tribal government, in the notice of proposed rulemaking (NPRM) Evaluation under the regulatory policies aggregate, or by the private sector of with respect to this rule because prior and procedures of DHS unnecessary. $100,000,000 or more in any one year. removal of the bridge renders a notice This rule merely removes an operating Though this rule will not result in such and comment period unnecessary. regulation for a movable bridge that has an expenditure, we do discuss the Under 5 U.S.C. 553(d)(3), the Coast been removed. Therefore, the operating effects of this rule elsewhere in this Guard finds that good cause exists for regulation is unnecessary and its preamble. removal will have a de minimis making this rule effective in less than 30 Taking of Private Property days after publication in the Federal economic impact. This rule will not effect a taking of Register. This rule removes the Small Entities regulation used for the operation of a private property or otherwise have movable bridge. Since the modification Under the Regulatory Flexibility Act taking implications under Executive has already taken place, the removal of (5 U.S.C. 601–612), we have considered Order 12630, Governmental Actions and the regulation will not adversely affect whether this rule would have a Interference with Constitutionally mariners. significant economic impact on a Protected Property Rights. substantial number of small entities. Background and Purpose The term ‘‘small entities’’ comprises Civil Justice Reform The Jordan (S337) Bridge vertical-lift small businesses, not-for-profit This rule meets applicable standards span at AIWW mile 2.8, across the organizations that are independently in sections 3(a) and 3(b)(2) of Executive Elizabeth River (Southern Branch) in owned and operated and are not Order 12988, Civil Justice Reform, to Chesapeake, VA, was removed on May dominant in their fields, and minimize litigation, eliminates 6, 2009, thereby eliminating the need for governmental jurisdictions with ambiguity, and reduce burden. populations of less than 50,000. 33 CFR 117.997(b). Protection of Children Since the vertical-lift span of the The Coast Guard certifies under 5 bridge has been removed, a special U.S.C. 605(b) that this rule will not have We have analyzed this rule under operating regulation for a movable a significant economic impact on a Executive Order 13045, Protection of bridge is unnecessary. This final rule substantial number of small entities. Children from Environmental Health removes the regulation regarding the Since the bridge is no longer a movable Risks and Safety Risks. This rule is not Jordan (S337) Bridge. bridge, the regulation controlling the an economically significant rule and opening and closing of the bridge in no would not create an environmental risk Discussion of Rule longer necessary. Hence, this action will to health or risk to safety that might This change removes the regulation have no economic impact on small disproportionately affect children. governing the operation of a movable entities. Indian Tribal Governments bridge that has been removed. This action necessitates redesignating Assistance for Small Entities This rule does not have tribal the remaining regulations listed in 33 Under section 213(a) of the Small implications under Executive Order CFR 117.997 as (b), (c), (d), (e), (f), (g), Business Regulatory Enforcement 13175, Consultation and Coordination (h), and (i) for the drawbridges at Fairness Act of 1996 (Pub. L. 104–121), with Indian Tribal Governments, Norfolk and Western Railroad, we offered to assist small entities in because it would not have a substantial Gilmerton (US13/460), Norfolk understanding the rule so that they direct effect on one or more Indian Southern #7 Railroad, I–64, Dominion could better evaluate its effects on them tribes, on the relationship between the

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Federal Government and Indian tribes, List of Subjects in 33 CFR Part 117 Floor, Room W12–140, 1200 New Jersey or on the distribution of power and Bridges. Avenue, SE., Washington, DC 20590, responsibilities between the Federal ■ For the reasons discussed in the between 9 a.m. and 5 p.m., Monday Government and Indian tribes. preamble, the Coast Guard amends 33 through Friday, except Federal holidays Energy Effects CFR part 117 as follows: FOR FURTHER INFORMATION: If you have We have analyzed this rule under questions on this rule, call or e-mail PART 117—DRAWBRIDGE Executive Order 13211, Actions David H. Sulouff, Chief, Bridge Section, OPERATION REGULATIONS Concerning Regulations That Eleventh Coast Guard District; 510–437– Significantly Affect Energy Supply, ■ 1. The authority citation for part 117 3516, [email protected]. If you Distribution, or Use. We have continues to read as follows: have questions on viewing the docket, determined that it is not a ‘‘significant Authority: 33 U.S.C. 499; 33 CFR 1.05–1; call Renee V. Wright, Program Manager, energy action’’ under that order because Department of Homeland Security Delegation Docket Operations, 202–366–9826. it is not a ‘‘significant regulatory action’’ No. 0170.1. under Executive Order 12866 and is not SUPPLEMENTARY INFORMATION: Caltrans likely to have a significant adverse effect § 117.997 [Amended] requested a temporary change to the on the supply, distribution, or use of ■ 2. In § 117.997, remove paragraph (b) operation of the California Route 160 energy. The Administrator of the Office and redesignate paragraphs (c) through Drawbridge, mile 0.1, Three Mile of Information and Regulatory Affairs (j) as paragraphs (b) through (i). Slough, near Rio Vista, CA. The has not designated it as a significant drawbridge navigation span provides a Dated: September 29, 2009. energy action. Therefore, it does not vertical clearance of 12 feet above Mean require a Statement of Energy Effects Patrick B. Trapp, High Water in the closed-to-navigation under Executive Order 13211. Captain, U.S. Coast Guard, Acting position. The drawbridge opens on Commander, Fifth Coast Guard District. Technical Standards signal as required by 33 CFR 117.5. [FR Doc. E9–24830 Filed 10–14–09; 8:45 am] Navigation on the waterway is The National Technology Transfer BILLING CODE 4910–15–P commercial and recreational. and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use The drawbridge will be secured in the voluntary consensus standards in their DEPARTMENT OF HOMELAND closed-to-navigation position from 8 regulatory activities unless the agency SECURITY a.m. through 4 p.m. Monday through provides Congress, through the Office of Friday, from October 15, 2009 through Management and Budget, with an Coast Guard November 4, 2009, to allow Caltrans to explanation of why using these replace the industrial staircase leading standards would be inconsistent with 33 CFR Part 117 to the control house. At all other times applicable law or otherwise impractical. [Docket No. USCG–2009–0896] during this period the drawbridge will Voluntary consensus standards are open on signal as required by 33 CFR technical standards (e.g., specifications Drawbridge Operation Regulation; 117.5. This temporary deviation has of materials, performance, design, or Three Mile Slough, Rio Vista, CA been coordinated with commercial and operation; test methods; sampling AGENCY: Coast Guard, DHS. recreational waterway users. There is no procedures; and related management anticipated levee maintenance during systems practices) that are developed or ACTION: Notice of temporary deviation from regulations. this deviation period. No objections to adopted by voluntary consensus the proposed temporary deviation were standards bodies. SUMMARY: The Commander, Eleventh raised. This rule does not use technical Coast Guard District, has issued a standards. Therefore, we did not Vessels that can transit the temporary deviation from the regulation drawbridge, while in the closed-to- consider the use of voluntary consensus governing the operation of the California standards. navigation position, may continue to do Route 160 Drawbridge across Three Mile so at any time. Environment Slough, mile 0.1, near Rio Vista, CA. In the event of an emergency the We have analyzed this rule under The deviation is necessary to allow Caltrans to conduct drawbridge drawbridge can be opened with 4 hours Department of Homeland Security advance notice. Management Directive 023–01 and maintenance. This deviation allows the Commandant Instruction M16475.1D bridge to remain in the closed-to- In accordance with 33 CFR 117.35(e), which guides the Coast Guard in navigation position during the the drawbridge must return to its regular complying with the National maintenance period. operating schedule immediately at the Environmental Policy Act of 1969 DATES: This deviation is effective from end of the designated time period. This (NEPA) (42 U.S.C. 4321–4370f), and 8 a.m. on October 15, 2009 through 4 deviation from the operating regulations have concluded that this action is one p.m. on November 4, 2009. is authorized under 33 CFR 117.35. of a category of actions which do not ADDRESSES: Documents mentioned in Dated: October 01, 2009. individually or cumulatively have a this preamble as being available in the S.P. Metruck, significant effect on the human docket are part of docket USCG–2009– environment. Therefore this rule is 0896 and are available online by going Captain, U.S. Coast Guard, Acting categorically excluded, under figure 2– to www.regulations.gov, inserting Commander, Eleventh Coast Guard District. 1, paragraph (32)(e), of the Instruction. USCG–2009–0896 in the ‘‘Keyword’’ [FR Doc. E9–24831 Filed 10–14–09; 8:45 am] Under figure 2–1, paragraph (32)(e), of box and then clicking ‘‘Search.’’ This BILLING CODE 4910–15–P the Instruction, an environmental material is also available for inspection analysis checklist and a categorical or copying at the Docket Management exclusion determination are not Facility (M–30), U.S. Department of required for this rule. Transportation, West Building Ground

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ENVIRONMENTAL PROTECTION received will be included in the public SUPPLEMENTARY INFORMATION: AGENCY docket without change and may be Throughout this document whenever made available online at ‘‘we,’’ ‘‘us,’’ or ‘‘our’’ is used, we mean 40 CFR Part 52 www.regulations.gov, including any EPA. This supplementary information section is arranged as follows: [EPA–R05–OAR–2009–0120; FRL–8968–1] personal information provided, unless the comment includes information I. Why did the State make this submittal to Approval and Promulgation of Air claimed to be Confidential Business EPA? Quality Implementation Plans; Indiana; Information (CBI) or other information II. What is a Limited Maintenance Plan? Carbon Monoxide Maintenance Plan whose disclosure is restricted by statute. III. What is EPA’s analysis of the submittal? Updates; Limited Maintenance Plan Do not submit information that you IV. What action is EPA taking? consider to be CBI or otherwise V. Statutory and Executive Order Reviews AGENCY: Environmental Protection protected through www.regulations.gov I. Why did the State make this Agency (EPA). or e-mail. The www.regulations.gov Web submittal to EPA? ACTION: Direct final rule. site is an ‘‘anonymous access’’ system, which means EPA will not know your On December 21, 1999, the State of SUMMARY: The Indiana Department of identity or contact information unless Indiana submitted redesignation Environmental Management (IDEM) you provide it in the body of your requests and limited CO maintenance submitted Carbon Monoxide (CO) comment. If you send an e-mail plans for the Lake County (East Chicago) ‘‘Limited Maintenance Plan’’ updates comment directly to EPA without going and Marion County (Indianapolis) CO for Lake and Marion Counties on through www.regulations.gov your e- nonattainment areas. EPA subsequently January 12, 2009. These Limited mail address will be automatically approved the redesignation request and Maintenance Plans demonstrate captured and included as part of the limited maintenance plans for CO continued attainment of the CO comment that is placed in the public attainment in Lake and Marion Counties National Ambient Air Quality Standard docket and made available on the on January 19, 2000 (65 FR 2883). (NAAQS) for Lake and Marion counties Internet. If you submit an electronic Section 175A of the Clean Air Act for an additional ten years. EPA is, comment, EPA recommends that you therefore, approving it into Indiana’s (CAA) sets forth the elements of a include your name and other contact State Implementation Plan (SIP). maintenance plan for areas seeking information in the body of your DATES: This direct final rule will be redesignation from nonattainment to comment and with any disk or CD–ROM attainment. The plan must demonstrate effective December 14, 2009, unless EPA you submit. If EPA cannot read your receives adverse comments by continued attainment of the applicable comment due to technical difficulties NAAQS for at least ten years after EPA November 16, 2009. If adverse and cannot contact you for clarification, comments are received, EPA will approves a redesignation to attainment. EPA may not be able to consider your Eight years after the redesignation, the publish a timely withdrawal of the comment. Electronic files should avoid direct final rule in the Federal Register State must submit a revised the use of special characters, any form maintenance plan which demonstrates informing the public that the rule will of encryption, and be free of any defects not take effect. attainment for the ten years following or viruses. the initial ten year period. ADDRESSES: Submit your comments, Docket: All documents in the docket identified by Docket ID No. EPA–R05– As part of the original redesignation are listed in the www.regulations.gov OAR–2009–0120, by one of the request and limited CO maintenance index. Although listed in the index, following methods: plan, IDEM committed to review, and some information is not publicly 1. www.regulations.gov: Follow the revise its limited maintenance plan available, e.g., CBI or other information on-line instructions for submitting eight years after the areas were whose disclosure is restricted by statute. comments. redesignated to attainment of the CO Certain other material, such as 2. E-mail: [email protected]. standard, as required by section 175A(b) copyrighted material, will be publicly 3. Fax: (312) 692–2551. of the CAA. On January 12, 2009, available only in hard copy. Publicly 4. Mail: John M. Mooney, Chief, Indiana satisfied its commitment by available docket materials are available Criteria Pollutant Section, Air Programs submitting a revision to its SIP to either electronically in Branch (AR–18J), U.S. Environmental update the limited CO maintenance www.regulations.gov or in hard copy at Protection Agency, 77 West Jackson plans for both the Lake County and the Environmental Protection Agency, Boulevard, Chicago, Illinois 60604. Marion County CO attainment areas. Region 5, Air and Radiation Division, 77 5. Hand Delivery: John M. Mooney, The update to the limited CO West Jackson Boulevard, Chicago, Chief, Criteria Pollutant Section, Air maintenance plan for Lake County and Illinois 60604. This facility is open from Programs Branch (AR–18J), U.S. Marion County supplements, and does 8:30 a.m. to 4:30 p.m., Monday through Environmental Protection Agency, 77 not replace, the original approved Friday, excluding Federal holidays. We West Jackson Boulevard, Chicago, maintenance plans. The commitments recommend that you telephone Charles Illinois 60604. Such deliveries are only in the approved maintenance plans Hatten, Environmental Engineer, at accepted during the Regional Office continue to apply for a second 10 year (312) 886–6031 before visiting the normal hours of operation, and special period. Region 5 office. arrangements should be made for A. Has public notice been provided? deliveries of boxed information. The FOR FURTHER INFORMATION CONTACT: Regional Office official hours of Charles Hatten, Environmental Indiana published a public notice on business are Monday through Friday, Engineer, Criteria Pollutant Section, Air November 19, 2008, for the limited 8:30 a.m. to 4:30 p.m., excluding Programs Branch (AR–18J), U.S. maintenance plan update for the Lake Federal holidays. Environmental Protection Agency, and Marion Counties CO attainment Instructions: Direct your comments to Region 5, 77 West Jackson Boulevard, areas. No public comments were Docket ID No. EPA–R05–OAR–2009– Chicago, Illinois 60604, (312) 886–6031, received during the 30-day comment 0120. EPA’s policy is that all comments [email protected]. period ending on December 19, 2008.

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B. Geographic Boundaries emissions of air quality over the 2006. This decrease can be attributed to The CO maintenance areas are much maintenance period. EPA believes that a number of factors, including Federally smaller than Lake County and Marion if the area begins the maintenance mandated programs, closings of County, respectively. The following is a period at, or below, 85 percent of the CO permitted stationary sources, and brief description of the two maintenance 8-hour NAAQS, then the applicability of source-specific operating provisions. counties included in this update. Prevention of Significant Deterioration By opting to comply with the (PSD) requirements, the control requirements of the limited Lake County measures already in the SIP, and maintenance plan option, IDEM is not Lake County is located in northwest Federal measures should provide required to project CO emissions for Indiana. The Lake County CO adequate assurance of maintenance over Lake and Marion Counties as part of the maintenance area is in the City of East the ten year maintenance period. In updates to these limited maintenance Chicago (area bounded by Columbus addition, the design value for the area plans. Drive on the north, the Indiana Harbor must continue to be at or below 7.65 Canal on the west, 148th St., if ppm until the time of final EPA action. Maintenance Demonstration extended, on the south and Euclid The core provisions that are required To qualify for the limited CO Avenue on the east). in a limited maintenance plan for CO maintenance plan option, the CO design are: an attainment emissions inventory, Marion County value for the area (the second highest a maintenance demonstration (which is eight hour non-overlapping monitored Marion County is located in central satisfied by the air quality value), based on eight consecutive Indiana, and is part of the Indianapolis demonstration described in the previous quarters (2 years of data) must be at or metropolitan area. However, only a paragraph), continued operation of an below, 7.65 ppm, or 85 percent of the small area located in the center of EPA approved CO monitoring network, level of the eight hour CO NAAQS. To Marion County, bounded by 11th St. on a contingency plan, and a assess whether the area meets the to the north, Capitol Avenue to the west, demonstration of transportation applicability cutoff for the limited Georgia Street to the south and conformity. Each of these components maintenance plan, a separate design Delaware to the east is classified as has been adequately addressed by in value must be developed for every maintenance for CO. IDEM’s submittal. monitoring site. The highest of these II. What is a Limited Maintenance III. What is EPA’s Analysis of the design values is the design value for the Plan? submittal? whole area. ‘‘Limited Maintenance Plans’’ are In Lake County, there is one Attainment/Emission Inventory applicable in certain areas that EPA had monitoring site collecting CO data for formerly designated as nonclassifiable The State is required to develop an maintenance of the CO NAAQS located and nonattainment for CO. As discussed attainment emission inventory to at the East Chicago Post Office. The in an October 6, 1995, memorandum identify a level of emissions in the area 2007 eight hour CO design value for the entitled ‘‘Limited Maintenance Plan which is sufficient to attain the CO monitor in Lake County area is 3.0 ppm. Option for Nonclassifiable CO NAAQS. In its submittal, IDEM In Marion County, there are two CO Nonattainment Areas,’’ EPA will provided a comprehensive emission monitoring sites in operation, one consider the maintenance inventory of major sources permitted in located at 50 North Illinois Street, and demonstration satisfied if the design Lake and Marion Counties from the one at the Naval Avionics Center. The value (the second highest 8-hour non- original maintenance plan’s emissions 2007 eight hour CO design values for overlapping monitored value) is at or (1997) compared to the most recent these two monitors are 3.6 ppm (North below 7.65 parts per million (ppm), or emissions inventory (2006). The State Illinois Street), and 2.1 ppm (Naval 85 percent of the level of the eight hour demonstrated that the CO emissions Avionics Center). This makes the CO NAAQS of 9.0 ppm. The design from major sources in Lake County and Marion County CO maintenance area’s value must be based on eight Marion County have decreased by design value 3.6 ppm. The CO design consecutive quarters of data. For such 2,126.86 tons per year, and 22,679.12 values for Lake and Marion Counties are areas, there is no requirement to project tons per year, respectively, from 1997 to presented in the table below.

CURRENT CO DESIGN VALUE FOR LAKE AND MARION COUNTIES

1st Max 2nd Max Design Site ID County Site name Year 8-hour 8-hour value (ppm) (ppm) (ppm)

18–089–0001 ...... Lake ...... East Chicago ...... 2006 3.2 2.4 2.4 18–089–0001 ...... Lake ...... East Chicago ...... 2007 3.1 3.0 3.0 18–097–0072 ...... Marion ...... 50 North Illinois ...... 2006 2.1 2.0 2.4 18–097–0072 ...... Marion ...... 50 North Illinois ...... 2007 4.3 3.6 3.6 18–097–0073 ...... Marion ...... Naval Avionics Center ...... 2006 2.3 2.1 2.1 18–097–0073 ...... Marion ...... Naval Avionics Center ...... 2007 2.3 2.0 2.1

The eight hour design values from the County and have not exceeded the 7.65 ppm and Marion County continue to be below AIRS (Aerometric Information Retrieval level for the 1998 to 2007 time interval. 7.65 ppm. See table below. System) Quick Look data report were Current data in AIRS for 2008 show that examined for Lake County and Marion the CO monitoring values for Lake County

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CURRENT CO AMBIENT MONITORING DATA FOR LAKE AND MARION COUNTIES

1st Max 2nd Max Site ID County Site name Year 8-hour 8-hour (ppm) (ppm)

18–089–0001 ...... Lake ...... East Chicago ...... 2008 3.3 3.0 18–097–0072 ...... Marion ...... 50 North Illinois ...... 2008 3.2 2.1 18–097–0073 ...... Marion ...... Naval Avionics Center ...... 2008 1.3 1.2

EPA also examined at CO monitoring data • Is not a ‘‘significant regulatory action’’ action is not a ‘‘major rule’’ as defined by 5 for 2009. While this data has yet to be quality subject to review by the Office of U.S.C. 804(2). assured, it shows CO levels continue to be Management and Budget under Executive Under section 307(b)(1) of the Clean Air low for Lake County and Marion County. Order 12866 (58 FR 51735, October 4, 1993); Act, petitions for judicial review of this Based on ambient air monitoring date, Lake • Does not impose an information action must be filed in the United States and Marion Counties are eligible to update collection burden under the provisions of the Court of Appeals for the appropriate circuit their maintenance plan under the limited Paperwork Reduction Act (44 U.S.C. 3501 et by December 14, 2009. Filing a petition for maintenance plan policy. IDEM will continue seq.); reconsideration by the Administrator of this to maintain a continuous CO monitoring • Is certified as not having a significant final rule does not affect the finality of this network, meeting the requirements of 40 CFR economic impact on a substantial number of action for the purposes of judicial review nor Part 58, that provides adequate coverage to small entities under the Regulatory does it extend the time within which a verify continued compliance with the CO Flexibility Act (5 U.S.C. 601 et seq.); petition for judicial review may be filed, and NAAQS. • Does not contain any unfunded mandate shall not postpone the effectiveness of such or significantly or uniquely affect small rule or action. Parties with objections to this IV. What action is EPA taking? governments, as described in the Unfunded direct final rule are encouraged to file a EPA is approving a SIP revision request Mandates Reform Act of 1995 (Pub. L. 104– comment in response to the parallel notice of submitted by the State of Indiana. This SIP 4); proposed rulemaking for this action revision meets the requirements for a second • Does not have Federalism implications published in the Proposed Rules section of ten year limited CO maintenance plan for as specified in Executive Order 13132 (64 FR today’s Federal Register, rather than file an Lake County and Marion County, Indiana. 43255, August 10, 1999); immediate petition for judicial review of this The SIP revision supplements the current • Is not an economically significant direct final rule, so that EPA can withdraw approved limited CO maintenance plans for regulatory action based on health or safety this direct final rule and address the Lake County and Marion County, and risks subject to Executive Order 13045 (62 FR comment in the proposed rulemaking. This continues to demonstrate maintenance of the 19885, April 23, 1997); action may not be challenged later in CO NAAQS for an additional ten years. • Is not a significant regulatory action proceedings to enforce its requirements. (See We are publishing this action without prior subject to Executive Order 13211 (66 FR section 307(b)(2).) proposal because we view this as a 28355, May 22, 2001); List of Subjects in 40 CFR Part 52 noncontroversial amendment and anticipate • Is not subject to requirements of Section no adverse comments. However, in the 12(d) of the National Technology Transfer Environmental protection, Air Proposed Rules section of this Federal and Advancement Act of 1995 (15 U.S.C. 272 pollution control, Carbon monoxide, Register publication, we are publishing a note) because application of those Incorporation by reference, and separate document that will serve as the requirements would be inconsistent with the Intergovernmental relations. proposal to approve the state plan if relevant Clean Air Act; and adverse written comments are filed. This rule • Does not provide EPA with the Dated: September 29, 2009. will be effective December 14, 2009 without discretionary authority to address, as Walter W. Kovalick Jr., further notice unless we receive relevant appropriate, disproportionate human health Acting Regional Administrator, Region 5. or environmental effects, using practicable adverse written comments by November 16, ■ For the reasons stated in the preamble, 2009. If we receive such comments, we will and legally permissible methods, under withdraw this action before the effective date Executive Order 12898 (59 FR 7629, February part 52, chapter I, of title 40 of the Code by publishing a subsequent document that 16, 1994). of Federal Regulations is amended as will withdraw the final action. All public In addition, this rule does not have Tribal follows: comments received will then be addressed in implications as specified by Executive Order a subsequent final rule based on the 13175 (65 FR 67249, November 9, 2000), PART 52—[AMENDED] because the SIP is not approved to apply in proposed action. The EPA will not institute ■ 1. The authority citation for part 52 a second comment period, therefore, any Indian country located in the state, and EPA parties interested in commenting on this notes that it will not impose substantial continues to read as follows: action should do so at this time. If we do not direct costs on Tribal governments or Authority: 42 U.S.C. 7401 et seq. receive any comments, this action will be preempt Tribal law. effective December 14, 2009. The Congressional Review Act, 5 U.S.C. Subpart P—Indiana 801 et seq., as added by the Small Business V. Statutory and Executive Order Reviews Regulatory Enforcement Fairness Act of 1996, ■ 2. Section 52.785 is amended by Under the Clean Air Act, the Administrator generally provides that before a rule may take adding paragraph (c) to read as follows: is required to approve a SIP submission that effect, the agency promulgating the rule must complies with the provisions of the Act and submit a rule report, which includes a copy § 52.785 Control Strategy: Carbon applicable Federal regulations. 42 U.S.C. of the rule, to each House of the Congress and Monoxide. 7410(k); 40 CFR 52.02(a). Thus, in reviewing to the Comptroller General of the United * * * * * SIP submissions, EPA’s role is to approve States. EPA will submit a report containing (c) Approval—The Indiana state choices, provided that they meet the this action and other required information to Department of Environmental criteria of the Clean Air Act. Accordingly, the U.S. Senate, the U.S. House of this action merely approves state law as Representatives, and the Comptroller General Management (IDEM) submitted Carbon meeting Federal requirements and does not of the United States prior to publication of Monoxide (CO) Limited Maintenance impose additional requirements beyond the rule in the Federal Register. A major rule Plan Updates for Lake and Marion those imposed by state law. For that reason, cannot take effect until 60 days after it is Counties on January 12, 2009. The this action: published in the Federal Register. This updated Limited Maintenance Plans

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demonstrate attainment of the CO (SIP). These revisions were proposed in location (e.g., copyrighted material), and National Ambient Air Quality Standard the Federal Register on July 13, 2009 some may not be publicly available in (NAAQS) for Lake and Marion Counties and concern volatile organic compound either location (e.g., CBI). To inspect the for an additional ten years. (VOC) emissions from graphic arts hard copy materials, please schedule an [FR Doc. E9–24695 Filed 10–14–09; 8:45 am] printing operations, digital printing appointment during normal business BILLING CODE 6560–50–P operations, adhesives, cleaning solvents, hours with the contact listed in the FOR transfer of organic liquids, and facilities FURTHER INFORMATION CONTACT section. engaged in coating of wood products, ENVIRONMENTAL PROTECTION flat paneling, paper, film, foil, and FOR FURTHER INFORMATION CONTACT: AGENCY fabric. We are approving local rules that Nicole Law, EPA Region IX, (415) 947– regulate these emission sources under 4126, [email protected]. 40 CFR Part 52 the Clean Air Act as amended in 1990 SUPPLEMENTARY INFORMATION: [EPA–R09–OAR–2009–0473; FRL–8956–8] (CAA or the Act). Throughout this document, ‘‘we,’’ ‘‘us’’ DATES: Effective Date: This rule is and ‘‘our’’ refer to EPA. Revisions to the California State effective on November 16, 2009. Table of Contents Implementation Plan, San Joaquin ADDRESSES: EPA has established docket Valley Air Pollution Control District number EPA–R09–OAR–2009–0473 for I. Proposed Action AGENCY: Environmental Protection this action. The index to the docket is II. Public Comments and EPA Responses Agency (EPA). available electronically at http:// III. EPA Action IV. Statutory and Executive Order Reviews ACTION: Final rule. www.regulations.gov and in hard copy at EPA Region IX, 75 Hawthorne Street, I. Proposed Action SUMMARY: EPA is finalizing approval of San Francisco, California. While all revisions to the San Joaquin Valley Air documents in the docket are listed in On July 13, 2009 (74 FR 33399), EPA Pollution Control District portion of the the index, some information may be proposed to approve the following rules California State Implementation Plan publicly available only at the hard copy into the California SIP.

Local agency Rule # Rule title Adopted Submitted

SJVAPCD ...... 4606 Wood Products and Flat Wood Paneling Product Coating Oper- 10/16/08 12/23/08 ations. SJVAPCD ...... 4607 Graphic Arts and Paper, Film, Foil, and Fabric Coatings ...... 12/18/08 03/17/09 SJVAPCD ...... 4624 Transfer of Organic Liquid ...... 09/20/07 03/07/08 SJVAPCD ...... 4653 Adhesives ...... 12/20/07 03/07/08

We proposed to approve these rules approves State law as meeting Federal • Is not a significant regulatory action because we determined that they requirements and does not impose subject to Executive Order 13211 (66 FR complied with the relevant CAA additional requirements beyond those 28355, May 22, 2001); requirements. Our proposed action imposed by State law. For that reason, • Is not subject to requirements of contains more information on the rules this action: Section 12(d) of the National and our evaluation. • Is not a ‘‘significant regulatory Technology Transfer and Advancement action’’ subject to review by the Office Act of 1995 (15 U.S.C. 272 note) because II. Public Comments and EPA application of those requirements would Responses of Management and Budget under Executive Order 12866 (58 FR 51735, be inconsistent with the Clean Air Act; EPA’s proposed action provided a 30- October 4, 1993); and • Does not provide EPA with the day public comment period. During this • period, we received no comments. Does not impose an information discretionary authority to address, as collection burden under the provisions appropriate, disproportionate human III. EPA Action of the Paperwork Reduction Act (44 health or environmental effects, using No comments were submitted that U.S.C. 3501 et seq.); practicable and legally permissible change our assessment that the • Is certified as not having a methods, under Executive Order 12898 submitted rules comply with the significant economic impact on a (59 FR 7629, February 16, 1994). relevant CAA requirements. Therefore, substantial number of small entities In addition, this rule does not have as authorized in section 110(k)(3) of the under the Regulatory Flexibility Act (5 Tribal implications as specified by Act, EPA is fully approving these rules U.S.C. 601 et seq.); Executive Order 13175 (65 FR 67249, into the California SIP. • Does not contain any unfunded November 9, 2000), because the SIP is not approved to apply in Indian country IV. Statutory and Executive Order mandate or significantly or uniquely located in the State, and EPA notes that Reviews affect small governments, as described in the Unfunded Mandates Reform Act it will not impose substantial direct Under the Clean Air Act, the of 1995 (Pub. L. 104–4); costs on Tribal governments or preempt Administrator is required to approve a • Tribal law. SIP submission that complies with the Does not have Federalism The Congressional Review Act, 5 provisions of the Act and applicable implications as specified in Executive U.S.C. 801 et seq., as added by the Small Federal regulations. 42 U.S.C. 7410(k); Order 13132 (64 FR 43255, August 10, Business Regulatory Enforcement 40 CFR 52.02(a). Thus, in reviewing SIP 1999); Fairness Act of 1996, generally provides submissions, EPA’s role is to approve • Is not an economically significant that before a rule may take effect, the State choices, provided that they meet regulatory action based on health or agency promulgating the rule must the criteria of the Clean Air Act. safety risks subject to Executive Order submit a rule report, which includes a Accordingly, this action merely 13045 (62 FR 19885, April 23, 1997); copy of the rule, to each House of the

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Congress and to the Comptroller General (363) * * * to the definition of ‘‘qualifying of the United States. EPA will submit a (i) * * * country.’’ report containing this action and other (A) * * * 209.403. Specifies the debarring and required information to the U.S. Senate, (2) Rule 4607, ‘‘Graphic Arts and suspending official for the Defense the U.S. House of Representatives, and Paper, Film, Foil, and Fabric Coatings,’’ Intelligence Agency. the Comptroller General of the United adopted on December 18, 2008. 225.7002–2. Revises the cross- States prior to publication of the rule in ■ (364) New and amended regulations reference to the definition of ‘‘qualifying the Federal Register. A major rule were submitted on December 23, 2008 country.’’ cannot take effect until 60 days after it by the Governor’s designee. 241.103. Correct the statutory is published in the Federal Register. (i) Incorporation by Reference. reference to 10 U.S.C. 2688(d)(2). This action is not a ‘‘major rule’’ as (A) San Joaquin Valley Unified Air 244.403. Correct the reference to the defined by 5 U.S.C. 804(2). Pollution Control District. current specialty metals clause, Under section 307(b)(1) of the Clean (1) Rule 4606, ‘‘Wood Products and 252.225.7009, Restriction on Air Act, petitions for judicial review of Flat Wood Paneling Product Coating Acquisition of Certain Articles this action must be filed in the United Operations,’’ adopted on October 16, Containing Specialty Metals. States Court of Appeals for the 2008. List of Subjects in 48 CFR Parts 204, appropriate circuit by December 14, * * * * * 205, 209, 225, 241, and 244 2009. Filing a petition for [FR Doc. E9–24687 Filed 10–14–09; 8:45 am] Government procurement. reconsideration by the Administrator of BILLING CODE 6560–50–P this final rule does not affect the finality Amy G. Williams, of this action for the purposes of judicial review nor does it extend the time Editor, Defense Acquisition Regulations DEPARTMENT OF DEFENSE System. within which a petition for judicial review may be filed, and shall not ■ Therefore, 48 CFR parts 204, 205, 209, Defense Acquisition Regulations 225, 241, and 244 are amended as postpone the effectiveness of such rule System or action. This action may not be follows: challenged later in proceedings to ■ 1. The authority citation for 48 CFR 48 CFR Parts 204, 205, 209, 225, 241, parts 204, 205, 209, 225, 241, and 244 enforce its requirements (see section and 244 307(b)(2)). continues to read as follows: List of Subjects in 40 CFR Part 52 Defense Federal Acquisition Authority: 41 U.S.C. 421 and 48 CFR Regulation Supplement (DFARS); chapter 1. Environmental protection, Air Technical Amendments pollution control, Incorporation by PART 204—ADMINISTRATIVE reference, Intergovernmental relations, AGENCY: Defense Acquisition MATTERS Ozone, Reporting and recordkeeping Regulations System, Department of requirements, Volatile organic Defense (DoD). ■ 2. Section 204.7107 is revised to read compounds. ACTION: Final rule. as follows: Dated: August 26, 2009. 204.7107 Contract accounting SUMMARY: DoD is making technical Laura Yoshii, classification reference number (ACRN) and amendments to the Defense Federal agency accounting identifier (AAI). Acting Regional Administrator, Region IX. Acquisition Regulation Supplement Traceability of funds from accounting ■ Part 52, Chapter I, Title 40 of the Code (DFARS) to specify the debarring and systems to contract actions is of Federal Regulations is amended as suspending official for the Defense accomplished using ACRNs and AAIs. follows: Intelligence Agency and update other Follow the procedures at PGI 204.7107 references within the DFARS text. PART 52—[AMENDED] for use of ACRNs and AAIs. DATES: Effective Date: October 15, 2009 ■ 1. The authority citation for Part 52 FOR FURTHER INFORMATION CONTACT: Ms. PART 205—PUBLICIZING CONTRACT continues to read as follows: Amy Williams, OUSD (AT&L) DPAP ACTIONS (DARS), IMD 3D139, 3062 Defense Authority: 42 U.S.C. 7401 et seq. ■ Pentagon, Washington, DC 20301–3062. 3. In section 205.301, paragraph (a)(iii)(b) is revised to read as follows: Subpart F—California Telephone 703–602–0328; facsimile 703–602–7887. 205.301 General. ■ 2. Section 52.220 is amended by SUPPLEMENTARY INFORMATION: (a) * * * adding paragraphs (c)(354)(i)(E)(3) and A. Background (iii) * * * (4), (363)(i)(A)(2) and (364) to read as (B) ‘‘The exception at DFARS follows: This final rule amends DFARS text as 225.7002–2(n) applies to this follows: § 52.220 Identification of plan. acquisition, because the contracting 204.7107. Adds a pointer to the officer has determined that this * * * * * procedures on agency accounting (c) * * * acquisition of chemical warfare identifiers in the DFARS companion protective clothing furthers an (354) * * * resource, Procedures, Guidance, and (i) * * * agreement with a qualifying country Information. identified in DFARS 225.003(10).’’ (E) * * * 205.301. Corrects the cross-reference (3) Rule 4624, ‘‘Transfer of Organic to the exception for acquisitions of PART 209—CONTRACTOR Liquid,’’ adopted on December 20, 2007. chemical warfare protective clothing QUALIFICATIONS (4) Rule 4653, ‘‘Adhesives,’’ adopted from the restrictions on food, clothing, on September 20, 2007. fabrics, and hand or measuring tools at ■ 4. Section 209.403 is amended by * * * * * 225.7002 and revises the cross-reference revising paragraph (1) of the definition

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for ‘‘debarring and suspending official DEPARTMENT OF TRANSPORTATION Avenue, SE., Washington, DC 20590, to read as follows: between 9 a.m. and 5 p.m., Monday Pipeline and Hazardous Materials through Friday, except Federal holidays. 209.403 Definitions. Safety Administration Instructions: All submissions must ‘‘Debarring and suspending official.’’ include the agency name and docket (1) For DoD, the designees are— 49 CFR Part 172 number for this rule. Note that all Army—Commander, U.S. Army Legal [Docket No. PHMSA–2009–0238 (HM–224G)] comments received will be posted Services Agency without change, including any personal RIN 2137–AE49 information provided. Navy—The General Counsel of the FOR FURTHER INFORMATION CONTACT: T. Department of the Navy Hazardous Materials: Chemical Oxygen Generators Glenn Foster, (202) 366–8553, U.S. Air Force—Deputy General Counsel Department of Transportation, Pipeline (Contractor Responsibility) AGENCY: Pipeline and Hazardous and Hazardous Materials Safety Defense Advanced Research Projects Materials Safety Administration Administration, Office of Hazardous Agency—The Director (PHMSA). Materials Standards, 1200 New Jersey Defense Information Systems Agency— ACTION: Direct final rule. Avenue, SE., Washington, DC 20590. The General Counsel SUPPLEMENTARY INFORMATION: SUMMARY: This direct final rule amends Defense Intelligence Agency—The the Hazardous Materials Regulations to List of Topics Senior Procurement Executive revise the quantity limitation from 25 kg I. Background Defense Logistics Agency—The Special ‘‘gross’’ to 25 kg ‘‘net’’ for packages of II. Appeals to the January 31, 2007 Final Rule Assistant for Contracting Integrity chemical oxygen generators transported III. Petitions to the January 31, 2007 Final National Geospatial—Intelligence aboard cargo aircraft only. The intended Rule Agency—The General Counsel effect of this rule is to provide IV. Summary of the Direct Final Rule V. Regulatory Analyses and Notices Defense Threat Reduction Agency—The regulatory relief by raising the quantity A. Statutory/Legal Authority for Director threshold for shipments of chemical Rulemaking National Security Agency—The Senior oxygen generators transported aboard B. Executive Order 12866 and DOT Acquisition Executive cargo aircraft only. This action is Regulatory Policies and Procedures necessary to address difficulties C. Executive Order 13132 Missile Defense Agency—The General concerning implementation and D. Executive Order 13175 Counsel compliance with the requirements for E. Regulatory Flexibility Act, Executive Overseas installations—as designated by the transportation of chemical oxygen Order 13272, and DOT Procedures and the agency head generators in outer packagings meeting Policies * * * * * F. Unfunded Mandates Reform Act of 1995 certain flame penetration resistance G. Paperwork Reduction Act standards and thermal protection PART 225—FOREIGN ACQUISITION H. Regulation Identifier Number (RIN) capabilities, as evidenced by comments I. Environmental Assessment 225.7002–2 [Amended] received from the hazardous materials J. Privacy Act industry and other interested parties. ■ 5. Section 225.7002–2 is amended by The amendment contained in this rule I. Background removing the reference to ‘‘225.872’’ in is a minor substantive change, in the The National Transportation Safety paragraph (n) and adding in its place a public interest, and unlikely to result in Board found that one of the probable reference to ‘‘225.003(10)’’. adverse comment. causes of the May 11, 1996 crash of DATES: This direct final rule is effective ValuJet Airlines flight No. 596 was a fire PART 241—ACQUISITION OF UTILITY November 16, 2009, unless an adverse in the airplane’s cargo compartment that SERVICES comment or notice of intent to file an was initiated and enhanced by the 241.103 [Amended] adverse comment is received by actuation of one or more chemical November 16, 2009. PHMSA will oxygen generators that were being ■ 6. Section 241.103 is amended by publish in the Federal Register a timely improperly carried as cargo. Following removing from paragraph (1) the document confirming the effective date that tragedy, in which 110 lives were statutory reference ‘‘10 U.S.C. of this final rule. lost, the Department of Transportation: 2688(c)(3)’’ and adding in its place the ADDRESSES: You may submit comments —Prohibited the transportation of statutory reference ‘‘10 U.S.C. identified by the docket number chemical oxygen generators 2688(d)(2)’’. PHMSA–2009–0238 by any of the (including personal-use chemical oxygen generators) on board PART 244—SUBCONTRACTING following methods: passenger-carrying aircraft and the POLICIES AND PROCEDURES Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the transportation of spent chemical online instructions for submitting oxygen generators on both passenger- ■ 7. Section 244.403(1) is revised to comments. carrying and cargo-only aircraft, 61 FR read as follows: Fax: 1–202–493–2251. 26418 (May 24, 1996), 61 FR 68952 244.403 Contract clause. Mail: Docket Operations, U.S. (Dec. 30, 1996), 64 FR 45388 (Aug. 19, * * * * * Department of Transportation, West 1999); Building, Ground Floor, Room W12– —Issued standards governing the (1) 252.225–7009, Restriction on 140, Routing Symbol M–30, 1200 New transportation of chemical oxygen Acquisition of Certain Articles Jersey Avenue, SE., Washington, DC generators on cargo-only aircraft (and Containing Specialty Metals. 20590. by motor vehicle, rail car and vessel), * * * * * Hand Delivery: To Docket Operations; including the requirement for an [FR Doc. E9–24843 Filed 10–14–09; 8:45 am] Room W12–140 on the ground floor of approval issued by the Research and BILLING CODE 5001–08–P the West Building, 1200 New Jersey Special Programs Administration

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(RSPA), the predecessor agency to the packaging standard addresses two safety (United). Delta Airlines (Delta) also Pipeline and Hazardous Materials concerns—protecting a cylinder and an submitted a letter expressing its general Safety Administration (PHMSA), 62 oxygen generator that could be exposed support for United’s formal appeal. The FR 30767 (June 5, 1997), 62 FR 34667 directly to flames from a fire and appellants based their appeals on (June 27, 1997); protecting a cylinder and an oxygen several aspects of the January 31 final —Upgraded fire safety standards for generator that could be exposed rule, most notably, the effective date of Class D cargo compartments on indirectly to heat from a fire. certain requirements in the rule, cost aircraft to require a smoke or fire In addition, an outer packaging for a and availability of the required outer detection system and a means of cylinder containing compressed oxygen packaging, marking requirements, and suppressing a fire or minimizing the or another oxidizing gas and a package thermal resistance testing. We also available oxygen, on certain transport- containing an oxygen generator were received requests for clarification of category aircraft, 63 FR 8033 (Feb. 17, required to meet the standards in Part III certain requirements of the final rule. 1998); and of Appendix F to 14 CFR Part 25, Test In response to the appeals, we —Imposed additional requirements on Method to Determine Flame Penetration published a final rule on September 28, the transportation of cylinders of Resistance of Cargo Compartment 2007 (72 FR 55091) granting the request compressed oxygen by aircraft and Liners. An outer packaging’s materials to delay the mandatory effective date for prohibited the carriage of chemical of construction must prevent a new limit on PRD settings on ° oxidizers in inaccessible aircraft cargo penetration by a flame of 1,700 F for cylinders containing compressed compartments that do not have a fire five minutes, in accordance with Part III oxygen or other oxidizing gases or smoke detection and fire of Appendix F, paragraphs (a)(3) and transported on board aircraft from suppression system, 64 FR 45388 (f)(5) of 14 CFR Part 25. October 1, 2007 until October 1, 2008. (Aug. 19, 1999). Further, a cylinder of compressed We also clarified the thermal resistance oxygen or another oxidizing gas must test methods for packagings for oxygen In the August 19, 1999 final rule, we remain below the temperature at which cylinders and oxygen generators in amended the Hazardous Materials its pressure relief device would activate Appendix D to Part 178, and added a Regulations (HMR; 49 CFR Parts 171– and an oxygen generator must not new Appendix E to Part 178—Flame 180) to: (1) Allow a limited number of actuate when exposed to a temperature Penetration Resistance to incorporate cylinders containing medical-use of at least 400 °F for three hours. The the standards in Part III of Appendix F oxygen to be carried in the cabin of a 400 °F temperature is the estimated to 14 CFR Part 25, Test Method to passenger-carrying aircraft, 49 CFR mean temperature of a cargo Determine Flame Penetration Resistance 175.10(b); (2) limit the number of compartment during a halon-suppressed of Cargo Compartment Liners Flame oxygen cylinders that may be carried as fire. Three hours and 27 minutes is the Penetration Resistance Test. In addition, cargo in compartments that lack a fire maximum estimated diversion time we granted the request to include DOT suppression system and require that world-wide, based on an aircraft flying specifications 3E seamless steel and 39 cylinders be stowed horizontally on the a southern route over the Pacific Ocean. non-reusable (non-refillable) cylinders floor or as close as practicable to the Data collected during Federal Aviation among the types of cylinders authorized floor of the cargo compartment or unit Administration (FAA) tests indicate for the transportation of compressed load device, 49 CFR 175.85(h) & (i); and that, on average, a 3AA seamless steel oxygen and other oxidizing gases aboard (3) require each cylinder of compressed oxygen cylinder with a pressure relief aircraft. Further, we provided a marking oxygen (in the passenger cabin or a device set at cylinder test pressure will option to ensure easier identification of cargo compartment) to be placed in an open when the cylinder reaches a cylinders equipped with the new PRD overpack or outer packaging that meets temperature of approximately 300 °F. and outer packagings meeting the flame the performance criteria of Air This result is consistent with penetration and thermal resistance Transport Association Specification 300 calculations performed by PHMSA. In requirements. Finally, in response to the for Type I (ATA 300) shipping analyzing pressure relief device (PRD) concerns of appellants pertaining to the containers, 49 CFR 172.102, Special function, PHMSA calculated that a 3HT availability of the required packaging, Provision A52. seamless steel cylinder for aircraft with we indicated that PHMSA and FAA On January 31, 2007, PHMSA issued a PRD set at 90% of cylinder test would closely monitor the availability a final rule under Docket No. RSPA–04– pressure will vent at temperatures of the required packaging as the 17664 (HM–224B) to enhance the safety greater than 220 °F. In order to assure effective date (after September 30, 2009) standards for transportation by air of an adequate safety margin for all of this provision approached and would compressed oxygen, other oxidizing authorized cylinders, including 3HT consider an extension of the compliance gases, and chemical oxygen generators cylinders, we amended the HMR to date for this requirement if it was (72 FR 4442). Specifically, the final rule require cylinders of compressed oxygen determined that a sufficient supply of amended the HMR to require cylinders and other oxidizing gases, which are the required outer packaging would not of compressed oxygen and chemical contained in the specified outer be available. oxygen generators to be transported in packaging, to maintain an external III. Petitions to the January 31, 2007 an outer packaging that: (1) Meets the temperature below 93 °C (199 °F) when Final Rule same flame penetration resistance exposed to a 400 °F temperature for standards as required for cargo three hours. PHMSA received petitions dated compartment sidewalls and ceiling September 23, 2008 and April 21, 2009 panels in transport category airplanes; II. Appeals to the January 31, 2007 from the Council on Safe Transportation and (2) provides certain thermal Final Rule of Hazardous Articles, Inc. (COSTHA) protection capabilities so as to retain its The following organizations pertaining to the mandatory compliance contents during an otherwise submitted appeals to the January 31, date for the required outer packaging. In controllable cargo compartment fire. 2007 final rule, in accordance with 49 its September 23, 2008 petition, These performance requirements must CFR Part 106: Air Canada (AC); Barlen COSTHA requested an extension of the remain in effect for the entire service and Associates, Inc. (Barlen); PSI Plus, compliance date until April 1, 2011 for life of the outer packaging. The outer Inc. (PSI); and United Airlines, Inc. the outer packaging requirement, and

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also suggested that PHMSA permit the the petitioner that the regulatory of hazardous materials that can be current use of non-rigid outer evaluation underestimates the costs for transported. We believe that the packagings meeting the requirements of outer packagings that conform to the allowable weight of chemical oxygen ATA Spec 300 through April 1, 2010. performance standard established in the generators can be increased by revising COSTHA argued that the additional final rule. However, we also found that the quantity limit from ‘‘gross’’ to ‘‘net,’’ time would ‘‘allow packaging the evaluation significantly in this direct final rule without manufacturers to competitively underestimates the expected life-span sacrificing our intent of protecting a introduce lightweight, durable, and for such outer packagings. In addition, chemical oxygen generator exposed affordable packaging with an the regulatory evaluation overestimates directly to flames from a fire or exposed anticipated long term safety benefit.’’ the number of such packagings that indirectly to heat from a fire. Therefore, PHMSA denied this petition, and in our would be required to accommodate air in this direct final rule, we are response, reiterated our intention to shipments of compressed oxygen and amending the HMR to revise the monitor the availability and costs of the other oxidizing gases and chemical quantity limitation for packages of required outer packaging and to oxygen generators. Based on this re- chemical oxygen generators transported consider an extension of the compliance evaluation, we concluded that the costs aboard cargo aircraft only from 25 date for this requirement if it were associated with the requirement that kilograms ‘‘gross’’ to 25 kilograms ‘‘net.’’ determined that a sufficient supply of outer packagings meet certain flame We note that the revision applies to the required outer packaging would not penetration and thermal resistance chemical oxygen generators transported be available as we approached the requirements when transported aboard by cargo-only aircraft, and that the compliance date. aircraft are within the range of the costs transportation of chemical oxygen In its petition dated April 21, 2009, estimated in the regulatory evaluation. generators by passenger aircraft or rail COSTHA again requested the Following our denial of COSTHA’s continues to be prohibited. compliance date be extended to April 1, second petition, we posted an advisory IV. Summary of the Direct Final Rule 2011 and suggested that the required alert on our website confirming the outer packagings were currently not in mandatory compliance for the outer Based on petitions received in production and would not be available packaging requirement, and provided a response to the final rule and our own in sufficient time to meet the October 1, contact list of packaging manufacturers initiatives, we are adopting a 2009 compliance date. COSTHA further who have indicated they are able to requirement that quantities of chemical requested that PHMSA re-evaluate the produce the required packaging. oxygen generators are limited to 25 kg entire rulemaking based on its PHMSA also received a petition dated net mass per package for transport contention that the original regulatory aboard cargo-only aircraft. Any quantity evaluation developed in support of the June 29, 2009 (P–1544) from Satair USA, Inc pertaining to the quantity limitation of chemical oxygen generators final rule was ‘‘significantly flawed and transported aboard passenger aircraft or incomplete.’’ We denied this petition for packages of chemical oxygen generators. Currently, the HMR limits rail car remains prohibited. based on our identification of a number This direct final rule is issued under of packaging manufacturers that are able the total package weight (gross) of chemical oxygen generators to a the procedures set forth in § 106.40 of to produce outer packagings that the HMR. Unless an adverse comment conform to the performance standards maximum of 25 kilograms when transported aboard cargo-aircraft only. or notice of intent to file an adverse established in the January 31, 2007 final comment is received by November 16, rule in quantities sufficient to meet This 25 kilogram gross limit includes the hazardous material and its outer 2009, this rule will become effective on expected demand by October 1, 2009. November 16, 2009. An adverse We based our conclusion on packaging. In its petition, Satair contends that because of the additional comment explains why a rule would be consultations with companies that are inappropriate, or would be ineffective or able to produce similar packaging, and weight of the more robust outer packaging required by the January 31, unacceptable without a change. Under on demonstrations presented to the the direct final rule process, we do not Department by packaging manufacturers 2007 final rule, much of the 25 kilogram limit is utilized by the weight of the consider a comment to be adverse that: detailing development and production (1) Recommends another rule change, in plans for the required packaging, outer packaging thereby limiting the actual weight of the hazardous material addition to the change in the direct final supporting test documentation, cost rule at issue, unless the commenter estimates, and samples of their to be transported. Satair states that if the 25 kilogram gross requirement remains states why the rule would be ineffective packaging prototypes. without the change; or (2) is a frivolous In addition, PHMSA and FAA in place, it will severely limit the or irrelevant comment. Therefore, attended a conference sponsored by quantity of items that may be shipped comments that do not specifically American Airlines held in Tulsa, within each container. In its petition, address the 25 kg weight limitation for Oklahoma on March 10–11, 2009 for Satair requested that we amend the packages of chemical oxygen generators airline representative and packaging HMR to revise the quantity limitation transported aboard cargo only aircraft manufacturers to discuss issues for packages of chemical oxygen will be considered beyond the scope of pertaining to the HM–224B outer generators transported aboard cargo this rulemaking. PHMSA will publish in packaging requirements. At this aircraft only. We agree with the meeting, eight (8) packaging petitioner. During our monitoring of the the Federal Register in a timely manufacturers provided presentations availability of the required outer document confirming the effective date that discussed the weight, cost, packaging and conversations with of this direct final rule. production lead-times, life expectancy, several packaging manufacturers, we V. Regulatory Analyses and Notices and production rate of the required agreed that the weight of the outer outer packaging, with several packaging material will be increased A. Statutory/Legal Authority for manufactures providing production- because of the additional thermal Rulemaking ready prototypes. We also re-examined resistance and flame penetration This direct final rule is published the regulatory evaluation developed in requirements of the January 31, 2007 under the authority of Federal support of the final rule. We agreed with final rule, and thereby limits the amount hazardous materials transportation law

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(Federal hazmat law; 49 U.S.C. 5101 et preempts State, local, and Indian tribe impose increased compliance costs on seq.) and 49 U.S.C. 44701. Section requirements on the following subjects: the regulated industry. The revisions, 5103(b) of Federal hazmat law 1. The designation, description, and clarifications, and corrections we are authorizes the Secretary of classification of hazardous material; making to the January 31, 2007 final Transportation to prescribe regulations 2. The packing, repacking, handling, rule will provide regulatory relief to for the safe transportation, including labeling, marking, and placarding of persons transporting chemical oxygen security, of hazardous material in hazardous material; generators on aircraft by revising the intrastate, interstate, and foreign 3. The preparation, execution, and use quantity limitation for packages of commerce. Section 1.53 of 49 CFR of shipping documents related to chemical oxygen generators transported delegates the authority to issue hazardous material and requirements aboard cargo aircraft only. Accordingly, regulations in accordance with 49 related to the number, contents, and pursuant to the Regulatory Flexibility U.S.C. 5103(b) to the Administrator of placement of those documents; Act, 5 U.S.C. 605(b), DOT certifies that the Pipeline and Hazardous Materials 4. The written notification, recording, this rule will not have a significant Safety Administration. and reporting of the unintentional economic impact on a substantial release in transportation of hazardous number of small entities. B. Executive Order 12866 and DOT material; and This direct final rule has been Regulatory Policies and Procedures 5. The design, manufacture, developed in accordance with Executive This direct final rule is not considered fabrication, marking, maintenance, Order 13272 (‘‘Proper Consideration of a significant regulatory action under recondition, repair, or testing of a Small Entities in Agency Rulemaking’’) section 3(f) of Executive Order 12866 packaging or container represented, and DOT’s procedures and policies to and, therefore, was not reviewed by the marked, certified, or sold as qualified promote compliance with the Office of Management and Budget for use in transporting hazardous Regulatory Flexibility Act to ensure that (OMB). This rule is not significant material. potential impacts of draft rules on small under the Regulatory Policies and This direct final rule addresses items entities are properly considered. 1, 2 and 5 above and preempts any Procedures of the Department of F. Unfunded Mandates Reform Act of Transportation (44 FR 11034). State, local, or Indian tribe requirements not meeting the ‘‘substantially the 1995 In this direct final rule, we are same’’ standard. amending the HMR to enhance safety This direct final rule does not impose Federal hazardous materials and to offer greater flexibility in unfunded mandates under the transportation law provides at complying with the regulatory Unfunded Mandates Reform Act of § 5125(b)(2) that, if DOT issues a requirements for packages of chemical 1995. It does not result in costs of regulation concerning any of the oxygen generators without sacrificing $141,300,000 or more to either State, covered subjects, DOT must determine the current HMR level of safety. These local or tribal governments, in the and publish in the Federal Register the amendments are based on petitions for aggregate, or to the private sector, and effective date of Federal preemption. rulemaking submitted by the regulated is the least burdensome alternative that The effective date may not be earlier community and, for the most part, achieves the objective of the rule. than the 90th day following the date of should reduce overall compliance costs. issuance of the final rule and not later G. Paperwork Reduction Act The amendment pertaining to the than two years after the date of issuance. This direct final rule imposes no new quantity limitation of chemical oxygen This effective date of preemption is 90 information collection and generators aboard cargo-only aircraft days after the publication of this final recordkeeping requirements. adopted in this direct final rule provides rule in the Federal Register. regulatory relief by raising the quantity H. Regulation Identifier Number (RIN) threshold for such shipments. D. Executive Order 13175 A regulation identifier number (RIN) Overall this direct final rule will This direct final rule has been is assigned to each regulatory action enhance transportation safety and analyzed in accordance with the listed in the Unified Agenda of Federal reduce the overall compliance burden principles and criteria contained in Regulations. The Regulatory Information on the regulated industry. Executive order 13175 (‘‘Consultation Service Center publishes the Unified C. Executive Order 13132 and Coordination with Indian Tribal Agenda in April and October of each Governments’’). Because this direct final year. The RIN number contained in the This direct final rule has been rule will not have tribal implications, heading of this document can be used analyzed in accordance with the does not impose substantial direct to cross-reference this action with the principles and criteria contained in compliance costs on Indian tribal Unified Agenda. Executive Order 13132 (‘‘Federalism’’). governments, and does not preempt I. Environmental Assessment This direct final rule preempts State, tribal law, the funding and consultation local and Indian tribe requirements, but requirements of Executive Order 13084 The National Environmental Policy does not amend any regulation that has do not apply, and a tribal summary Act, 42 U.S.C. 4321–4375, requires direct effects on the States, the impact statement is not required. federal agencies to analyze proposed relationship between the national actions to determine whether the action government and the States, or the E. Regulatory Flexibility Act, Executive will have a significant impact on the distribution of power and Order 13272, and DOT Procedures and human environment. The Council on responsibilities among the various Policies Environmental Quality (CEQ) levels of government. Therefore, the The Regulatory Flexibility Act of 1980 regulations order federal agencies to consultation and funding requirements requires an agency to review regulations conduct an environmental review of Executive Order 13132 do not apply. to assess their impact on small entities considering: (1) The need for the The Federal hazardous materials unless the agency determines that a rule proposed action; (2) alternatives to the transportation law, 49 U.S.C. 5101– is not expected to have a significant proposed action; (3) probable 5127, contains an express preemption impact on a substantial number of small environmental impacts of the proposed provision (49 U.S.C. 5125(b)) that entities. This direct final rule will not action and alternatives; and (4) the

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agencies and persons consulted during DEPARTMENT OF TRANSPORTATION within the Board. These rules set out the the consideration process. 40 CFR new delegations and procedures for 1508.9(b). Surface Transportation Board processing cases, appeals, and inquiries The provisions of this direct final rule from the public. 49 CFR Parts 1001, 1002, 1003, 1007, build on current regulatory 49 CFR 1001.1, Records Available From requirements to enhance the safety and 1011, 1012, 1016, 1100, 1102, 1103, 1104, 1105, 1109, 1110, 1113, 1114, the Board and 49 CFR 1001.2, Certified security of shipments of chemical Copies of Records oxygen generators when transported 1116, 1118, 1132, 1139, 1150, 1152, aboard an aircraft. The net 1177, 1180, 1240, 1241, 1242, 1243, In sections 1001.1(a) and 1001.2, environmental impact, therefore, will be 1245, 1246, 1248, 1253, 1260, 1261, which concern availability of Board moderately positive. There are no 1262, 1263, 1264, 1265, 1266, 1267 and records and certification of record significant environmental impacts 1269 copies, the Board removes the references to the Secretary. In section associated with this direct final rule. [STB Ex Parte No. 685] 1001.1(a), the Board changes the J. Privacy Act Removal of Delegations of Authority to reference from Secretary to Records Anyone is able to search the Secretary Officer, the new custodian of records for electronic form of all comments the Board. In section 1001.2, the Board received into any of our dockets by the AGENCY: Surface Transportation Board. changes the reference from the Secretary name of the individual submitting the ACTION: Final rules. to the Records Officer, to reflect the comment (or signing the comment, if Records Officer’s new responsibility for SUMMARY: submitted on behalf of an association, The Surface Transportation certifying copies of records. Board (Board or STB) amends its business, labor union, etc.). You may 49 CFR 1002.1, Fees for Records review DOT’s complete Privacy Act regulations by eliminating the Secretary of the Board, reassigning the delegations Search, Review, Copying, Certification, Statement in the Federal Register and Related Services published on April 11, 2000 (Volume of authority from the Secretary to other 65, Number 70; Pages 19477–78) or you Offices of the Board, and making Sections 1002.1(a), (g)(14)(vi), and (i). may visit http://dms.dot.gov. additional updates to eliminate The Board changes the references from incorrect or obsolete references. Because the Secretary in sections 1002.1(a) and List of Subjects in 49 CFR Part 172 these administrative final rules amend (i), which concern fees for records Education, Hazardous materials internal agency practice and procedure, certification, records copying, and transportation, Hazardous waste, this action is exempt from the usual transcript purchases, to the Records Labeling, Markings, Packaging and requirement for notice and an Officer. Sections 1002.1(g)(14)(vi) and containers, Reporting and recordkeeping opportunity for public comment under (i) will be updated to add the 4-digit requirements. 5 U.S.C. 553(b)(A) of the Administrative code provided by the United States Procedure Act. Postal Service to the postal ZIP code for ■ In consideration of the foregoing, we DATES: These rules are effective on the Board’s office. are amending title 49 Chapter I, Section 1002.1(e). This section Subchapter C, as follows: November 16, 2009. ADDRESSES: Information or questions concerns fees for courier services. The PART 172—HAZARDOUS MATERIALS regarding this final rule should position of Information Officer no TABLE, SPECIAL PROVISIONS, reference STB Ex Parte No. 685 and be longer exists, so the reference will be HAZARDOUS MATERIALS in writing addressed to: Chief, Section changed to the Records Officer. Fees for COMMUNICATIONS, EMERGENCY of Administration, Office of courier service can be obtained from the RESPONSE INFORMATION, AND Proceedings, Surface Transportation Records Officer or the Board’s Web site. TRAINING REQUIREMENTS, AND Board, 395 E Street, SW., Washington, Sections 1002.1(f), (f)(1), and (g)(8). SECURITY PLANS DC 20423–0001. These sections, which concern fees for search and copying services requiring FOR FURTHER INFORMATION CONTACT: ■ 1. The authority citation for part 172 computer processing and for records not Cynthia T. Brown at (202) 245–0350. continues to read as follows: considered public under the Freedom of [Assistance for the hearing impaired is Information Act, will be revised to Authority: 49 U.S.C. 5101–5128, 44701; 49 available through the Federal CFR 1.53. remove the outdated term ‘‘ADP’’ and Information Relay Service (FIRS) at replace it with the term ‘‘computer.’’ § 172.101 [Amended] 1–800–877–8339.] SUPPLEMENTARY INFORMATION: The Board 49 CFR 1002.2, Filing Fees ■ 2. In the Hazardous Materials Table, is revising its regulations to eliminate Section 1002.2(a)(3). This section, in § 172.101, for the shipping name the Secretary of the Board, to reassign which identifies a Board designee to ‘‘Oxygen generator, chemical (including the delegations of authority from the receive payment of filing fees, will be when contained in associated Secretary to other Board Offices, and to revised to remove the reference to the equipment, e.g., passenger service units make additional updates to eliminate Secretary. Routine business practices (PSUs), portable breathing equipment incorrect or obsolete references. The require only that the fees be payable to (PBE), etc),’’ the entry in Column (9B), regulations at 49 CFR part 1011, which the Surface Transportation Board. We is revised to read ‘‘25 kg’’. provide the delegations of authority by will not require additional specificity. Issued in Washington, DC on October 8, the Board, and all other rules affected by Section 1002.2(e)(2)(i) and (e)(2)(iii). 2009 under authority delegated in 49 CFR the removal of delegations of authority These sections concern requests for part 106. from the Secretary will be revised to waiver or reduction of fees prescribed in Cynthia Douglass, reflect the change in delegations and section 1002.2(f) and notification of the Acting Deputy Administrator for Hazardous other updates. The Secretary is being Board’s action on such requests. The Materials Safety. eliminated to increase efficiency within reference to the Secretary in section [FR Doc. E9–24779 Filed 10–14–09; 8:45 am] the Board. The duties of the Secretary 1002.2(e)(2)(i) will be changed to BILLING CODE 4910–60–P will be transferred to other Offices ‘‘Chief, Section of Administration,

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Office of Proceedings, Surface sections to the Director of the Office of copies of the votes or statements of Transportation Board’’ and in section Proceedings. position of Board Members eligible to 1002.2(e)(2)(iii) to ‘‘Chief, Section of participate in action taken by notation 49 CFR 1011.7, Delegations of Authority Administration, Office of Proceedings, voting. The reference to the Secretary of by the Board to Specific Offices of the Surface Transportation Board.’’ Board the Board will be deleted and replaced with Records Officer. 49 CFR 1003.1, General Information Sections 49 CFR 1011.7(a), (b), and Section 49 CFR 1012.3. This section In section 1003.1, which provides (c). These sections identify delegations refers to public notice of the scheduling instruction for obtaining prescribed of authority to specific offices of the of a Board meeting. The reference to the forms except insurance forms, the Board Board. Because there is no longer an Secretary in section 1012.3(a) will be removes the reference to the Office of Office of the Secretary, the heading in changed to Clearance Clerk. the Secretary and inserts a reference to the regulations for the Secretary (section Section 49 CFR 1016.311. This section the Office of Public Assistance, 1011.7(a)) will be deleted and replaced refers to an applicant’s submission of an Governmental Affairs, and Compliance. with Office of Proceedings. All other award granted against the Board. The references to the Secretary in section 49 CFR 1007.3, Requests by an reference to the Secretary in this section 1011.7(a) will be changed to the Director will be changed to ‘‘Chief, Section of Individual for Information or Access of the Office of Proceedings. The section Financial Services.’’ and 49 CFR 1007.6, Disclosure to Third will read: ‘‘(a) Office of Proceedings. (1) Parties The Director of the Office of 49 CFR Parts 1100–1269 These sections, which concern Proceedings is delegated the following Our decision requires minor changes requests by individuals for information authority: * * * .’’ Sections 1011.7(a)(1) to 49 CFR parts 1100–1269, which and disclosure to third parties by the and (a)(2) will be renumbered to contain provisions for conducting Board, will be updated to reflect the sections 1011.7(a)(1)(i) and (a)(1)(ii), proceedings and procedures for how the Board’s current United States Postal respectively. In section 1011.7(a), the public shall communicate with the Service mailing address. cross-reference to paragraph (c)(2) will Board when submitting documents and be updated to (b)(2) (to reflect the 49 CFR 1011.3, The Chairman, Vice requesting reports.2 In most instances, change that will be adopted below) and Chairman, and Board Member we remove references to the Office of the 4-digit code provided by the United the Secretary or Secretary and insert Section 1011.3(c)(1) refers to the States Postal Service will be added to references to the Office of Proceedings, Secretary as one of the designees for the postal ZIP code for the Board’s recording legally required votes and its Director, or its Chief of the Section office. 3 official acts of the Board. This reference There is no longer an Office of of Administration. These additions to will be changed to Clearance Clerk. Compliance and Enforcement so the the delegations of authority to the references to that Office also will be Director of the Office of Proceedings 49 CFR 1011.6, Delegations of Authority deleted and replaced with the Office of will appear at 49 CFR 1011.6 and by the Chairman Public Assistance, Governmental 1011.7. Sections 49 CFR 1011.6(c)(3), (d), and Affairs, and Compliance in sections In the sections revised to insert (g). These sections identify delegations 1011.7(a) and (c). Accordingly, the references to the Chief of the Section of of authority to the Secretary. Under reference to the Chief, Section of Tariffs, Administration we update references to section 1011.6(c)(3), the Secretary has Office of Compliance and Enforcement the Secretary to reflect our decision that authority to dispose of routine in section 1011.7(c) will be deleted. The the Chief of the Section of procedural matters under modified reference to the Office of Proceedings in Administration will be the contact for procedure not assigned to an the heading to section 1011.7(b) will be all Board filings.4 Unless otherwise administrative law judge or Board deleted. Section 1011.7(b) will be noted in the regulations, proceeding and Member and, unless otherwise ordered renumbered as section 1011.7(2) and recordation related correspondence to by the Chairman or by a majority of the will read: ‘‘(2) In addition to the the Board should be addressed to the Board in individual proceedings, authority delegated * * * .’’ The Chief of the Section of Administration. authority to decide whether complaint remainder of section 1011.7(b) will be In some instances, the change in these proceedings shall be assigned for oral renumbered appropriately and the sections will be to delete references to hearing or handled under modified cross-reference to 49 CFR 1011.6(h) will the Secretary and insert a reference to procedure. Section 1011.6(d) provides be updated to reflect 49 CFR the Office of Public Assistance, for the authority of the Secretary to 1011.6(c)(3), (d), (g), and (h), to include Governmental Affairs, and Compliance, dismiss a complaint or application at the new delegations of authority or to its Director.5 These updated the request of the complainant or announced in this decision. In section applicant. In section 1011.6(g), the 1011.7(b)(16), the Board changes the 2 The affected sections shall include 49 CFR parts Secretary has authority to sign and reference from ‘‘The Burlington 1100, 1102, 1103, 1104, 1105, 1109, 1110, 1113, transmit to the Small Business Northern and Santa Fe’’ to ‘‘BNSF.’’ 1114, 1116, 1118, 1132, 1139, 1150, 1152, 1177, 1180, 1240, 1241, 1242, 1243, 1245, 1246, 1248, Administration certifications of no Section 1011.7(c) will be renumbered as 1253, and 1260–1269. 1 significant economic impact on a section 1011.7(b). 3 Sections revised to insert references to the substantial number of small entities for Office of Proceedings or its Director shall include 49 CFR 1012.1, General Provisions, 49 proposed rules that might be adopted by 49 CFR 1109.1, 1110.7, 1113.2, 1113.17, 1114.24, CFR 1012.3, Public Notice, and 49 CFR the Board and findings regarding waiver 1114.31, and 1180.4. 1016.311, Payment of Award 4 Sections revised to insert references to the Chief of initial regulatory flexibility analysis of the Section of Administration shall include 49 or delay of initial or final regulatory Section 49 CFR 1012.1. Section CFR 1102.1, 1102.2, 1103.4, 1104.1, 1105.12, flexibility analyses, under the 1012.1(c) refers to written requests for 1109.1, 1110.2–.3, 1110.9, 1113.2, 1116.1, 1118.3, Regulatory Flexibility Act, 5 U.S.C. 601, 1132.1, 1139.7, 1139.25, 1150.10, 1152.21–.22, 1 1152.24–.25, 1152.27, 1152.29, 1177.2–.4, 1180.4, et seq. We are removing all references to Unless otherwise noted, the references in this decision to 49 CFR part 1011 will be to the sections and 1253.20. the Secretary in these sections and of that part as numbered prior to the changes we 5 The affected sections shall include 49 CFR delegating the authorities stated in these are adopting in this decision. 1100.4, 1103.3, 1105.12, and 1110.3.

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references reflect our decision that 49 CFR Parts 1002 and 1003 49 CFR Parts 1240, 1241, and 1243 public inquiries concerning the Administrative practice and Railroads and Recordkeeping regulations, offers of financial procedure, Common carriers, and requirements. assistance, public use or trails, and the Freedom of information. availability of published notices, and 49 CFR Part 1242 requests for non-attorneys to practice 49 CFR Part 1007 Railroads, Taxes. before the Board should be directed to Privacy. the Office of Public Assistance, 49 CFR Part 1245 Governmental Affairs, and Compliance. 49 CFR Part 1011 Railroad employees, Reporting and In parts 1240–1269, the references to the Administrative practice and recordkeeping requirements, and Wages. Secretary concerning availability of procedure, Authority delegations 49 CFR Part 1246 report forms will be deleted and (Government agencies), and replaced with the Office of Economics, Organization and functions Railroad employees, Reporting and Environmental Analysis, and (Government agencies). recordkeeping requirements. Administration. We also make the following technical 49 CFR Part 1012 49 CFR Part 1248 changes. In section 1150.10(b), the Sunshine Act. Freight, Railroads, Reporting and cross-reference 49 CFR 1002.2(f)(33) is recordkeeping requirements, and 49 CFR Part 1016 noted as reserved; we will revise the Statistics. cross-reference to 49 CFR 1002.2(f). In Claims, Equal access to justice, and 49 CFR Part 1253 section 49 CFR 1152.25(e) the Board Lawyers. updates the cross-reference from 49 CFR Freight forwarders, Maritime carriers, 49 CFR Parts 1100, 1102, 1103, and 1011.8(c)(4) and (5) to 49 CFR Motor carriers, Pipelines, Railroads, and 1104 1011.7(a)(2)(iv) and (v) to reflect the Reporting and recordkeeping changes made in this decision. In Administrative practice and requirements. section 49 CFR 1152.27(e)(1) and (e)(2) procedure. 49 CFR Part 1260–1269 the out-of-date reference to section 49 CFR Part 1105 1011.8 (concerning delegation of Valuation. authority) will be updated to section Environmental impact statements, It is ordered: 1011.7(a). In section 1180.4, the Reporting and recordkeeping 1. The final rules set forth in the reference to James H. Bayne will be requirements. Appendix to this decision are adopted. deleted. In 49 CFR parts 1100–1269, we 49 CFR Part 1109 Notice of the rules adopted here will be also update the Board’s address and add published in the Federal Register. the 4-digit code provided by the United Administrative practice and 2. This decision is effective on States Postal Service to the postal ZIP procedure, Maritime carriers, Motor November 16, 2009. code for the Board’s office, as carriers, and Railroads. necessary.6 Decided: October 5, 2009. 49 CFR Parts 1110, 1113, 1114, 1116, By the Board, Chairman Elliott, Vice Because these changes relate solely to 1118, and 1132 Chairman Nottingham, and Commissioner the rules of agency practice, procedure, Administrative practice and Mulvey. and organization, they will be issued as Kulunie L. Cannon, final rules without requesting public procedure. Clearance Clerk. comment. See 5 U.S.C. 553(b)(A). 49 CFR Part 1139 APPENDIX The Board certifies that these rule Administrative practice and changes will not have a significant procedure, Buses, Freight, Motor Code of Federal Regulations economic effect on a substantial number carriers, and Reporting and ■ For the reasons set forth in the of small entities. The changes being recordkeeping requirements. made pertain to agency management, preamble, the Surface Transportation personnel, and procedure, and should 49 CFR Part 1150 Board amends parts 1001 through 1003, have no impact on small entities. 1007, 1011, 1012, 1016, 1100, 1102 Administrative practice and through 1105, 1109, 1110, 1113, 1114, This action will not significantly procedure, and Railroads. 1116, 1118, 1132, 1139, 1150, 1152, affect either the quality of the human 49 CFR Part 1152 1177, 1180, 1240 through 1243, 1245, environment or the conservation of 1246, 1248, 1253, and 1260–1269 of title energy resources. Administrative practice and 49, chapter X, of the Code of Federal procedure, Railroads, Reporting and List of Subjects Regulations as follows: recordkeeping requirements, and 49 CFR Part 1001 Uniform System of Accounts. PART 1001—INSPECTION OF RECORDS Administrative practice and 49 CFR Part 1177 procedure, Confidential business Administrative practice and ■ 1. The authority citation for part 1001 information, and Freedom of procedure, Archives and records, continues to read as follows: information. Maritime carriers, and Railroads. Authority: 5 U.S.C. 552, 49 U.S.C. 702, and 49 U.S.C. 721. 6 The affected sections shall include 49 CFR 49 CFR Part 1180 1102.1, 1104.1, 1105.12, 1110.2, 1110.9, 1116.1, ■ 1118.3, 1139.7, 1139.25, 1152.21–.22, 1152.24–.25, Administrative practice and 2. Amend § 1001.1 by revising 1152.27, 1177.2, 1180.4, and 49 CFR parts 1260– procedure, Railroads, and Reporting and paragraph (a) introductory text to read 1269. recordkeeping requirements. as follows:

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§ 1001.1 Records available from the Board. the identified commercial interest of the § 1003.1 General information. (a) The following specific files and requester is sufficiently large, in * * * * * records in the custody of the Records comparison with the public interest in (c) Copies of all prescribed forms Officer of the Surface Transportation disclosure, that disclosure is ‘‘primarily except insurance forms are available Board are available to the public and in the commercial interest of the upon request from the Office of Public may be inspected at the Board’s office requester.’’ This fee waiver and Assistance, Governmental Affairs, and upon reasonable request during reduction provision will be Compliance, Surface Transportation business hours (between 8:30 a.m. and implemented in accordance with Board, Washington, DC 20423. 5 p.m., Monday through Friday): guidelines issued by the U.S. * * * * * Department of Justice on April 2, 1987 PART 1007—RECORDS CONTAINING INFORMATION ABOUT INDIVIDUALS ■ 3. Revise § 1001.2 to read as follows: and entitled ‘‘New FOIA Fee Waiver Policy Guidance.’’ A copy of these ■ § 1001.2 Certified copies of records. guidelines may be inspected or obtained 9. The authority citation for part 1007 Copies of and extracts from public from the Surface Transportation Board’s continues to read as follows: records will be certified by the Records Freedom of Information Office, Authority: 5 U.S.C. 552, 49 U.S.C. 721. Officer. Persons requesting the Board to Washington, DC 20423–0001. ■ 10. Amend § 1007.3 by revising prepare such copies should clearly state * * * * * paragraph (a) to read as follows: the material to be copied, and whether (i) Transcript of testimony and of oral it shall be certified. Charges will be argument, or extracts therefrom, may be § 1007.3 Requests by an individual for made for certification and for the purchased by the public from the information or access. preparation of copies as provided in Board’s official reporter. For (a) Any individual may request part 1002 of this chapter. information regarding the official information on whether a system of records maintained by the Board PART 1002—FEES reporter, contact the Records Officer, Surface Transportation Board, contains any information pertaining to ■ 4. The authority citation for part 1002 Washington, DC 20423–0001. him or her, or may request access to his or her record or to any information continues to read as follows: ■ 6. Amend § 1002.2 by revising pertaining to him or her which is Authority: 5 U.S.C. 552(a)(4)(A) and 553; paragraphs (a)(3) and (e)(2)(i) and (iii) to contained in a system of records. All 31 U.S.C. 9701; and 49 U.S.C. 721. Section read as follows: 1002.1(g)(11) also issued under 5 U.S.C. 5514 requests shall be directed to the Privacy and 31 U.S.C. 3717. § 1002.2 Filing fees. Officer, Surface Transportation Board, 395 E Street, SW., Washington, DC (a) * * * ■ 5. Amend § 1002.1 by revising 20423–0001. (3) Fees will be payable to the Surface paragraphs (a), (e), (f) introductory text, * * * * * (f)(1), (g)(8), (g)(14)(vi), and (i) to read as Transportation Board, by check payable ■ follows: in United States currency drawn upon 11. Amend § 1007.6 by revising funds deposited in a United States or paragraph (c) to read as follows: § 1002.1 Fees for records search, review, foreign bank or other financial § 1007.6 Disclosure to third parties. copying, certification, and related services. institution, money order payable in * * * * * * * * * * United States currency, or by credit (c) The accounting described in (a) Certificate of the Records Officer, card. $17.00. paragraph (b) of this section will be * * * * * made available to the individual named * * * * * (e) * * * (e) Fees for courier services to in the record upon his written request, transport agency records to provide on- (2) * * * directed to the Privacy Officer, Surface site access to agency records stored off- (i) When to request. At the time that Transportation Board, 395 E Street, SW., site will be set at the rates set forth in a filing is submitted to the Board the Washington, DC 20423–0001, except the Board’s agreement with its courier applicant may request a waiver or that the accounting will not be revealed service provider. Rate information is reduction of the fee prescribed in this with respect to disclosures made under available on the Board’s Web site part. Such request should be addressed paragraph (a)(7) of this section 1107.6 (http://www.stb.dot.gov) or can be to the Chief, Section of Administration, pertaining to law enforcement activity, obtained from the Board’s Records Office of Proceedings, Surface and will not be maintained as to Officer, Room 1200, Surface Transportation Board. disclosures involving systems of records Transportation Board, Washington, DC * * * * * exempted under section 1007.12. 20423–0001. (iii) Board action. The Chief, Section * * * * * (f) The fee for search and copying of Administration, Office of services requiring computer processing Proceedings, Surface Transportation PART 1011—BOARD ORGANIZATION; are as follows: Board will notify the applicant of the DELEGATIONS OF AUTHORITY (1) A fee of $66.00 per hour for decision to grant or deny the request for ■ 12. The authority citation for part professional staff time will be charged waiver or reduction. when it is required to fulfill a request 1011 continues to read as follows: * * * * * for computer data. Authority: 5 U.S.C. 553; 31 U.S.C. 9701; * * * * * PART 1003—FORMS 49 U.S.C. 701, 721, 11123, 11124, 11144, (g) * * * 14122, and 15722. (8) The fees for computer data are set ■ 7. The authority citation for part 1003 ■ 13. Amend § 1011.3 by revising forth in paragraph (f) of this section. continues to read as follows: paragraph (c)(1) to read as follows: * * * * * Authority: 49 U.S.C. 721, 13301(f). (14) * * * § 1011.3 The Chairman, Vice Chairman, (vi) The primary interest in ■ 8. Amend § 1003.1 by revising and Board Member. disclosure: Whether the magnitude of paragraph (c) to read as follows: * * * * *

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(c)(1) The Chairman presides at all interpretations on carrier tariff postponed the effective date of the sessions of the Board and sees that every provisions), which are not binding on exemption. vote and official act of the Board the Board. In issuing informal opinions (viii) In proceedings under the Feeder required by law to be recorded is or interpretations, the Director of the Railroad Development Program under accurately and promptly recorded by Office of Proceedings shall consult with 49 U.S.C. 10907 and the implementing the Clearance Clerk or the person the Directors of the appropriate Board regulations at 49 CFR part 1151: designated by the Board for that offices. Such requests must be directed (A) Whether to accept or reject purpose. to the Director of the Office of primary applications under 49 CFR * * * * * Proceedings, Surface Transportation 1151.2(b); competing applications under section 1151.2(c); and incomplete ■ 14. Amend § 1011.6 by revising Board, Washington, DC 20423–0001. Authority to issue informal opinions applications under 49 CFR 1151.2(d). paragraphs (c)(3), (d), and (g) (B) Whether to grant waivers from introductory text to read as follows: and interpretations on carrier tariff provisions is delegated at paragraph specific provisions of 49 CFR part 1151. § 1011.6 Delegations of authority by the (b)(2) of this section to the Office of (ix) In exemption proceedings subject Chairman. Public Assistance, Governmental to environmental or historic * * * * * Affairs, and Compliance. preservation reporting requirements, to (c) * * * (2) In addition to the authority issue a decision, under 49 CFR (3) Unless otherwise ordered by the delegated at 49 CFR 1011.6(c)(3), (d),(g), 1105.10(g), making a finding of no Board in individual proceedings, and (h), the Director of the Office of significant impact where no authority to dispose of routine Proceedings shall have authority environmental or historic preservation procedural matters in proceedings initially to determine the following: issues have been raised by any party or assigned for handling under modified (i) Whether to designate abandonment identified by the Board’s Section of procedure, other than those assigned to proceedings for oral hearings on request. Environmental Analysis. an administrative law judge or a Board (ii) Whether offers of financial (x) Whether to issue notices of Member, is assigned to the Director of assistance satisfy the statutory standards exemption under 49 U.S.C. 10502: the Office of Proceedings. The Director of 49 U.S.C. 10904(d) for purposes of (A) For acquisition, lease, and of the Office of Proceedings shall also negotiations or, in exemption operation transactions under 49 U.S.C. have authority, unless otherwise proceedings, for purposes of partial 10901 and 10902 and the implementing ordered by the Chairman or by a revocation and negotiations. regulations at 49 CFR part 1150, majority of the Board in individual (iii) Whether: subparts D and E; (B) For connecting track constructions proceedings, to decide whether (A) To impose, modify, or remove under 49 U.S.C. 10901 and the complaint proceedings shall be handled environmental or historic preservation implementing regulations at 49 CFR under the modified procedure or be conditions; and 1150.36; assigned for oral hearings. In carrying (B) In abandonment proceedings, to (C) For rail transactions under 49 out these duties, the Director of the impose public use conditions under 49 U.S.C. 11323 and the implementing Office of Proceedings shall consult, as U.S.C. 10905 and the implementing regulations at 49 CFR 1180.2(d); and necessary, with the General Counsel and regulations at 49 CFR 1152.28. (D) For abandonments and the Director of any Board office to (iv) In abandonment proceedings, discontinuances under 49 U.S.C. 10903 which an individual proceeding has when a request for interim trail use/rail and the implementing regulations at 49 been assigned. banking is filed under 49 CFR 1152.29, CFR 1152.50. (d) Except as provided at 49 CFR to determine whether the National (xi) When an application or a petition 1113.3(b)(1), authority to dismiss a Trails System Act, 16 U.S.C. 1247(d), is for exemption for abandonment is filed, complaint on complainant’s request, or applicable and, where appropriate, to the Director will issue a notice of that an application on applicant’s request, is issue Certificates of Interim Trail Use or filing pursuant to 49 CFR 1152.24(e)(2) delegated to the Director of the Office of Abandonment (in application and 49 CFR 1152.60, respectively. Proceedings. proceedings) or Notices of Interim Trail (xii) Whether to issue a notice of * * * * * Use or Abandonment (in exemption exemption under 49 U.S.C. 13541 for a (g) The Director of the Office of proceedings). transaction under 49 U.S.C. 14303 Proceedings is delegated authority, (v) In any abandonment proceeding within a motor passenger carrier under the Regulatory Flexibility Act, 5 where interim trail use/rail banking is corporate family that does not result in U.S.C. 601, et seq., to: an issue, to make such findings and adverse changes in service levels, * * * * * issue decisions as may be necessary for significant operational changes, or a ■ 15. Amend § 1011.7 by revising the orderly administration of the change in the competitive balance with paragraphs (a), (b) introductory text, National Trails System Act, 16 U.S.C. motor passenger carriers outside the (b)(1), and (b)(3) to read as follows: 1247(d). corporate family. (vi) Whether to institute requested (xiii) Whether to issue rail modified § 1011.7 Delegations of authority by the declaratory order proceedings under 5 certificates of public convenience and Board to specific offices of the Board. U.S.C. 554(e). necessity under 49 CFR part 1150, (a) Office of Proceedings. (vii) To issue decisions, after 60 days’ subpart C. (1) The Director of the Office of notice by any person discontinuing a (xiv) Whether to waive the regulations Proceedings is delegated the following subsidy established under 49 U.S.C. at 49 CFR part 1152, subpart C, on authority: 10904 and at the railroad’s request: appropriate petition. (i) Whether (in consultation with (A) In application proceedings, (xv) To reject applications, petitions involved Offices) to waive filing fees set immediately issuing decisions for exemption, and verified notices forth at 49 CFR 1002.2(f). authorizing abandonment or (filed in class exemption proceedings) (ii) To issue, on written request, discontinuance; and for noncompliance with the informal opinions and interpretations (B) In exemption proceedings, environmental rules at 49 CFR part (exclusive of informal opinions and immediately vacating the decision that 1105.

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(xvi) To reject applications by BNSF of the notice with the Clearance Clerk of PART 1102—COMMUNICATIONS Railway Company to abandon rail lines the Board for posting and for service on in North Dakota exceeding the 350-mile all parties of record in any proceeding ■ 23. The authority citation for part cap of section 402 of Public Law 97– which is the subject of the meeting or 1102 continues to read as follows: 102, 95 Stat. 1465 (1981), as amended any other person who has requested Authority: 49 U.S.C. 721. by The Department of Transportation notice with respect to meetings of the and Related Agencies Appropriations Board, and by submitting a copy of the ■ 24. Amend § 1102.1 to read as follows: Act, 1992, Public Law 102–143, section notice for publication in the Federal § 1102.1 How Addressed. 343 (Oct. 28, 1991). Register. All communications should be (b) Office of Public Assistance, * * * * * Governmental Affairs, and Compliance. addressed to the Chief, Section of The Office of Public Assistance, PART 1016—SPECIAL PROCEDURES Administration, Office of Proceedings, Governmental Affairs, and Compliance GOVERNING THE RECOVERY OF Surface Transportation Board, is delegated the authority to: EXPENSES BY PARTIES TO BOARD Washington, DC 20423–0001 unless (1) Reject tariffs and railroad ADJUDICATORY PROCEEDINGS otherwise specifically directed by transportation contract summaries filed another Board regulation. All with the Board that violate applicable Subpart C—Procedures for communications should designate the statutes, rules, or regulations. Any Considering Applications docket number and title, if any. The rejection of a tariff or contract summary person communicating shall state his may be by letter signed by or for the ■ 19. The authority citation for part address, and the party he represents. 1016 continues to read as follows: Director, Office of Public Assistance, ■ 25. Amend § 1102.2 by revising Governmental Affairs, and Compliance. Authority: 5 U.S.C. 504(c)(1), 49 U.S.C. paragraph (e) to read as follows: (2) * * * 721. (3) Grant or withhold special tariff § 1102.2 Ex parte communications authority granting relief from the ■ 20. Revise § 1016.311 to read as prohibited; penalties provided. provisions of 49 CFR part 1312. Any follows: * * * * * grant or withholding of such relief may § 1016.311 General provisions. (e) Procedure required of Board be by letter signed by or for the Director, members and employees upon receipt of Office of Public Assistance, An applicant seeking payment of an ex parte communications concerning Governmental Affairs, and Compliance. award shall submit to the appropriate the merits of a proceeding. Any person * * * * * official of the paying agency a copy of who receives an ex parte the Board’s final decision granting the communication concerning the merits of PART 1012—MEETINGS OF THE award, accompanied by a statement that a proceeding must promptly transmit BOARD the applicant will not seek review of the either the written communication, or a decision in the United States courts. written summary of the oral ■ 16. The authority citation for part Where the award is granted against the communication with an outline of the 1012 continues to read as follows: Surface Transportation Board the surrounding circumstances to the Chief, Authority: 5 U.S.C. 552b(g), 49 U.S.C. 701, applicant shall make its submission to Section of Administration, Office of 721. the Chief, Section of Financial Services, Proceedings, Surface Transportation Surface Transportation Board, Board. The Section Chief shall place all ■ 17. Amend § 1012.1 by revising Washington, DC 20423–0001. The Board of the material in the correspondence paragraph (c) to read as follows: will pay the amount awarded to the section of the public docket of the § 1012.1 General provisions. applicant within 60 days of the proceeding. A recipient of such ex parte * * * * * applicant’s submission unless the communication, who has doubt as to the (c) These regulations are not intended judicial review of the award or of the nature of the communication, may to govern situations in which members underlying decision of the adversary request a ruling on the question from of the Board consider individually and adjudication has been sought by the the Board’s Designated Agency Ethics vote by notation upon matters which are applicant or any other party to the Official. The Designated Agency Ethics circulated to them in writing. Copies of proceeding. Official shall promptly reply to such the votes or statements of position of all requests. The Chief, Section of Board Members eligible to participate in PART 1100—GENERAL PROVISIONS Administration, Office of Proceedings, action taken by notation voting will be shall promptly notify the Chairman of made available, as soon as possible after ■ 21. The authority citation for part the Board of such ex parte the date upon which the action taken is 1100 continues to read as follows: communications sent to the Section made public or any decision or order Authority: 49 U.S.C. 721. Chief. The Designated Agency Ethics adopted is served, in a public reading Official shall promptly notify the room or other easily accessible place ■ 22. Revise § 1100.4 to read as follows: Chairman of all requests for rulings sent within the Board, or upon written to the Designated Agency Ethics § 1100.4 Information and inquires. request to the Records Officer. Official. The Chairman may require that ■ 18. Amend § 1012.3 by revising Persons with questions concerning any communication be placed in the paragraph (a) to read as follows: these rules should either send a written correspondence section of the docket inquiry addressed to the Director, Office when fairness requires that it be made § 1012.3 Public notice. of Public Assistance, Governmental public, even if it is not a prohibited (a) Unless a majority of the Board Affairs, and Compliance, Surface communication. The Chairman may determines that such information is Transportation Board or should direct the taking of such other action as exempt from disclosure under the Act, telephone the Office of Public may be appropriate under the public notice of the scheduling of a Assistance, Governmental Affairs, and circumstances. meeting will be given by filing a copy Compliance. * * * * *

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PART 1103—PRACTITIONERS ■ 30. Amend § 1104.1 by revising that office at [INSERT TELEPHONE paragraph (a) to read as follows: NUMBER]. ■ 26. The authority citation for part Appropriate offers of financial assistance to 1103 continues to read as follows: § 1104.1 Address, identification, and continue rail service can be filed with the electronic filing option. Board. Requests for environmental Authority: 21 U.S.C. 862; 49 U.S.C. 703(e), (a) Except as provided in § 1115.7, conditions, public use conditions, or rail 721. banking/trails use also can be filed with the pleadings should be addressed to the Board. An original and 10 copies of any ■ 27. Amend § 1103.3 by revising ‘‘Chief, Section of Administration, pleading that raises matters other than paragraphs (c)(1) and (j) to read as Office of Proceedings, Surface environmental issues (such as trails use, follows: Transportation Board, Washington, DC public use, and offers of financial assistance) 20423–0001,’’ and should designate the must be filed directly with the Board’s § 1103.3 Persons not attorneys-at-law— docket number and title of the Section of Administration, Office of qualifications and requirements for practice proceeding, if known. Proceedings, 395 E Street, SW., Washington, before the Board. DC 20423–0001 [See 49 CFR 1104.1(a) and * * * * * * * * * * 1104.3(a)], and one copy must be served on (c)(1) Application for admission. An applicants’ representative [See 49 CFR PART 1105—PROCEDURES FOR 1104.12(a)]. Questions regarding offers of application filed pursuant to this rule IMPLEMENTATION OF financial assistance, public use or trails use under oath for admission to practice ENVIRONMENTAL LAWS may be directed to the Board’s Office of shall be submitted between January and Public Assistance, Governmental Affairs, and May 1 of the year in which the ■ 31. The authority citation for part Compliance at [INSERT TELEPHONE examination is to be taken. The 1105 continues to read as follows: NUMBER]. Copies of any comments or requests for conditions should be served on application is to be completed in full on Authority: 16 U.S.C. 470f, 1456, and 1536; the form provided by the Board, and the applicant’s representative: (Name, 42 U.S.C. 4332 and 6362(b); and 49 U.S.C. address and phone number). shall be addressed to the Director, Office 701 note (1995) (Savings Provisions), 721(a), of Public Assistance, Governmental 10502, and 10903–10905. Sample Local Newspaper Notice for Affairs, and Compliance, Surface Petitions for Abandonment Exemptions Transportation Board, Washington, DC ■ 32. Amend § 1105.12 by revising Appendix to § 1105.12—Sample Notice of Intent To Abandon or To 20423–0001, to the attention of the room Discontinue Rail Service Newspaper Notices to read as follows: number indicated on the form. (Name of railroad) gives notice that on or * * * * * § 1105.12 Sample newspaper notices for about (insert date petition for abandonment (j) Examination results. Results will abandonment exemption cases. exemption will be filed with the Surface be released within 90 days after the * * * * * Transportation Board) it intends to file with examination. Individual results will be the Surface Transportation Board, Washington, DC 20423, a petition for forwarded to the applicants at least 1 Appendix to § 1105.12—Sample Newspaper Notices exemption under 49 U.S.C. 10502 from the week before being publicly released. To prior approval requirements of 49 U.S.C. protect the privacy of those taking the Sample Local Newspaper Notice for Out-Of- 10903, et seq., permitting the (abandonment examination, individual grades will not Service Abandonment Exemptions of or discontinuance of service on) allmile be released over the telephone to Notice of Intent To Abandon or To line of railroad between railroad lll anyone. Requests for grades may, Discontinue Rail Service milepost , near (station name) which traverses through United States Postal however, be submitted in writing to the (Name of railroad) gives notice that on or Office of Public Assistance, Service ZIP Codes (ZIP Codes), and railroad about (insert date notice of exemption will be milepostl, near (station name) which Governmental Affairs, and Compliance filed with the Surface Transportation Board), traverses through United States Postal to the attention of the address stated in it intends to file with the Surface Service ZIP Codes (ZIP Codes) the application form. Transportation Board, Washington, DC inllCounty(ies), (State). The proceeding * * * * * 20423, a notice of exemption under 49 CFR has been docketed as No. ABll(Sub- 1152 Subpart F—Exempt Abandonments No.llX). ■ 28. Amend § 1103.4 by revising permitting the (abandonment of or The Board’s Section of Environmental paragraph (d) to read as follows: discontinuance of service on) allmile line Analysis (SEA) will generally prepare an of railroad between railroad milepost ll, Environmental Assessment (EA), which will § 1103.4 Initial appearances. near (station name), which traverses through normally be available 60 days after the filing * * * * * United States Postal Service ZIP Codes (ZIP of the petition for abandonment exemption. (d) Filing a letter with the Chief, Codes) and railroad milepost ll, near Comments on environmental and energy Section of Administration, Office of (station name) which traverses through matters should be filed no later than 30 days Proceedings, Surface Transportation United States Postal Service ZIP Codes (ZIP after the EA becomes available to the public Codes) inllCounty(ies), (State). The Board stating that practitioner is and will be addressed in a Board decision. proceeding will be docketed as No. Interested persons may obtain a copy of the authorized to represent a party. The ABll(Sub-No.llX). EA or make inquiries regarding party represented, their address, and the The Board’s Section of Environmental environmental matters by writing to SEA, docket number of the proceeding must Analysis (SEA) will generally prepare an Surface Transportation Board, Washington, also be identified at the time of the Environmental Assessment (EA), which will DC 20423 or by calling SEA at [INSERT initial appearance. normally be available 25 days after the filing TELEPHONE NUMBER]. of the notice of exemption. Comments on Appropriate offers of financial assistance to PART 1104—FILING WITH THE environmental and energy matters should be continue rail service can be filed with the BOARD—COPIES—VERIFICATION— filed no later than 15 days after the EA Board. Requests for environmental SERVICE—PLEADINGS, GENERALLY becomes available to the public and will be conditions, public use conditions, or rail addressed in a Board decision. Interested banking/trails use also can be filed with the ■ 29. The authority citation for part persons may obtain a copy of the EA or make Board. An original and 10 copies of any inquiries regarding environmental matters by pleading that raises matters other than 1104 continues to read as follows: writing to the Section of Environmental environmental issues (such as trails use, Authority: 5 U.S.C. 553 and 559; 18 U.S.C. Analysis (SEA), Surface Transportation public use, and offers of financial assistance) 1621; 21 U.S.C. 862; and 49 U.S.C. 721. Board, Washington, DC 20423 or by calling must be filed directly with the Board’s

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Section of Administration, Office of § 1110.2 Opening of proceeding. Board’s Web site, will be served upon Proceedings, 395 E Street, SW., Washington, * * * * * the parties and such other persons as DC 20423–0001 [See 49 CFR 1104.1(a) and (c) * * * may be entitled to receive notice under 1104.3(a)], and one copy must be served on (1) Be submitted, along with 15 copies the Act, and will be available for applicants’ representative [See 49 CFR 1104.12(a)]. Questions regarding offers of if possible, to the Chief, Section of inspection at the Board’s office. financial assistance, public use or trails use Administration, Office of Proceedings, * * * * * may be directed to the Board’s Office of Surface Transportation Board, ■ Public Assistance, Governmental Affairs, and Washington, DC 20423–0001; 42. Amend § 1113.2 by revising Compliance at [INSERT TELEPHONE * * * * * paragraphs (a) and (d) to read as follows: NUMBER]. Copies of any comments or ■ requests for conditions should be served on 37. Amend § 1110.3 by revising § 1113.2 Subpoenas. paragraph (d) to read as follows: the applicant’s representative (name and (a) Issuance. A subpoena may be address). § 1110.3 Publication of notices. issued upon the direction of the Board PART 1109—USE OF ALTERNATIVE * * * * * on its own motion or upon request. A DISPUTE RESOLUTION IN BOARD (d) In addition to being published in subpoena may be issued by the Board or PROCEEDINGS AND THOSE IN WHICH the Federal Register, notices of by the officer presiding at a hearing and THE BOARD IS A PARTY proposed rulemaking and subsequent must be signed by the Director of the notices and decisions in rulemaking Office of Proceedings or a member of the ■ 33. The authority citation for part proceedings, will be served on the Board. 1109 continues to read as follows: parties by the Office of Proceedings and * * * * * made available to the public through the (d) Return. If service of subpoena is Authority: 5 U.S.C. 571 et seq. Office of Public Assistance, made by a United States marshal or his Governmental Affairs, and Compliance. ■ 34. Revise § 1109.1 to read as follows: To the extent possible, the date of deputy, service should be evidenced by service will be the same as the date of his return on the subpoena. If made by § 1109.1 Invoking ADR in Board any other person, such person shall proceedings. publication in the Federal Register. When the service and publication dates make an affidavit stating the date, time Any proceeding may be held in are not the same, the date of publication and manner of service; and return such abeyance for 90 days while in the Federal Register is controlling for affidavit on, or with, the original administrative dispute resolution (ADR) the purpose of determining time periods subpoena in accordance with the form procedures (such as arbitration and set by these procedures or by notices thereon. In case of failure to make mediation) are pursued. (Additional 90 issued in individual proceedings. service the reasons for the failure should day periods can be requested.) The be stated on the original subpoena. The ■ 38. Revise § 1110.7 to read as follows: period while any proceeding is held in written acceptance of service of a abeyance to facilitate ADR will not be § 1110.7 Availability of dockets. subpoena by the person subpoenaed counted towards the statutory Dockets of pending rulemaking will be sufficient without other deadlines. All parties are required to proceedings are maintained in the evidence of return. The original indicate their written consent for ADR Office of Proceedings. These dockets are subpoena bearing or accompanied by treatment. Requests that a proceeding be available for inspection by any person, the required return, affidavit, statement, held in abeyance while ADR procedures and copies may be obtained upon or acceptance of service, should be are pursued should be submitted to the payment of the prescribed fee. returned forthwith to the Chief, Section of Administration, Office of Chief, Section of Administration, Office ■ 39. Revise § 1110.9 to read as follows: of Proceedings. The Director of the Proceedings, unless otherwise directed. Office of Proceedings shall promptly § 1110.9 Petition for waiver. * * * * * issue an order in response to such Any person may petition the Board ■ requests. Unless arbitration or some for a permanent or temporary waiver of 43. Amend § 1113.17 by revising other binding process involving a any rule. Petitions should be filed with paragraph (c) to read as follows: neutral has been undertaken, any party the Chief, Section of Administration, § 1113.17 Transcript of record. believing that ADR procedures are not Office of Proceedings, Surface * * * * * yielding the intended results shall Transportation Board, Washington, DC inform the Chief, Section of 20423–0001, and should identify the (c) Objections to corrections. Parties Administration, Office of Proceedings rule involved. disagreeing with corrections suggested and all parties in writing, and normal pursuant to paragraph (b) of this section agency procedures will be reactivated PART 1113—ORAL HEARING should file written objections in the by the Director of the Office of same manner as suggested corrections Proceedings by notice served on all the ■ 40. The authority citation for part are to be filed. Objections to suggested parties. 1113 continues to read as follows: corrections should be filed not later Authority: 5 U.S.C. 559; 49 U.S.C. 721. than 15 days after the filing with the PART 1110—PROCEDURES Board of suggested corrections. If no ■ GOVERNING INFORMAL 41. Amend § 1113.1 by revising objections are timely filed, the Office of RULEMAKING PROCEEDINGS paragraph (a) to read as follows: Proceedings shall make the suggested § 1113.1 Scheduling hearings; continued corrections to the transcript. If ■ 35. The authority citation for part hearings. objections are timely filed, the officer 1110 continues to read as follows: (a) Assignment; service and posting of who presided at the hearing shall determine the merits of the suggested Authority: 49 U.S.C. 721. notice. In those proceedings in which an oral hearing is to be held, the Board will correction and enter an appropriate ■ 36. Amend § 1110.2 by revising assign a time and place for hearing. decision in the proceeding. paragraph (c)(1) to read as follows: Notice of hearings will be posted on the * * * * *

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PART 1114—EVIDENCE; DISCOVERY PART 1118—PROCEDURES IN ■ 54. Revise § 1139.7 to read as follows: INFORMAL PROCEEDINGS BEFORE § 1139.7 Service. ■ 44. The authority citation for part EMPLOYEE BOARDS The detailed information called for 1114 continues to read as follows: ■ 49. The authority citation for part herein shall be in writing and shall be Authority: 5 U.S.C. 559; 49 U.S.C. 721. 1118 continues to read as follows: verified by a person or persons having knowledge thereof. The original and 10 Authority: 49 U.S.C. 721. ■ 45. Amend § 1114.24 by revising copies of each verified statement for the paragraph (h) to read as follows: ■ 50. Amend § 1118.3 by revising use of the Board shall be filed with the § 1114.24 Depositions; procedures. paragraph (d) to read as follows: Chief, Section of Administration, Office of Proceedings, Surface Transportation * * * * * § 1118.3 Appeals. Board, Washington, DC 20423–0001. A (h) Return. The officer shall securely * * * * * copy of each statement shall be mailed seal the deposition in an envelope (d) Where filed. Appeals and replies by first-class mail to each party of endorsed with sufficient information to to appeals of decisions issued by record in the last formal proceeding identify the proceeding and marked employee boards must be filed with the concerning a general rate increase in the ‘‘Deposition of (here insert name of Chief, Section of Administration, Office affected area or territory. However, one witness)’’ and shall either personally of Proceedings, Surface Transportation copy of each statement shall be sent by deliver or promptly send the original Board, 395 E St., SW., Washington, DC express mail to any person undertaking and one copy of all exhibits by 20423–0001. to bear the cost. Written request for this registered mail to the Office of * * * * * expedited service must be made no less Proceedings. A deposition to be offered than 5 days before the statement is due in evidence must reach the Board not PART 1132—PROTESTS REQUESTING to be filed with the Board. Otherwise, later than 5 days before the date it is to SUSPENSION AND INVESTIGATION the service requirements of 49 CFR be so offered. OF COLLECTIVE RATEMAKING 1104.12 should be observed. ACTIONS * * * * * Information with respect to carrier affiliates may be served on the parties in ■ ■ 51. The authority citation for part 46. Amend § 1114.31 by revising summary form, if so desired. A copy of 1132 continues to read as follows: paragraph (a)(4) to read as follows: each statement shall be furnished to any § 1114.31 Failure to respond to discovery. Authority: 49 U.S.C. 721, 13301(f), and interested person on request. 13703. ■ 55. Revise § 1139.25 to read as (a) * * * ■ 52. Amend § 1132.1 by revising the follows: (4) Ruling on motion to compel in section heading and paragraph (d) to § 1139.25 Service. stand-alone cost and simplified read as follows: standards rate cases. Within 5 business The detailed information called for days after a conference with the parties § 1132.1 Protest against collective herein shall be in writing and shall be ratemaking actions. convened pursuant to paragraph (a)(3) verified by a person or persons having of this section, the Director of the Office * * * * * knowledge thereof. The original and 16 of Proceedings will issue a summary (d) Copies; service. In connection with copies of each verified statement for the ruling on the motion to compel proceedings involving proposals subject use of the Board shall be filed with the discovery. If no conference is convened, to the special procedures in Ex Parte No. Chief, Section of Administration, Office the Director of the Office of Proceedings MC–82, New Procedures in Motor of Proceedings, Surface Transportation will issue this summary ruling within Carrier Rev. Proc. 339 I.C.C. 324, and set Board, Washington, DC 20423–0001. 10 days after the filing of the reply to forth at 49 CFR part 1139, an original One copy of each statement shall be sent the motion to compel. Appeals of a and 10 copies of every protest or reply first-class mail to each of the regional Director’s ruling will proceed under 49 filed under this section should be offices of the Board in the area affected CFR 1115.9, and the Board will attempt furnished for the use of the Board. by the proposed increase, where it will to rule on such appeals within 20 days Except as provided for proposals subject be open to public inspection. A copy of after the filing of the reply to the appeal. to the special procedures in Ex Parte No. each statement shall be mailed by first- MC–82, the original and 10 copies of class mail to each party of record in the * * * * * each protest, or of each reply filed under last formal proceeding concerning a PART 1116—ORAL ARGUMENT this section, must be filed with the general increase in bus passenger fares BEFORE THE BOARD Board, and one copy simultaneously in the affected area or territory. must be served upon the publishing Otherwise, the service requirements of carrier or collective ratemaking ■ 47. The authority citation for part § 1130.1 shall be observed. organization, and upon other persons 1116 continues to read as follows: known by protestant to be interested. PART 1150—CERTIFICATE TO Authority: 49 U.S.C. 721. These pleadings should be directed to CONSTRUCT, ACQUIRE, OR OPERATE the attention of the Chief, Section of RAILROAD LINES ■ 48. Amend § 1116.1 by revising Administration, Office of Proceedings, ■ 56. The authority citation for part paragraph (a) to read as follows: Surface Transportation Board. 1150 continues to read as follows: § 1116.1 Requests. * * * * * Authority: 49 U.S.C. 721(a), 10502, 10901, (a) Addressee. Requests for oral PART 1139—PROCEDURES IN MOTOR and 10902. argument should be addressed to the CARRIER REVENUE PROCEEDINGS ■ 57. Amend § 1150.10 by revising Chief, Section of Administration, Office paragraph (b) to read as follows: of Proceedings, Surface Transportation ■ 53. The authority citation for part Board, Washington, DC 20423–0001. 1132 continues to read as follows: § 1150.10 Procedures. * * * * * Authority: 49 U.S.C. 721, 13703. * * * * *

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(b) Filing procedures. The original notice of application in paragraph (i) to and argument, and replies. (1) Written and 10 copies of the application and all read as follows: comments and protests, as well as documents shall be filed with the Chief, public use and trail use requests, shall Section of Administration, Office of § 1152.22 Contents of application. be filed with the Board (the Chief, Proceedings. A filing fee in the amount * * * * * Section of Administration, Office of set forth in 49 CFR 1002.2(f) is required (i) * * * Proceedings, Surface Transportation to file an application. Copies of (iv) * * * Board, Washington, DC 20423–0001) documents shall be furnished promptly * * * * * within 45 days of the filing with the to interested parties upon request. The Written comments and protests, Board of an abandonment or application shall include a stamped self- including all requests for public use and discontinuance application. addressed envelope to be used to notify trail use conditions, must indicate the * * * * * applicant of the docket number. proceeding designation STB No. AB (e) * * * Additionally, if possible, telephonic ll (Sub-No. ll) and should be filed (1) * * * communication of the docket number with the Chief, Section of (iii) The applicability and shall be made. Administration, Office of Proceedings, administration of the Trails Act [16 * * * * * Surface Transportation Board (Board), U.S.C. 1247(d)] in abandonment Washington, DC 20423–0001, no later proceedings under 49 U.S.C. 10903 (and PART 1152—ABANDONMENT AND than (insert the date 45 days after the abandonment exemption proceedings), DISCONTINUANCE OF RAIL LINES date applicant intends to file its issued pursuant to delegations of AND RAIL TRANSPORTATION UNDER application). Interested persons may file authority at 49 CFR 1011.7(a)(2)(iv) and 49 U.S.C. 10903 a written comment or protest with the (v), will be acted on by the entire Board Board to become a party to this as set forth at 49 CFR 1011.2(a)(7). An ■ 58. The authority citation for part abandonment (or discontinuance) original and 10 copies of all appeals, 1152 continues to read as follows: proceeding. A copy of each written and replies to appeals, under this Authority: 11 U.S.C. 1170; 16 U.S.C. comment or protest shall be served section must be filed with the Board. 1247(d) and 1248; 45 U.S.C. 744; and 49 upon the representative of the applicant * * * * * U.S.C. 701 note (1995) (section 204 of the ICC (insert name, address, and phone ■ 63. Amend § 1152.27 by revising Termination Act of 1995), 721(a), 10502, number). The original and 10 copies of paragraphs (c)(1)(i) introductory text, 10903–10905, and 11161. all comments or protests shall be filed (c)(2)(ii), and (e) to read as follows: with the Board with a certificate of ■ 59. Amend § 1152.21 by revising the service. Except as otherwise set forth in § 1152.27 Financial assistance third paragraph of section (4)(vi) of the part 1152, every document filed with procedures. notice of intent to read as follows: the Board must be served on all parties * * * * * § 1152.21 Form of notice. to the abandonment proceeding. 49 CFR (c) Submission of financial assistance * * * * * 1104.12(a). offer—(1) Abandonment and discontinuance applications and (4) * * * * * * * * petitions for exemption—(i) Service and (vi) * * * ■ 61. Amend § 1152.24 by revising paragraph (a) to read as follows: filing. An offeror must serve its offer of * * * * * assistance on the carrier owning and Written comments and protests, § 1152.24 Filing and service of application. operating the line and all parties to the including all requests for public use and (a) An original and 10 copies of abandonment or discontinuance trail use conditions, should indicate the applications, typewritten or printed on application or exemption proceeding. proceeding designation STB No. AB paper approximately 81⁄2 inches by 11 The offer must be filed concurrently ll (Sub-No. ll) and must be filed inches with 11⁄2 inch left margin, shall with the Chief, Section of with the Chief, Section of be filed with the Chief, Section of Administration, Office of Proceedings, Administration, Office of Proceedings, Administration, Office of Proceedings, Surface Transportation Board, Surface Transportation Board, Washington, DC 20423–0001. The Washington, DC 20423–0001. Washington, DC 20423–0001, no later original shall bear the date and * * * * * than (insert the date 45 days after the signature and shall be complete in itself; (2) * * * date applicant intends to file its the signature may be stamped or typed (ii) Service and filing. An offeror must application). Interested persons may file and the notarial seal may be omitted on serve its offer of assistance on the carrier a written comment or protest with the the copies. A check, money order or that instituted the exempt filing as well Board to become a party to this payment by credit card payable to the as all other parties to the proceeding. abandonment (or discontinuance) Surface Transportation Board must also The offer must be filed concurrently proceeding. A copy of each written be submitted to cover the applicable with the Chief, Section of comment or protest shall be served filing fee. If the applicant carrier is in Administration, Office of Proceedings, upon the representative of the applicant bankruptcy, the application shall also be Surface Transportation Board, (insert name, address, and phone filed on the bankruptcy court. Washington, DC 20423–0001. number). The original and 10 copies of * * * * * * * * * * all comments or protests shall be filed ■ 62. Amend § 1152.25 by revising (e) Review of offers—(1) with the Board with a certificate of Abandonment and discontinuance service. Except as otherwise set forth in paragraphs (c)(1) and (e)(1)(iii) to read as follows: applications. The Board will review part 1152, each document filed with the each offer submitted to determine if a Board must be served on all parties to § 1152.25 Participation in abandonment or financially responsible person has the abandonment proceeding. 49 CFR discontinuance proceedings. offered assistance. If that criterion is 1104.12(a). * * * * * met, the Board will issue a decision ■ 60. Amend § 1152.22 by revising the (c) Filing and service of written postponing the effective date of the third paragraph of section (iv) of the comments, protests, along with evidence authorization for abandonment or

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discontinuance. This decision will be (2) A railroad that receives authority Authority: 49 U.S.C. 721, 11301. issued within 15 days of the service of from the Board to abandon a line (in a ■ 66. Revise § 1177.2 to read as follows: the decision granting the application (or regulated abandonment proceeding within 5 days after the offer is filed if under 49 U.S.C. 10903, or by individual § 1177.2 To whom documents should be the time for filing has been tolled under or class exemption issued under 49 submitted for recordation. paragraph (c)(1)(i)(C) of this section, or U.S.C. 10502) shall file a notice of Documents to be recorded shall be within 5 days after expiration of the 120 consummation with the Board to signify submitted in person, via the Board’s day (4 month) period described in 49 that it has exercised the authority website, or by mail addressed to the U.S.C. 10904, if that occurs first). Under granted and fully abandoned the line Chief, Section of Administration, Office the delegation of authority at (e.g., discontinued operations, salvaged of Proceedings, Surface Transportation § 1011.7(a), the Director of the Office of the track, canceled tariffs, and intends Board, Washington, DC 20423–0001. All Proceedings will make the initial that the property be removed from the documents submitted by mail should determination whether offers of interstate rail network). The notice shall clearly state ‘‘Documents for financial assistance satisfy the standards provide the name of the STB proceeding Recordation’’ on the envelope. of 49 U.S.C. 10904(d) for purposes of and its docket number, a brief ■ 67. Amend § 1177.3 by revising instituting negotiations. Appeals of description of the line, and a statement paragraph (d) introductory text to read initial decisions determining whether that the railroad has consummated, or as follows: offers of financial assistance satisfy the fully exercised, the abandonment standards of 49 U.S.C. 10904(d) for authority on a certain date. The notice § 1177.3 Requirements for submission. purposes of instituting negotiations will shall be filed within 1 year of the * * * * * be acted upon by the entire Board service date of the decision permitting (d) Be accompanied by a letter of pursuant to 49 CFR 1011.2(a)(7). the abandonment (assuming that the transmittal requesting the recording of (2) Exemption proceedings. The Board railroad intends to consummate the the document. For a sample of a letter, will review each offer submitted to abandonment). Notices will be deemed see § 1177.4. Documents submitted determine if a financially responsible conclusive on the point of concurrently under the same person has offered assistance. If that consummation if there are no legal or recordation number may be included in criterion is met, the Board will postpone regulatory barriers to consummation a single transmittal letter. Otherwise, the effective date either of the decision (such as outstanding conditions, each document must have its own letter granting a petition for individual including Trails Act conditions). If, after of transmittal. The letter should be exemption or the notice of exemption 1 year from the date of service of a addressed to the Chief, Section of under the class exemption and partially decision permitting abandonment, Administration, Office of Proceedings revoke the exemption or (in the case of consummation has not been effected by and include the following information: a class exemption) the notice of the railroad’s filing of a notice of * * * * * exemption to the extent it applies to 49 consummation, and there are no legal or ■ 68. Amend § 1177.4 by revising the U.S.C. 10904. The decision to postpone regulatory barriers to consummation, first two sentences of paragraph (b) to and partially revoke will be issued the authority to abandon will read as follows: within 15 days of the service date of a automatically expire. In that event, a § 1177.4 Sample forms. decision granting a petition for new proceeding would have to be exemption, or within 35 days of the instituted if the railroad wants to * * * * * abandon the line. Copies of the (b) Sample Letter of Transmittal. Federal Register publication described [Chief, Section of Administration, railroad’s notice of consummation shall in paragraph (b)(2)(ii) of this section (or Office of Proceedings’ Name] Chief, be filed with the Chief, Section of within 5 days after the offer is filed if Section of Administration, Office of Administration, Office of Proceedings. the time for filing has been tolled under Proceedings, Surface Transportation paragraph (c)(1)(i)(C) or (c)(2)(ii) (C) or In addition, the notice of consummation Board, Washington, DC. (D) of this section). Under the delegation shall be sent to the State Public Service Dear Section Chief: I have enclosed an of authority at section 1011.7(a), the Commission (or equivalent agency) of original and one copy/counterpart of the Director of the Office of Proceedings every state through which the line document(s) described below, to be will make the initial determination passes. If, however, any legal or recorded pursuant to Section 11301 of whether offers of financial assistance regulatory barrier to consummation Title 49 of the U.S. Code. satisfy the standards of 49 U.S.C. exists at the end of the 1-year time * * * * * 10904(d) for purposes of partial period, the notice of consummation revocation and institution of must be filed not later than 60 days after PART 1180—RAILROAD ACQUISITION, negotiations. Appeals of initial satisfaction, expiration or removal of the CONTROL, MERGER, decisions determining whether offers of legal or regulatory barrier. For good CONSOLIDATION PROJECT, financial assistance satisfy the standards cause shown, a railroad may file a TRACKAGE RIGHTS, AND LEASE of 49 U.S.C. 10904(d) for purposes of request for an extension of time to file PROCEDURES partial revocation and institution of a notice so long as it does so sufficiently negotiations will be acted upon by the in advance of the expiration of the ■ 69. The authority citation for part entire Board pursuant to 49 CFR deadline for notifying the Board of 1180 continues to read as follows: 1011.2(a)(7). consummation to allow for timely Authority: 5 U.S.C. 553 and 559; 11 U.S.C. * * * * * processing. 1172; 49 U.S.C. 721, 10502, 11323–11325. ■ 64. Amend § 1152.29 by revising * * * * * ■ 70. Amend § 1180.4 by revising paragraph (e)(2) to read as follows: paragraphs (c)(2)(ii), (c)(6)(iii), (g)(1) PART 1177—RECORDATION OF introductory text, and (g)(2)(i) to read as § 1152.29 Prospective use of rights-of-way DOCUMENTS follows: for interim trail use and rail banking. * * * * * ■ 65. The authority citation for part § 1180.4 Procedures. (e) * * * 1177 continues to read as follows: * * * * *

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(c) * * * (ii) To qualify for an exemption under Note: The report forms prescribed by part (2) * * * section 1180.2(d)(8) (acquisition of 1242 are available upon request from the (ii) The application shall be filed with temporary trackage rights), in addition Office of Economics, Environmental Chief, Section of Administration, Office to the notice, the railroad must file a Analysis, and Administration, Surface Transportation Board, Washington, DC of Proceedings, Surface Transportation caption summary suitable for 20423–0001. Board, Washington, DC 20423–0001. publication in the Federal Register. The * * * * * caption summary must be in the following form: PART 1243—QUARTERLY OPERATING (6) * * * REPORTS—RAILROADS (iii) The Board’s Office of Proceedings Surface Transportation Board will provide informal opinions and Notice of Exemption ■ 76. The authority citation for part interpretations, which are not binding STB Finance Docket No. 1243 continues to read as follows: on the Board, regarding the format of or (1)—Temporary Trackage Rights—(2) Authority: 49 U.S.C. 721, 11145. information to be included in the (2)(3) to grant overhead temporary application. trackage rights to (1) between (4). The ■ 77. Revise the note to part 1243 to * * * * * temporary trackage rights will be read as follows: (g) Notice of exemption. (1) To qualify effective on (5). The authorization will Note: The report forms prescribed by part for an exemption under section expire on (6). 1243 are available upon request from the 1180.2(d), a railroad must file a verified This notice is filed under Office of Economics, Environmental notice of the transaction with the Board § 1180.2(d)(8). Petitions to revoke the Analysis, and Administration, Surface at least 30 days before the transaction is exemption under 49 U.S.C. 10502(d) Transportation Board, Washington, DC consummated indicating the proposed may be filed at any time. The filing of 20423–0001. consummation date. Before a notice is a petition to revoke will not stay the filed, the railroad shall obtain a docket transaction. PART 1245—CLASSIFICATION OF number from the Board’s Section of Dated: RAILROAD EMPLOYEES; REPORTS Administration, Office of Proceedings. By the Board. OF SERVICE AND COMPENSATION * * * * * [Insert name] ■ 78. The authority citation for part (2)(i) To qualify for an exemption Director, Office of Proceedings. under section 1180.2(d)(7) (acquisition 1245 continues to read as follows: or renewal of trackage rights PARTS 1240–1259—REPORTS Authority: 49 U.S.C. 721, 11145. agreements), in addition to the notice, ■ the railroad must file a caption ■ 71. Revise the note to parts 1240–1259 79. Revise the note to part 1245 to summary suitable for publication in the to read as follows: read as follows: Federal Register. The caption summary Note: The report forms prescribed by parts Note: The report forms prescribed by part must be in the following form: 1241–1259 are available upon request from 1245 are available upon request from the the Office of Economics, Environmental Office of Economics, Environmental Surface Transportation Board Analysis, and Administration, Surface Analysis, and Administration, Surface Notice of Exemption Transportation Board, Washington, DC Transportation Board, Washington, DC Finance Docket No. 20423–0001. 20423–0001. (1)—Trackage Rights—(2) (2) (3) to grant (4) trackage rights to (1) PART 1241—ANNUAL, SPECIAL, OR PART 1246—NUMBER OF RAILROAD between (5). The trackage rights will be PERIODIC REPORTS—CARRIERS EMPLOYEES effective on (6). SUBJECT TO PART I OF THE ■ 80. The authority citation for part This notice is filed under section INTERSTATE COMMERCE ACT 1246 continues to read as follows: 1180.2(d)(7). Petitions to revoke the ■ 72. The authority citation for part exemption under 49 U.S.C. 10502(d) Authority: 49 U.S.C. 721, 11145. 1241 continues to read as follows: may be filed at any time. The filing of ■ Authority: 49 U.S.C. 11145. 81. Amend § 1246.1 by revising the a petition to revoke will not stay the note to read as follows: transaction. ■ 73. Revise the note to part 1241 to Dated: read as follows: § 1246.1 Monthly report of number of By the Board. railroad employees. Note: The report forms prescribed by part [Insert name] 1241 are available upon request from the * * * * * Director, Office of Proceedings. Office of Economics, Environmental Note: The report forms prescribed by parts Analysis, and Administration, Surface The following key identifies the 1245 and 1246 are available upon request Transportation Board, Washington, DC from the Office of Economics, Environmental information symbolized in the 20423–0001. Analysis, and Administration, Surface summary. Transportation Board, Washington, DC (1) Name of the tenant railroad. PART 1242—SEPARATION OF 20423–0001. (2) Name of the landlord railroad. COMMON OPERATING EXPENSES (3) If an agreement has been entered BETWEEN FREIGHT SERVICE AND PART 1248—FREIGHT COMMODITY use ‘‘has agreed’’, but if an agreement PASSENGER SERVICE FOR STATISTICS has been reached but not entered use RAILROADS ‘‘will agree.’’ ■ 82. The authority citation for part (4) Indicate whether ‘‘overhead’’ or ■ 74. The authority citation for part 1248 continues to read as follows: ‘‘local’’ trackage rights are involved. 1242 continues to read as follows: Authority: 49 U.S.C. 721, 11144 and (5) Describe the trackage rights. Authority: 49 U.S.C. 721, 11142. 11145. (6) State the date the trackage rights agreement is proposed to be ■ 75. Revise the note to part 1242 to ■ 83. Revise the note to part 1248 to consummated. read as follows: read as follows:

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Note: The report forms prescribed by part ACTION: Temporary rule; modification of § 679.20(d)(1)(iii) on January 1, 2009 (74 1248 are available upon request from the closure. FR 7359, February 17, 2009). Economics, Environmental Analysis, and As of October 7, 2009, NMFS has Administration, Surface Transportation SUMMARY: NMFS is opening directed Board, Washington, DC 20423–0001. fishing for northern rockfish in the determined that approximately 4,794 Bering Sea and Aleutian Islands metric tons of northern rockfish remain Management Area (BSAI). This action is unharvested in the BSAI. Therefore, in PART 1253—RATE–MAKING necessary to fully use the 2009 total accordance with § 679.25(a)(1)(i), ORGANIZATION; RECORDS AND allowable catch (TAC) of northern (a)(2)(i)(C) and (a)(2)(iii)(D), and to fully REPORTS rockfish in the BSAI. utilize the 2009 TAC of northern rockfish in the BSAI, NMFS is ■ DATES: Effective 1200 hrs, Alaska local 84. The authority citation for part terminating the previous closure and is time (A.l.t.), October 11, 2009, through 1253 continues to read as follows: opening directed fishing for northern 1200 hrs, A.l.t., December 31, 2009. Authority: 49 U.S.C. 721, 10706, 13703, rockfish in the BSAI. This will enhance 11144, and 11145. Comments must be received at the following address no later than 4:30 the socioeconomic well-being of ■ 85. Revise the note to part 1253 to p.m., A.l.t., October 30, 2009. harvesters in this area. The Administrator, Alaska Region (Regional read as follows: ADDRESSES: Send comments to Sue Administrator) considered the following Salveson, Assistant Regional Note: The report forms prescribed by part factors in reaching this decision: (1) the Administrator, Sustainable Fisheries 1253 are available upon request from the current catch of northern rockfish in the Office of Economics, Environmental Division, Alaska Region, NMFS, Attn: BSAI and, (2) the harvest capacity and Analysis, and Administration, Surface Ellen Sebastian. You may submit stated intent on future harvesting Transportation Board, Washington, DC comments, identified by 0648–XS34, by patterns of vessels in participating in 20423–0001. any one of the following methods: this fishery. ■ 86. Amend § 1253.20 by revising • Electronic Submissions: Submit all paragraph (c) to read as follows: electronic public comments via the Classification Federal eRulemaking Portal website at § 1253.20 Other records. http://www.regulations.gov. This action responds to the best * * * * * • Mail: P.O. Box 21668, Juneau, AK available information recently obtained (c) All rate bureaus are required to: 99802. from the fishery. The Assistant (1) Advise the Board of any change in • Fax: (907) 586–7557. Administrator for Fisheries, NOAA legal address by notifying the Chief, • Hand delivery to the Federal (AA), finds good cause to waive the Section of Administration, Office of Building: 709 West 9th Street, Room requirement to provide prior notice and Proceedings; and 420A, Juneau, AK. opportunity for public comment (2) Submit information to the Board All comments received are a part of pursuant to the authority set forth at 5 when requested. the public record and will generally be U.S.C. 553(b)(B) and 679.25(c)(1)(ii) as posted to http://www.regulations.gov such requirement is impracticable and PARTS 1260–1269—VALUATION without change. All Personal Identifying contrary to the public interest. This Information (for example, name, requirement is impracticable and ■ 87. Revise the note to parts 1260— address, etc.) voluntarily submitted by contrary to the public interest as it 1269 to read as follows: the commenter may be publicly would prevent NMFS from responding accessible. Do not submit Confidential Note: The report forms prescribed by parts to the most recent fisheries data in a 1260–1269 are available upon request from Business Information or otherwise timely fashion and would delay the the Office of Economics, Environmental sensitive or protected information. opening of northern rockfish in the Analysis, and Administration, Surface NMFS will accept anonymous BSAI. NMFS was unable to publish a Transportation Board, Washington, DC comments. Enter ‘‘N/A’’ in the required notice providing time for public 20423–0001. fields, if you wish to remain comment because the most recent, anonymous. Attachments to electronic relevant data only became available as [FR Doc. E9–24674 Filed 10–14–09; 8:45 am] comments will be accepted in Microsoft of October 7, 2009. BILLING CODE 4915–01–P Word, Excel, WordPerfect, or Adobe The AA also finds good cause to portable document file (pdf) file formats waive the 30-day delay in the effective only. date of this action under 5 U.S.C. DEPARTMENT OF COMMERCE FOR FURTHER INFORMATION CONTACT: 553(d)(3). This finding is based upon Patty Britza, 907–586–7376. the reasons provided above for waiver of National Oceanic and Atmospheric SUPPLEMENTARY INFORMATION: NMFS Administration prior notice and opportunity for public manages the groundfish fishery in the comment. BSAI according to the Fishery 50 CFR Part 679 Without this inseason adjustment, Management Plan for Groundfish of the NMFS could not allow the fishery for [Docket No. 0810141351–9087–02] Bering Sea and Aleutian Islands northern rockfish in the BSAI to be Management Area (FMP) prepared by RIN 0648–XS34 harvested in an expedient manner and the North Pacific Fishery Management in accordance with the regulatory Fisheries of the Exclusive Economic Council under authority of the schedule. Under § 679.25(c)(2), Zone Off Alaska; Northern Rockfish in Magnuson-Stevens Fishery interested persons are invited to submit the Bering Sea and Aleutian Islands Conservation and Management Act. written comments on this action to the Management Area Regulations governing fishing by U.S. above address until October 26, 2009. vessels in accordance with the FMP AGENCY: National Marine Fisheries appear at subpart H of 50 CFR part 600 This action is required by § 679.20 Service (NMFS), National Oceanic and and 50 CFR part 679. and § 679.25 and is exempt from review Atmospheric Administration (NOAA), NMFS closed the directed fishery for under Executive Order 12866. Commerce. northern rockfish in the BSAI under Authority: 16 U.S.C. 1801 et seq.

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Dated: October 9, 2009. Emily H. Menashes, Acting Director, Office of Sustainable Fisheries, National Marine Fisheries Service. [FR Doc. E9–24824 Filed 10–9–09; 8:45 am] BILLING CODE 3510–22–S

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Proposed Rules Federal Register Vol. 74, No. 198

Thursday, October 15, 2009

This section of the FEDERAL REGISTER manner detailed in the SUPPLEMENTARY Requests to participate in the public contains notices to the public of the proposed INFORMATION section below. forum are due on October 9, 2009.5 issuance of rules and regulations. The Accordingly, the Commission has purpose of these notices is to give interested FOR FURTHER INFORMATION CONTACT: decided to extend the comment period persons an opportunity to participate in the Allison Brown, Division of Financial from October 9, 2009 to October 26, rule making prior to the adoption of the final Practices, Bureau of Consumer 2009. Interested parties are invited to rules. Protection, Federal Trade Commission, submit written comments electronically 600 Pennsylvania Avenue, NW, or in paper form. Comments should Washington, DC 20580, (202) 326-3224. FEDERAL TRADE COMMISSION refer to ‘‘Telemarketing Sales Rule - SUPPLEMENTARY INFORMATION: On August Debt Relief Amendments, R411001’’ to 16 CFR Part 310 19, 2009, the Commission published an facilitate the organization of comments. NPRM proposing amendments to the Please note that your comment— Telemarketing Sales Rule; Extension Telemarketing Sales Rule (16 CFR part including your name and your state— of Comment Period in the Notice of 310) to address concerns about debt will be placed on the public record of Proposed Rulemaking relief services. In that Notice, the this proceeding, including on the publicly accessible FTC Website at AGENCY: Commission solicited comment Federal Trade Commission (http://www.ftc.gov/os/ (‘‘Commission’’ or ‘‘FTC’’). regarding the proposed Rule and provided for a 60-day comment period. publiccomments.shtm). ACTION: Extension of comment period. Thus, the comment period for the Because comments will be made public, they should not include any SUMMARY: In a Federal Register NPRM would close October 9, 2009. 1 sensitive personal information, such as document announced on July 30, 2009, On September 17, 2009, U.S. any individual’s: Social Security and published in the Federal Register Congressman Dan Burton sent a letter to 2 Number; date of birth; driver’s license on August 19, 2009 (‘‘Notice), the FTC Chairman Jon D. Leibowitz number, other state identification Federal Trade Commission requested requesting a 120-day extension of the number, or foreign country equivalent; comment on its Notice of Proposed comment period, and on October 2, passport number; financial account Rulemaking (‘‘NPRM’’) in connection 2009, U.S. Congressman Pete Sessions number; or credit or debit card number. with proposed debt relief amendments and nine other Members of Congress4 Comments also should not include any to the Telemarketing Sales Rule sent a letter to Chairman Leibowitz sensitive health information, such as (‘‘TSR’’). The NPRM stated that similarly requesting a 120-day extension medical records or other individually comments must be received on or before of the comment period. In their letters, identifiable health information. In October 9, 2009. In response to a request Congressman Burton and the other addition, comments should not include to extend the comment period received Members of Congress state that the any ‘‘[t]rade secret or any commercial or on September 17, 2009, the Commission NPRM involves issues that are financial information which is obtained has determined to extend the comment important to many Members of from any person and which is privileged period until October 26, 2009. Congress, who were unable to give the orconfidential,’’ as provided in Section DATES: Written comments addressing issues proper consideration due to the 6(f) of the Federal Trade Commission the debt relief amendments to the TSR August recess and ensuing and pressing Act (‘‘FTC Act’’), 15 U.S.C. 46(f), and must be received on or before October Congressional business. They also state FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). 26, 2009. that many members of the public will be Comments containing material for ADDRESSES: Interested parties are unable to participate in the comment which confidential treatment is invited to submit written comments process given the current comment requested must be filed in paper form, electronically or in paper form. For deadline. must be clearly labeled ‘‘Confidential,’’ important information concerning the The Commission concludes that and must comply with FTC Rule 4.9(c), comments you file, please review the although an extension is warranted, an 16 CFR 4.9(c).6 SUPPLEMENTARY INFORMATION section extension of 120 days is unnecessary to Because paper mail addressed to the below. Comments in electronic form ensure that interested parties have an FTC is subject to delay due to should be filed at the following adequate opportunity to prepare and heightened security screening, please electronic address: (https:// submit comments and would cause consider submitting your comments in secure.commentworks.com/ftc- undue delay. In addition, the FTC staff electronic form. Comments filed in TSRDebtRelief) (following the is holding a public forum on November electronic form should be submitted by instructions on the web-based form). 4, 2009 to discuss the comments using the following weblink: (https:// Comments in paper form should be received on the proposed rule and allow mailed or delivered to the following 5 Additional information about the public forum members of the public to express views is available at (http://www1.ftc.gov/opa/2009/08/ address: Federal Trade Commission, about the proposed rule. The public tsrforum.shtm). Office of the Secretary, Room H-135 forum provides another opportunity to 6 The comment must be accompanied by an (Annex T), 600 Pennsylvania Avenue, provide information to the Commission. explicit request for confidential treatment, NW, Washington, DC 20580, in the including the factual and legal basis for the request, and must identify the specific portions of the 4 The other signatories are Rep. John Sullivan, comment to be withheld from the public record. 1 The Notice was announced in a press release Rep. Steve Scalise, Rep. Lynne Westmoreland, Rep. The request will be granted or denied by the on July 30, 2009, available at: (http://www.ftc.gov/ Sam Johnson, Rep. Sue Myrick, Rep. Marsha Commission’s General Counsel, consistent with opa/2009/07/tsr.shtm). Blackburn, Rep. Mike Coffman, Rep. Tom Price, and applicable law and the public interest. See FTC 2 74 FR 41988 (Aug. 19, 2009). Rep. Mary Fallin. Rule 4.9(c), 16 CFR 4.9(c).

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secure.commentworks.com/ftc- By direction of the Commission. (Annex T), 600 Pennsylvania Avenue, TSRDebtRelief) (and following the NW, Washington, DC 20580, in the Donald S. Clark, instructions on the web-based form). To manner detailed in the SUPPLEMENTARY ensure that the Commission considers Secretary. INFORMATION section below. an electronic comment, you must file it [FR Doc. E9–24730 Filed 10–14–09: 8:45 am] FOR FURTHER INFORMATION CONTACT: on the web-based form at the weblink BILLING CODE 6750–01–S Katherine Armstrong, Attorney, or (https://secure.commentworks.com/ftc- Steven Toporoff, Attorney, Division of TSRDebtRelief). If this Notice appears at Privacy and Identity Protection, Bureau FEDERAL TRADE COMMISSION (http://www.regulations.gov/search/ of Consumer Protection, Federal Trade Regs/home.html#home), you may also 16 CFR Part 610 Commission, 600 Pennsylvania Avenue, file an electronic comment through that NW., Washington, DC 20580, (202) 326- website. The Commission will consider RIN 3084-AA94 2252. all comments that regulations.gov SUPPLEMENTARY INFORMATION: Free Annual File Disclosures forwards to it. You may also visit the Amendments to Rule to Prevent I. Background FTC website at (http://www.ftc.gov) to Deceptive Marketing of Credit Reports read the Notice and the news release In this Notice, the Commission is and to Ensure Access to Free Annual describing it. proposing to amend its Free Annual File File Disclosures Disclosures Rule (‘‘Free Reports Rule’’ A comment filed in paper form 1 AGENCY: Federal Trade Commission. or ‘‘Rule’’), which went into effect in should include the ‘‘Telemarketing 2004. This Rule sets out the procedures Sales Rule - Debt Relief Amendments - ACTION: Notice of proposed rulemaking; request for comment. that nationwide consumer reporting R411001’’ reference both in the text and agencies2 (‘‘CRAs’’) and nationwide on the envelope, and should be mailed SUMMARY: Section 205 of the Credit specialty consumer reporting agencies3 or delivered to the following address: CARD Act of 2009 requires the Federal must follow to comply with section 612 Federal Trade Commission, Office of the Trade Commission (‘‘FTC’’ or of the Fair Credit Reporting Act Secretary, Room H-135 (Annex T), 600 ‘‘Commission’’) to issue a rule by (‘‘FCRA’’), which gives consumers the Pennsylvania Avenue, NW, Washington, February 22, 2010, to prevent deceptive right to obtain free annual file DC 20580. The FTC requests that any marketing of ‘‘free credit reports.’’To disclosures from the nationwide CRAs comment filed in paper form be sent by that end, the Commission proposes, and through a single centralized source. The courier or overnight service, if possible, seeks comment on, amendments to the Commission’s proposed amendments to avoid security related delays. Commission’s Free Annual File implement the Credit Card Comments on any proposed filing, Disclosures Rule, 16 CFR Part 610. The Accountability Responsibility and recordkeeping, or disclosure proposed amendments would require Disclosure Act of 2009 (‘‘Act’’),4 which requirements that are subject to certain advertisements for ‘‘free credit directs the Commission to promulgate a paperwork burden review under the reports’’ to include prominent rule within nine months requiring Paperwork Reduction Act should disclosures designed to prevent certain disclosures in the advertising for additionally be submitted to: Office of consumers from confusing these ‘‘free’’ ‘‘free credit reports’’ to reduce consumer Information and Regulatory Affairs, offers with the federally mandated free confusion. The Commission also is Office of Management and Budget annual file disclosures available through proposing a number of changes to (‘‘OMB’’), Attention: Desk Officer for the single centralized source. In address certain practices that the Federal Trade Commission. Comments addition, the Commission proposes Commission believes interfere with or should be submitted via facsimile to amendments to delay advertisements for detract from consumers’ ability to obtain (202) 395-5167 because U.S. postal mail products and services through the their free annual file disclosures, as well at the OMB is subject to delays due to centralized source until after the as certain technical corrections heightened security precautions. consumer receives his or her free annual described below. The FTC Act and other laws the file disclosure, and to prohibit other A. The Free Annual File Disclosures Commission administers permit the practices that may interfere with the free Rule file disclosure process. Finally, the collection of public comments to The Fair and Accurate Credit Commission proposes certain technical consider and use in this proceeding as Transactions Act of 2003 (‘‘FACT Act’’) amendments to the Rule. appropriate. The Commission will amended the FCRA and directed the consider all timely and responsive DATES: Comments must be received on Commission to promulgate a rule public comments that it receives, or before November 30, 2009. specifying the procedures for consumers whether filed in paper or electronic ADDRESSES: Interested parties are form. Comments received will be invited to submit written comments 116 CFR Part 610. available to the public on the FTC electronically or in paper form, by 2Section 603(p) of the FCRA defines a website, to the extent practicable, at following the instructions in the ‘‘nationwide consumer reporting agency’’ as a (http://www.ftc.gov/os/ consumer reporting agency that compiles and Request for Comments part of the maintains files on consumers on a nationwide basis. publiccomments.shtm). As a matter of SUPPLEMENTARY INFORMATION At this time, there are three nationwide consumer discretion, the Commission makes every section below. Comments in electronic reporting agencies – Equifax Inc., Experian, and effort to remove home contact form should be submitted by using the TransUnion LLC. information for individuals from the following weblink: (http:// 3Nationwide specialty consumer reporting agencies are defined in section 603(w) of the FCRA. public comments it receives before public.commentworks.com/ftc/ Specifically, section 603(w) defines ‘‘nationwide placing those comments on the FTC FreeCreditReportNPRM) (and following specialty consumer reporting agency’’ as a CRA that website. More information, including the instructions on the web-based form). compiles and maintains files on consumers on a routine uses permitted by the Privacy Comments in paper form should be nationwide basis relating to (1) medical records or payments; (2) residential or tenant history, (3) check Act, may be found in the FTC’s privacy mailed or delivered to the following writing history, (4) employment history, or (5) policy, at (http://www.ftc.gov/ftc/ address: Federal Trade Commission, insurance claims. privacy.shtm). Office of the Secretary, Room H-135 4Pub. L. 111-24, 123 Stat. 1734 (May 22, 2009).

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to obtain free annual file disclosures authorized source for free annual file In addition to law enforcement, the from nationwide CRAs and nationwide disclosures, but to commercial websites Commission has undertaken extensive specialty consumer reporting agencies.5 operated by the nationwide CRAs or education efforts to alert consumers of To carry out this directive, the others that sell a variety of products and their legal rights to obtain their free Commission promulgated the Free services. Further, when a consumer uses annual file disclosures. For example, in Reports Rule, which became effective in an Internet search engine to find the the past five years, the Commission has a structured roll-out beginning on the website for free annual file disclosures, distributed approximately 1.5 million west coast in December 2004 and the search engine will usually list copies of the Commission’s brochure ending on the east coast in September ‘‘sponsored’’ links – again, selling Your Access to Free Credit Reports, 2005.6 The purpose of the Rule was to products and services – such as which was published in both English enable consumers to detect and dispute ‘‘FreeCreditReport.com’’ first.9 and Spanish. In addition, (www.ftc.gov/ inaccurate or incomplete information in As a result of this advertising, freereports) contains materials on the the files of nationwide CRAs. consumers are often misled and Free Reports Rule and has garnered The Rule requires that the nationwide confused about where to go to obtain the more than 8.6 million hits. Most CRAs jointly establish and operate a free annual file disclosure mandated by recently, the Commission distributed centralized source from which federal law. Indeed, as discussed further educational videos through its own consumers can obtain free annual file below, the Commission has received website and at (www.youtube.com/ disclosures through a single dedicated numerous consumer complaints ftcvideos) to educate consumers about Internet website demonstrating such confusion, and AnnualCreditReport.com, the only (AnnualCreditReport.com),7 a toll-free concerns about the issue have been the federally recognized source for free telephone number, or a postal address.8 topic of numerous articles and online annual file disclosures. These videos Consumers may request and obtain their discussions.10 have been viewed or downloaded more free annual file disclosures from each The Commission has taken action to than 400,000 times. nationwide CRA at one time or stagger address these practices. For example, in C. Section 205 of the Act and Proposed their requests throughout the year. 2005, the Commission sent 29 warning Section 610.4 of the Free Reports Rule letters to operators of more than 130 B. The Advertising of ‘‘Free Credit Despite the Commission’s efforts, the Reports’’ ‘‘imposter’’ sites. That same year, the Commission filed an action against aggressive advertising for ‘‘free credit Since issuance of the Rule, there has Consumerinfo.com, Inc.,11 a marketer of reports’’ tied to the purchase of products been a proliferation of confusing ‘‘free credit reports.’’ In that action, the and services continues to confuse advertising regarding where consumers Commission alleged that consumers. To address consumer can obtain their free annual file confusion, Congress enacted section 205 Consumerinfo.com, which advertised 14 disclosures. For example, shortly after ‘‘free credit reports’’ to consumers on of the Act (‘‘section 205’’). Section 205 the Rule went into effect, imposter the Internet, through emails, and directs the Commission to promulgate a websites appeared that misspelled through television and radio rule within nine months that would AnnualCreditReport.com or used sound- advertisements, engaged in deceptive require advertisements for ‘‘free credit alike website names that did not link to acts or practices in violation of section reports’’ in any medium to include certain prominent disclosures. With the authorized AnnualCreditReport.com 5 of the FTC Act, including the failure: website. respect to television and radio to disclose or to disclose adequately In addition, the nationwide CRAs and advertisements, section 205 specifies in their advertisements or on their others have advertised ‘‘free credit the language for the required disclosure websites that the ‘‘free’’ credit reports reports’’ that are tied to the purchase of as: ‘‘This is not the free credit report they were offering were not associated products and services, such as credit provided for by Federal law.’’For with the annual free credit report scores and credit monitoring. Although television advertisements, this program pursuant to the FACT Act, some advertising predated the Rule, the disclosure must appear in both the but rather a commercial promotion, bulk of the advertising for ‘‘free credit audio and visual portion of the and that consumers cannot obtain reports’’ now takes advantage of advertisement. For all other media, their statutorily-mandated free report consumers’ general knowledge that free section 205 directs the Commission to through Defendant’s websites.12 file disclosures are available under issue a rule determining the content and Two years later, the Commission federal law. These advertisements direct placement of the disclosures.15 Finally, entered a second order with consumers not to section 205 requires the following Consumerinfo.com settling allegations interim advertising disclosure if a rule AnnualCreditReport.com, the 13 that it violated the 2005 order. is not finalized within nine months: 5Prior to the FACT Act, consumers could ‘‘Free credit reports are available under 9 purchase file disclosures from consumer reporting ‘‘FreeCreditReport.com’’ is owned and operated Federal law at: agencies, but could only receive a free file by Consumerinfo.com, Inc., an Experian company. 10 AnnualCreditReport.com.’’ disclosure under limited circumstances. For See discussion of disclosure for Internet example, section 615 of the FCRA provides that websites below at II.C.4.d of this document. The Commission proposes to add consumers denied credit or employment based 11 FTC v. Consumerinfo.com, Inc., SACV05-801 section 610.4 to this part to carry out the upon information contained in a consumer report AHS (MLGx) (C.D. Cal. Aug. 15, 2005). mandate of section 205. This proposal is may obtain a free file disclosure from the CRA that 12 Id. The settlement in this action required the intended to implement the clear provided the report. 15 U.S.C. 1681m. defendant to pay consumer redress, prohibited the Congressional directive to combat the 669 FR 35468 (June 24, 2004). The Commission defendant from making deceptive and misleading staggered implementation of the Rule across the claims about ‘‘free’’ reports, and required disclosure deceptive marketing of ‘‘free credit country to manage requests for free file disclosures. of the terms and conditions of any ‘‘free’’ offers. The reports’’ through ‘‘prominent’’ 7Most requests for file disclosures through the defendant also agreed to forgo $950,000 in ill-gotten disclosures. In enacting section 205, centralized source occur through the gains. Congress was well aware of current AnnualCreditReport.com website. 13 FTC v. Consumerinfo.com, Inc., SACV05-801 practices in this area, as well as the AnnualCreditReport.com is the only federally AHS (MLGx) (C.D. Cal., Jan. 8, 2007) (prohibiting authorized website for obtaining free annual file defendant from failing to make required disclosures disclosures. mandated by the 2005 Order and requiring 14 Pub. L. 111-24, 123 Stat. 1734 (May 22, 2009). 816 CFR 610.2(a). $300,000 payment for consumer redress). 15 Id.

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Commission’s efforts to address them in Section 610.2 of the Rule currently The Commission also proposes the the Consumerinfo.com settlements.16 As permits the nationwide CRAs to addition of a new section 610.2(h) to explained more fully below, it is clear advertise their proprietary products and prohibit a number of other practices that that Congress sought a marked and services through the centralized source. may interfere with or undermine substantial change from the status quo, When it promulgated the Rule, the consumers’ ability to obtain their free requiring more significant disclosures Commission recognized the potential for annual file disclosures. This new than any currently required or used in confusion from such advertising and provision: (1) prohibits the placement of advertisements for ‘‘free credit marketing, but chose not to restrict it.18 hyperlinks to the nationwide CRAs’ reports.’’Accordingly, the Commission Instead, to address concerns about websites that transport consumers away proposes specific prominent disclosures confusion from such advertising, the from the AnnualCreditReport.com to prevent consumer confusion and Commission restricted communications website; (2) prohibits the nationwide deceptive marketing of ‘‘free credit on the centralized source that ‘‘interfere CRAs that participate in the centralized reports.’’ Such disclosures are designed with, detract from, contradict, or source process from requiring to prevent consumer deception and otherwise undermine the purpose of the consumers to establish an account to confusion without impeding the truthful centralized source.’’19 obtain a disclosure; and (3) prohibits the advertising and marketing of products The Commission does not believe that nationwide CRAs from imposing any and services that consumers may choose the standard set forth in the Rule has ‘‘terms and conditions’’ on consumers’ to purchase. worked well. Consumers are subjected access to their file disclosures. As As described in the Section-by- to substantial amounts of advertising for above, these restrictions are designed to Section analysis below, proposed the nationwide CRAs’ proprietary address practices that interfere with a section 610.4 includes general products or services while navigating consumer’s right to obtain disclosures requirements to ensure that the required AnnualCreditReport.com to obtain their through the centralized source; they do disclosures are sufficiently prominent, free annual file disclosures. Indeed, not prevent the truthful advertising and such as requiring that all audio when consumers access the website, marketing of products and services disclosures be delivered in a slow and they encounter offers for a variety of outside of this context. deliberate manner. This section also add-on goods or services – such as includes requirements that are specific II. Section-by-Section Discussion of credit scores and credit monitoring Proposed Amendments to the Rule to each of the various media in which services – which they must purchase or advertising may occur. For Internet- decline before obtaining their free This section discusses each of the based advertisements, for example, annual file disclosures.20 proposed amendments to the Rule. The proposed section 610.4 requires that any To address this concern, the Commission seeks comment on each of advertisements for ‘‘free credit reports’’ Commission proposes to amend section these proposals. appearing on a commercial website 610.2(g) to delay any advertising or include a distinct landing page – not A. Proposed section 610.2: Operation of marketing for products or services easily bypassed and containing no the centralized source through the centralized source until distracting text – directing consumers to after consumers have obtained their free Proposed section 610.2 retains the AnnualCreditReport.com. current Rule’s general restriction on Where possible, the minimum annual file disclosures. To ensure that there is no uncertainty as to when communications or instructions that disclosure standards in the proposed interfere with, detract from, contradict, amended rule are drawn from advertising or marketing may begin, the proposed amended Rule specifies that or otherwise undermine the purpose of comparable FTC law addressing the 21 advertising or marketing may only begin the centralized source. In addition, the prominence of specific required Commission proposes to add a disclosures – in particular the Trade once consumers have obtained their file disclosures through telephone, mail, or restriction on any advertising or Regulation Rule Pursuant to the marketing for products or services, or Telephone Disclosure and Dispute Internet requests. The Commission believes that consumers are less likely any communications or instructions that Resolution Act of 1992 (‘‘Pay Per Call advertise or market any products or Rule’’).17 They also draw upon relevant to be confused or deceived if they are presented with commercial messages services, through the centralized source Commission law enforcement actions until after the consumer has obtained and business education materials. after they have obtained their disclosures. The Commission notes that his or her annual file disclosure. As D. Proposed Changes to Section 610.2 the proposed delay does not prevent discussed above, the Commission believes such a restriction is needed to In addition to adding provisions to truthful advertising or marketing after address the proliferation of distracting implement section 205, the Commission consumers obtain their free file and confusing advertising for products also proposes several changes to section disclosures. and services to which consumers are 610.2 of the Rule to address certain exposed on AnnualCreditReport.com, practices that the Commission believes 18 Id. Among other things, the Commission interfere with or detract from reasoned that the FACT Act required nationwide and to ensure that consumers easily can consumers’ ability to obtain their free CRAs to inform consumers of the availability of exercise their federal right to obtain credit scores when providing file disclosures to annual file disclosures through the their free annual file disclosures. By them and that there was a benefit to those delaying such advertising, consumers centralized source. In many respects, consumers wishing to purchase a credit score to do these proposed changes complement so at the same time that they obtain their annual can focus first on obtaining their free section 610.4 in that they would restrict file disclosures. 69 FR at 35486. annual file disclosure and can decide 1916 CFR 610.2(g)(1). afterwards whether to purchase practices that may confuse or mislead 20 consumers. Consumer complaints received by the additional products or services. Commission show that promotions selling products The proposed Rule amendments also and services confuse and frustrate consumers 16 See, e.g., 155 Cong. Rec. S6178, S6179 (June attempting to obtain their free annual file add language to clarify when consumers 4, 2009) (statement of Sen. Levin) (emphasizing the disclosures. Indeed, consumers report feeling inadequacy of current disclosures accompanying compelled to purchase these advertised products or 21 The current restriction found in section offerings for ‘‘free credit reports’’). services in order to obtain their free annual file 610.2(g)(1) will be renumbered as proposed section 1716 CFR Part 308. disclosure. 610.2(g)(2).

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have ‘‘obtained’’ an annual file do not provide the federally mandated credit report,’’ as used in this section of disclosure. Specifically, proposed free file disclosures and, indeed, may the Rule, as follows: section 610.2(g)(1)(i) provides that, for instead be selling various products or a consumer report or file disclosure telephone and written requests for services. that is prepared by or obtained, annual file disclosures, the consumer 2. Proposed section 610.2(h)(ii): directly or indirectly, from a ‘‘has obtained’’ the file disclosure when nationwide consumer reporting the file disclosure is mailed to the Prohibition on requiring the establishment of accounts agency (as defined in section 603(p) of consumer. Similarly, proposed section the [FCRA]); that is represented, 610.2(g)(1)(ii) provides that, for file Proposed section 610.2(h)(ii) prohibits either expressly or impliedly, to be disclosures requested through the requiring a consumer to establish an available to the consumer free of Internet, the consumer ‘‘has obtained’’ ‘‘account’’ as a prerequisite for obtaining charge; and that is, in any way, tied the file disclosure when it is delivered an annual file disclosure through the to the purchase of a product or to the consumer through the Internet. centralized source. The Commission service. The Commission intends this provision believes that such a practice interferes to mean that the delivery is made in a with the operation of the Rule because The proposed definition has three form that permits the consumer to store, it imposes a condition – namely, the parts. First, because the term ‘‘credit download, print, or otherwise maintain requirement that the consumer establish report’’ is undefined in section 205 of the file disclosure for future reference.22 an account – on the consumer’s ability the Act, the FCRA, or the Free Reports Proposed section 610.2(g)(2) retains the to obtain free annual file disclosures. Rule, the Commission proposes to requirement that any advertising on the Such a prerequisite is contrary to the define the term to include a ‘‘consumer centralized source shall not ‘‘interfere intent of the Rule and existing report’’ or ‘‘file disclosure’’ under the with, detract from, contradict, or Commission commentary on the FCRA. Second, the term ‘‘free credit otherwise undermine the purpose of the provision of file disclosures.23 Further, report’’ includes only those consumer centralized source.’’ because establishing an account reports or file disclosures that are represented to be free of charge. Third, B. Proposed section 610.2(h): Additional generally requires the collection of the term covers only ‘‘free credit report’’ prohibited practices personally identifiable information, this practice runs counter to the prohibition offers tied to the purchase of a product Proposed section 610.2(h) prohibits in section 610.2(b)(ii), which limits the or service. The qualifier ‘‘tied to the three additional types of conduct that collection of information to that which purchase of a product or service’’ makes the Commission believes interfere with is reasonably necessary to properly clear that providers of truly free and undermine consumers’ ability to identify the consumer and to process consumer reports – including the free obtain their free annual file disclosures the consumer’s transaction(s). file disclosures provided through the through the centralized source. centralized source – need not comply Specifically, proposed section 610.2(h) 3. Proposed section 610.2(h)(iii): with the advertising disclosure prohibits: (1) hyperlinks to commercial Prohibition on requiring terms and requirements of this section. websites from the centralized source; (2) conditions any requirement that consumers 2. Proposed section 610.4(b): The term Finally, proposed section 610.2(h)(iii) ‘‘www.AnnualCreditReport.com and establish an account in order to obtain prohibits asking or requiring consumers 877-322-8228’’ their free annual file disclosures; and (3) to agree to terms and conditions as a Proposed section 610.4(b) provides any requirement that consumers agree to prerequisite for obtaining their free that if the centralized source’s website ‘‘terms and conditions’’ in order to annual file disclosures through the (currently obtain their free annual file disclosures. centralized source. Apart from ‘‘(www.AnnualCreditReport.com) ’’) or Each of these proposed conduct providing appropriate identifying toll-free telephone number (currently prohibitions is discussed below. information, a consumer’s right to 877-322-8228) were to change, the new obtain a free annual file disclosure 1. Proposed section 610.2(h)(i): website or toll-free telephone number should be unfettered and without any Prohibition on hyperlinks to would be substituted in all disclosures restrictions or conditions. commercial websites required by this proposed section of the Proposed section 610.2(h)(i) prohibits C. Proposed Section 610.4: Prevention of Rule. hyperlinks to commercial or proprietary deceptive marketing of free credit 3. Proposed section 610.4(c): General websites on the website for the reports requirements for advertising disclosures centralized source. Currently, the Proposed section 610.4 implements landing page to Proposed section 610.4(c) implements the Act’s prominent disclosure AnnualCreditReport.com contains the Act’s mandate that the required requirements for any advertisement for hyperlinks to the websites of the three advertising disclosures for ‘‘free credit ‘‘free credit reports.’’As detailed below, nationwide CRAs. If a consumer clicks reports’’ be ‘‘prominent’’ by setting forth the proposed rule requirements specify on one of the CRA’s hyperlinks, the requirements for visual, audio, and the wording and placement of the 24 consumer is transported to that CRA’s program-length advertisements. These disclosures. commercial website, where the proposed presentation requirements are consumer is unable to obtain his or her 1. Proposed section 610.4(a): The term designed to ensure that the mandated free annual file disclosure provided by ‘‘free credit report’’ federal law. The proposed prohibition is 24These minimum disclosure standards are As a preliminary matter, proposed drawn from several Commission trade regulation intended to reduce the possibility that section 610.4(a) defines the term ‘‘free rules. See Trade Regulation Rule Pursuant to the consumers attempting to obtain their Telephone Disclosure and Dispute Resolution Act free annual file disclosures will be of 1992 (‘‘Pay Per Call Rule’’), 16 CFR Part 308; 23 See FTC Commentary on the Fair Credit Door-to-Door Sales Rule, 16 CFR Part 429; transferred to commercial websites that Reporting Act, 16 CFR 600 Appendix, comment Franchise Rule, 16 CFR Part 436; Business 610-2 (‘‘A consumer reporting agency may not add Opportunity Rule, 16 CFR Part 437; and Regulations 22 Cf. Franchise Rule, 16 CFR 436.6(b) (addressing conditions not set out in the FCRA as a prerequisite under the Fair Packaging and Labeling Act, 16 CFR disclosures in an online environment). to the required disclosure.’’). Part 500.

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disclosures can be readily understood c. Proposed section 610.4(c)(3): Audio inconsistent information, or other by consumers. disclosures actions that undermine the disclosures to consumers. a. Proposed section 610.4(c)(1): Proposed section 610.4(c)(3) requires Language usage that audio disclosures for ‘‘free credit 4. Proposed section 610.4(d): Media- reports’’ be delivered in a slow and Proposed section 610.4(c)(1) requires specific advertising disclosures deliberate manner and in a reasonably that any advertising disclosure Proposed section 610.4(d) understandable volume. This provision mandated by this section be provided in incorporates the statutory requirements is identical to section 308.3(a)(4) of the the same language as that principally Pay Per Call Rule and is necessary to relating to prominence in specific used in the advertisement. This ensure that audio disclosures can be media. The proposed wording and proposal draws from identical language heard and understood by consumers.28 presentation of required advertising in section 308.3(a)(1) of the Pay Per Call disclosures for each type of media are Rule.25 The Commission believes that a d. Proposed section 610.4(c)(4): described below. disclosure in a language different from Program-length advertisements a. Proposed section 610.4(d)(1): that which is principally used in an Proposed section 610.4(c)(4) requires advertisement would be deceptive. Disclosures for television that any program-length television, advertisements b. Proposed section 610.4(c)(2): Visual radio, or Internet-hosted multi-media As mandated by section 205 of the disclosures advertisement for ‘‘free credit reports’’ provide the required disclosures at the Act, proposed section 610.4(d)(1) of the Proposed section 610.4(c)(2) requires beginning, near the middle, and at the amended Rule requires that all that a visual disclosure be: (1) of a color end of the advertisement. This provision advertisements for ‘‘free credit reports’’ or shade that readily contrasts with the is identical to section 308.3(a)(6) of the broadcast on television include the background of the advertisement; (2) in Pay Per Call Rule.29 It is designed to following disclosure: ‘‘This is not the a font that is easy to read; and (3) enable consumers tuning in to the free credit report provided for by parallel to the base of the advertisement. program-length advertisement at Federal law.’’ These proposed requirements draw from different stages of the broadcast to Proposed section 610.4(d)(1) also comparable provisions in the Pay Per receive the required disclosure. requires that the disclosure appear Call Rule. Specifically, section simultaneously in the audio and visual 308.3(a)(2) of the Pay Per Call Rule e. Proposed section 610.4(c)(5): parts of the advertisement, be at least provides that television, video, and Inconsistent and contrary information four (4) percent of the vertical picture print advertising disclosures be of a Proposed section 610.4(c)(5) prohibits height, and appear for a minimum of color or shade that readily contrasts anything ‘‘contrary to, inconsistent four seconds. This proposal is with the background of the with, or in mitigation of, the required consistent with the Act, which advertisement. The Commission disclosure’’ in any advertisement in any specifically requires that all television believes that a contrast between the medium. This section also prohibits any advertising disclosures be provided disclosure and the background on audio, visual, or print technique that is simultaneously in the audio and visual which it appears is fundamental to likely to detract significantly from the parts of the advertisement.31 In ensure readability.26 In addition, the communication of any required addition, the proposed requirement that font used for the disclosures should be disclosure. This provision is identical to the visual disclosure be at least four (4) easily readable. For example, if the section 308.3(a)(5) of the Pay Per Call percent of the vertical picture height required disclosure were sufficiently Rule,30 and is designed to prevent and appear on the screen for four large, but in an old English text font, the circumvention of the Rule requirements seconds is consistent with comparable disclosure would not be easily readable. through the conveyance of contrary or Federal Election Commission Finally, section 308.3(3) of the Pay Per requirements for the disclosure of the Call Rule requires that the disclosures in advertisement); Regulation under Section 4 of the funding source of a political print advertisements be parallel with Fair Packaging and Labeling Act, 16 CFR 500.4 advertisement on television.32 the base of the advertisement. The (requiring statement of identity for packaged goods Commission has found that visual to appear ‘‘in lines generally parallel to the base on b. Proposed section 610.4(d)(2): disclosures that are parallel to the base which the packaging or commodity rests as it is Disclosures for radio advertisements of the advertisement are more noticeable designed to be displayed’’). 28 See, e.g., In re Kmart Corp ., C-4197 (2007) Proposed section 610.4(d)(2) requires 27 to consumers. (requiring audio disclosures to be made ‘‘in a that all advertisements for ‘‘free credit volume and cadence sufficient for an ordinary reports’’ broadcast on radio include the 25 See also 16 CFR 429.1(a) (requiring disclosure consumer to hear and comprehend it’’); In re following disclosure: ‘‘This is not the of right to cancel door-to-door sales ‘‘in the same Darden Restaurants, Inc., C-4189 (2007) (same); In language, e.g., Spanish, as that principally used in re Palm, Inc., C-4044 (2002) (same); Dot Com free credit report provided for by the oral sales presentation’’). Disclosures at 14 (Audio disclosures should be ‘‘in 26 See, e.g., In re Tender Corp., C-4261 (2009); In a volume and cadence sufficient for a reasonable 31 See generally Maria Grubbs Hoy and J. Craig re Budget Rent-A-Car System, Inc., C-4212 (2008) consumer to hear and understand it.’’). Andrews, Adherence of Prime-Time Televised (requiring disclosures to appear in ‘‘print that 29 Cf. In re Synchronal Corp., 116 FTC 1189 Advertising Disclosures to the ‘‘Clear and contrasts with the background against which it (1993) (requiring video or commercial Conspicuous’’ Standard: 1990 Versus 2002, 23 J. appears’’); see also Federal Trade Commission advertisements 15 minutes or longer to disclose that Mktg. Pub. Pol. 170 (2004) (citing numerous studies Guidance, Dot Com Disclosures: Information about program is a paid advertisement within the first 30 demonstrating that disclosures made in ‘‘dual Online Advertising, at 12, available at (http:// seconds and immediately before presentation of modality’’ – audio and video simultaneously – are www.ftc.gov/bcp/edu/pubs/business/ecommerce/ ordering instructions). more effective at communicating information to bus41.pdf) (‘‘Dot Com Disclosures’’) (‘‘A disclosure 30 Cf. Franchise Rule, 16 CFR 436.9(a) and consumers); see also In re Kraft, Inc., 114 F.T.C. 40 in a color that contrasts with the background Business Opportunity Rule, 16 CFR 437.1(a)(21) (1991), aff’d, 970 F.2d 311 (7 th Cir. 1992) (in which emphasizes the text of the disclosure and makes it (prohibiting the making of any claim or the Commission noted that ‘‘given the distracting more noticeable. Information in a color that blends representation, orally or visually, or in writing, that visual and audio elements and the brief appearance in with the background of the advertisement is contradicts the information required to be disclosed of complex superscript in the middle of the likely to be missed.’’) by the Rule); Guides for Environmental Marketing commercial,’’ it was unlikely that a visual 27 See, e.g., In re Swisher Int’l, Inc., C-3964 (2000) Claims, 16 CFR 260.6(a) (noting that an absence of disclosure alone would be effective as a corrective (requiring warnings on cigar advertisements to contrary claims will help make disclosures clear measure). appear ‘‘parallel . . . to the base of the and prominent). 32 See 11 CFR 110.11(c)(3)(iii)(B).

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Federal law.’’This section incorporates call 877-322-8228.’’Proposed section Second, the Act gives the Commission the Act’s specific required disclosure 610.4(d)(4) also requires that the landing discretion to determine the timing, language for radio advertisements. page contain no other information aside placement, and format of Internet from the statement: ‘‘Go to [hyperlink to disclosures, subject to the overarching c. Proposed section 610.4(d)(3): company’s website.]’’Further, this goal that the disclosures be prominent. Disclosures for print advertisements proposed disclosure must: (1) be visible Specifically, section 205 of the Act Proposed section 610.4(d)(3) requires to consumers without requiring them to directs the Commission to promulgate a that all advertisements for ‘‘free credit scroll down the web page; (2) contain an rule ‘‘for advertisements on the Internet reports’’ in print include the following operational hyperlink directing [that] shall include whether the disclosure: ‘‘This is not the free credit consumers to disclosure . . . shall appear on the report provided for by Federal law. To (www.AnnualCreditReport.com) that advertisement or the website on which get your free report, visit appears before the hyperlink to the the free credit report is made available.’’ (www.AnnualCreditReport.com) or call advertised company’s commercial Consistent with case law construing 877-322-8228.’’Proposed section website; and (3) be in a type at least similar uses of the word ‘‘or,’’ as well as 610.4(d)(3) further requires that each twice the size as the hyperlink to the the Act’s clear purpose, the Commission letter of the disclosure be, at a company’s website or display of the believes that the word ‘‘or’’ indicates minimum, one half the size of the larger company’s Uniform Resource Locator. alternatives and requires that of the largest letter or numeral used in Finally, the proposed Rule provides that alternatives be considered separately, the name of the website or the telephone the landing page must occupy the full thus allowing the Commission number to which consumers are referred screen and that no other information, maximum flexibility to select the most to receive what is advertised as a free graphics, or material may be shown to effective option.35 In this case, the credit report. the consumer unless and until the Commission believes that a separate Section 205 of the Act does not consumer has affirmatively selected one disclosure on the website where specify the wording of the advertising of the two hyperlinks, described above. consumers go to obtain advertised ‘‘free disclosure required in print The Commission believes that this credit reports’’ is likely to be the most advertisements; rather, it only requires proposal implements the clear purpose effective way to ensure prominence and that the disclosure be ‘‘prominent’’ and and language of the Act. First, the Act prevent consumer confusion. authorizes the Commission to determine specifies that the disclosures be the appropriate wording of the ‘‘prominent.’’In specifying this Indeed, the Commission notes that advertising disclosure through this language, Congress was aware of the some Internet advertising, such as pop- rulemaking. The Commission’s proposal prolific and confusing advertising with up screens and banner ads, are size- adopts the wording for the disclosure respect to ‘‘free credit reports,’’ as well restricted. In light of such restrictions, it for television and radio advertisements, as the disclosures currently being used would be difficult to design a disclosure but also adds language directing to distinguish such offers from the free in this context that would satisfy the 36 consumers to AnnualCreditReport.com annual file disclosures mandated by statutory ‘‘prominence’’ requirement. or the toll free number where they can federal law.33 Thus, its use of the word Further, based on its experience in obtain their free annual file disclosures ‘‘prominent’’ must be viewed as an designing disclosures, the Commission provided by law. The Commission expression of intent that the new has found that certain disclosures are believes that this additional language disclosures be more noticeable and most effective when given at the will assist consumers in obtaining their more effective than those currently moment that a consumer is making a free annual file disclosures, consistent required or used in advertising for ‘‘free decision regarding a product or with the purpose of the Act. credit reports.’’To fulfill this statutory The proposed type size requirement mandate, the Commission proposes that Cir. 1949) (upholding Commission order that in this section – a minimum of one-half company selling shortened versions of books the disclosure be on a separate landing disclose that its publications are abridged ‘‘in the size of the larger of the largest letter page and in a prominent type size with immediate connection with the title and in clear, or numeral used in the name of the little additional text; these format conspicuous type’’). website or the telephone number to requirements are designed to ensure that 35 See Azure v. Morton, 514 F.2d 897, 900 (9 th which consumers are referred to obtain consumers see the disclosure and are Cir. 1975) (‘‘As a general rule, the use of a disjunctive in a statute indicates alternatives and their ‘‘free credit report’’ – is identical 34 not distracted by competing messages. requires that they be treated separately.’’); see also to section 308.3(b)(v)(2)(i) of the Pay Per Garcia v. United States, 469 U.S. 70, 73 (1984) Call Rule. Tying the type size of the 33 See 155 Cong. Rec. S6178, S6179 (June 4, 2009) (‘‘Cannons of construction indicate that terms proposed disclosure to that of the (statement of Sen. Levin) (‘‘[Section 205] will not connected in the disjunctive . . . be given separate website or telephone number promoting achieve its purpose unless the mandated disclosure meanings.’’); Reiter v. Sonotone Corp., 442 U.S. 330, is made in a clear, prominent, and effective manner, 339 (1979); FCC v. Pacifica Foundation, 438 U.S. the ‘‘free credit report’’ ensures that the a standard that disclosures in many current 726, 739-740 (1978). See also 155 Cong. Rec. at disclosure is ‘‘prominent’’ and increases promotions do not achieve. The cleverly S6179 (statement of Sen. Levin)(‘‘Section the likelihood that the required deemphasized disclosure currently on 205(b)(2)(B) . . .is intended to allow the FTC to disclosure will be effectively FreeCreditReport.com, for example, would not be require disclosures on an internet ad, on the sufficient.’’); see also Robert N. Mayer and Tyler website to which the ad is linked, on the ‘home’ communicated to consumers. Barrick, Univ. of Utah, ‘‘Web Sites Offering ‘Free’ website of the company advertising ‘free’ credit d. Proposed section 610.4(d)(4): Credit Reports’’ (Apr. 26, 2007), available at (http:// reports, or on any combination of the three.’’). www.consumerwebwatch.org/pdfs/creditsites.pdf) 36Indeed, Congress expressed concern not only Disclosures for Internet websites (‘‘[C]onsumers using the alternative sites because of with deceptive advertising that directs consumers Proposed section 610.4(d)(4) requires confusion about annualcreditreport.com and its to contact commercial websites that are unaffiliated alternatives may end up paying needlessly for with AnnualCreditReport.com, but with the that any website on which ‘‘free credit something they are entitled by law to receive for inadequate disclaimers and disclosures that are reports’’ are offered for sale must first free.’’). buried in fine print or appear in places where most display on a separate landing page the 34Commission precedent establishes that consumers will not see them. See 155 Cong. Rec. following visual disclosure: ‘‘This is not disclosures in fine print or buried in dense blocks at S6179 (statement of Sen. Levin) (‘‘[B]uried in the of text are not prominent. The mandate that small print it is revealed that customers that request the free credit report provided for by disclosures be ‘‘clear and conspicuous’’ or ‘‘clear a free credit report must also opt out of a credit Federal law. To get your free report, and prominent’’ dates back more than 60 years. See, monitoring service or else they will be charged $15 visit (www.AnnualCreditReport.com) or e.g., Hillman Periodicals v. FTC, 174 F.2d 122 (2d a month, indefinitely.’’).

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service.37 Here, the proposed disclosure proposes a disclosure on the landing appearing in the advertisement. The would occur at the moment that a page to ensure that the disclosure is Commission believes that tying the size consumer is seeking to exercise his prominent and that consumers view it at of the disclosure to the size of the federal right to obtain his free annual the most relevant time – when they seek company’s web address or telephone disclosure online – a critical time to to exercise their federal right to obtain numbers will ensure that the disclosures prevent deception and the possible free annual file disclosures online. As are more readily noticed and purchase of unwanted goods and noted above, however, nothing in this understood by consumers. services.38 proposal is intended to prevent the f. Proposed section 610.4(d)(6): Third, the proposed requirement for truthful advertising and marketing of Disclosures for telephone requests Internet advertising is consistent with products and services that consumers the Act’s specific mandates for may choose to purchase. Proposed section 610.4(d)(6) requires television advertising. As noted above, that when consumers call any telephone while the Act provides the Commission e. Proposed section 610.4(d)(5): number appearing in any advertisement with discretion for many forms of Disclosures for Internet-hosted multi- for free credit reports other than the advertising, it contains specific media advertising number of the centralized source, mandates for television advertising to Proposed section 610.4(d)(5) requires consumers must first receive the ensure that such advertising be that all Internet-hosted multi-media following audio disclosure: ‘‘You have sufficiently prominent. Specifically, advertisements for ‘‘free credit reports’’ reached [name of company or service]. with respect to television, the Act states disseminated in both audio and visual This is not the source for the free credit that the disclosures must appear in both format include the following disclosure: report provided for by Federal law. To the audio and visual portions of the ‘‘This is not the free credit report get your free credit report, call 877-322- advertisement. This approach reflects provided by Federal law. To get your 8228 or visit the well-established principle of free report, visit (www.AnnualCreditReport.com).’’ The marketing communication that dual- (www.AnnualCreditReport.com) or call Commission believes that the Act’s modality disclosures ‘‘have been found 877-322-8228.’’This section further broad mandate to require advertising to achieve much higher levels of requires that the disclosure appear disclosure ‘‘for any advertisement for a message recall than single-modality simultaneously in the audio and visual free credit report in any medium’’ disclosures.’’39 Similarly, required part of the advertisement and that the includes inbound telemarketing.42 To disclosures for Internet advertisements visual disclosure be in a type at least the prevent confusion, the Commission should reflect the same clarity, same size as the largest hyperlink to the believes that consumers calling prominence, and unavoidability that are company’s website, display of the telephone numbers advertised in the the hallmarks of the form of disclosure Uniform Resource Locator of the marketing of ‘‘free credit reports’’ must Congress mandated for television company’s website, or display of the be informed that they have reached a advertisements.40 company’s telephone number appearing telephone number that is not related to Overall, the Commission believes that in the advertisement. the federally-recognized source of free requiring a clear and unavoidable This proposed section is intended to reports. Finally, to satisfy the standard disclosure is a necessary step in the address innovative forms of advertising of prominence, the Commission believes evolution of efforts to combat pervasive for ‘‘free credit reports’’ in multi-media that this disclosure should be made at and confusing marketing of free credit platforms, such as smart phone the outset of the call. The proposed reports. As discussed above, the applications, youtube.com, and requirements are drawn from the Commission has combated such comparable visual and audio Commission’s Telemarketing Sales Rule confusion through warning letters to mechanisms. The Commission believes which, among other things, prohibits companies, increased consumer that, as with the disclosure for telemarketers from failing to disclose outreach, and law enforcement. Despite television advertising, the required that the purpose of the call is to sell these efforts, a robust industry selling disclosures for Internet-hosted multi- goods or services and the nature of the ‘‘free credit reports’’ tied to the purchase media advertising must appear goods or services.43 of products and services continues simultaneously in the audio and visual unabated. Indeed, the Commission part of the advertisement. g. Proposed section 610.4(d)(7): continues to receive consumer Further, to be prominent, the visual Telemarketing solicitations complaints demonstrating ongoing disclosure must be in a type at least the Section 610.4(d)(7) requires that any confusion in the ‘‘free credit report’’ same size as the largest hyperlink to the telemarketing call made to a consumer marketplace.41 The Commission thus company’s website, display of the that offers a ‘‘free credit report’’ include, company’s web address, or display of at the first mention of ‘‘free credit 37 See Dot Com Disclosures at 11 (disclosures are the company’s telephone number report,’’ the following disclosure: ‘‘This more likely to be effective if they are provided is not the source for the free credit when the consumer is considering the purchase). discussions. See, e.g. Robert N. Mayer and Tyler 38 See generally FTC v. TALX Corp., Civ. No. report provided by Federal law. To get Barrick, Univ. of Utah, ‘‘Web Sites Offering ‘Free’ your free credit report, call 877-322- 4:09-cv-01071 (E.D. Mo. 2009) (requiring ‘‘clear and Credit Reports’’ (Apr. 26, 2007), available at (http:// prominent’’ disclosures on the principal website www.consumerwebwatch.org/pdfs/creditsites.pdf) 8228 or visit screen or landing page where the disclosures are (‘‘Consumers unaware of their right to obtain free (www.AnnualCreditReport.com.) ’’As most relevant). credit reports from annualcreditreport.com may buy noted above, the Commission believes 39Michael B. Mazis and Louis A. Morris, Channel, expensive services from other sites, believing they that the Act’s broad mandate to cover in Warnings and Risk Communication, 106 are getting a credit report for free.’’); Byron (Michael S. Wogalter, et al., eds., 1999) (citations Acochido and Jon Swartz, ‘‘Free’’ credit reports omitted). sometimes aren’t free; And it’s not easy to figure out 42 Cf. Telemarketing Sales Rule, 16 CFR 310.2(bb) 40 See Dot Com Disclosures (noting that general which score to use’’ USA Today, Nov. 28, 2007, (defining a telemarketer as ‘‘any person who, in advertising law principles apply regardless of the available at (http://www.usatoday.com/money/ connection with telemarketing, initiates or receives medium used). perfi/credit/2007-11-27-credit-scores_N.htm) telephone calls to or from a customer’’); 16 CFR 41The confusion and frustration consumers (‘‘Consumers are also getting tricked into paying for 310.2(cc) (defining telemarketing as a ‘‘plan, experience when trying to exercise their federal basic credit reports before obtaining the ones they program, or campaign which is conducted to induce right to obtain a free annual file disclosure has also can get free, as mandated by the federal government the purchase of goods or services’’). been the subject of numerous articles and online in 2003.’’). 4316 CFR 310.3.

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‘‘any advertisement for a free credit alternative definitions the Commission Because paper mail addressed to the report in any medium’’ includes should consider. FTC is subject to delay due to telemarketing solicitations. ∑ Whether the Commission’s proposal heightened security screening, please for Internet-hosted multi-media consider submitting your comments in D. Elimination of Obsolete ‘‘Roll-out’’ advertising is sufficient to ensure that electronic form. Comments filed in Provisions of the Current Rule the Rule would continue to cover electronic form should be submitted by Finally, the Commission proposes to advertising for ‘‘free credit reports’’ in using the following weblink: (http:// eliminate from the current Rule the the evolving technology marketplace. public.commentworks.com/ftc/ ‘‘roll-out’’ provisions contained in ∑ When the amendments to the Free FreeCreditReportNPRM) (and following sections 610.2(i) and 610.3(g). When the Reports Rule should go into effect, in the instructions on the web-based form). Commission promulgated the current light of the requirement for interim To ensure that the Commission Rule, it provided for a structured ‘‘roll- advertising disclosures in section 205 of considers an electronic comment, you out’’ of the availability of free file the Act? Are there particular sections of must file it on the web-based form at the disclosures, beginning in the western the proposed Rule amendments that weblink (http:// states on December 1, 2004, and require more time for covered entities to public.commentworks.com/ftc/ concluding with eastern states on comply with the proposed Rule’s FreeCreditReportNPRM). If this September 1, 2005. This provision of the requirements? document appears at (http:// ∑ current Rule is now obsolete and Ways to minimize any burdens www.regulations.gov/search/Regs/ retaining it in the amended Rule would imposed by the proposed Rule, while home.html#home), you may also file an serve no useful purpose. Accordingly, also ensuring that consumers have electronic comment through that the proposed amended Rule would unfettered access to their free file website. The Commission will consider delete sections 610.2(i) and 610.3(g) of disclosures. all comments that regulations.gov the current Rule.44 Interested parties are invited to forwards to it. You may also visit the submit written comments electronically FTC Website at (http://www.ftc.gov) to III. Request for Comments or in paper form. Comments should read the document and the news release The Commission invites comment on refer to ‘‘Free Annual File Disclosures, describing it. all aspects of the proposed amendments Rule No. R411005’’ to facilitate the A comment filed in paper form to the Free Reports Rule and on the organization of comments. Please note should include the ‘‘Free Annual File specific issues on which comment is that your comment – including your Disclosures Rulemaking, Rule No. solicited elsewhere in this document: name and your state – will be placed on R411005’’ reference both in the text and ∑ The extent to which the advertising the public record of this proceeding, on the envelope, and should be mailed or marketing of credit products and including on the publicly accessible or delivered to the following address: services through the centralized source FTC website, at (http://www.ftc.gov/os/ Federal Trade Commission, Office of the interferes with or undermines publiccomments.shtm). Secretary, Room H-135 (Annex T), 600 Because comments will be made consumers’ ability to obtain their free Pennsylvania Avenue, NW, Washington, public, they should not include any annual file disclosures, and whether the DC 20580. The FTC is requesting that sensitive personal information, such as proposed limitation on advertising any comment filed in paper form be sent any individual’s Social Security would address this concern. by courier or overnight service, if number; date of birth; driver’s license ∑ Whether the Commission should possible, because U.S. postal mail in the number or other state identification adopt a ban on all advertising through Washington area and at the Commission number, or foreign country equivalent; is subject to delay due to heightened the centralized source, and what the passport number; financial account benefits and costs of such a ban would security precautions. number; or credit or debit card number. Comments on any proposed filing, be. Comments also should not include any ∑ Are there effective methods other recordkeeping, or disclosure sensitive health information, such as requirements that are subject to than those proposed by the Commission medical records or other individually to reduce confusing and deceptive paperwork burden review under the identifiable health information. In Paperwork Reduction Act should advertising regarding ‘‘free credit addition, comments should not include reports’’? How do the costs and benefits additionally be submitted to: Office of any ‘‘[t]rade secret or any commercial or Information and Regulatory Affairs, of these methods compare with those financial information which is obtained proposed by the Commission? Office of Management and Budget ∑ from any person and which is privileged (‘‘OMB’’), Attention: Desk Officer for Whether there are additional or confidential. . . ,’’ as provided in examples of communications or Federal Trade Commission. Comments Section 6(f) of the Federal Trade should be submitted via facsimile to instructions that may ‘‘interfere with, Commission Act (‘‘FTC Act’’), 15 U.S.C. (202) 395-5167 because U.S. postal mail detract from, contradict, or otherwise 46(f), and FTC Rule 4.10(a)(2), 16 CFR at the OMB is subject to delay due to undermine the purpose of the 4.10(a)(2). Comments containing heightened security precautions. centralized source’’ that the material for which confidential The FTC Act and other laws the Commission should consider adding to treatment is requested must be filed in Commission administers permit the the list of examples in proposed section paper form, must be clearly labeled collection of public comments to 610.2(g)(3). ‘‘Confidential,’’ and must comply with ∑ consider and use in this proceeding as Whether the proposed definitions of FTC Rule 4.9(c), 16 CFR 4.9(c).45 appropriate. The Commission will ‘‘free credit report’’ and consider all timely and responsive ‘‘(www.AnnualCreditReport.com) and 45The comment must be accompanied by an public comments that it receives, 877-322-8228’’ are complete and explicit request for confidential treatment, whether filed in paper or electronic accurate, and whether there are including the factual and legal basis for the request, and must identify the specific portions of the form. Comments received will be comment to be withheld from the public record. available to the public on the FTC 44 In addition to the proposed revisions and The request will be granted or denied by the website, to the extent practicable, at additions discussed above, proposed section Commission’s General Counsel, consistent with 610.2(b)(2)(iv)(D) removes an erroneous reference to applicable law and the public interest. See FTC (http://www.ftc.gov/os/ ‘‘national credit reporting agencies.’’ Rule 4.9(c), 16 CFR 4.9(c). publiccomments.shtm). As a matter of

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discretion, the Commission makes every In addition, proposed section 610.4 A. Description of the Reasons That effort to remove home contact sets forth prohibitions and disclosures Action by the Agency Is Being information for individuals from the concerning the advertising or marketing Considered public comments it receives before of ‘‘free credit reports’’ tied to the The Commission proposes, and seeks placing those comments on the FTC purchase of other goods or services, comment on, amendments to the Free Website. More information, including such as credit scores or credit Reports Rule to implement section 205 routine uses permitted by the Privacy monitoring services, pursuant to section of the Act, which mandates that Act may be found in the FTC’s privacy 205 of the Act. The Commission advertisements offering ‘‘free credit policy, at (http://www.ftc.gov/ftc/ believes that the universe of entities reports’’ contain prominent prescribed privacy.shtm). offering ‘‘free credit reports’’ is likely to disclosures informing consumers that IV. Communications by Outside Parties be small, comprised mostly of the three federally mandated free file disclosures to the Commissioners or Their Advisors nationwide CRAs and their subsidiaries are available at and affiliates. Further, staff estimates, Written communications and AnnualCreditReport.com. Further, the summaries or transcripts of oral based upon its knowledge of industry Free Reports Rule requires, among other communications respecting the merits practices and members, that there may things, a centralized source through of this proceeding from any outside also be a small number of which consumers may request a free party to any Commissioner or independently operating credit annual file disclosure from each Commissioner’s advisor will be placed reporting agencies or resellers of nationwide CRA. Through this Notice, on the public record.46 consumer reports that, in theory, might the Commission proposes, and seeks offer ‘‘free credit reports’’ subject to the comment on, amendments to the Rule V. Regulatory Flexibility Act Rule. For example, when the Rule was that would eliminate practices that The Regulatory Flexibility Act of 1980 first implemented, several resellers of interfere with consumers’ ability to (‘‘RFA’’)47 requires the Commission to reports appeared, using imposter obtain free annual file disclosures provide an Initial Regulatory Flexibility websites, such as those misspelling through the centralized source, in Analysis (‘‘IRFA’’) with a proposed rule, AnnualCreditReport.com, or using violation of section 610.2(g) of the and a Final Regulatory Flexibility sound-alike websites names that did not current Rule. Analysis (‘‘FRFA’’) with a final rule, link to AnnualCreditReport.com. In B. Statement of the Objectives of, and unless the Commission certifies that the 2005, the Commission staff sent warning Legal Basis for, the Proposed Rule rule will have no significant economic letters to the known operators of those Amendments impact on a substantial number of small suspect sites, totaling 29 operators. entities.48 While this suggests that the total The proposed amendments to the Free The Commission anticipates that the number of independent resellers of Reports Rule implement section 205 of proposed Rule amendments will have reports may be small, Commission staff the Act, which directs the Commission no significant economic impact on a does not know the exact number of any to prevent deceptive advertising of ‘‘free substantial number of small entities. As such independent reporting agencies or credit reports.’’In addition, the noted above, proposed section 610.2 how many of those independent Commission seeks to eliminate practices will amend the Rule to limit advertising agencies, if any, might be small that interfere with consumers’ ability to through the centralized source and businesses.50 Nonetheless, Commission obtain file disclosures through the prohibit other conduct in connection staff believes that the number of small centralized source, in violation of with the provision of annual file entities offering ‘‘free credit reports’’ is section 610.2(g) of the current Rule. disclosures to consumers. By its terms, likely to be insubstantial. The overall C. Small Entities to Which the Proposed amended section 610.2 will apply economic impact of the proposed rule Rule Amendments Will Apply exclusively to the nationwide CRAs that amendments set forth at section 610.4 is currently operate and maintain the not likely to have a significant impact As noted above, the proposed Rule centralized source pursuant to section on a substantial number of small amendments set forth in section 610.2 612(a) of the FCRA, 15 U.S.C. 1681j(a). entities. will apply to the nationwide CRAs that None of the three nationwide CRAs is a are required to provide free annual file small entity.49 Accordingly, this document serves as disclosures through the centralized notice to the Small Business source pursuant to section 612(a) of the 46 See 16 CFR 1.26(b)(5). Administration of the Commission’s FCRA, 15 U.S.C. 1681j(a). The 475 U.S.C. 601-612. certification of no economic impact. Commission has not identified any 485 U.S.C. 603-605. Nonetheless, the Commission has nationwide CRA that is a small entity. 49Covered entities under the proposed amended determined to prepare the following The proposed amendments to the Rule Rule will be classified as small businesses if they analysis: satisfy the Small Business Administration’s relevant set forth in proposed section 610.4 size standards, as determined by the Small Business pertaining to the advertising of free Size Standards component of the North American covered by the proposed Free Reports Rule. The credit reports pursuant to section 205 of Industry Classification System (‘‘NAICS’’). The Commission received no comments responsive to the Act will apply to the nationwide closest NAICS size standard relevant to this those questions. 69 FR at 35495. rulemaking is for ‘‘credit bureaus,’’ which is $7 50A Consumer Reports WebWatch study of 24 CRAs and their subsidiaries, as well as million maximum in annual receipts. See (http:// websites offering ‘‘free’’ credit reports found that 18 independent resellers of annual file www.sba.gov/idc/groups/public/documents/ were owned by or were closely associated with one disclosures. Commission staff believes, sba_homepage/serv_sstd_tablepdf.pdf). of the three major CRAs – Experian, Equifax, and based upon its knowledge of the See also 69 FR 35468, at 35494-495 (June 24, TransUnion. The remaining six sellers of free credit 2004) (‘‘[T]he Commission is aware of three entities reports may be independently operating consumer industry and its members, that few, if that meet the rule definition . . . of a ‘nationwide reporting agencies. See Robert N. Mayer and Tyler any, of these entities are likely to be consumer reporting agency.’ The Commission has Barrick, Univ. Of Utah, ‘‘Web Sites Offering ‘Free’ small. Nonetheless, the Commission concluded that none of these is a small entity.’’). In Credit Reports’’ (Apr. 26, 2007), available at (http:// specifically requests additional the original Notice of Proposed Rulemaking for the www.consumerwebwatch.org/pdfs/creditsites.pdf) Free Reports Rule, the Commission specifically (concluding that the marketing of ‘‘free’’ credit comment on the number of entities asked several questions related to the existence, reports is concentrated in the hands of the three likely to be affected by the proposed number and nature of small business entities major CRAs). section 610.4 to the Rule and the

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number of those, if any, that are small such entities, the Commission will standardized form that may be used to entities. consider the feasibility of such comply with that requirement. alternatives and determine whether they D. Projected Reporting, Recordkeeping, should be incorporated into any B. Proposed Section 610.4 and Other Compliance Requirements amended final rule. Proposed section 610.4 would require The amendments proposed in section all advertisements for ‘‘free credit 610.4 would set forth statutorily- VI. Paperwork Reduction Act reports’’ to contain certain prescribed mandated advertising disclosures for The Commission is submitting this disclosures tailored to the medium offering of ‘‘free credit reports’’ in proposed amended Rule and a used. As such, these disclosures do not television and radio advertisements, as Supporting Statement for Information well as other media, including print and constitute a ‘‘collection of information,’’ Collection Provisions to the Office of as defined by OMB’s regulations that Internet advertising. These proposed Management and Budget (‘‘OMB’’) for 51 amendments to the Rule impose no implement the PRA. Accordingly, review under the Paperwork Reduction implementation of section 205 of the reporting or recordkeeping obligations. Act (‘‘PRA’’), 44 U.S.C. 3501-3521. In The amendments proposed in section Act presents no associated PRA this Notice, the Commission proposes to collection of information burden. 610.2 would limit advertising on the amend the Free Reports Rule to centralized source until after consumers implement section 205 of the Act C. Proposed Amended Section 610.2 have obtained their free annual file Specifically, the amendments would The proposed amendments to section disclosures, as well as prohibit practices require any entity engaged in the 610.2 of the Rule are designed to that interfere with consumers’ ability to marketing of ‘‘free credit reports’’ to prevent interference with consumers’ obtain free annual file disclosures include in its advertisements prescribed ability to obtain their free annual file through the centralized source. As disclosures appropriate for the medium disclosures through the centralized discussed more fully below in in which the advertisements appear. In source, as permitted by law. The connection with the Paperwork addition, the Commission proposes to proposed amendments will not modify Reduction Act, Commission staff amend the Rule to eliminate the nationwide CRAs’ current obligation estimates that these proposed unnecessary interference with to provide consumers with free annual amendments to the Rule will impose no consumers’ ability to obtain their annual file disclosures upon request. Nor are more than a de minimis, one-time file disclosures from the centralized the proposed amendments to section burden of 12 hours to be completed by source. professional technical personnel and/or 610.2 likely to increase or decrease the management personnel. The Commission invites comments estimated number of annual file that will enable it to: (1) evaluate disclosures made available to E. Duplicative, Overlapping, or whether the proposed collections of consumers, whether through the Conflicting Federal Rules information are necessary for the proper Internet, telephone, or mail. Rather, the The Commission has not identified performance of the functions of the amendments are intended to make it any other federal statutes, rules, or Commission, including whether the easier for consumers to obtain their free policies that would duplicate, overlap, information will serve a useful purpose; annual file disclosures from the or conflict with the proposed rule (2) evaluate the accuracy of the centralized source without distracting amendments. The Commission invites Commission’s estimate of the burden of advertising, including advertising comment on this issue. the proposed collection of information, leading consumers to commercial including the validity of the websites. F. Significant Alternatives to the methodology and assumptions used; (3) Proposed Rule Amendments enhance the quality, utility, and clarity Moreover, the proposed amendments As previously noted, the proposed of the information to be collected; and to section 610.2 are unlikely to increase amendments to the Rule will affect only (4) minimize the burden of the significantly the administrative burden nationwide CRAs and their subsidiaries, collections of information on those who on the nationwide CRAs providing as well as independent resellers of must comply, including through the use consumers with annual file disclosures credit reports. The Commission is of appropriate automated, electronic, through the centralized source. As unaware of any nationwide CRAs or mechanical, or other technological discussed above, the proposed independent resellers of credit reports techniques, or other forms of amendments to section 610.2 would that are small entities and therefore it information technology. require the nationwide CRAs to remove does not include any special links on the centralized source to their A. Current Rule and Associated PRA exemptions, delayed compliance dates, commercial or proprietary websites. Burden or other regulatory alternatives Finally, if a nationwide CRA chooses to specifically to reduce burdens on such The current Rule requires nationwide advertise products and services – such entities. Nonetheless, the Commission CRAs and nationwide specialty CRAs to as credit scores or credit monitoring – seeks additional comment regarding: (1) disclose information to third parties by through the centralized source, it can do the existence of small entities for which requiring those consumer reporting so only after the consumer has obtained the proposed rule amendments would agencies to provide to consumers, upon his or her free annual file disclosure. have a significant economic impact; and request, one free annual file disclosure. Accordingly, in order to advertise (2) suggested alternatives that would It also requires the nationwide CRAs to through the centralized source, the reduce the economic impact of the provide consumers with the ability to nationwide CRAs must establish a proposed rule amendments on such request this disclosure through a mechanism to verify that consumers small entities. If the comments filed in centralized Internet website, a toll-free have completed their transaction. response to this document identify any telephone number, and a postal address. small entities that would be In addition, the current Rule requires 51 See 5 CFR 1320.3(c)(2) (excluding from the definition of ‘‘collection of information’’ the significantly affected by the proposed the nationwide CRAs to establish a ‘‘public disclosure of information originally rule amendments, as well as alternatives standardized form for Internet and mail supplied by the Federal government to the recipient that would reduce compliance costs on requests, and it provides a model for the purpose of disclosure to the public’’).

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1. Estimated Hours Burden and supply such file disclosures, nor affect necessary to properly identify the Associated Labor Cost the overall number of file disclosures consumer as required under the Fair Commission staff believes that the provided to consumers annually, Credit Reporting Act, section 610(a)(1), above-noted proposed administrative because consumers will likely be 15 U.S.C. 1681h(a)(1), and other amendments to section 610.2 will redirected from websites that require applicable laws and regulations, and to impose no more than a de minimis, one- consumers to pay for their ‘‘free credit process the transaction(s) requested by time burden, as the three nationwide report’’ to the centralized source. the consumer; (iii) Provides information through the CRAs reconfigure the centralized source Proposed Rule centralized source website and and their own proprietary websites. telephone number regarding how to Commission staff estimates that these List of Subjects in 16 CFR Part 610 make a request by all request methods steps will take approximately 12 hours Fair Credit Reporting Act, Consumer required under § 610.2(b)(1) of this part; to complete per CRA.52 reports, Consumer reporting agencies, Commission staff estimates labor costs and Credit, Trade practices. (iv) Provides clear and easily by applying appropriate estimated understandable information and hourly cost figures to the burden hours Authority and Issuance instructions to consumers, including, (12) described above. It is difficult to For the reasons discussed in the but not necessarily limited to: preamble, the Federal Trade calculate with precision the labor costs (A) Providing information on the association with the proposed Rule Commission proposes to amend title 16, progress of the consumer’s request amendments, because they entail Chapter I, Subchapter F, of the Code of while the consumer is engaged in the varying compensation levels of Federal Regulations, part 610, as process of requesting a file disclosure; management (e.g., administrative follows: (B) For a website request method, services, computer and information providing access to a ‘‘help’’ or systems, systems analysts, and network 1. The authority citation for part 610 is revised to read as follows: ‘‘frequently asked questions’’ screen, and computer system administrators). which includes specific information FTC staff assumes that professional Authority: 15 U.S.C. 1681a, g, and h; sec. that consumers might reasonably need technical personnel and/or management 211(a) and (d), Pub. L. 108-159, 117 Stat. to request file disclosures, the answers personnel will implement the 1968 and 1972 (15 U.S.C. 1681j). Pub. L. 111- 24. to questions that consumers might amendments, at an hourly rate of reasonably ask, and instructions $39.42.53 2. Revise § 610.2 to read as follows: whereby a consumer may file a Based upon the above estimates and § 610.2 Centralized source for requesting complaint with the centralized source assumptions, the total labor cost for and with the Federal Trade each of the three nationwide CRAs to annual file disclosures from nationwide consumer reporting agencies. Commission; comply with the proposed amendments (C) In the event that a consumer × (a) Purpose. The purpose of the to the Rule is $473.00 (12 hours requesting a file disclosure through the $39.42) or, cumulatively, $1,419. centralized source is to enable consumers to make a single request to centralized source cannot be properly 2. Estimated Capital/Other Non-Labor obtain annual file disclosures from all identified in accordance with the Fair Cost Burden nationwide consumer reporting Credit Reporting Act, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and other Commission staff believes that the agencies, as required under section applicable laws and regulations, proposed Rule amendments will not 612(a) of the Fair Credit Reporting Act, providing a statement that the impose any capital or other non-labor 15 U.S.C. 1681j(a). consumers’ identity cannot be verified; costs. Commission staff assumes that the (b) Establishment and operation. All and directions on how to complete the nationwide CRAs will continue their nationwide consumer reporting agencies request, including what additional current practice of using third-party shall jointly design, fund, implement, information or documentation will be contractors (instead of their own maintain, and operate a centralized required to complete the request, and employees) to fulfill consumer requests source for the purpose described in how to submit such information; and for annual file disclosures, pursuant to paragraph (a) of this section. The centralized source required by this part (D) A statement indicating that the the Rule. Because of the way these consumer has reached the website or contracts are typically established, these shall: (1) Enable consumers to request telephone number for ordering free costs will likely be incurred on a annual credit reports as required by continuing basis, and will be calculated annual file disclosures by any of the following request methods, at the federal law; and based on the number of annual file (3) Make available to consumers a disclosures requested by consumers. As consumers’ option: (i) A single, dedicated Internet standardized form established jointly by discussed above, Commission staff the nationwide consumer reporting believes that the proposed amendments, website, (ii) A single, dedicated toll-free agencies, which consumers may use to while making it easier for consumers to telephone number; and make a request for an annual file obtain their free annual file disclosures (iii) Mail directed to a single address; disclosure, either by mail or on the from the centralized source, will not (2) Be designed, funded, Internet website required under increase the burden on industry to implemented, maintained, and operated § 610.2(b)(1) of this part, from the in a manner that: centralized source required by this part. 52 This figure derives from consultation with FTC (i) Has adequate capacity to accept The form provided at 16 CFR Part 698, staff experienced in web design and operations. 53This estimate is based on mean hourly wages requests from the reasonably anticipated Appendix D, may be used to comply found at (http://www.bls.gov/ncs/ volume of consumers contacting the with this section. ncswage2008.htm#Wage_Tables) (National centralized source through each request (c) Requirement to anticipate. The Compensation Survey: Occupational Earnings in method, as determined in accordance nationwide consumer reporting agencies the United States 2008, US Department of Labor released August 2009, Bulletin 2720, Table 3) for with paragraph (c) of this section; shall implement reasonable procedures the various managerial and technical staff support (ii) Collects only as much personally to anticipate, and to respond to, the exemplified above. identifiable information as is reasonably volume of consumers who will contact

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the centralized source through each agency, that nationwide consumer (4) To update personally identifiable request method, to request, or attempt to reporting agency shall, upon proper information already maintained by the request, a file disclosure, including identification in compliance with nationwide consumer reporting agency developing and implementing section 610(a)(1) of the Fair Credit for the purpose of providing consumer contingency plans to address Reporting Act, 15 U.S.C. 1681h(a)(1), reports, provided that the nationwide circumstances that are reasonably likely provide an annual file disclosure to consumer reporting agency uses and to occur and that may materially and such consumer if the consumer makes a discloses the updated personally adversely impact the operation of the request through the centralized source. identifiable information subject to the nationwide consumer reporting agency, (e) High request volume and same restrictions that would apply, a centralized source request method, or extraordinary request volume – (1) High under any applicable provision of law the centralized source. request volume. Provided that a or regulation, to the information (1) The contingency plans required by nationwide consumer reporting agency updated or replaced. this section shall include reasonable has implemented reasonable procedures (g) Communications provided through measures to minimize the impact of developed in accordance with centralized source. such circumstances on the operation of paragraph (c) of this section, entitled (1) Any advertising or marketing for the centralized source and on ‘‘requirement to anticipate,’’ the products or services, or any consumers contacting, or attempting to nationwide consumer reporting agency communications or instructions that contact, the centralized source. shall not be deemed in violation of advertise or market any products or (i) Such reasonable measures to paragraph (b)(2)(i) of this section for any services, through the centralized source minimize impact shall include, but are period of time in which a centralized must be delayed until after the not necessarily limited to: source request method, the centralized consumer has obtained his or her (A) The extent reasonably practicable source, or the nationwide consumer annual file disclosure. under the circumstances, providing reporting agency experiences high (i) In the case of requests made by information to consumers on how to use request volume, if the nationwide mail or telephone, the consumer ‘‘has another available request method; consumer reporting agency: obtained his or her annual file (B) The extent reasonably practicable (i) Collects all consumer request disclosure’’ when the file disclosure is under the circumstances, information and delays accepting the mailed, and a nationwide consumer communicating, to a consumer who request for processing until a reasonable reporting agency may include attempts but is unable to make a later time; and advertising for other products or request, the fact that a condition exists (ii) Clearly and prominently informs services with the file disclosure. that has precluded the centralized the consumer of when the request will (ii) In the case of requests made source from accepting all requests, and be accepted for processing. through the centralized source Internet the period of time after which the (2) Extraordinary request volume. website, the consumer ‘‘has obtained his centralized source is reasonably Provided that the nationwide consumer or her annual file disclosure’’ when the anticipated to be able to accept the reporting agency has implemented file disclosure is delivered to the consumers’ request for an annual file reasonable procedures developed in consumer through the Internet, and the disclosure; and compliance with paragraph (c) of this nationwide consumer reporting agency (C) Taking all reasonable steps to section, entitled ‘‘requirement to that provided the disclosure may then restore the centralized source to normal anticipate,’’ the nationwide consumer advertise other products or services. operating status as quickly as reasonably reporting agency shall not be deemed in (2) Any communications, practicable under the circumstances. violation of paragraph (b)(2)(i) of this instructions, or permitted advertising or (ii) Reasonable measures to minimize section for any period of time during marketing shall not interfere with, impact may also include, as appropriate, which a particular centralized source detract from, contradict, or otherwise collecting request information but request method, the centralized source, undermine the purpose of the declining to accept the request for or the nationwide consumer reporting centralized source stated in paragraph processing until a reasonable later time, agency experiences extraordinary (a) of this section. provided that the consumer is clearly request volume. (3) Examples of interfering, detracting, and prominently informed, to the extent (f) Information use and disclosure. inconsistent, and/or undermining reasonably practicable under the Any personally identifiable information communications include: circumstances, of when the request will collected from consumers as a result of (i) Centralized source materials that be accepted for processing. a request for annual file disclosure, or represent, expressly or by implication, (2) A nationwide consumer reporting other disclosure required by the Fair that a consumer must purchase a paid agency shall not be deemed in violation Credit Reporting Act, made through the product or service in order to receive or of § 610.2(b)(2)(i) of this part if a centralized source, may be used or to understand the annual file disclosure; centralized source request method is disclosed by the centralized source or a (ii) Centralized source materials that unavailable to accept requests for a nationwide consumer reporting agency represent, expressly or by implication, reasonable period of time for purposes only: that annual file disclosures are not free, of conducting maintenance on the (1) To provide the annual file or that obtaining an annual file request method, provided that the other disclosure or other disclosure required disclosure will have a negative impact required request methods remain under the FCRA requested by the on the consumers’ credit standing; and available during such time. consumer; (iii) Centralized source materials that (d) Disclosures required. If a (2) To process a transaction requested falsely represent, expressly or by nationwide consumer reporting agency by the consumer at the same time as a implication, that a product or service has the ability to provide a consumer request for annual file disclosure or offered ancillary to receipt of a file report to a third party relating to a other disclosure; disclosure, such as a credit score or consumer, regardless of whether the (3) To comply with applicable legal credit monitoring service, is free, or fail consumer report is owned by that requirements, including those imposed to clearly and prominently disclose that nationwide consumer reporting agency by the Fair Credit Reporting Act and consumers must cancel a service, or by an associated consumer reporting this part; and advertised as free for an initial period of

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time, to avoid being charged, if such is disclosures shall be used in any website or display of the Uniform the case. advertisement in any medium; nor shall Resource Locator of the company’s (h) Other practices prohibited through any audio, visual, or print technique be website. the centralized source. The centralized used that is likely to detract (iii) The landing page must occupy source shall not: significantly from the communication of the full screen and no other information, (1) Contain hyperlinks to commercial any disclosure. or proprietary websites on the website (d) Medium-specific advertising graphics, or material may be shown to for the centralized source. disclosures. All advertisements that the consumer unless and until the (2) Ask or require consumers to set up include offers of free credit reports shall consumer has affirmatively selected one an account as a prerequisite for include the disclosures required by this of the two hyperlinks described in obtaining an annual file disclosure; or section. paragraph (d)(4)(ii) of this section. (3) Ask or require consumers to agree (1) Television advertisements. All (5) Internet-hosted multi-media to terms and conditions as a prerequisite advertisements for free credit reports advertising. All advertisements for free for obtaining an annual file disclosure. broadcast on television shall include the credit reports disseminated through 3. In § 610.3, remove paragraph (g). following disclosure: ‘‘This is not the Internet-hosted multi-media in both 4. Add § 610.4 to read as follows: free credit report provided for by audio and visual format shall include Federal law.’’ The disclosure shall § 610.4 Prevention of deceptive marketing the following disclosure: ‘‘This is not of free credit reports appear simultaneously in the audio and the free credit report provided for by visual part of the advertisement. The (a) Free credit report. For purposes of Federal law. To get your free report, visual disclosure shall be at least 4 visit www.AnnualCreditReport.com or this section, ‘‘free credit report’’ means percent of the vertical picture height, call 877-322-8228.’’ The disclosure shall a consumer report or file disclosure that and appear for a minimum of four appear simultaneously in the audio and is prepared by or obtained, directly or seconds. indirectly, from a nationwide consumer (2) Radio advertisements. All visual part of the advertisement. The reporting agency (as defined in section advertisements for free credit reports visual disclosure shall be in type at least 603(p) of the Fair Credit Reporting Act); broadcast on radio shall include the the same size as the largest hyperlink to that is represented, either expressly or following disclosure: ‘‘This is not the the company’s website, the Uniform impliedly, to be available to the free credit report provided for by Resource Locator of the company’s consumer free of charge; and that is, in Federal law.’’ website, or the company’s telephone any way, tied to the purchase of a (3) Print advertisements. All print number appearing in the advertisement. product or service. advertisements for free credit reports (6) Telephone requests. When (b) www.AnnualCreditReport.com and shall include the following disclosure: 877-322-8228. The disclosures consumers call any telephone number, ‘‘This is not the free credit report other than the number of the centralized mandated by this section use the provided for by Federal law. To get your Uniform Resource Locator address source, appearing in an advertisement free report, visit that represents free credit reports are ‘‘www.AnnualCreditReport.com’’ and www.AnnualCreditReport.com or call available at the number, consumers toll-free telephone number, 877-322- 877-322-8228.’’ Each letter of the must first receive the following audio 8228. These are the locator address and disclosure shall be, at minimum, one- toll-free telephone number currently half the size of the largest letter or disclosure: ‘‘You have reached [name of used by the centralized source. If the numeral used in the name of the website company or service]. This is not the locator address or toll-free telephone or the telephone number to which source for the free credit report number changes in the future, the new consumers are referred to receive what provided for by Federal law. To get your address or telephone number shall be is advertised as a free credit report. free credit report, call 877-322-8228 or substituted. (4) Internet websites. visit www.AnnualCreditReport.com.’’ (c) General requirements for (i) Any website offering free credit (7) Telemarketing solicitations. When advertising disclosures. The disclosures reports must first display a separate telemarketing sales calls are made that covered by paragraph (d) of this section landing page to consumers before the include offers of free credit reports, the shall comply with the following consumer may obtain the report from call must include at the first mention of requirements: that website. a credit report thefollowing disclosure: (1) All disclosures shall be made in (ii) The landing page must display the ‘‘This is not the source for the free credit the same language as that principally following visual disclosure: ‘‘This is not used in the advertisement; the free credit report provided for by report provided by Federal law. To get (2) Visual disclosures shall be of a Federal law. To get your free report, your free credit report, call 877-322- color or shade that readily contrasts visit www.AnnualCreditReport.com or 8228 or visit with the background of the call 877-322-8228.’’ The landing page www.AnnualCreditReport.com.’’ advertisement, in a font easily read by may contain no other information aside By direction of the Commission. a reasonable consumer, and be parallel from the statement: ‘‘Go to [hyperlink to Donald S. Clark, to the base of the advertisement; company’s website.]’’ The required Secretary. (3) Audio disclosures shall be disclosure must: delivered in a slow and deliberate (A) Be visible to consumers without [FR Doc. E9–24729 Filed 10–14–09: 10:06 am] manner and in a reasonably requiring them to scroll down the understandable volume; webpage; BILLING CODE 6750–01–S (4) Program-length television, radio, (B) Include an operational hyperlink or Internet-hosted multi-media that will direct consumers exclusively advertisement disclosures shall be made to www.AnnualCreditReport.com that at the beginning, near the middle, and appears before the hyperlink to the at the end of the advertisement; and company’s website; and (5) Nothing contrary to, inconsistent (C) Appear in type at least twice the with, or in mitigation of, the required size as any hyperlink to the company’s

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DEPARTMENT OF HOMELAND personal information provided. For I. Excise Taxation Under the Internal SECURITY detailed instructions on submitting Revenue Code of 1986 comments and additional information The Internal Revenue Code (IRC) of DEPARTMENT OF THE TREASURY on the rulemaking process, see the 1986, as amended (IRC), codified as title ‘‘Public Participation’’ heading of the 26 of the United States Code (26 U.S.C.), Bureau of Customs and Border SUPPLEMENTARY INFORMATION section of is the main body of domestic statutory Protection this document. tax law of the United States and includes, inter alia, laws covering 19 CFR Parts 113 and 191 Docket: For access to the docket to read background documents or Federal excise taxes. Federal excise [USCBP–2009–0021] comments received, go to http:// taxes are imposed on the manufacture RIN 1505–AC18 www.regulations.gov. Submitted and distribution of certain non-essential comments may also be inspected during consumer goods, such as distilled Drawback of Internal Revenue Excise regular business days between the hours spirits, wines, beer, tobacco products, Tax of 9 a.m. and 4:30 p.m. at the Trade and imported taxable fuel and petroleum Commercial Regulations Branch, products. AGENCY: Customs and Border Protection, Regulations and Rulings, Office of Department of Homeland Security; Distilled Spirits, Wines, and Beer: International Trade, U.S. Customs and Department of the Treasury. Imposition of Federal Excise Tax and Border Protection, 799 9th Street, NW., Exemptions ACTION: Notice of proposed rulemaking. 5th Floor, Washington, DC Chapter 51 of the IRC sets forth excise SUMMARY: This document proposes to Arrangements to inspect submitted comments should be made in advance tax collection and related provisions amend title 19 of the Code of Federal applicable to distilled spirits, wines, Regulations to preclude situations by calling Joseph Clark at (202) 325– 0118. and beer. In general, this chapter where imported merchandise subject to provides that a Federal excise tax is Federal excise tax is allowed into the FOR FURTHER INFORMATION CONTACT: imposed on all wines, distilled spirits, United States, in effect, 99 percent free William Rosoff, Entry Process and Duty and beer produced in or imported into of that tax through application of a Refunds, Regulations and Rulings, the United States. 26 U.S.C. 5041, 5001, drawback claim. Specifically, the Office of International Trade, (202) 325– and 5051. proposed amendments would preclude 0047. Statutory exceptions to the imposition the filing of a substitution drawback of Federal excise tax exist; for example, claim for internal revenue excise tax SUPPLEMENTARY INFORMATION: domestically produced wine, distilled paid on imported merchandise in Public Participation spirits, and beer are exempt from the tax situations where no excise tax was paid if removed from bonded premises for upon the substituted merchandise or Interested persons are invited to export. 26 U.S.C. 5362(c), 5214(a), 5053. where the substituted merchandise is participate in this rulemaking by In addition, upon the exportation of the subject of a different claim for submitting written data, views, or domestically-produced wine, distilled refund or drawback of tax under any arguments on all aspects of the spirits, or beer removed from bonded provision of the Internal Revenue Code. proposed rule. Customs and Border premises with payment of tax, drawback This document also proposes to amend Protection (CBP) also invites comments is allowed in an amount equal to the tax title 19 by adding a basic importation that relate to the economic, paid. 26 U.S.C. 5062, 5055. and entry bond condition to foster environmental, or federalism effects that compliance with the amended drawback Tobacco: Imposition of Federal Excise might result from this proposed rule. If Tax and Exemptions provision. These proposed amendments appropriate to a specific comment, the are necessary to protect the revenue by commenter should reference the specific Under Chapter 52, a Federal excise clarifying the relationship between portion of the proposed rule, explain the tax is imposed on all tobacco products drawback claims and Federal excise tax reason for any recommended change, and cigarette papers and tubes liability. and include data, information, or manufactured in or imported into the DATES: Comments must be received on authority that support such United States. 26 U.S.C. 5701. The tax or before November 16, 2009. recommended change. on domestically-produced tobacco ADDRESSES: You may submit comments, products and cigarette papers and tubes identified by USCBP docket number, by Background is imposed at the time that the product comes into existence, that is, when a one of the following methods: This document proposes amendments • Federal eRulemaking Portal: http:// product meets one of the definitions to title 19 of the Code of Federal www.regulations.gov. Follow the under the IRC. The Federal excise tax on Regulations (19 CFR) that would instructions for submitting comments imported and domestically-produced preclude the filing of a substitution via docket number USCBP–2009–0021. tobacco products and cigarette papers drawback claim for internal revenue • Mail: Trade and Commercial and tubes is generally not paid or Regulations Branch, Regulations and excise tax paid on imported determined until the products are Rulings, Office of International Trade, merchandise in situations where no released from customs custody or U.S. Customs and Border Protection, excise tax was paid upon the substituted removed from bonded premises. 26 799 9th Street, NW. (Mint Annex), merchandise or where the substituted U.S.C. 5702, 5703. Tobacco products Washington, DC 20229–1179. merchandise is the subject of a different and cigarette papers and tubes may be Instructions: All submissions received claim for refund or drawback of excise removed from bonded premises, must include the agency name and tax under any provision of the Internal without the payment of Federal excise USCBP docket number for this proposed Revenue Code. tax, for export. 26 U.S.C. 5704. In rulemaking. All comments received will The statutory and regulatory addition, upon exportation of tobacco be posted without change to http:// framework giving rise to this situation is products and cigarette papers and tubes www.regulations.gov, including any explained below. upon which the tax has been paid,

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drawback of the tax paid is allowed. 26 Substitution Drawback (19 U.S.C. Federal excise tax on the imported U.S.C. 5706. 1313(j)(2)) wine. Other Excise Taxes Section 313(j)(2) (19 U.S.C. Diverse Commodities Potentially 1313(j)(2)), hereafter referred to in this Impacted Chapter 32 of the IRC imposes various document as ‘‘(j)(2) substitution In addition to the claims processed by manufacturers excise taxes, including drawback,’’ is a type of drawback that taxes on gasoline, diesel fuel, and CBP involving (j)(2) substitution permits other merchandise to be drawback on wine, given the present kerosene (taxable fuel). The tax on substituted for the imported imported taxable fuel is imposed on statutory and regulatory structure merchandise for purposes of satisfying within which these claims are entry into the United States for the exportation or destruction consumption, use, or warehousing. If administered, other products that are requirement. Specifically, 19 U.S.C. subject to excise tax under the IRC may taxable fuel is exported, the IRC 1313(j)(2) provides for the payment of provides that the tax paid on the fuel also be the subject of such drawback drawback, not to exceed 99 percent of claims where the excise taxes on the may be refunded to the taxpayer or an the duties, taxes, and fees paid on the amount equal to the tax paid on the fuel good have been refunded, remitted, or imported merchandise, based on the not paid (e.g., distilled spirits and beer may be paid to the person exporting the exportation or destruction of ‘‘any other fuel. Chapter 38 of the IRC also imposes (IRC chapters 51 and 52; 26 U.S.C. 5001; merchandise (whether imported or 5051); tobacco products and cigarette various environmental taxes, including domestic)’’ that is: (1) Commercially a tax on petroleum products entered papers and tubes (IRC chapter 52; 26 interchangeable with the imported U.S.C. 5701); imported taxable fuel (IRC into the United States for consumption, merchandise on which duties, taxes, use, or warehousing. chapter 32; 26 U.S.C. 4081); petroleum and fees were paid; (2) exported or products (IRC chapter 38; 26 U.S.C. Implementing Excise Tax Regulations destroyed within 3 years of the date of 4611)). importation of the imported Regulations implementing the merchandise; and (3) not used within Congressional Intent provisions of chapters 51 and 52 of the the United States before such The allowance of (j)(2) substitution IRC are contained in chapter 1 of title exportation or destruction and is in the drawback claims in circumstances in 27 of the CFR (27 CFR chapter 1). The possession of the party claiming which internal revenue taxes have not Alcohol and Tobacco Tax and Trade drawback. been paid on the substituted domestic Bureau (TTB) within the Department of product is incompatible with Congress’ the Treasury is responsible for the Implementing CBP Drawback intent to levy excise taxes under the IRC administration of chapter 51 and the Regulations and circumvents the intended regulations promulgated thereunder. Regulations implementing 19 U.S.C. administration of drawback under the Regulations implementing the 1313 are set forth in part 191 of title 19 comprehensive framework of section provisions of chapters 32 and 38 are of the Code of Federal Regulations (19 313. contained in title 26 of the CFR and are CFR part 191). Within part 191, subpart As part of Congress’ extensive review administered by the Internal Revenue C sets forth the regulations pertaining to of the drawback statute, effected by the Service. unused merchandise drawback and Customs Modernization and Informed II. Drawback Under the Tariff Act of includes, in § 191.32, standards Compliance Act (Mod Act), Public Law 1930 applicable to (j)(2) drawback claims. No. 103–182, 632, 107 Stat. 2057 (1993) (enacted as Title VI of the North Section 313 of the Tariff Act of 1930, III. Reasons for Regulatory Change American Free Trade Agreement as amended, (19 U.S.C. 1313), concerns Integrity of Federal Excise Tax System Implementation Act), a provision was drawback and refunds. Drawback is a at Risk added to section 313(v) that provides refund of certain duties, taxes and fees that, ‘‘[m]erchandise that is exported or paid by the importer of record and In recent years, CBP has received and destroyed to satisfy any claim for granted to a drawback claimant upon approved a number of (j)(2) substitution drawback shall not be the basis of any the exportation, or destruction under drawback claims involving imported other claim for drawback; except that CBP supervision, of eligible articles bottled and bulk wine and domestically- appropriate credit and deductions for under specified conditions. The purpose produced wine. A hypothetical example claims covering components or of drawback is to place U.S. exporters of this type of transaction follows: ingredients of such merchandise shall on equal footing with foreign A domestic winery imports 100 cases of be made in computing drawback competitors by refunding most of the bottled wine, pays Federal excise tax on the payments.’’ Based on the foregoing duties paid on imports used in domestic wine, and sells the imported wine in the statutory prohibition against multiple manufactures intended for export. United States. The domestic winery then exports 100 cases of its domestic wine drawback claims, 19 U.S.C. 1313(v) There are several types of drawback. without payment of Federal excise tax. The precludes the use of merchandise on Within section 313, paragraph (j) domestic winery files a (j)(2) drawback claim which there has been a remission of provides for ‘‘unused merchandise with CBP on the basis that the 100 cases of duties, taxes, and fees from being used drawback,’’ which is intended to permit domestically-produced wine are to claim drawback of duties, taxes, and drawback to be claimed on imported commercially interchangeable with the 100 fees paid on other merchandise upon its merchandise on which was paid any cases of imported wine. The domestic winery exportation or destruction. duty, tax, or fee imposed under Federal receives a refund of 99 percent of the Federal The legislative history of this law upon entry or importation if such excise taxes that it paid on the 100 cases of provision indicates that Congress did merchandise was exported or was imported wine. not intend to allow multiple drawback destroyed under CBP supervision, and In the above hypothetical, imported claims on the exportation or destruction was not used within the United States wine is introduced into the U.S. market, of goods. As noted in the House Report before such exportation or destruction, in effect, free of 99 percent of Federal accompanying the legislation, section within the 3-years from the date of excise tax. As a result, the U.S. Treasury 632(a)(7) provides that under the importation. ultimately receives only 1 percent of the amended statute, ‘‘only one drawback

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claim per exportation or destruction of value or improved in condition by any raise novel policy concerns. The Office goods would be allowed.’’ H.R. Rep. No. process of manufacture or other means of Management and Budget has not 103–361(l), at 130, reprinted in 1993 while abroad. U.S. note 1(b) was reviewed this regulatory evaluation United States Code Congressional and structured to ensure collection of the tax under that Order. Administrative News (U.S.C.C.A.N.) by stating that the provisions of the Regarding the impact of the proposed 2552, 2680. subchapter (with certain exceptions not rule on small entities as required by the In the context of amending 19 U.S.C. relevant here) do not apply to any Regulatory Flexibility Act (5 U.S.C. 1313 as part of the Mod Act, Congress article ‘‘[o]f a kind with respect to the 604), as amended by the Small Business also added language to subsection (u) of importation of which an internal- Regulatory Enforcement and Fairness section 313 which restricted eligibility revenue tax is imposed at the time such Act of 1996, a small entity may be a for drawback to imported merchandise article is entered, unless such article small business (defined as any that had been regularly entered or was subject to an internal-revenue tax independently owned and operated withdrawn for consumption. This imposed upon production or business not dominant in its field that limiting language was added, as importation at the time of its qualifies as a small business per the described in the legislative history, exportation from the United States and Small Business Act); a small not-for- because it codified ‘‘current Customs it shall be proved that such tax was paid profit organization; or a small practice against piggybacking other duty before exportation and was not governmental jurisdiction (locality with exemption benefits (foreign-trade zones, refunded.’’ The net effect of U.S. note fewer than 50,000 people). bonded warehouses and duty-free 1(b) to subchapter I of chapter 98, As stated above, these changes are temporary importation) onto the HTSUS, is to ensure that internal intended to preclude the filing of (j)(2) drawback benefits.’’ H.R. Rep. No. 103– revenue tax is imposed on merchandise substitution drawback claims in 361(I) at 130, reprinted in 1993 that is entered for consumption in the circumstances in which internal U.S.C.C.A.N. at 2680. The addition of United States. Section 10.3 of title 19 of revenue taxes have not been paid on the this limiting language ensured that the CFR (19 CFR 10.3) implements the substituted domestic product, or where companies could not claim drawback on provisions of U.S. note 1(b) to that merchandise is subject to a different the ‘‘importation’’ of goods which had subchapter I of chapter 98, HTSUS. The claim for refund or drawback of IRC never actually been entered for amendments proposed in this document taxes. The proposed amendments still consumption in the United States, but would similarly ensure that internal allow for the return of 99 percent of the rather had been physically located in a revenue taxes will be paid in cases duties, taxes, and fees paid on the foreign trade zone and then exported involving (j)(2) substitution drawback. imported merchandise upon export, or without the payment of duties. The when IRC taxes have been paid on ability to obtain substitution drawback Explanation of Proposed Amendments substituted domestic product and the under 19 U.S.C. 1313(j)(2), thus For the reasons outlined above, this substituted merchandise is not the introducing imported wine into the U.S. document proposes to amend § 191.32 subject of a separate claim for refund or market nearly free of Federal excise tax, of title 19 of the CFR (19 CFR 191.32) drawback of such taxes. is an example of ‘‘piggybacking’’ a by adding a new paragraph (b)(4) to To the extent that small entities have previously existing Federal excise tax preclude drawback of internal revenue filed (j)(2) substitution drawback claims exemption benefit (exporting tax imposed under the IRC in that would no longer be permitted, this domestically-produced wine without connection with a (j)(2) substitution regulation, if finalized as proposed, payment of excise tax) onto the drawback claim if no excise tax was could have an economic impact on a drawback benefits. paid on the substituted exported substantial number of small entities. The IRC is quite specific regarding the merchandise or if that merchandise was However, this proposed rule does not circumstances in which internal subject to a claim for refund or restrict import and export activities for revenue taxes are, and are not, required drawback of tax under any provision of any entities, regardless of size; these to be paid on domestic and imported the IRC. In addition, this document proposed amendments merely reflect merchandise. See chapters 32, 38, 51, proposes to amend § 113.62 of title 19 Congress’ intent regarding statutory and 52 of the IRC. The fact that a party of the CFR (19 CFR 113.62), which sets prohibitions against multiple drawback would be able to avoid the payment of forth basic importation and entry bond claims and serve to clarify the internal revenue taxes on both imported conditions, to add a new condition application of existing statutory and domestically-produced under which the principal agrees not to provisions. Thus, the impacts of this merchandise by relying on the file, or transfer the right to file, a rule would not rise to the level that provisions of two discrete statutory substitution drawback claim that would would be considered economically programs administered by different be inconsistent with the terms of new significant. agencies for different purposes is § 191.32(b)(4). The consequences of CBP welcomes comments on this contrary to Congressional intent, as default specified in newly re-designated assumption. The most helpful discussed above. paragraph (n) of § 113.62 would apply comments are those that can give us Congress is cognizant of the in the case of a breach of this bond specific information or examples of a possibility that the interplay of tariff condition. direct impact on small entities. If we do provisions could lead to a situation Conforming regulatory texts are also not receive comments that demonstrate where collection of internal revenue tax being published by TTB in this edition that the rule causes small entities to might be at risk in an import of the Federal Register. incur significant direct costs, we may, transaction. For example, Congress during the process of drafting the final Executive Order 12866 and the structured U.S. note 1(b) to subchapter rule, certify that this action does not Regulatory Flexibility Act I of Chapter 98 of the Harmonized Tariff have a significant economic impact on Schedule of the United States (HTSUS) This proposed rule is not considered a substantial number of small entities. to avoid this outcome. The subchapter to be a significant regulatory action I provisions allow duty-free or reduced- under Executive Order 12866 because it Paperwork Reduction Act duty treatment for articles exported and will not have an annual effect on the As there are no new collections of returned that were not advanced in economy of $100 million and does not information proposed in this document,

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the provisions of the Paperwork Authority: 5 U.S.C. 301; 19 U.S.C. 66, for public comment, and specifically Reduction Act of 1995 (44 U.S.C. 3507) 1202 (General Note 3(i), Harmonized Tariff solicited public comment on extending are inapplicable. Schedule of the United States), 1313, 1624; the effective date of the rule. While * * * * * HUD remains committed to full Signing Authority 4. Section 191.32 is amended: implementation of the Enterprise The amendments contained in this a. At the end of paragraph (b)(2), by Income Verification system, the public document are being issued by CBP in removing the word ‘‘and’’; comments submitted on the January 27, accordance with § 0.1(a)(1) of title 19 of b. At the end of paragraph (b)(3), by 2009, final rule highlighted for HUD the CFR (19 CFR 0.1(a)(1)), pertaining to removing the period and adding, in its certain regulatory provisions that the authority of the Secretary of the place, ‘‘; and’’; and require further clarification, and ones Treasury (or his/her delegate) to c. By adding a new paragraph (b)(4) to that were extraneous to the purpose of approve regulations related to certain read as follows: the rule, which is full implementation CBP revenue functions. of the Enterprise Income Verification § 191.32 Substitution drawback. system. List of Subjects * * * * * By final rule published on August 28, (b) * * * 19 CFR Part 113 2009, HUD delayed the effective date of (4) For purposes of drawback of Bonds, Customs duties and the January 27, 2009, final rule to internal revenue tax imposed under inspection, Exports, Imports, Reporting January 31, 2010. During this period Chapters 32, 38, 51, and 52 of the and recordkeeping requirements. before the final rule takes effect, HUD Internal Revenue Code of 1986, as submits for public comment, through amended (IRC), drawback granted on 19 CFR Part 191 this proposed rule, regulatory revisions the export or destruction of substituted Administrative practice and designed to make certain provisions in merchandise will be limited to the procedure, Bonds, Claims, Commerce, the January 27, 2009, final rule more amount of taxes paid (and not returned Customs duties and inspection, clear, and return other regulatory by refund, credit, or drawback) on the Drawback, Exports, Reporting and provisions to their pre-January 2009 substitute merchandise. recordkeeping requirements. final rule content. * * * * * Proposed Amendments to the DATES: Comment Due Date: Regulations Approved: October 8, 2009. November 16, 2009. Jayson P. Ahern, For the reasons set forth in the ADDRESSES: Interested persons are Acting Commissioner, U.S. Customs and preamble, CBP and the Treasury Border Protection. invited to submit comments regarding Department propose to amend 19 CFR this proposed rule to the Regulations Timothy E. Skud, parts 113 and 191 as set forth below: Division, Office of General Counsel, Deputy Assistant Secretary of the Treasury. Department of Housing and Urban PART 113—CUSTOMS BONDS [FR Doc. E9–24789 Filed 10–14–09; 8:45 am] Development, 451 Seventh Street, SW., BILLING CODE 9111–14–P 1. The general authority citation for Room 10276, Washington, DC 20410– part 113 continues to read as follows: 0500. Communications must refer to the above docket number and title. There Authority: 19 U.S.C. 66, 1623, 1624. DEPARTMENT OF HOUSING AND are two methods for submitting public 2. Section 113.62 is amended by URBAN DEVELOPMENT comments. All submissions must refer redesignating paragraph (m) as to the above docket number and title. paragraph (n) and adding a new 24 CFR Parts 5 and 908 1. Submission of Comments by Mail. paragraph (m) to read as follows: [Docket No. FR–5351–P–01] Comments may be submitted by mail to the Regulations Division, Office of § 113.62 Basic importation and entry bond RIN 2501–AD48 conditions. General Counsel, Department of Housing and Urban Development, 451 * * * * * Refinement of Income and Rent Seventh Street, SW., Room 10276, (m) Agreement to comply with CBP Determination Requirements in Public Washington, DC 20410–0500. regulations applicable to substitution and Assisted Housing Programs: drawback claims. In the case of Implementation of Enterprise Income 2. Electronic Submission of imported merchandise that is subject to Verification Comments. Interested persons may internal revenue tax imposed under the submit comments electronically through Internal Revenue Code of 1986, as AGENCY: Office of the Secretary, HUD. the Federal eRulemaking Portal at amended (IRC), the principal agrees not ACTION: Proposed rule. www.regulations.gov. HUD strongly to file, or to transfer to a successor the encourages commenters to submit SUMMARY: right to file, a substitution drawback On January 27, 2009, HUD comments electronically. Electronic claim involving such tax if the issued a final rule that revised the submission of comments allows the substituted merchandise has been, or regulations for HUD’s public and commenter maximum time to prepare will be, the subject of a removal from assisted housing programs to require the and submit a comment, ensures timely bonded premises without payment of use of HUD’s Enterprise Income receipt by HUD, and enables HUD to tax, or the subject of a claim for refund Verification system by public housing make them immediately available to the or drawback of tax, under any provision agencies and multifamily housing public. Comments submitted of the IRC. owners and management agents when electronically through the verifying the employment and income www.regulations.gov Web site can be * * * * * of program participants. Consistent with viewed by other commenters and PART 191—DRAWBACK Administration policy to review rules interested members of the public. issued during the transition from one Commenters should follow the 3. The general authority citation for Administration to another, HUD re- instructions provided on that site to part 191 continues to read as follows: opened the January 27, 2009, final rule submit comments electronically.

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Note: To receive consideration as public received on the June 2007 proposed Rule, and to review and consider the comments, comments must be submitted rule. public comments received on HUD’s through one of the two methods specified The Final Rule was originally February 11, 2009, Federal Register above. Again, all submissions must refer to scheduled to become effective on March notice. the docket number and title of the rule. 30, 2009. On February 11, 2009 (74 FR No Facsimile Comments. Facsimile 6839), HUD published a notice in the II. This Proposed Rule (FAX) comments are not acceptable. Federal Register seeking public As noted in the Summary to this Public Inspection of Public comment on whether to delay the proposed rule, the Department remains Comments. All properly submitted effective date of the Final Rule. The committed to the full and effective comments and communications February 11, 2009, notice was issued in implementation of the EIV system. The submitted to HUD will be available for accordance with the memorandum of use of upfront income verification will public inspection and copying between January 20, 2009, from the assistant to help identify and cure inaccuracies in 8 a.m. and 5 p.m. weekdays at the above the President and Chief of Staff, entitled public and assisted housing subsidy address. Due to security measures at the ‘‘Regulatory Review’’ and subsequently determinations, which benefits public HUD Headquarters building, an published in the Federal Register on and assisted housing providers, tenants, appointment to review the public January 26, 2009 (74 FR 4435). The and taxpayers. Following a thorough comments must be scheduled in notice explained that HUD was review of the subject matter of the Final advance by calling the Regulations considering a temporary 60-day delay in Rule and the issues raised by the Division at 202–708–3055 (this is not a the effective date to allow the comments on the February 11, 2009, toll-free number). Individuals with Department an opportunity for further notice, HUD is proposing, through this speech or hearing impairments may review and consideration of new rule, to make certain changes to the access this number via TTY by calling regulations, consistent with the Chief of Final Rule, which HUD believes will the Federal Information Relay Service at Staff memorandum. In addition to address the issues and concerns raised 800–877–8339. Copies of all comments soliciting comments specifically by the public commenters, and defer submitted are available for inspection delaying the effective date, the February other issues, to subsequent rulemaking. and downloading at 11, 2009, notice also requested comment To provide stakeholders, residents, www.regulations.gov. generally on the Final Rule. and other interested members of the The comment period on the February public with the opportunity to offer FOR FURTHER INFORMATION CONTACT: For 11, 2009, notice closed on March 13, feedback on the proposed regulatory Office of Public and Indian Housing 2009. HUD received 50 public changes, HUD is undertaking additional programs, contact Nicole Faison, comments. Comments were submitted rulemaking and soliciting comments on Program Advisor for the Office of Public by a variety of organizations including the proposed amendments for a period Housing and Voucher Programs, PHAs, property owners, management of 30 days. The regulatory changes Department of Housing and Urban agents, legal aid organizations, proposed by this rule are few and Development, 451 7th Street, SW., community development organizations, focused, and HUD believes that, in light Room 4214, Washington, DC 20410, and public interest organizations. The of the prior public comment on the telephone number 202–402–4267. For majority of comments were supportive Final Rule, a 30-day period presents Office of Housing Programs, contact Gail of a delayed effective date. The sufficient time to review and comment Williamson, Director of the Housing commenters not only supported a delay on the changes. Assistance Policy Division, Department but sought clarification or changes by HUD welcomes public comment on of Housing and Urban Development, HUD of certain aspects of the Final all aspects of the proposed rule; 451 7th Street, SW., Room 6138, Rule, about which questions and however given the privacy concerns Washington, DC 20410, telephone comments were raised. Among other surrounding the disclosure of social number 202–402–2473. (These are not issues, commenters requested that HUD security numbers (SSNs), the toll-free numbers.) Persons with hearing address the need to revise the definition Department specifically requests or speech impairments may access these of ‘‘annual income,’’ and clarify the comments on those proposed regulatory numbers through TTY by calling the verification procedures applicable to requirements pertaining to SSN toll-free Federal Information Relay noncitizens and participants who may disclosure. All public comments will be Service at 800–877–8339. experience difficulty obtaining social considered by HUD in the development SUPPLEMENTARY INFORMATION: security numbers for their children. of a final rule that will, depending upon Following publication of the February public comments received in response I. Background 11, 2009, Federal Register notice, HUD to this proposed rule, and further On January 27, 2009 (74 FR 4832), issued a final rule on March 27, 2009 consideration of issues by HUD, HUD published a final rule, entitled (74 FR 13339), that extended the supersede provisions of the Final Rule ‘‘Refinement of Income and Rent effective date of the Final Rule to that would otherwise take effect on Determination Requirements in Public September 30, 2009. The purpose of this January 31, 2010. and Assisted Housing Programs’’ (Final extension was to provide HUD with The following presents a summary of Rule). The Final Rule revised HUD’s time to review the public comments the key changes made to the Final Rule, public and assisted housing program received in response to the February 11, and these changes are directed to: regulations to implement the upfront 2009, notice. On August 28, 2009 (74 FR deferring changes to the definition of income verification process for program 44285), HUD published a final rule that annual income to separate rulemaking participants and to require the use of further extended the effective date of the that may address broader rent and HUD’s Enterprise Income Verification Final Rule to January 31, 2010. The income reforms; deferring any changes (EIV) system by public housing agencies further extension was undertaken to to HUD’s noncitizen regulations, which, (PHAs) and owners and management allow the two HUD Assistant given the importance of this issue, agents. The Final Rule followed Secretaries, who have responsibility for should be addressed by separate publication of a June 19, 2007 (72 FR the programs affected by the rule, and rulemaking; and simplifying SSN 33844) proposed rule, and took into only recently confirmed, sufficient time disclosure and verification processes, to consideration the public comments to review the subject matter of the Final the extent feasible, and consistent with

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maintaining confidentiality of these reduce the administrative burden for the with additional flexibility to determine processes. covered housing providers that must the timing of disclosure of a newly collect this information. assigned SSN, by providing that if a A. Proposed Amendments to 24 CFR 3. Required documentation. Proposed participant has been assigned a new Part 5, Subpart B—Disclosure and § 5.216(g)(1) would permit compliance SSN, the participant must disclose the Verification of Social Security Numbers with the SSN disclosure requirements SSN at either the time of receipt of the and Employer Identification Numbers; through submission of a valid SSN card new SSN; at the next interim or Procedures for Obtaining Income issued by the Social Security regularly scheduled reexamination or Information Administration or an original document recertification of family composition or 1. Applicability of the Social Security issued by a federal or state government income, or other reexamination or Number disclosure requirements. HUD’s agency that provides the SSN of the recertification; or at such earlier time regulations at 24 CFR 5.216 establish individual along with other identifying specified by the processing entity. requirements regarding SSN disclosure information. In addition, the proposed Under the regulations currently in effect and verification. This proposed rule rule provides for HUD to prescribe other the participant is not required to would clarify that the SSN disclosure acceptable evidence of a SSN through disclose a newly assigned SSN until a requirements apply to applicants and administrative instructions. The public reexamination or recertification of participants in HUD’s public and comments received in response to the family composition and income. assisted housing programs subject to the February 2009, notice noted the possible 6. Exception to required termination requirements of 24 CFR part 5, subpart unforeseen circumstances that might of assistance or tenancy due to B; however, the disclosure requirements delay issuance of a SSN card, even unforeseen circumstances. Under the are inapplicable to individuals who do where the individual has a valid SSN current regulations in effect, a not contend eligible immigration status number. The proposed changes would processing entity must terminate the under HUD’s noncitizens regulations at address such concerns and reduce assistance or tenancy, or both, of a 24 CFR part 5, subpart E. The disclosure administrative burden by authorizing participant who does not meet the SSN requirements for such individuals reliance on the SSN documentation disclosure requirements (see § 5.218(c)). continue to be found at 24 CFR 5.508 of provided by another government As noted above in this preamble, HUD the noncitizens regulations. As noted agency. However, HUD notes that such is aware that unforeseen circumstances above in this preamble, the Final Rule SSN data provided by participants may sometimes delay the issuance of a was not directed to addressing the would still be subject to verification by SSN. Accordingly, the proposed rule noncitizens requirements. Given the PHAs and owners and management would revise § 5.218(c) to allow the significance of the issues involved, HUD agents through use of the EIV system. processing entity to defer termination believes that any changes deemed 4. Addition of new household and provide the participant with an necessary to the noncitizens members under the age of six. The additional 90 days to disclose a valid requirements would more appropriately proposed rule would also revise and SSN, but only if the processing entity be the subject of a separate rulemaking. clarify the applicability of the SSN determines that: (1) failure to comply 2. Participant SSN disclosure disclosure requirements for households with the SSN requirements was due to requirements—‘‘grandfathering’’ of adding new household members under circumstances that could not have participants 62 years of age or older and the age of six. Public comments on the reasonably been foreseen and were exemption for individuals who have February 2009, notice made HUD outside the control of the household; already disclosed a valid SSN. This cognizant that there may be unforeseen and (2) there is a reasonable likelihood proposed rule would also streamline the circumstances outside the control of a that the participant will be able to SSN disclosure requirements for current household that may delay the issuance disclose a SSN by the deadline. Failure participants in HUD rental assistance of a SSN for such children under the age of the participant to disclose a SSN by programs. Specifically, the proposed of six. To address these concerns, the deadline will result in termination. rule would exempt current participants proposed § 5.216(e)(2)(ii) would provide 7. Required use of EIV—no deferred 62 years of age or older as of January 31, participants with 90 days to provide a implementation date for multifamily 2010, from having to disclose an SSN. SSN for new household members under owners and management agents. The Department is sympathetic to the the age of six. The processing entity Consistent with the Final Rule, this burden that such a disclosure shall grant an extension of one proposed rule would continue the requirement might impose on elderly additional 90-day period if the required use of the EIV system by PHAs residents, many of whom have been processing entity, in its discretion, and multifamily owners and residing in their units for many years determines that the participant’s failure management agents (see § 5.233 of the and are otherwise in compliance with to provide documentation of a SSN for Final Rule). However, the proposed rule all program requirements. The proposed the child under six was due to would no longer provide for deferred rule would also reduce administrative circumstances that could not have EIV implementation for owners and burden by exempting those participants reasonably been foreseen and were management agents. Although PHAs who have previously disclosed a valid outside the control of the participant. have long had experience with EIV, the SSN from having to re-provide their During the period that the processing system was relatively new for owners SSN for duplicative verification. Under entity is awaiting documentation of a and management agents at the time the proposed § 5.216(e)(1), only those SSN, the child is entitled to all the Final Rule was originally published. individuals who have not previously benefits of being a member of the Accordingly, HUD provided multifamily disclosed a valid SSN or who have been household. Failure of the participant to owners and management agents with an issued a new SSN would be subject to provide documentation of a SSN for the additional six months from the rule’s the SSN disclosure and verification child under six by the deadline, will effective date to comply with EIV use. procedures. The proposed changes result in applicable penalties as The deferral was intended to provide would reduce administrative burden, described in § 5.218. owners and management agents with and enhance privacy protections for 5. Disclosure requirements upon the necessary time to become familiar individuals and households who have assignment of new SSN. The proposed with the EIV system. Given the already disclosed valid SSNs, as well as rule would provide processing entities extension of time for implementation

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that is now provided by extending the noncitizens requirements be deemed ‘‘Regulatory Planning and Review’’). effective date of the use of EIV to necessary, they would more OMB determined that this proposed rule January 31, 2010, HUD determined that appropriately be the subject of a is a ‘‘significant regulatory action,’’ as a deferral is no longer necessary. separate rulemaking focused exclusively defined in section 3(f) of the Order 8. Required use of EIV in its entirety. on these policies and procedures and (although not economically significant, Several commenters on the February 11, providing the public with additional as provided in section 3(f)(1) of the 2009, notice questioned whether the use opportunity to comment. Accordingly, Order). of the EIV system was required only for through this rule, HUD proposes to The January 27, 2009, final rule was income verification or in its entirety. As withdraw the January 27, 2009, determined an economically significant previously noted, HUD is committed to amendments to the noncitizens rule based on full implementation of the full and effective implementation of regulations, and leaves in place the EIV, which the January 27, 2009, final the EIV system, and continues to believe requirements codified in 24 CFR part 5, rule would achieve by mandating its use that the use of upfront income subpart E, prior to revision by the Final by all HUD housing providers. The verification will help identify and cure Rule. rulemaking initiated by this proposed inaccuracies in public and assisted rule does not propose to alter full use of housing subsidy determinations, which C. Withdrawal of Amendments to 24 EIV. As stated earlier in this preamble, benefits public and assisted housing CFR Part 5, Subpart F (Family Income HUD is committed to full providers, tenants, and taxpayers. In and Payment Requirements) and 24 CFR implementation of EIV. This proposed response to the comments, this Part 92 (HOME Investment Partnerships rule is limited to address certain proposed rule would clarify that Program) regulatory amendments in the January processing entities must use the EIV The Final Rule would have revised 27, 2009, final rule that caused system in its entirety as a third-party the definition of annual income for confusion and which amendments were source to verify tenant employment and HUD’s public and assisted housing not central or necessary to full income information during mandatory programs codified at § 5.609. implementation of EIV. The reexaminations or recertifications of Specifically, the Final Rule would have clarifications made by this rule do not family composition and income and added new provisions regarding the use result in an impact on the economy of also to reduce administrative and of historical income amounts for $100 million or more. subsidy payment errors in accordance purposes of determining annual income, The docket file is available for public with HUD administrative guidance. and made other technical changes to the inspection in the Regulations Division, 9. Technical and conforming determination of annual income. The Office of General Counsel, Department amendments. The proposed rule would Final Rule would also have made a of Housing and Urban Development, also make several technical, non- conforming change to the annual 451 Seventh Street, SW., Room 10276, substantive changes, to the regulations income provisions of the HOME Washington, DC 20410–0500. Due to at 24 CFR part 5, subpart B. These Investment Partnership program at 24 security measures at the HUD changes include updating cross- CFR 92.203. Headquarters building, please schedule references to other regulatory provisions Many of the comments on HUD’s an appointment to review the docket file that would be revised by the proposed February 11, 2009, notice questioned by calling the Regulations Division at rule, and removing outdated references the annual income provisions of the (202) 402–3055 (this is not a toll-free to HUD programs no longer in existence Final Rule, and requested additional number). Individuals with speech or (for example, the obsolete reference to clarification and revisions. Given the hearing impairments may access this the Section 215 program at comments received on the issue number via TTY by calling the Federal § 5.216(b)(3)(i)(A)). HUD believes that expressing uncertainty about the Information Relay Service at 800–877– these changes, although technical and changes to annual income in the Final 8339. conforming in nature, will help Rule, the possibility of legislation that Paperwork Reduction Act eliminate confusion, and contribute to would make, within the near future, clarity. statutory changes to annual income The information collection requirements in this proposed rule have B. Withdrawal of Amendments to 24 provisions, and the fact that such been approved by the Office of CFR Part 5, Subpart E—Restrictions on changes are not necessary to Management and Budget (OMB) under Assistance to Noncitizens implementation of the EIV system, the Department has decided to maintain the the Paperwork Reduction Act of 1995 The Final Rule would have made (44 U.S.C. 3501–3520) and assigned several revisions to the documentation definition of annual income currently in effect; that is, this proposed rule leaves OMB Control Numbers 2577–0220 and requirements in HUD’s noncitizens 2502–0204. In accordance with the regulations, primarily to conform to the the content of § 5.609 as it was prior to amendment by the January 27, 2009, Paperwork Reduction Act, HUD may not other amendments pertaining to use of conduct or sponsor, and a person is not the EIV system. As noted elsewhere in final rule. Should HUD determine that additional rulemaking on the subject of required to respond to, a collection of this preamble, the intent of the Final information, unless the collection Rule was not directed to revising or annual income is necessary or appropriate, HUD will provide the displays a currently valid OMB Control updating the noncitizens requirements. Number. Many of the comments submitted in public with the opportunity to comment response to the February 11, 2009, on any proposed changes to the Regulatory Flexibility Act notice requested clarification regarding regulations. The Regulatory Flexibility Act (RFA) the verification procedures applicable to III. Findings and Certifications (5 U.S.C. 601 et seq.) generally requires noncitizens and posed questions an agency to conduct a regulatory concerning the intent of the regulatory Executive Order 12866, Regulatory flexibility analysis of any rule subject to changes contained in the Final Rule. Planning and Review notice and comment rulemaking Given the sensitivity and significance of The Office of Management and Budget requirements, unless the agency certifies the issues involved, HUD has decided (OMB) reviewed this proposed rule that the rule will not have a significant that should any future changes to the under Executive Order 12866 (entitled economic impact on a substantial

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number of small entities. agency from promulgating a regulation § 5.216 Disclosure and verification of Implementation of HUD’s EIV system, that has federalism implications and Social Security and Employer Identification which the Refinement of Income and either imposes substantial direct Numbers. Rent Determination rulemaking compliance costs on state and local (a) General. The requirements of this addresses is concerned with those governments and is not required by section apply to applicants and entities that are responsible for making statute, or preempts state law, unless the participants as described in this section, eligibility determinations and income relevant requirements of section 6 of the except this section is inapplicable to reexaminations or recertifications under Executive Order are met. This rule does individuals who do not contend eligible sections 3 and 5 of the United States not have federalism implications and immigration status under subpart E of Housing Act of 1937, and tenant-based does not impose substantial direct this part (see § 5.508). and project-based housing assistance compliance costs on state and local (b) Disclosure required of assistance under section 8 of the United States governments or preempt state law applicants. Each assistance applicant Housing Act of 1937. The purpose of within the meaning of the Executive must submit the following information this proposed rule is not to interfere Order. to the processing entity when the with full implementation of HUD’s EIV assistance applicant’s eligibility under system, now scheduled to take effect on Unfunded Mandates Reform Act the program involved is being January 31, 2010, but is limited to Title II of the Unfunded Mandates determined. (1) The complete and accurate SSN clarifying certain regulatory Reform Act of 1995 (2 U.S.C. 1531– assigned to the assistance applicant and amendments of the January 27, 2009, 1538) (UMRA) establishes requirements to each member of the assistance final rule that required further for Federal agencies to assess the effects applicant’s household; and clarification, and proposing to remove of their regulatory actions on State, other regulatory amendments that were (2) The documentation referred to in local, and tribal governments, and on determined not necessary for paragraph (g)(1) of this section to verify the private sector. This proposed rule implementation of EIV. Accordingly, each such SSN. would not impose any Federal mandate this proposed rule does not alter the (c) Disclosure required of individual on any State, local, or tribal government, small entity impact analysis made in the owner applicants. Each individual or on the private sector, within the January 27, 2009, final rule nor does this owner applicant must submit the meaning of the UMRA. proposed rule, which makes certain following information to the processing clarifying amendments, result in a List of Subjects entity when the individual owner significant economic impact on a applicant’s eligibility under the program substantial number of small entities. 24 CFR Part 5 involved is being determined: Notwithstanding HUD’s Administrative practice and (1) The complete and accurate SSN determination that this rule does not procedure, Aged, Claims, Crime, assigned to the individual owner have a significant economic impact on Government contracts, Grant applicant and to each member of the a substantial number of small entities, programs—housing and community individual owner applicant’s household HUD invites comments from all entities, development, Individuals with who will be obligated to pay the debt including small entities, regarding less disabilities, Intergovernmental relations, evidenced by the mortgage or loan burdensome alternatives to this rule that Loan programs—housing and documents; and (2) The documentation referred to in will meet HUD’s objectives as described community development, Low and paragraph (g)(1) of this section to verify in this preamble. moderate income housing, Mortgage each such SSN. insurance, Penalties, Pets, Public Environmental Impact (d) Disclosure required of certain housing, Rent subsidies, Reporting and This proposed rule involves officials of entity applicants. Each recordkeeping requirements, Social statutorily required and/or discretionary officer, director, principal stockholder, Security, Unemployment compensation, establishment and review of interest or other official of an entity applicant Wages. rates, loan limits, building cost must submit the following information estimates, prototype costs, fair market 24 CFR Part 908 to the processing entity when the entity rent schedules, HUD-determined applicant’s eligibility under the program prevailing wage rates, income limits and Computer technology, Grant involved is being determined: exclusions with regard to eligibility for programs—housing and community (1) The complete and accurate SSN or calculation of HUD housing development, Rent subsidies, Reporting assigned to each such individual; and assistance or rental assistance, and and recordkeeping requirements. (2) The documentation referred to in similar rate and cost determinations and Accordingly, for the reasons described paragraph (g)(1) of this section to verify related external administrative or fiscal in the preamble, HUD proposes to each SSN. requirements or procedures that do not amend 24 CFR parts 5 and 908, as (e) Disclosure required of participants. constitute a development decision amended in the final rule published on (1) Initial disclosure. (i) Each affecting the physical condition of January 27, 2009, at 74 FR 4832, as participant, except those age 62 or older specific project areas or building sites. follows: as of January 31, 2010, whose initial Accordingly, under 24 CFR 50.19(c)(6), determination of eligibility under the this proposed rule is categorically PART 5—GENERAL HUD PROGRAM program involved was begun before excluded from environmental review REQUIREMENTS; WAIVERS January 31, 2010, must submit the under the National Environmental information described in paragraph Policy Act of 1969 (42 U.S.C. 4321 et 1. The authority citation for part 5 (e)(1)(ii) of this section, if the seq.) continues to read as follows: participant has: (A) Not previously disclosed a SSN; Executive Order 13132, Federalism Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n, 3535(d), and Sec. 327, Pub. L. (B) Previously disclosed a SSN that Executive Order 13132 (entitled 109–115, 119 Stat. 2936. HUD or the SSA determined was ‘‘Federalism’’) prohibits, to the extent invalid; or practicable and permitted by law, an 2. Revise § 5.216 to read as follows: (C) Been issued a new SSN.

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(ii) Each participant subject to the (iii) Assignment of new SSN. If the (ii) The documentation referred to in disclosure requirements under participant or any member of the paragraph (g)(1) of this section to verify paragraph (e)(1)(i) of this section must participant’s household has been the SSN of each such member. submit the following information to the assigned a new SSN, the participant (2) For applicants to the Section 8 processing entity at the next interim or must submit the following to the Moderate Rehabilitation Single Room regularly scheduled reexamination or processing entity at either the time of Occupancy (SRO) Program for Homeless recertification of family composition or receipt of the new SSN; at the next Individuals under 24 CFR part 882, income, or other reexamination or interim or regularly scheduled subpart H, the documentation required recertification for the program involved: reexamination or recertification of in paragraph (h)(1) of this section must (A) The complete and accurate SSN family composition or income, or other be provided to the processing entity assigned to the participant and to each reexamination or recertification; or at within 90 days from the date of member of the participant’s household; such earlier time specified by the admission into the program. The and processing entity: processing entity shall grant an (B) The documentation referred to in (A) The complete and accurate SSN extension of one additional 90-day paragraph (g)(1) of this section to verify assigned to the participant or household period if the processing entity, in its each such SSN. member involved; and discretion, determines that the (2) Subsequent disclosure. Once a (B) The documentation referred to in applicant’s failure to comply was due to participant has disclosed and the paragraph (g)(1) of this section to verify circumstances that could not have processing entity has verified each SSN, the SSN of each individual. reasonably been foreseen and were the following rules apply: (f) Disclosure required of entity outside the control of the applicant. If (i) Addition of new household who is applicants. Each entity applicant must upon expiration of the provided time at least six years of age. When the submit the following information to the period, the individual fails to produce a participant requests to add a new processing entity when the entity SSN, the processing entity shall follow household member who is at least six applicant’s eligibility under the program the provisions of § 5.218. years of age, the participant must involved is being determined: (i) Rejection of documentation. The provide the following to the processing (1) Any complete and accurate EIN processing entity must not reject entity at the time of the request, or at the assigned to the entity applicant; and documentation referred to in paragraph (2) The documentation referred to in time of processing the interim (g) of this section, except as HUD may paragraph (g)(2) of this section to verify reexamination or recertification of otherwise prescribe through publicly the EIN. family composition that includes the issued notice. (g) Required documentation. (1) SSN. new member(s): 3. Amend § 5.218 by revising The documentation necessary to verify (A) The complete and accurate SSN paragraphs (a), (b) and (c) to read as the SSN of an individual who is follows: assigned to each new member; and required to disclose his or her SSN (B) The documentation referred to in under paragraphs (a) through (e) of this § 5.218 Penalties for failing to disclose and paragraph (g)(1) of this section to verify section is: verify Social Security and Employer the SSN for each new member. (i) A valid SSN card issued by the Identification Numbers. (ii) Addition of household member SSA; (a) Denial of eligibility of assistance who is under the age of six. (A) When (ii) An original document issued by a applicants and individual owner a participant seeks to include or add a federal or state government agency, applicants. The processing entity must household member who is under the age which contains the name of the deny the eligibility of an assistance of six and who has no SSN, the individual and the SSN of the applicant or individual owner applicant participant shall be required to provide individual, along with other identifying in accordance with the provisions the complete and accurate SSN assigned information of the individual; or governing the program involved, if the to each new child and the (ii) Such other evidence of the SSN as assistance or individual owner documentation referred to in paragraph HUD may prescribe in administrative applicant does not meet the applicable (g)(1) of this section to verify the SSN instructions. SSN disclosure, documentation, and for each new child within 90 calendar (2) EIN. The documentation necessary verification requirements as specified in days of the child being added to the to verify an EIN of an entity applicant § 5.216. household. that is required to disclose its EIN under (b) Denial of eligibility of entity (B) The processing entity shall grant paragraph (f) of this section is the applicants. The processing entity must an extension of one additional 90-day official, written communication from deny the eligibility of an entity period if the processing entity, in its the Internal Revenue Service (IRS) applicant in accordance with the discretion, determines that the assigning the EIN to the entity provisions governing the program participant’s failure to comply was due applicant, or such other evidence of the involved; if: to circumstances that could not have EIN as HUD may prescribe in (1) The entity applicant does not meet reasonably been foreseen and were administrative instructions. the EIN disclosure, documentation, and outside the control of the participant. (h) Effect on assistance applicants. (1) verification requirements specified in During the period that the processing Except as provided in paragraph (h)(2) § 5.216; or entity is awaiting documentation of a of this section, if the processing entity (2) Any of the officials of the entity SSN, the processing entity shall include determines that the assistance applicant applicant referred to in § 5.216(d) does the child as part of the assisted is otherwise eligible to participate in a not meet the applicable SSN disclosure, household and the child shall be program, the assistance applicant may and documentation and verification entitled to all the benefits of being a retain its place on the waiting list for the requirements specified in § 5.216. household member. If upon expiration program, but cannot become a (c) Termination of assistance or of the provided time period, the participant until it can provide: termination of tenancy of participants. participant fails to produce a SSN, the (i) The complete and accurate SSN (1) The processing entity must terminate processing entity shall follow the assigned to each member of the the assistance or terminate the tenancy, provisions of § 5.218. household; and or both, of a participant, in accordance

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with the provisions governing the (b) Penalties for noncompliance. DEPARTMENT OF THE TREASURY program involved, if the participant Failure to use the EIV system in its does not meet the applicable SSN entirety may result in the imposition of Alcohol and Tobacco Tax and Trade disclosure, documentation, and sanctions and/or the assessment of Bureau verification requirements specified in disallowed costs associated with any § 5.216. resulting incorrect subsidy or tenant 27 CFR Parts 28 and 44 (2) The processing entity may defer rent calculations, or both. [Docket No. TTB–2009–0005; Notice No. termination and provide the participant 100] with an additional 90 days to disclose § 5.236 [Amended] a SSN, but only if unless the processing RIN 1513–AB77 entity, in its discretion, determines that: 5. In § 5.236(b)(3)(i)(A), remove (i) The failure to meet these ‘‘215’’. Drawback of Internal Revenue Taxes requirements was due to circumstances PART 908—ELECTRONIC AGENCY: Alcohol and Tobacco Tax and that could not have reasonably been Trade Bureau, Treasury. foreseen and were outside the control of TRANSMISSION OF REQUIRED ACTION: Notice of proposed rulemaking. the participant; and FAMILY DATA FOR PUBLIC HOUSING, (ii) There is a reasonable likelihood INDIAN HOUSING, AND THE SECTION SUMMARY: The Alcohol and Tobacco Tax that the participant will be able to 8 RENTAL CERTIFICATE, RENTAL and Trade Bureau proposes to amend its disclose a SSN by the deadline. VOUCHER, AND MODERATE regulations to clarify the relationship (3) Failure of the participant to REHABILITATION PROGRAMS between tax payment under the Internal disclose a SSN by the deadline specified Revenue Code of 1986 and drawback of in paragraph (c)(2) of this section will 6. The authority citation for part 908 tax under the Tariff Act of 1930. The result in termination of the assistance or continues to read as follows: proposal provides conforming tenancy, or both, of the participant. Authority: 42 U.S.C. 1437f, 3535d, 3543, amendments to reflect proposed * * * * * 3544, and 3608a. Customs and Border Protection 4. Add a new § 5.233 to read as regulations stating that domestic follows: 7. Revise § 908.101 to read as follows: merchandise on which no tax is paid under the Internal Revenue Code may § 5.233 Mandated use of HUD’s Enterprise § 908.101 Purpose. Income Verification (EIV) System. not be substituted for imported (a) Programs subject to this section The purpose of this part is to require merchandise for purposes of claims for and requirements. (1) The requirements Public Housing Agencies (PHAs), drawback of tax under the customs laws of this section apply to entities including Moving to Work (MTW) and regulations. administering assistance under the: PHAs, that operate Public Housing, DATES: We must receive your written (i) Public Housing program under 24 Indian Housing, or Section 8 Rental comments on or before December 14, CFR part 960; Certificate, Housing Choice Voucher 2009. (ii) Section 8 Housing Choice Voucher (HCV), Rental Voucher, and Moderate ADDRESSES: You may send comments on (HCV) program under 24 CFR part 982; Rehabilitation programs to (iii) Moderate Rehabilitation program this notice to one of the following electronically submit certain data to addresses: under 24 CFR part 882; HUD for those programs. These • (iv) Project-based Voucher program http://www.regulations.gov: Use the electronically submitted data are comment form for this notice on the under 24 CFR part 983; required for HUD forms: HUD–50058, (v) Project-based Section 8 programs Federal e-rulemaking portal, under 24 CFR parts 880, 881, 883, 884, including the Family Self-Sufficiency Regulations.gov, to submit comments (FSS) Addendum. Applicable program via the Internet; 886, and 891; • (vi) Section 202 of the Housing Act of entities must retain at a minimum, the Mail: Director, Regulations and 1959 (12 U.S.C. 1701q); last three years of the form HUD–50058, Rulings Division, Alcohol and Tobacco (vii) Section 811 of the Cranston- and supporting documentation, during Tax and Trade Bureau, P.O. Box 14412, Gonzalez National Affordable Housing the term of each assisted lease, and for Washington, DC 20044–4412. • Act (42 U.S.C. 8013); a period of at least 3 years from the end Hand Delivery/Courier in Lieu of (viii) Sections 221(d)(3) and 236 of the of participation (EOP) date, to support Mail: Alcohol and Tobacco Tax and National Housing Act (12 U.S.C. billings to HUD and to permit an Trade Bureau, 1310 G Street, NW., Suite 1715l(d)(3) and 1715z–1); and effective audit. Electronic retention of 200–E, Washington, DC 20005. See the Public Participation section of (ix) Rent Supplement program under form HUD–50058 and HUD–50058–FSS this notice for specific instructions and section 101 of the Housing and Urban and supporting documentation fulfills requirements for submitting comments, Development Act of 1965 (12 U.S.C. the retention requirement under this and for information on how to request 1701s). section. (2) Processing entities must use a public hearing. HUD’s EIV system in its entirety: Dated: September 23, 2009. You may view copies of this notice, (i) As a third-party source to verify Shaun Donovan, selected supporting materials, and the tenant employment and income Secretary. comments we receive about this proposal within Docket No. TTB–2009– information during mandatory [FR Doc. E9–24809 Filed 10–14–09; 8:45 am] reexaminations or recertifications of 0005 at http://www.regulations.gov. A family composition and income, in BILLING CODE 4210–67–P direct link to this docket is posted on accordance with § 5.236 and the TTB Web site at http://www.ttb.gov/ administrative guidance issued by HUD; regulations_laws/all_rulemaking.shtml and under Notice No. 100. You also may (ii) To reduce administrative and view copies of this notice, all subsidy payment errors in accordance supporting materials, and the comments with HUD administrative guidance. we receive about this proposal by

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appointment at the TTB Information United States. 26 U.S.C. 5701. The tax drawback provision also includes a Resource Center, 1310 G Street, NW., on domestically-produced tobacco standard for commercial Washington, DC 20220. Please call 202– products and cigarette papers and tubes interchangeability for wine, that is, 453–2270 to make an appointment. is imposed at the time that the product ‘‘wine of the same color having a price FOR FURTHER INFORMATION CONTACT: comes into existence, that is, when a variation not to exceed 50 percent Gerry Isenberg, Regulations and Rulings product meets one of the definitions between the imported wine and the Division, Alcohol and Tobacco Tax and under the IRC. The Federal excise tax on exported wine.’’ Trade Bureau, 1310 G Street, NW., Suite imported and domestically-produced Regulations implementing section 313 200–E, Washington, DC 20220; tobacco products and cigarette papers are set forth in 19 CFR part 191. Subpart telephone 202–453–2097. and tubes is generally not paid or C of part 191 concerns unused SUPPLEMENTARY INFORMATION: determined until the products are merchandise drawback and includes, in released from customs custody or § 191.32, standards applicable to (j)(2) Background removed from bonded premises. 26 drawback claims. The Bureau of Taxation of Distilled Spirits, Wines, U.S.C. 5702, 5703. Tobacco products Customs and Border Protection (CBP) is Beer, and Tobacco Products Under the and cigarette papers and tubes may be responsible for the administration of Internal Revenue Code of 1986 removed from bonded premises, section 313 and the regulations without the payment of Federal excise promulgated thereunder. Chapter 51 of the Internal Revenue tax, for export. 26 U.S.C. 5704. Proposed CBP and TTB Regulatory Code of 1986 (IRC) sets forth excise tax Regulations implementing the Changes collection and related provisions provisions of Chapters 51 and 52 of the applicable to distilled spirits, wines, IRC are contained in 27 CFR chapter 1. In recent years CBP has received and and beer. Chapter 52 of the IRC contains The Alcohol and Tobacco Tax and approved a number of (j)(2) drawback similar provisions applicable to tobacco Trade Bureau (TTB) within the claims involving imported bottled and products and cigarette papers and tubes. Department of the Treasury is bulk wine and domestically-produced Under Chapter 51, a Federal excise responsible for the administration of wine. A hypothetical example of how tax is imposed on all wines and distilled Chapters 51 and 52 and the regulations such a transaction could work is as spirits produced in or imported into the promulgated thereunder. follows: A domestic winery imports 100 United States. 26 U.S.C. 5001, 5041. A cases of bottled wine, pays Federal Federal excise tax also is imposed on Drawback Under the Tariff Act of 1930 excise tax on the wine, and sells the beer brewed or produced, and removed Section 313 of the Tariff Act of 1930, imported wine in the United States; the for consumption or sale within the as amended (19 U.S.C. 1313), provides domestic winery then exports 100 cases United States, or imported into the for the drawback or refund of duties, of its domestic wine without payment of United States. 26 U.S.C. 5051. For taxes, and fees paid on imported Federal excise tax; the domestic winery domestically-produced wine, the tax is merchandise if that merchandise is then files a (j)(2) drawback claim with imposed at the conclusion of subsequently exported or destroyed CBP, on the basis that the 100 cases of fermentation or removal from the under customs supervision. Paragraph domestically-produced wine are fermenter (see 27 CFR 24.176). For (2) of subsection (j), hereafter referred to commercially interchangeable with the domestically-produced distilled spirits, as ‘‘(j)(2) drawback,’’ permits the 100 cases of imported wine; and, finally, the tax is imposed at the time that the substitution of other merchandise for the domestic winery receives a refund of product comes into existence. 26 U.S.C. the imported merchandise for purposes 99 percent of the Federal excise taxes 5001(b). For domestically-produced of the exportation or destruction that it paid on the 100 cases of imported beer, the tax is imposed when the requirement. wine. product is removed for consumption or Specifically, the (j)(2) drawback In the scenario described above, only sale. 26 U.S.C. 5051. For imported wine, provision allows the payment of 1 percent of the Federal excise tax on distilled spirits, and beer, the tax is drawback, not to exceed 99 percent of the imported wine is ultimately imposed when the product is imported the duties, taxes, and fees paid on the received into the U.S. Treasury. Thus, into the United States. imported merchandise, based on the (j)(2) drawback in effect allows imported However, Federal excise taxes on exportation or destruction of ‘‘any other wine to be introduced into the U.S. imported and domestically-produced merchandise (whether imported or market 99 percent free of Federal excise wine, distilled spirits, and beer are domestic)’’ that: (1) Is commercially tax. Although the (j)(2) drawback claims generally not paid or determined until interchangeable with the imported involving the drawback or refund of IRC the products are removed from bonded merchandise on which duties, taxes, tax that CBP has processed have been premises or from customs custody for and fees were paid, (2) is exported or limited to wine, under the present consumption or sale. 26 U.S.C. 5041, destroyed within 3 years of the date of statutory and regulatory framework, 5061, 5006, 5007, 5054. Domestically- importation of the imported other products that are subject to excise produced wine, distilled spirits, and merchandise, and (3) before such tax under IRC Chapters 51 and 52 could beer may be exported without payment exportation or destruction, is not used be the subject of claims for (j)(2) of the Federal excise tax. 26 U.S.C. within the United States and is in the drawback. 5362(c), 5214(a), 5053. In addition, on possession of the party claiming Based on a review of the applicable the exportation of domestically- drawback, that is, either the importer of statutory provisions, the Department of produced wine, distilled spirits, or beer the imported merchandise or a person the Treasury has concluded that the that was removed from bonded premises who receives from the importer a practice of allowing (j)(2) drawback with payment of tax, drawback is certificate of delivery transferring to that claims in circumstances in which allowed in an amount equal to the tax person the imported merchandise or internal revenue taxes have not been paid. 26 U.S.C. 5062, 5055. commercially interchangeable paid on the substituted domestic Under Chapter 52, a Federal excise merchandise or any combination of the product is incompatible with the intent tax is imposed on all tobacco products two (and with the transferred of Congress in levying excise taxes and cigarette papers and tubes merchandise being treated as the under the IRC and extends beyond the manufactured in or imported into the imported merchandise). The (j)(2) intent of Congress for administering

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drawback under the comprehensive comments by the closing date shown Public Disclosure framework of section 313. In order to above in this notice. Your comments On the Federal e-rulemaking portal, address these concerns, CBP in a must reference Notice No. 100 and Regulations.gov, we will post, and the document published in this issue of the include your name and mailing address. public may view, copies of this notice, Federal Register is proposing to amend Your comments also must be made in selected supporting materials, and any its regulations to preclude the filing of English, be legible, and be written in electronic or mailed comments we a claim covering drawback of tax under language acceptable for public receive about this proposal. A direct subsection (j)(2) if no tax was paid on disclosure. We do not acknowledge link to the Regulations.gov docket the substituted domestically-produced receipt of comments, and we consider containing this notice and the posted merchandise. all comments as originals. In view of the relationship between comments received on it is available on (j)(2) drawback claims and excise tax Submitting Comments the TTB Web site at http://www.ttb.gov/ regulations_laws/all_rulemaking.shtml liability under Chapters 51 and 52 of the You may submit comments on this under Notice No. 100. You may also IRC as discussed above and as reflected notice by using one of the following reach the docket containing this notice in the proposed new CBP regulatory three methods: and the posted comments received on it texts, TTB believes that it would be • Federal e-Rulemaking Portal: You through the Regulations.gov search page appropriate to add to the TTB may send comments via the online at http://www.regulations.gov. regulations conforming amendments comment form associated with this that alert the reader to the effect of the notice in Docket No. TTB–2009–0005 on All posted comments will display the new CBP regulatory provision as regards ‘‘Regulations.gov,’’ the Federal commenter’s name, organization (if alcohol and tobacco products exported e-rulemaking portal, at http:// any), city, and State, and, in the case of without payment of tax or with www.regulations.gov. A link to that mailed comments, all address drawback of tax. TTB notes in this docket is available under Notice No. 100 information, including e-mail addresses. regard that the IRC vests broad authority on the TTB Web site at http:// We may omit voluminous attachments in the Secretary of the Treasury to www.ttb.gov/regulations_laws/ or material that we consider unsuitable promulgate regulations governing the all_rulemaking.shtml. Supplemental for posting. removal of alcohol and tobacco products files may be attached to comments You and other members of the public for export without payment of tax in submitted via Regulations.gov. For may view copies of this notice, any order to ensure protection of the information on how to use supporting materials, and any electronic revenue. See 26 U.S.C. 5053 for beer, Regulations.gov, click on the site’s Help or mailed comments we receive about 5214(a) for distilled spirits, 5362(c) for or FAQ tabs. this proposal by appointment at the TTB wine, and 5704 for tobacco products. • U.S. Mail: You may send comments Information Resource Center, 1310 G Furthermore, the IRC vests broad via postal mail to the Director, Street, NW., Washington, DC 20220. authority in the Secretary of the Regulations and Rulings Division, You may also obtain copies at 20 cents Treasury to promulgate regulations Alcohol and Tobacco Tax and Trade per 8.5 x 11-inch page. Contact our needed for the enforcement of the IRC. Bureau, P.O. Box 14412, Washington, information specialist at the above See 26 U.S.C. 7805(a). TTB believes that DC 20044–4412. address or by telephone at 202–453– the proposed conforming amendments • Hand Delivery/Courier: You may 2270 to schedule an appointment or to are needed to contribute to the hand-carry your comments or have them request copies of comments or other enforcement and integrity of the excise hand-carried to the Alcohol and materials. tax system. Tobacco Tax and Trade Bureau, 1310 G Regulatory Analysis and Notices Accordingly, this document proposes Street, NW., Suite 200–E, Washington, six amendments to part 28 of the TTB DC 20005. Executive Order 12866 regulations (27 CFR part 28), which If you are commenting on behalf of an This proposed rule is not a significant contains rules regarding the exportation association, business, or other entity, regulatory action as defined in of distilled spirits, wine, and beer your comment must include the entity’s Executive Order 12866. Therefore, a without payment of tax and with name as well as your name and position regulatory assessment is not required. drawback of tax. Similarly, this title. If you comment via Regulatory Flexibility Act document proposes two amendments to Regulations.gov, please include the part 44 of the TTB regulations (27 CFR entity’s name in the ‘‘Organization’’ Pursuant to the requirements of the part 44), which contains rules regarding blank of the comment form. If you Regulatory Flexibility Act (5 U.S.C. the exportation of tobacco products and comment via postal mail, please submit chapter 6), we certify that this notice of cigarette papers and tubes without your entity’s comment on letterhead. proposed rulemaking will not have a payment of tax and with drawback of You may also write to the significant economic impact on a tax. Although the only substantive text Administrator before the comment substantial number of small entities. change in each affected section involves closing date to ask for a public hearing. The proposed rule imposes no the addition of a reference to the new The Administrator reserves the right to substantive requirements and therefore CBP rule, in several cases the entire determine whether to hold a public will not impose, or otherwise cause, a section is revised in order to eliminate hearing. significant increase in reporting, the use of undesignated introductory recordkeeping, or other compliance and concluding text and thus facilitate Confidentiality burdens on a substantial number of addition of the new provision. All submitted comments and small entities. Accordingly, a regulatory Public Participation attachments are part of the public record flexibility analysis is not required. and subject to disclosure. Do not Drafting Information Comments Invited enclose any material in your comments We invite comments from interested that you consider to be confidential or Francis W. Foote of the Regulations members of the public on this proposed that is inappropriate for public and Rulings Division drafted this rulemaking. Please submit your disclosure. document.

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List of Subjects (b) All such withdrawals shall be containers in the United States on made under the applicable bond which an internal revenue tax has been 27 CFR Part 28 prescribed in subpart D. paid or determined, and which are filled Aircraft, Alcohol and alcoholic (c) Wine withdrawn without payment on premises qualified under this chapter beverages, Armed forces, Beer, Claims, of tax under this subpart may not be to package or bottle wines, may, subject Excise taxes, Exports, Foreign trade substituted for imported merchandise to this part, be: zones, Labeling, Liquors, Packaging and for purposes of drawback of tax under (1) Exported; containers, Reporting and recordkeeping section 313(j)(2) of the Tariff Act of (2) Laden for use on the vessels or requirements, Surety bonds, Vessels, 1930, as amended (19 U.S.C. 1313(j)(2)). aircraft described in § 28.21; or Warehouses, Wine. See 19 CFR 191.32(b)(4). (3) Transferred to and deposited in a 4. Section 28.141 is amended by foreign-trade zone for exportation or for 27 CFR Part 44 adding a new paragraph (d) to read as storage pending exportation. Aircraft, Armed forces, Cigars and follows: (b) On receipt by the appropriate TTB cigarettes, Claims, Customs duties and officer of required evidence of inspection, Excise taxes, Exports, § 28.141 General. exportation, lading for use, or transfer, Foreign trade zones, Labeling, Packaging * * * * * there shall be allowed a drawback equal and containers, Reporting and (d) Customs drawback claims. Beer in amount to the tax found to have been recordkeeping requirements, Surety removed without payment of tax under paid or determined on the wines. bonds, Tobacco, Vessels, Warehouses. this subpart may not be substituted for (c) Wines on which drawback is paid imported merchandise for purposes of Authority and Issuance under this subpart may not be drawback of tax under section 313(j)(2) substituted for imported merchandise For the reasons explained in the of the Tariff Act of 1930, as amended for purposes of drawback of tax under preamble, TTB proposes to amend (19 U.S.C. 1313(j)(2)). See 19 CFR section 313(j)(2) of the Tariff Act of chapter I of title 27 of the Code of 191.32(b)(4). 1930, as amended (19 U.S.C. 1313(j)(2)). Federal Regulations as follows: 5. Section 28.171 is revised to read as See 19 CFR 191.32(b)(4). follows: 7. Section 28.221 is revised to read as PART 28—EXPORTATION OF follows: ALCOHOL § 28.171 General. (a) Distilled spirits manufactured, § 28.221 General. 1. The authority citation for part 28 is produced, bottled in bottles, packed in (a) Beer brewed or produced in the revised to read as follows: containers, or packaged in casks or other United States and on which the internal Authority: 5 U.S.C. 552(a); 19 U.S.C. 81c, bulk containers in the United States on revenue tax has been paid may, subject 1202; 26 U.S.C. 5001, 5007, 5008, 5041, 5051, which an internal revenue tax has been to this part, be: 5053, 5054, 5061, 5111, 5112, 5114, 5121, paid or determined, and which have (1) Exported; 5122, 5124, 5201, 5205, 5207, 5214, 5232, been marked under the provisions of 27 (2) Delivered for use as supplies on 5273, 5301, 5313, 5362, 5555, 6302, 7805; 27 CFR part 19 and of this part, as U.S.C. 203, 205; 44 U.S.C. 3504(h). the vessels and aircraft described in applicable, especially for export with § 28.21; or 2. Section 28.91 is amended by benefit of drawback may be: (3) Transferred to and deposited in a adding a new paragraph (c) to read as (1) Exported; foreign-trade zone for exportation or for follows: (2) Laden for use on the vessels or storage pending exportation. aircraft described in § 28.21; § 28.91 General. (b) A claim for drawback of taxes (3) Transferred to and deposited in a found to have been paid may be filed * * * * * foreign-trade zone for exportation or for only by the producing brewer or his (c) Distilled spirits withdrawn storage pending exportation; or duly authorized agent. On receipt by the without payment of tax under this (4) Transferred to and deposited in a appropriate TTB officer of required subpart may not be substituted for customs bonded warehouse as provided evidence of such exportation, delivery imported merchandise for purposes of for in § 28.26(b). for use, or transfer, there shall be drawback of tax under section 313(j)(2) (b) On receipt by the appropriate TTB allowed a drawback equal in amount to of the Tariff Act of 1930, as amended officer of required evidence of the tax found to have been paid on such (19 U.S.C. 1313(j)(2)). See 19 CFR exportation, lading for use, or transfer, beer. 191.32(b)(4). there shall be allowed to the bottler (or (c) Beer on which drawback is paid 3. Section 28.121 is revised to read as packager) of the spirits, drawback equal under this subpart may not be follows: in amount to the tax found to have been substituted for imported merchandise § 28.121 General. paid or determined on the spirits. for purposes of drawback of tax under (c) Distilled spirits on which section 313(j)(2) of the Tariff Act of (a) Wine may, subject to this part, be drawback is paid under this subpart withdrawn from a bonded wine cellar, 1930, as amended (19 U.S.C. 1313(j)(2)). may not be substituted for imported See 19 CFR 191.32(b)(4). without payment of tax, for: merchandise for purposes of drawback (1) Exportation; of tax under section 313(j)(2) of the PART 44—EXPORTATION OF (2) Use on the vessels and aircraft Tariff Act of 1930, as amended (19 TOBACCO PRODUCTS AND described in § 28.21; U.S.C. 1313(j)(2)). See 19 CFR CIGARETTE PAPERS AND TUBES, (3) Transfer to and deposit in a 191.32(b)(4). WITHOUT PAYMENT OF TAX, OR WITH foreign-trade zone for exportation or for 6. Section 28.211 is revised to read as DRAWBACK OF TAX storage pending exportation; follows: (4) Transfer to and deposit in a 8. The authority citation for part 44 customs bonded warehouse as provided § 28.211 General. continues to read as follows: in § 28.27; or (a) Wines manufactured, produced, Authority: 26 U.S.C. 5142, 5143, 5146, (5) Transportation to and deposit in a bottled in bottles packed in containers, 5701, 5703–5705, 5711–5713, 5721–5723, manufacturing bonded warehouse. or packaged in casks or other bulk 5731, 5741, 5751, 5754, 6061, 6065, 6151,

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6402, 6404, 6806, 7011, 7212, 7342, 7606, notice of proposed rulemaking (NPRM) www.regulations.gov and will include 7805; 31 U.S.C. 9301, 9303, 9304, 9306. and the Draft Programmatic any personal information you have 9. Section 44.61 is amended by Environmental Impact Statement provided. adding a new paragraph (c) to read as (DPEIS) for the rulemaking entitled Submitting Comments follows: ‘‘Standards for Living Organisms in Ships’ Ballast Water’’ (Docket No. If you submit a comment, please § 44.61 Removals, withdrawals, and include the docket number for this shipments authorized. USCG–2001–10486). DATES: Comments and related material rulemaking (USCG–2001–10486), * * * * * indicate the specific section of the (c) Tobacco products and cigarette for the NPRM and the DPEIS must either be submitted to our online docket via document to which each comment papers and tubes removed from a applies, and provide a reason for each factory or an export warehouse, and http://www.regulations.gov on or before the new date for the close of the suggestion or recommendation. You cigars withdrawn from a customs may comment on either the NPRM or bonded warehouse, without payment of comment period, December 4, 2009, or reach the Docket Management Facility the DPEIS or both. You may submit your tax under this subpart may not be comments and material online or by fax, substituted for imported merchandise by that date. ADDRESSES: You may submit comments mail, or hand delivery, but please use for purposes of drawback of tax under only one of these means. We section 313(j)(2) of the Tariff Act of identified by Coast Guard docket number USCG–2001–10486 to the recommend that you include your name 1930, as amended (19 U.S.C. 1313(j)(2)). and a mailing address, an e-mail See 19 CFR 191.32(b)(4). Docket Management Facility at the U.S. Department of Transportation. To avoid address, or a phone number in the body 10. Section 44.221 is amended by of your document so that we can contact designating the existing text as duplication, please use only one of the following methods: you if we have questions regarding your paragraph (a) and adding a new submission. paragraph (b) to read as follows: (1) Federal eRulemaking Portal: http://www.regulations.gov. To submit your comment online, go to § 44.221 Application of drawback of tax. (2) Mail: Docket Management Facility http://www.regulations.gov and click on the ‘‘submit a comment’’ box, which * * * * * (M–30), U.S. Department of (b) Tobacco products and cigarette Transportation, West Building Ground will then become highlighted in blue. papers and tubes on which drawback is Floor, Room W12–140, 1200 New Jersey Insert ‘‘USCG–2001–10486’’ in the allowed under this subpart may not be Avenue, SE., Washington, DC 20590– Keyword box, click ‘‘Search’’, and then substituted for imported merchandise 0001. click on the balloon shape in the for purposes of drawback of tax under (3) Hand delivery: Docket Actions column. If you submit your section 313(j)(2) of the Tariff Act of Management Facility (M–30), U.S. comments by mail or hand delivery, Department of Transportation, West submit them in an unbound format, no 1930, as amended (19 U.S.C. 1313(j)(2)). 1 See 19 CFR 191.32(b)(4). Building Ground Floor, Room W12–140, larger than 8 ⁄2 by 11 inches, suitable for copying and electronic filing. If you * * * * * 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. submit comments by mail and would Signed: September 3, 2009. and 5 p.m., Monday through Friday, like to know that they reached the John J. Manfreda, except Federal holidays. The telephone Facility, please enclose a stamped, self- Administrator. number is 202–366–9329. addressed postcard or envelope. Approved: September 17, 2009. (4) Fax: 202–493–2251. We will consider all comments and Timothy E. Skud, To avoid duplication, please use only material received during the comment period and may change this proposed Deputy Assistant Secretary (Tax, Trade, and one of these four methods. See the Tariff Policy). ‘‘Public Participation and Request for rule or the DPEIS based on your comments. [FR Doc. E9–24791 Filed 10–14–09; 8:45 am] Comments’’ portion of the SUPPLEMENTARY INFORMATION section BILLING CODE 4810–31–P Viewing Comments and Documents below for instructions on submitting comments. To view comments, as well as documents mentioned in this preamble DEPARTMENT OF HOMELAND FOR FURTHER INFORMATION CONTACT: If as being available in the docket, go to SECURITY you have questions on this proposed http://www.regulations.gov at any time. rulemaking, call or e-mail Mr. John Enter the docket number for this Coast Guard Morris, Project Manager, Environmental rulemaking (USCG–2001–10486) in the Standards Division, U.S. Coast Guard Keyword box, and click ‘‘Search’’. You 33 CFR Part 151 Headquarters, telephone 202–372–1433, may also visit the Docket Management e-mail [email protected]. If you Facility in Room W12–140 on the 46 CFR Part 162 have questions on viewing or submitting ground floor of the DOT West Building, material to the docket, call Ms. Renee [USCG–2001–10486] 1200 New Jersey Avenue, SE., Wright, Chief, Dockets, Department of Washington, DC 20590, between 9 a.m. RIN 1625–AA32 Transportation, telephone 202–366– and 5 p.m., Monday through Friday, 9826. Standards for Living Organisms in except Federal holidays. We have an Ships’ Ballast Water Discharged in SUPPLEMENTARY INFORMATION: agreement with the Department of Transportation to use the Docket U.S. Waters Public Participation and Request for Management Facility. Comments AGENCY: Coast Guard, DHS. Privacy Act ACTION: Notice; extension of comment We encourage you to participate in periods. this aspect of the rulemaking by Anyone can search the electronic submitting comments and related form of all comments received into any SUMMARY: The Coast Guard is extending materials. All comments received will of our dockets by the name of the the periods for public comment on the be posted, without change, to http:// individual submitting the comment (or

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signing the comment, if submitted on Dated: October 8, 2009. the impact of distributing FY 2008 behalf of an association, business, labor J.G. Lantz, highway, rail, and vehicle service driver union, etc.). You may review a Privacy Director of Commercial Regulations and costs based on the new and existing Act notice regarding our public dockets Standards, U.S. Coast Guard. density factors. See id., Proposal 20 at in the January 17, 2008, issue of the [FR Doc. E9–24745 Filed 10–14–09; 8:45 am] 3. Federal Register (73 FR 3316). BILLING CODE 4910–15–P It is ordered: 1. The Petition of the United States Background and Purpose Postal Service Requesting Initiation of a Proceeding to Consider a Proposed On August 28, 2009, the Coast Guard POSTAL REGULATORY COMMISSION Change in Analytic Principles (Proposal published an NPRM entitled ‘‘Standards 39 CFR Part 3050 Twenty), filed October 6, 2009, is for Living Organisms in Ships’ Ballast granted. [Docket No. RM2010–1; Order No. 311] Water Discharged in U.S. Waters’’ in the 2. The Commission establishes Docket Federal Register (74 FR 44632). The Periodic Reporting Rules No. RM2010–1 to consider the matters comment period for the NPRM was to raised by the Postal Service’s Petition. close on November 27, 2009. On the AGENCY: Postal Regulatory Commission. 3. Interested persons may submit same day, the Coast Guard also ACTION: Proposed rulemaking; comments on or before October 28, published a Notice of Availability in the availability of rulemaking petition. 2009. Federal Register informing the public 4. The Commission will determine the that the DPEIS for the ‘‘Standards for SUMMARY: This document announces a need for reply comments after review of Living Organisms in Ships’ Ballast proposed rulemaking in response to a the initial comments. Water Discharged in U.S. Waters’’ recent Postal Service petition involving 5. Cassie D’Souza is designated to rulemaking had been added to the periodic reporting rules. It concerns a serve as the Public Representative docket and was available for public new Postal Service special study representing the interests of the general comment (74 FR 44673). The August 28, updating the density factors that are public in this proceeding. 2009 Notice of Availability for the used to distribute certain attributable 6. The Secretary shall arrange for transportation costs in two cost DPEIS stated that the public comment publication of this notice in the Federal segments (Nos. 8 and 14). The public is period for the DPEIS would close on Register. invited to comment. November 27, 2009. By the Commission. DATES: Comments are due October 28, Council on Environmental Quality 2009. Shoshana M. Grove, regulations at 40 CFR part 1506.10 state Secretary. ADDRESSES: Submit comments that ‘‘(a) The Environmental Protection [FR Doc. E9–24860 Filed 10–14–09; 8:45 am] electronically via the Commission’s Agency shall publish a notice in the BILLING CODE 7710–FW–P Filing Online system at Federal Register each week of the http:www.prc.gov. environmental impact statements filed FOR FURTHER INFORMATION CONTACT: during the preceding week. The ENVIRONMENTAL PROTECTION minimum time periods set forth in this Stephen L. Sharfman, General Counsel, AGENCY section shall be calculated from the date at 202–789–6824 or of publication of this notice. (b) No [email protected]. 40 CFR Part 52 decision on the proposed action shall be SUPPLEMENTARY INFORMATION: On [EPA–R05–OAR–2009–0120; FRL–8968–2] made or recorded under Sec. 1505.2 by October 6, 2009, the Postal Service filed a Federal agency until the later of the a petition to initiate an informal Approval and Promulgation of Air following dates: (1) Ninety days after rulemaking proceeding to consider Quality Implementation Plans; Indiana; publication of the notice described changes in the analytical methods Carbon Monoxide Maintenance Plan 1 above in paragraph (a) of this section for approved for use in periodic reporting. Updates; Limited Maintenance Plan a draft environmental impact The Petition explains that the Postal statement.’’ The Environmental Service has conducted a new special AGENCY: Environmental Protection Protection Agency did not publish their study for the purpose of updating Agency (EPA). notice of availability for the DPEIS until density factors used to distribute vehicle ACTION: Proposed rule. service drive attributable costs in Cost September 4, 2009. Accordingly, the Segment 8 and attributable SUMMARY: EPA is proposing to approve Coast Guard has decided to extend the transportation costs in Cost Segment 14. a request submitted by the Indiana comment periods for both the NPRM The data-collection method is similar to Department of Environmental and the DPEIS in order to ensure that the previous special study described in Management (IDEM) on January 12, the public has adequate time to submit Library Reference USPS–LR–K–33 in 2009, for a State Implementation Plan comments regarding these important Docket No. R2001–1. See id., Proposal (SIP) revision of the carbon monoxide proposals. The comment period for the 20 at 1. (CO) ‘‘Limited Maintenance Plan’’ NPRM and the DPEIS will now close on The attachment to the Postal Service’s update for Lake and Marion Counties, December 4, 2009. Petition explains its proposal in more Indiana. These Limited Maintenance Additionally, you are reminded that detail, including the background, Plans demonstrate continued attainment you may comment on any aspect of the objective, rationale, and estimated of the CO National Ambient Air Quality rulemaking, including on any comments impact. For illustrative purposes, the Standard for Lake and Marion counties placed in the docket. We may change Postal Service provides a table showing for an additional ten years. the proposed rule or the DPEIS in DATES: Comments must be received on 1 Petition of the United States Postal Service or before November 16, 2009. response to the comments received. Requesting Initiation of a Proceeding to Consider a Proposed Change in Analytic Principles (Proposal ADDRESSES: Submit your comments, Twenty), October 6, 2009 (Petition). identified by Docket ID No. EPA–R05–

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OAR–2009–0120, by one of the Please see the direct final rule which comments, the direct final rule will be following methods: is located in the Rules section of this withdrawn and all public comments 1. http://www.regulations.gov: Follow Federal Register for detailed received will be addressed in a the on-line instructions for submitting instructions on how to submit subsequent final rule based on this comments. comments. proposed rule. EPA will not institute a 2. E-mail: [email protected]. second comment period. Any parties 3. Fax: (312) 692–2551. FOR FURTHER INFORMATION CONTACT: 4. Mail: John M. Mooney, Chief, Charles Hatten, Environmental interested in commenting on this action Criteria Pollutant Section, Air Programs Engineer, Criteria Pollutant Section, Air should do so at this time. Please note Branch (AR–18J), U.S. Environmental Programs Branch (AR–18J), U.S. that if EPA receives adverse comment Protection Agency, 77 West Jackson Environmental Protection Agency, on an amendment, paragraph, or section Boulevard, Chicago, Illinois 60604. Region 5, 77 West Jackson Boulevard, of this rule and if that provision may be 5. Hand Delivery: John M. Mooney, Chicago, Illinois 60604, (312) 886–6031, severed from the remainder of the rule, Chief, Criteria Pollutant Section, Air [email protected]. EPA may adopt as final those provisions Programs Branch (AR–18J), U.S. SUPPLEMENTARY INFORMATION: In the of the rule that are not the subject of an Environmental Protection Agency, 77 Rules section of this Federal Register, adverse comment. For additional West Jackson Boulevard, Chicago, EPA is approving the State’s SIP information, see the direct final rule Illinois 60604. Such deliveries are only submittal as a direct final rule without which is located in the Rules section of accepted during the Regional Office prior proposal because EPA views this this Federal Register. normal hours of operation, and special as a noncontroversial submittal and arrangements should be made for anticipates no adverse comments. A Dated: September 29, 2009. deliveries of boxed information. The detailed rationale for the approval is set Walter W. Kovalick Jr., Regional Office official hours of forth in the direct final rule. If no Acting Regional Administrator, Region 5. business are Monday through Friday, adverse comments are received in [FR Doc. E9–24698 Filed 10–14–09; 8:45 am] 8:30 a.m. to 4:30 p.m., excluding response to this rule, no further activity BILLING CODE 6560–50–P Federal holidays. is contemplated. If EPA receives adverse

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Notices Federal Register Vol. 74, No. 198

Thursday, October 15, 2009

This section of the FEDERAL REGISTER regional office by November 23, 2009. Statistics (BLS), and the Department of contains documents other than rules or The address is U.S. Commission on Health and Human Services (HHS) proposed rules that are applicable to the Civil Rights, 400 State Avenue, Suite sponsor this supplement. public. Notices of hearings and investigations, 908, Kansas City, Kansas 66101. The proposed supplement contains committee meetings, agency decisions and Comments may be e-mailed to rulings, delegations of authority, filing of the same items that were in the 2009 [email protected]. Records generated petitions and applications and agency ASEC instrument, with the exceptions by this meeting may be inspected and statements of organization and functions are described here: examples of documents appearing in this reproduced at the Central Regional section. Office, as they become available, both (1) Additional questions are added before and after the meeting. Persons concerning presence of mortgage, interested in the work of this advisory medical expenditures, child support COMMISSION ON CIVIL RIGHTS committee are advised to go to the paid, and child care paid. Commission’s Web site, www.usccr.gov, (2) Questions on welfare reform Agenda and Notice of Public Meeting or to contact the Central Regional Office of the Missouri Advisory Committee (SWR1—SWR18) are no longer at the above e-mail or street address. included. Notice is hereby given, pursuant to The meeting will be conducted pursuant to the provisions of the rules On June 17, 2009, Congressman the provisions of the rules and McDermott introduced the Measuring regulations of the U.S. Commission on and regulations of the Commission and American Poverty Act of 2009. Under Civil Rights (Commission), and the FACA. Federal Advisory Committee Act this legislation, the Census Bureau will Peter Minarik, be asked to produce estimates under a (FACA), that a planning meeting of the Acting Chief, Regional Programs Missouri Advisory Committee to the modernized poverty measure that Coordination Unit. includes several threshold and resource Commission will convene by conference [FR Doc. E9–24829 Filed 10–14–09; 8:45 am] call at 2 p.m. and adjourn at components that are not included in the BILLING CODE 6335–01–P approximately 3 p.m. on Tuesday, ASEC. The new items in the ASEC for November 10, 2009. The purpose of this 2010 help to implement this meeting is to plan activities for a public modernized poverty measure. DEPARTMENT OF COMMERCE meeting entitled ‘‘Civil Rights Affected Public: Individuals or Implications of Educational Submission for OMB Review; households. Opportunities in Urban Public School Comment Request Frequency: Annually. Settings and Education Reform in Missouri . . . Kansas City School The Department of Commerce will Respondent’s Obligation: Voluntary. District.’’ submit to the Office of Management and Legal Authority: Title 13, United This meeting is available to the public Budget (OMB) for clearance the States Code, section 182, and Title 29, through the following toll-free call-in following proposal for collection of United States Code, sections 1–9. number: (866) 364–7584, conference call information under the provisions of the access code number 33206302. Any Paperwork Reduction Act (44 U.S.C. OMB Desk Officer: Brian Harris- interested member of the public may chapter 35). Kojetin, (202) 395–7314. call this number and listen to the Agency: U.S. Census Bureau. Copies of the above information meeting. Callers can expect to incur Title: Annual Social and Economic collection proposal can be obtained by charges for calls they initiate over Supplement to the Current Population calling or writing Diana Hynek, wireless lines, and the Commission will Survey. Departmental Paperwork Clearance not refund any incurred charges. Callers Form Number(s): CPS–580 (ASEC), Officer, (202) 482–0266, Department of will incur no charge for calls they CPS–580 (ASEC)SP, CPS–676, CPS– Commerce, Room 7845, 14th and initiate over land-line connections to 676(SP). Constitution Avenue, NW., Washington, the toll-free telephone number. Persons OMB Control Number: 0607–0354. DC 20230 (or via the Internet at with hearing impairments may also Type of Request: Revision of a [email protected]). follow the proceedings by first calling currently approved collection. the Federal Relay Service at 1–800–977– Burden Hours: 32,500. Written comments and 8339 and providing the Service with the Number of Respondents: 78,000. recommendations for the proposed conference call number and contact Average Hours per Response: 25 information collection should be sent name Farella E. Robinson. minutes. within 30 days of publication of this To ensure that the Commission Needs and Uses: The purpose of this notice to Brian Harris-Kojetin, OMB secures an appropriate number of lines request for review is to obtain clearance Desk Officer either by fax (202–395– for the public, persons are asked to for the Annual Social and Economic 7245) or e-mail ([email protected]). register by contacting Corrine Sanders of Supplement (ASEC), which we will Dated: October 9, 2009. the Central Regional Office and TTY/ conduct in conjunction with the Glenna Mickelson, TDD telephone number, by 4 p.m. on February, March, and April Current November 3, 2009. Population Survey (CPS). The U.S. Management Analyst, Office of the Chief Members of the public are entitled to Census Bureau has conducted this Information Officer. submit written comments. The supplement annually for over 60 years. [FR Doc. E9–24747 Filed 10–14–09; 8:45 am] comments must be received in the The Census Bureau, the Bureau of Labor BILLING CODE 3510–07–P

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DEPARTMENT OF COMMERCE Supplement to the AD/CVD Petitions’’). 1990). In this case, consistent with the Also, on September 29, 2009, the position taken in circular welded carbon International Trade Administration Department issued a further request to quality steel pipe from the PRC, we have (C–570–957) Petitioners for information and revised the scope by removing all end– clarification of certain aspects of the use language from it. See Notice of Final Certain Seamless Carbon and Alloy Petition. In response to the Determination of Sales at Less Than Steel Standard, Line, and Pressure Department’s request, Petitioners filed a Fair Value and Affirmative Final Pipe from the People’s Republic of supplement to the Petition regarding Determination of Critical China: Initiation of Countervailing Duty general issues, on October 1, 2009. Circumstances: Circular Welded Carbon Investigation In accordance with section 702(b)(1) Quality Steel Pipe from the People’s of the Tariff Act of 1930, as amended Republic of China, 73 FR 31970 (June 5, AGENCY: Import Administration, (‘‘Act’’), Petitioners allege that 2008) (‘‘Circular Welded Pipe’’) at International Trade Administration, producers/exporters of seamless pipe Comment 1 (‘‘ the Department prefers to Department of Commerce. from the PRC received countervailable define product coverage by the physical EFFECTIVE DATE: October 15, 2009. subsidies within the meaning of characteristics of the merchandise FOR FURTHER INFORMATION CONTACT: sections 701 and 771(5) of the Act, and subject to investigation.’’). As noted in Yasmin Nair and Joseph Shuler, AD/ that imports from these producers/ Circular Welded Pipe, excluding end– CVD Operations, Import exporters materially injure, and threaten use language from the scope provides Administration, International Trade further material injury to, an industry in certainty with respect to product Administration, U.S. Department of the United States. coverage and will enable any potential Commerce, 14th Street and Constitution The Department finds that Petitioners future orders to be effectively Avenue, NW, Washington, DC 20230; filed the Petition on behalf of the administered by the Department and telephone: (202) 482–3813 and (202) domestic industry because Petitioners enforced by U.S. Customs and Border 482–1293, respectively. are interested parties, as defined in Protection (‘‘CBP’’). Further, clarity with section 771(9)(C) of the Act, and have respect to scope will ensure that SUPPLEMENTARY INFORMATION: demonstrated sufficient industry respondents in the investigation will The Petition support with respect to the investigation know precisely what is included in the that they request the Department to definition of subject merchandise. On September 16, 2009, the initiate (see ‘‘Determination of Industry As discussed in the preamble to the Department of Commerce Support for the Petition’’ below). Department’s regulations (Antidumping (‘‘Department’’) received a Duties; Countervailing Duties; Final countervailing duty (‘‘CVD’’) petition Period of Investigation Rule, 62 FR 27296, 27323 (May 19, concerning imports of certain seamless The period of investigation is January 1997)), we are setting aside a period for pipe (‘‘seamless pipe’’) from the 1, 2008, through December 31, 2008. interested parties to raise issues People’s Republic of China (‘‘PRC’’) regarding the product coverage of the Scope of Investigation filed in proper form by United States scope. The Department encourages all Steel Corporation and V&M Star L.P. The products covered by this interested parties to submit such 1 (collectively, ‘‘Petitioners’’). On investigation are seamless pipe from the comments by October 26, 2009, which September 25, 2009, the Petition was PRC. For a full description of the scope is twenty calendar days from the amended to add TMK IPSCO and The of the investigation, please see the signature date of this notice. Comments United Steel, Paper and Forestry, ‘‘Scope of the Investigation’’ in should be addressed to Import Rubber, Manufacturing, Energy, Allied Appendix I of this notice. Administration’s APO/Dockets Unit, Industrial and Service Worker Comments on the Scope of Investigation Room 1870, U.S. Department of International Union as additional Commerce, 14th Street and Constitution Petitioners. On September 21 and 22, During our review of the Petition, we Avenue, NW, Washington, DC 20230. 2009, the Department issued requests to discussed the scope of the investigation The period for scope consultations is Petitioners for additional information with Petitioners and suggested a number intended to provide the Department and for clarification of certain areas of of revisions to the scope language, with ample opportunity to consider all the Petition. Based on the Department’s including the removal from the scope of comments and to consult with parties requests, Petitioners filed a supplement all language that relies on end–use to prior to the issuance of the preliminary to the Petition, regarding general issues, define covered merchandise. While determination in this investigation. on September 25, 2009 (‘‘Supplement to Petitioners made a number of the the AD/CVD Petitions’’). On September suggested revisions to the scope, they Consultations 25, 2009, the Department requested did not remove end–use language from Pursuant to section 702(b)(4)(A)(ii) of further information from Petitioners, the scope. See Supplement Regarding the Act, on September 22, 2009, the including suggested refinements to the General Issues to the AD/CVD Petition Department invited representatives of scope. On September 28, 2009, at 4; Second Supplement Regarding the Government of the PRC for Petitioners filed a supplement to the General Issues to the AD/CVD Petition, consultations with respect to the Petition, regarding the CVD allegations. Item 3; and memorandum to the file Petition. The Government of the PRC On September 29, 2009, Petitioners filed from Drew Jackson regarding ‘‘Initiation did not request such consultations. an additional supplement to the Petition of the Antidumping Duty Investigation in response to the Department’s of Certain Seamless Carbon and Alloy Determination of Industry Support for September 25, 2009 request (‘‘Second Steel Standard, Line, and Pressure Pipe the Petition from the People’s Republic of China’’. Section 702(b)(1) of the Act requires 1 See Petition for the Imposition of Antidumping The Department has inherent authority that a petition be filed on behalf of the and Countervailing Duties Pursuant to Sections 701 to define the scope of the investigation domestic industry. Section 702(c)(4)(A) and 731 of the Tariff Act of 1930, as Amended: Certain Seamless Carbon and Alloy Steel Standard, and may depart from the scope as of the Act provides that a petition meets Line, and Pressure Pipe from the People’s Republic proposed by a petition. NTN Bearing this requirement if the domestic of China, dated September 16, 2009 (‘‘Petition’’). Corp. v. U.S., 747 F. Supp. 726, 731 (CIT producers or workers who support the

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petition account for: (i) at least 25 investigation requested in the Petition. polling).6 Second, the domestic percent of the total production of the As noted, the Department has changed producers (or workers) have met the domestic like product; and (ii) more the definition of the class or kind of statutory criteria for industry support than 50 percent of the production of the merchandise to be investigated from under section 702(c)(4)(A)(i) of the Act domestic like product produced by that that which was initially requested by because the domestic producers (or portion of the industry expressing Petitioners. The reference point from workers) who support the Petition support for, or opposition to, the which the domestic like product is account for at least 25 percent of the petition. Moreover, section 702(c)(4)(D) defined is the class or kind of total production of the domestic like of the Act provides that, if the petition merchandise that is the basis for the product.7 Finally, the domestic does not establish support of domestic Department’s initiation of this producers (or workers) have met the producers or workers accounting for investigation. Based on our analysis of statutory criteria for industry support more than 50 percent of the total the information submitted on the under section 702(c)(4)(A)(ii) of the Act production of the domestic like product, record, we have determined that because the domestic producers (or the Department shall: (i) poll the seamless pipe constitutes a single workers) who support the Petition industry or rely on other information in domestic like product and we have account for more than 50 percent of the order to determine if there is support for analyzed industry support in terms of production of the domestic like product the petition, as required by that domestic like product.3 produced by that portion of the industry subparagraph (A); or (ii) determine In determining whether Petitioners expressing support for, or opposition to, industry support using a statistically the Petition. Accordingly, the valid sampling method to poll the have standing under section 702(c)(4)(A) of the Act, we considered Department determines that the Petition industry. was filed on behalf of the domestic Section 771(4)(A) of the Act defines the industry support data contained in the Petition with reference to the industry within the meaning of section the ‘‘industry’’ as the producers as a 702(b)(1) of the Act.8 whole of a domestic like product. Thus, domestic like product as defined in the ‘‘Scope of the Investigation’’ in The Department finds that Petitioners to determine whether a petition has the filed the Petition on behalf of the requisite industry support, the statute Appendix I of this notice. To establish industry support, Petitioners provided domestic industry because Petitioners directs the Department to look to are interested parties (e.g., domestic producers and workers who produce the their own 2008 production of the domestic like product, and compared producers) as defined in section domestic like product. The International 771(9)(C) of the Act and have Trade Commission (‘‘ITC’’), which is this to the estimated total production of the domestic like product for the entire demonstrated sufficient industry responsible for determining whether support with respect to the CVD ‘‘the domestic industry’’ has been domestic industry.4 To estimate 2008 production of the domestic like product, investigation that they are requesting injured, must also determine what that the Department initiate.9 constitutes a domestic like product in Petitioners used data from an industry order to define the industry. While both publication, published by the American Injury Test Iron and Steel Institute (‘‘AISI’’), which the Department and the ITC must apply Because the PRC is a ‘‘Subsidies compiles data on domestic producers’ the same statutory definition regarding Agreement Country’’ within the shipments of seamless standard, line the domestic like product (see section meaning of section 701(b) of the Act, and pressure pipe. Petitioners 771(10) of the Act), they do so for section 701(a)(2) of the Act applies to approximated domestic production of different purposes and pursuant to a this investigation. Accordingly, the ITC seamless pipe by inflating the volume of separate and distinct authority. In must determine whether imports of the domestic shipments reported by AISI by addition, the Department’s subject merchandise from the PRC the ratio of the difference between determination is subject to limitations of materially injure, or threaten material Petitioners’ own production and time and information. Although this injury to, a U.S. industry. may result in different definitions of the shipments in the applicable calendar like product, such differences do not year.5 Allegations and Evidence of Material render the decision of either agency Our review of the data provided in the Injury and Causation 2 contrary to law. Petition, supplemental submissions, and Petitioners allege imports of seamless Section 771(10) of the Act defines the other information readily available to pipe from the PRC are benefitting from domestic like product as ‘‘a product the Department, including a search of countervailable subsidies and that such which is like, or in the absence of like, the Internet, indicates that Petitioners imports are causing, or threaten to cause most similar in characteristics and uses have established industry support. First, material injury to the domestic industry with, the article subject to an the Petition established support from producing seamless pipe. In addition, investigation under this title.’’ Thus, the domestic producers (or workers) Petitioners alleged that subject imports reference point from which the accounting for more than 50 percent of exceed the negligibility threshold domestic like product analysis begins is the total production of the domestic like provided for under section 771(24)(A) of ‘‘the article subject to an investigation,’’ product and, as such, the Department is the Act. (i.e., the class or kind of merchandise to not required to take further action in Petitioners contended that the be investigated, which normally will be order to evaluate industry support (e.g., industry’s injured condition is the scope as defined in the petition). illustrated by reduced market share, With regard to the domestic like 3 For a discussion of the domestic like product increased import penetration, product, Petitioners did not offer a analysis in this case, see Countervailing Duty definition of domestic like product underselling and price depressing and Investigation Initiation Checklist: Certain Seamless suppressing effects, lost sales and distinct from the scope of the Pipe from the PRC (‘‘Initiation Checklist’’) at Attachment II (‘‘Industry Support’’), dated 6 See Section 702(c)(4)(D) of the Act, and 2 See USEC, Inc. v. United States, 132 F. Supp. concurrently with this notice and on file in the ≥ ≥ Initiation Checklist at Attachment II. 2d 1, 8 (CIT 2001), citing Algoma Steel Corp. Ltd. Central Records Unit ( CRU ), Room 1117 of the 7 v. United States, 688 F. Supp. 639, 644 (CIT 1988), main Department of Commerce building. See Initiation Checklist at Attachment II. aff’d 865 F.2d 240 (Fed. Cir. 1989), cert. denied 492 4 See Initiation Checklist at Attachment II. 8 See id. U.S. 919 (1989). 5 See id. 9 See id.

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revenue, reduced production, reduced 4. Loan and Interest Forgiveness for 4. Program to Rebate Antidumping shipments, increased inventory SOEs Duties overhang, reduced employment and C. Tax Benefit Programs 5. Subsidies for Development of wages, and an overall decline in 1. Income Tax Credits for Famous Export Brands and China financial performance.10 We have Domestically Owned Companies World Top Brands assessed the allegations and supporting Purchasing Domestically Produced 6. Sub–central Government Programs evidence regarding material injury, Equipment to Promote Famous Export Brands threat of material injury, and causation, 2. Preferential Income Tax Policy for and China World Top Brands and have determined that these Enterprises in the Northeast Region 7. Grants to Loss–Making SOEs allegations are properly supported by 3. Forgiveness of Tax Arrears for 8. Export Interest Subsidies adequate evidence and meet the Enterprises in the Old Industrial H. Other Regional Programs statutory requirements for initiation.11 Bases of Northeast China 1. Subsidies Provided in the Tianjin 4. Reduction in or Exemption from Binhai New Area and the Tianjin Initiation of Countervailing Duty Fixed Assets Investment Economic and Technological Investigation Orientation Regulatory Tax Development Area Section 702(b)(1) of the Act requires D. Subsidies for Foreign Invested 2. High–Tech Industrial Development the Department to initiate a CVD Enterprises (‘‘FIEs’’) Zones proceeding whenever an interested 1. ‘‘Two Free, Three Half’’ Program For further information explaining party files a petition on behalf of an 2. Local Income Tax Exemption and why the Department is investigating industry that: (1) alleges the elements Reduction Programs for these programs, see Initiation Checklist. necessary for an imposition of a duty ‘‘Productive’’ FIEs We are not including in our under section 701(a) of the Act; and (2) 3. Preferential Tax Programs for FIEs investigation the following programs is accompanied by information Recognized as High or New alleged to benefit producers and reasonably available to the petitioner(s) Technology Enterprises exporters of the subject merchandise in supporting the allegations. 4. Income Tax Reductions for Export– the PRC: The Department has examined the Oriented FIEs A. Tax Benefit Programs Petition on seamless pipe from the PRC E. Tariff and Indirect Tax Programs and finds that it complies with the 1. Stamp Exemption on Share Income Tax Benefits for requirements of section 702(b) of the Transfers Under Non–Tradable Domestically–Owned Enterprises Act. Therefore, in accordance with Share Reform Engaging in Research and section 702(b) of the Act, we are 2. Value Added Tax (‘‘VAT’’) and Development Petitioners allege that according to the initiating a CVD investigation to Tariff Exemptions for Purchases of PRC’s World Trade Organization determine whether manufacturers, Fixed Assets Under the Foreign subsidies notification, domestic producers, or exporters of seamless pipe Trade Development Fund Program industrial enterprises whose research in the PRC receive countervailable 3. Import Tariff and VAT Exemptions and development expenses increased by subsidies. For a discussion of evidence for FIEs and Certain Domestic 10 percent from the previous year may supporting our initiation determination, Enterprises Using Imported offset 150 percent of the research see Initiation Checklist. Equipment in Encouraged We are including in our investigation Industries expenditures from their income tax the following programs alleged in the 4. Deed Tax Exemption For SOEs obligations. Petitioners have not Petition to have provided Undergoing Mergers or sufficiently established that this tax countervailable subsidies to producers Restructuring reduction program is specific. and exporters of the subject 5. Export Incentive Payments Consequently, we do not plan to merchandise in the PRC: Characterized as ‘‘VAT rebates’’ investigate this program. A. Preferential Loans F. Government Provision of Goods and B. Provision of Inputs for Less than 1. Policy Loans to the Seamless Pipe Services for Less Than Adequate Adequate Remuneration Industry Remuneration Export Restrictions on Steel Rounds 2. Export Loans 1. Provision of Land to SOEs for Less Petitioners allege that effective 3. Treasury Bond Loans Than Adequate Remuneration January 1, 2008, the Government of the 4. Preferential Loans for State–Owned 2. Provision of Land Use Rights for PRC increased the export tax on steel Enterprises (‘‘SOEs’’) Less Than Adequate Remuneration billets, including steel rounds, from 15 5. Preferential Loans for Key Projects 3. Provision of Steel Rounds for Less to 25 percent. The result, according to and Technologies Than Adequate Remuneration Petitioners, was a decline in exports of 6. Preferential Lending to Seamless 4. Provision of Electricity for Less this product from the PRC. Specifically, Pipe Producers and Exporters Than Adequate Remuneration Petitioners provide information Classified as ‘‘Honorable 5. Provision of Electricity and Water indicating that exports of steel rounds Enterprises for Less Than Adequate 7. Loans and Interest Subsidies Remuneration to Seamless Pipe fell by 92.6 percent on an annual basis Provided Pursuant to the Northeast Producers Located in Jiangsu for the first two months of the year, and Revitalization Program Province were zero in the month of February B. Equity Programs 6. Export Restrictions on Coke 2008. The further result of the export 1. Debt–to-Equity Swaps 7. Provision of Coking Coal for Less tax, according to Petitioners, was a 2. Equity Infusions Than Adequate Remuneration sharp divergence in domestic PRC and 3. Exemptions for SOEs From G. Grant Programs world prices of steel rounds. While Distributing Dividends to the State 1. The State Key Technology Project Petitioners have provided reasonably Fund available information showing that 10 See Initiation Checklist at Attachment III for 2. Foreign Trade Development Fund domestic PRC prices are less than world details. (Northeast Revitalization Program) prices, the information does not show a 11 See id. 3. Export Assistance Grants connection between the export

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restraints and this price difference. in outside diameter, regardless of wall– DEPARTMENT OF COMMERCE Consequently, we do not plan to thickness, manufacturing process (e.g., investigate this program. hot–finished or cold–drawn), end finish International Trade Administration Respondent Selection (e.g., plain end, beveled end, upset end, [A–570–601] threaded, or threaded and coupled), or For this investigation, the Department surface finish (e.g., bare, lacquered or Tapered Roller Bearings and Parts expects to select respondents based on coated). Redraw hollows are any Thereof, Finished and Unfinished, from CBP data for U.S. imports during the unfinished carbon or alloy steel (other the People’s Republic of China; period of investigation. We intend to than stainless steel) pipe or ‘‘hollow Extension of Time Limit for the Final make our decision regarding respondent Results of the 2007–2008 selection within 20 days of publication profiles’’ suitable for cold finishing operations, such as cold drawing, to Administrative Review of the of this Federal Register notice. The Antidumping Duty Order Department invites comments regarding meet the American Society for Testing the CBP data and respondent selection and Materials (‘‘ASTM’’) or American AGENCY: Import Administration, within seven calendar days of Petroleum Institute (‘‘API’’) International Trade Administration, publication of this Federal Register specifications referenced below, or Department of Commerce. notice. comparable specifications. Specifically FOR FURTHER INFORMATION CONTACT: included within the scope are seamless Frances Veith or Brendan Quinn, AD/ Distribution of Copies of the Petition carbon and alloy steel (other than CVD Operations, Import In accordance with section stainless steel) standard, line, and Administration, International Trade 702(b)(4)(A)(i) of the Act and 19 CFR pressure pipes produced to the ASTM Administration, U.S. Department of 351.202(f), a copy of the public version A–53, ASTM A–106, ASTM A–333, Commerce, 14th Street and Constitution of the Petition has been provided to the ASTM A–334, ASTM A–335, ASTM A– Avenue, NW, Washington, DC 20230, representatives of the Government of the 589, ASTM A–795, ASTM A–1024, and telephone: (202) 482–4295 or (202) 482– PRC. Because of the particularly large the API 5L specifications, or comparable 5848, respectively. number of producers/exporters specifications, and meeting the physical SUPPLEMENTARY INFORMATION: identified in the Petition, the parameters described above, regardless Background Department considers the service of the of application, with the exception of the public version of the Petition to the On July 30, 2008, the Department of exclusion discussed below. foreign producers/exporters satisfied by Commerce (‘‘Department’’) initiated the the delivery of the public version to the Specifically excluded from the scope of administrative review of the Government of the PRC, consistent with the investigation are unattached antidumping duty order on tapered 19 CFR 351.203(c)(2). couplings. roller bearings and parts thereof, finished or unfinished (‘‘TRBs’’), from ITC Notification the People’s Republic of China (‘‘PRC’’) We have notified the ITC of our The merchandise covered by the for the period June 1, 2007 through May initiation, as required by section 702(d) investigation is currently classified in 31, 2008. See Initiation of Antidumping of the Act. the Harmonized Tariff Schedule of the and Countervailing Duty Administrative United States (‘‘HTSUS’’) under item Reviews, Request for Revocation in Part, Preliminary Determination by the ITC numbers: 7304.19.1020, 7304.19.1030, and Deferral of Administrative Review, The ITC will preliminarily determine, 7304.19.1045, 7304.19.1060, 73 FR 44220 (July 30, 2008). On July 8, within 45 days after the date on which 7304.19.5020, 7304.19.5050, 2009, the Department published its the Petition is filed, whether there is a 7304.31.6050, 7304.39.0016, preliminary results on TRBs from the reasonable indication that imports of 7304.39.0020, 7304.39.0024, PRC. See Tapered Roller Bearings and subsidized seamless pipe from the PRC 7304.39.0028, 7304.39.0032, Parts Thereof, Finished or Unfinished, are causing material injury, or 7304.39.0036, 7304.39.0040, from the People’s Republic of China: threatening to cause material injury, to 7304.39.0044, 7304.39.0048, Preliminary Results of the 2007 2008 a U.S. industry. See section 703(a)(2) of 7304.39.0052, 7304.39.0056, Administrative Review of the the Act. A negative ITC determination 7304.39.0062, 7304.39.0068, Antidumping Duty Order, 74 FR 32539 will result in the investigation being 7304.39.0072, 7304.51.5005, (July 8, 2009). The final results of this terminated; otherwise, the investigation 7304.51.5060, 7304.59.6000, administrative review are currently due will proceed according to statutory and 7304.59.8010, 7304.59.8015, no later than November 5, 2009. regulatory time limits. This notice is issued and published 7304.59.8020, 7304.59.8025, Extension of Time Limit for Final pursuant to section 777(i) of the Act. 7304.59.8030, 7304.59.8035, Results 7304.59.8040, 7304.59.8045, Section 751(a)(3)(A) of the Tariff Act Dated: October 6, 2009. 7304.59.8050, 7304.59.8055, Ronald K. Lorentzen, of 1930, as amended (‘‘the Act’’), 7304.59.8060, 7304.59.8065, and requires the Department to issue the Acting Assistant Secretary for Import 7304.59.8070. Administration. final results in an administrative review within 120 days after the date on which Appendix I Although the HTSUS subheadings are the preliminary results are published. Scope of the Investigation provided for convenience and customs However, if it is not practicable to purposes, our written description of the complete the review within this time Attachment I period, section 751(a)(3)(A) of the Act merchandise subject to this scope is The merchandise covered by this allows the Department to extend the dispositive. investigation is certain seamless carbon time period to a maximum of 180 days. and alloy steel (other than stainless [FR Doc. E9–24834 Filed 10–14–09; 8:45 am] We determine that it is not practicable steel) pipes and redraw hollows, less BILLING CODE 3510–DS–S to complete the final results of this than or equal to 16 inches (406.4 mm) review within the original time limit

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because the Department requires Southwest Region, NMFS, 501 West prepare an environmental assessment or additional time to analyze issues raised Ocean Blvd., Suite 4200, Long Beach, environmental impact statement. in parties’ briefs and rebuttal briefs CA 90802–4213; phone (562)980–4001; Concurrent with the publication of which were also discussed in meetings fax (562)980–4018. this notice in the Federal Register, with counsel for the parties, such as, Written comments or requests for a NMFS is forwarding copies of this surrogate values and third–country public hearing on this application application to the Marine Mammal processing. Therefore, given the should be mailed to the Chief, Permits, Commission and its Committee of complexity of issues in this case, we are Conservation and Education Division, Scientific Advisors. extending the time limit for completion F/PR1, Office of Protected Resources, Dated: October 8, 2009. of the final results by 30 days. NMFS, 1315 East-West Highway, Room P. Michael Payne, An extension of 30 days from the 13705, Silver Spring, MD 20910. Those current deadline of November 5, 2009, Chief, Permits, Conservation and Education individuals requesting a hearing should Division, Office of Protected Resources, would result in a new deadline of set forth the specific reasons why a National Marine Fisheries Service. December 5, 2009. However, since hearing on this particular request would December 5, 2009, falls on a Saturday, [FR Doc. E9–24839 Filed 10–14–09; 8:45 am] be appropriate. BILLING CODE 3510–22–S a non–business day, the final results Comments may also be submitted by will now be due no later than December facsimile at (301)713–0376, provided 7, 2009, the next business day. the facsimile is confirmed by hard copy DEPARTMENT OF COMMERCE This notice is published pursuant to submitted by mail and postmarked no sections 751(a) and 777(i) of the Act. later than the closing date of the National Oceanic and Atmospheric Dated: October 8, 2009. comment period. Administration John M. Andersen, Comments may also be submitted by RIN: 0648–XS09 Acting Deputy Assistant Secretary for e-mail. The mailbox address for Antidumping and Countervailing Duty providing e-mail comments is North Pacific Fishery Management Operations. [email protected]. Include Council; Public Meeting [FR Doc. E9–24833 Filed 10–14–09; 8:45 am] in the subject line of the e-mail AGENCY: National Marine Fisheries BILLING CODE 3510–DS–S comment the following document Service (NMFS), National Oceanic and identifier: File No. 14676. Atmospheric Administration (NOAA), DEPARTMENT OF COMMERCE FOR FURTHER INFORMATION CONTACT: Kate Commerce. Swails or Tammy Adams, (301)713– ACTION: Notice of a public meeting. National Oceanic and Atmospheric 2289. Administration SUMMARY: The North Pacific Fishery SUPPLEMENTARY INFORMATION: The Management Council (Council) Salmon RIN 0648–XS27 subject permit is requested under the Bycatch Workgroup will meet in authority of the Marine Mammal Anchorage, AK. Marine Mammals; File No. 14676 Protection Act of 1972, as amended (MMPA; 16 U.S.C. 1361 et seq.), and the DATES: The meeting will be held on AGENCY: National Marine Fisheries October 29, 2009, 9 a.m. to 5 p.m. Service (NMFS), National Oceanic and regulations governing the taking and ADDRESSES: The meeting will be held at Atmospheric Administration (NOAA), importing of marine mammals (50 CFR the Clarion Suites Downtown (formally Commerce. part 216).The purpose of this research is Hawthorn Suites), 1110 West 8th ACTION: Notice; receipt of application. to determine the role of blood oxygen store depletion in the dive behavior and Avenue, Ballroom B, Anchorage, AK. SUMMARY: Notice is hereby given that foraging ecology of California sea lions. Council address: North Pacific Paul Ponganis, Ph.D., University of This research would help determine the Fishery Management Council, 605 W. California at San Diego, La Jolla, CA, ability of these animals to adapt to 4th Ave., Suite 306, Anchorage, AK 92093, has applied in due form for a environmental change. Over the course 99501–2252. permit to conduct research on California of five years, up to twenty animals FOR FURTHER INFORMATION CONTACT: sea lions (Zalophus californianus). would be captured, flipper tagged, Diana Stram, Council staff; telephone: DATES: Written, telefaxed, or e-mail anesthetized, and equipped with a (907) 271–2809. comments must be received on or before backpack blood oxygen recorder during SUPPLEMENTARY INFORMATION: The November 16, 2009. foraging trips to sea. Animals would be agenda for this meeting will include: ADDRESSES: The application and related recaptured after the foraging trip to review and provide comments on the documents are available for review by remove the recorders. Research would staff discussion paper of alternative selecting ‘‘Records Open for Public occur on San Nicolas Island off the coast chum management measure options, Comment’’ from the Features box on the of California. Annually, up to 6000 overview of chum stock status in Applications and Permits for Protected California sea lions, 500 harbor seals western AK, discussion of current Species (APPS) home page, https:// (Phoca vitulina), 1000 northern elephant knowledge of chum stock of origin in apps.nmfs.noaa.gov, and then selecting seals (Mirounga angustirostris), and 150 Bering Sea pollock fishery bycatch. File No. 14676 from the list of available northern fur seals (Callorhinus ursinus) Although non-emergency issues not applications. may be incidentally harassed during contained in this agenda may come These documents are also available research. The permit would be valid for before this group for discussion, in upon written request or by appointment five years. accordance with the Magnuson-Stevens in the following office(s): In compliance with the National Fishery Conservation and Management Permits, Conservation and Education Environmental Policy Act of 1969 (42 Act (Magnuson-Stevens Act), those Division, Office of Protected Resources, U.S.C. 4321 et seq.), an initial issues may not be the subject of formal NMFS, 1315 East-West Highway, Room determination has been made that the action during this meeting. Actions will 13705, Silver Spring, MD 20910; phone activity proposed is categorically be restricted to those issues specifically (301)713–2289; fax (301)713–0376; and excluded from the requirement to identified in this notice and any issues

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arising after publication of this notice spiny dogfish for the upcoming fishing 2009 at 11 a.m., reconvening each day that require emergency action under year(s). Management measures that will through Thursday, November 5, 2009. Section 305(c) of the Magnuson-Stevens be discussed may include, but not All meetings are open to the public, Act, provided the public has been necessarily be limited to, quotas and except a closed session will be held notified of the Council’s intent to take daily landings limits. Multiple-year from 11 a.m. until 1 p.m. on Saturday, final action to address the emergency. management measures for fishing years October 31 to address litigation and 2011 through 2012 may also be personnel matters. The Council will Special Accommodations addressed. The Atlantic States Marine meet as late as necessary each day to This meeting is physically accessible Fisheries Commission’s Spiny Dogfish complete its scheduled business. to people with disabilities. Requests for Technical Committee will also be ADDRESSES: The Pacific Council and sign language interpretation or other present and will develop advisory body meetings will be held at auxiliary aids should be directed to Gail recommendations for management the Hilton Orange County/Costa Mesa, Bendixen at (907) 271–2809 at least 7 measures in state jurisdictional waters. 3050 Bristol Street, Costa Mesa, CA working days prior to the meeting date. Although non-emergency issues not 92626; telephone: (714) 540–7000. Dated: October 8, 2009. contained in this agenda may come Council address: Pacific Fishery William D. Chappell, before this group for discussion, in Management Council, 7700 NE Acting Director, Office of Sustainable accordance with the Magnuson-Stevens Ambassador Place, Suite 101, Portland, Fisheries, National Marine Fisheries Service. Fishery Conservation and Management OR 97220. [FR Doc. E9–24736 Filed 10–14–09; 8:45 am] Act (Magnuson-Stevens Act), those FOR FURTHER INFORMATION CONTACT: Dr. issues may not be the subject of formal BILLING CODE 3510–22–S Donald O. McIsaac, Executive Director, action during this meeting. Actions will telephone: (866) 806–7204 or (503) 820– be restricted to those issues specifically 2280; or access the Pacific Council DEPARTMENT OF COMMERCE identified in this notice and any issues website, www.pcouncil.org for the arising after publication of this notice current meeting location, proposed National Oceanic and Atmospheric that require emergency action under agenda, and meeting briefing materials. Administration Section 305(c) of the Magnuson-Stevens SUPPLEMENTARY INFORMATION: The Act, provided the public has been RIN: 0648–XS31 following items are on the Pacific notified of the Council’s intent to take Council agenda, but not necessarily in final action to address the emergency. Mid-Atlantic Fishery Management this order: Council; Public Meeting Special Accommodations A. Call to Order AGENCY: National Marine Fisheries The meeting is physically accessible 1. Opening Remarks Service (NMFS), National Oceanic and to people with disabilities. Requests for 2. Roll Call Atmospheric Administration (NOAA), sign language interpretation or other 3. Report of the Executive Director Commerce. auxiliary aids should be directed to M. 4. Adopt Meeting Agenda ACTION: Notice of a public meeting. Jan Bryan at the Mid-Atlantic Council Office, (302) 674–2331 extension 18, at B. Open Comment Period SUMMARY: The Mid-Atlantic Fishery least 5 days prior to the meeting date. 1. Comments on Non-Agenda Items Management Council’s (Council) Spiny Dated: October 9, 2009. Dogfish Monitoring Committee will C. Pacific Halibut Management Tracey L. Thompson, hold a public meeting. 1. 2010 Pacific Halibut Fishery Acting Director, Office of Sustainable DATES: The meeting will be held on Fisheries, National Marine Fisheries Service. Regulations Thursday, October 29, 2009, from 10 a.m. to 4 p.m. [FR Doc. E9–24739 Filed 10–14–09; 8:45 am] D. Ecosystem Management BILLING CODE 3510–22–S ADDRESSES: The meeting will be held at 1. Ecosystem Based Fishery the Radisson Airport Hotel Providence, Management Plan 2081 Post Rd, Warwick, RI 02886, DEPARTMENT OF COMMERCE E. Habitat telephone: (401) 739–3000. Council address: Mid-Atlantic Fishery National Oceanic and Atmospheric 1. Current Habitat Issues Management Council, 300 S. New Administration F. Highly Migratory Species Street, Room 2115, Dover, DE 19904; Management telephone: (302) 674–2331. RIN: 0648–XS33 1. National Marine Fisheries Service FOR FURTHER INFORMATION CONTACT: Pacific Fishery Management Council; (NMFS) Report Daniel T. Furlong, Executive Director, Public Meeting 2. Recommendations to the Western Mid-Atlantic Fishery Management and Central Pacific Fisheries AGENCY: National Marine Fisheries Council, 300 S. New Street, Room 2115, Commission Service, National Oceanic and Dover, DE 19904; telephone: (302) 674– 3. Fishery Management Plan Atmospheric Administration, 2331, extension 19. Amendment 2: Annual Catch Limits and Commerce. SUPPLEMENTARY INFORMATION: The Accountability Measures purpose of this meeting is to review the ACTION: Notice of public meetings. update to the status of the spiny dogfish G. Groundfish Management SUMMARY: The Pacific Council and its stock and develop management 1. NMFS Report advisory entities will hold public measures for the 2010 fishing year. The 2. Stock Assessments and Rebuilding meetings. Monitoring Committee will take into Plans for 2011–12 Groundfish Fisheries consideration the Council’s Scientific DATES: The Pacific Council and its 3. Council Recommendations for and Statistical Committee’s advisory entities will meet October 30– Exempted Fishing Permits recommendations for specification of November 5, 2009. The Council meeting 4. Part 1 - Inseason Adjustments to Acceptable Biological Catch (ABC) for will begin on Saturday, October 31, 2009 and 2010 Groundfish Fisheries

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5. Part 1 - Management 9. Part 2 - Management 2. Amendment 13: Annual Catch Recommendations for 2011–12 Recommendations for 2011–12 Fisheries Limits and Accountability Measures Groundfish Fisheries 10. Part 2 - Inseason Adjustments to J. Administrative Matters 6. Fishery Management Plan 2009 and 2010 Groundfish Fisheries 1. Fiscal Matters Amendment 23 - Annual Catch Limits H. Salmon Management and Accountability Measures 2. Approval of Council Meeting 1. 2009 Salmon Methodology Review Minutes 7. National Catch Share Task Force 3. Membership Appointments and Report I. Coastal Pelagic Species Management Council Operating Procedures 8. Fishery Management Plan 1. Sardine Stock Assessment and 4. Future Council Meeting Agenda Amendment 20 - Trawl Rationalization Management Measures and Workload Planning SCHEDULE OF ANCILLARY AND ADVISORY BODY MEETINGS

Friday, October 30, 2009 . Scientific and Statistical Committee 8 a.m.. Habitat Committee 8:30 a.m.. Highly Migratory Species Advisory Subpanel 1 p.m.. Highly Migratory Species Management Team 1 p.m.. Pacific Council Office 1 p.m.. Saturday, October 31, 2009 . Pacific Council Office 7 a.m.. California State Delegation 7 a.m.. Oregon State Delegation 7 a.m.. Washington State Delegation 7 a.m.. Groundfish Advisory Subpanel 8 a.m.. Groundfish Management Team 8 a.m.. Highly Migratory Species Advisory Subpanel 8 a.m.. Highly Migratory Species Management Team 8 a.m.. Scientific and Statistical Committee 8 a.m.. Habitat Committee 8:30 a.m.. Enforcement Consultants 10 a.m.. Sunday, November 1, 2009 . Pacific Council Office 8 a.m.. California State Delegation 8 a.m.. Oregon State Delegation 8 a.m.. Washington State Delegation 8 a.m.. Highly Migratory Species Advisory Subpanel 8 a.m.. Highly Migratory Species Management Team 8 a.m.. Scientific and Statistical Committee 8 a.m.. Enforcement Consultants 9:30 a.m.. Groundfish Advisory Subpanel 9:30 a.m.. Groundfish Management Team 9:30 a.m.. Coastal Pelagic Species Advisory Subpanel and Management in Joint Session 1 p.m.. Annual Awards Banquet 6 p.m.. Monday, November 2, 2009 . Pacific Council Office 7 a.m.. California State Delegation 7 a.m.. Oregon State Delegation 7 a.m.. Washington State Delegation 7 a.m.. Coastal Pelagic Species Advisory Subpanel 8 a.m.. Coastal Pelagic Species Management Team 8 a.m.. Enforcement Consultants 8 a.m.. Groundfish Advisory Subpanel 8 a.m.. Groundfish Management Team 8 a.m.. Tuesday, November 3, 2009 . Pacific Council Office 7 a.m.. California State Delegation 7 a.m.. Oregon State Delegation 7 a.m.. Washington State Delegation 7 a.m.. Coastal Pelagic Species Management Team 8 a.m.. Enforcement Consultants 8 a.m.. Groundfish Advisory Subpanel 8 a.m.. Groundfish Management Team 8 a.m.. Wednesday, November 4, 2009 . Pacific Council Office 7 a.m.. California State Delegation 7 a.m.. Oregon State Delegation 7 a.m.. Washington State Delegation 7 a.m.. Enforcement Consultants 8 a.m.. Groundfish Advisory Subpanel 8 a.m.. Groundfish Management Team 8 a.m.. Thursday, November 5, 2009 . Pacific Council Office 7 a.m.. California State Delegation 7 a.m..

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SCHEDULE OF ANCILLARY AND ADVISORY BODY MEETINGS—Continued

Oregon State Delegation 7 a.m.. Washington State Delegation 7 a.m..

Although non-emergency issues not telephone: (401) 831–3900; fax: (401) DEPARTMENT OF COMMERCE contained in this agenda may come 751–0007. before the Pacific Council for Council address: New England National Oceanic and Atmospheric discussion, those issues may not be the Fishery Management Council, 50 Water Administration subject of formal Council action during Street, Mill 2, Newburyport, MA 01950. RIN: 0648–XS38 this meeting. Council action will be FOR FURTHER INFORMATION CONTACT: Paul restricted to those issues specifically J. Howard, Executive Director, New Gulf of Mexico Fishery Management listed in this notice and any issues England Fishery Management Council; Council; Public Meeting arising after publication of this notice telephone: (978) 465–0492. that require emergency action under AGENCY: National Marine Fisheries SUPPLEMENTARY INFORMATION: The Service (NMFS), National Oceanic and Section 305(c) of the Magnuson-Stevens Committee will review Scallop Fishery Conservation and Management Atmospheric Administration (NOAA), Framework 21 alternatives and analyses. Commerce. Act, provided the public has been Framework 21 is considering measures ACTION: Notice of a public meeting. notified of the Council’s intent to take for the 2010 fishing year including final action to address the emergency. compliance with the first reasonable SUMMARY: The Gulf of Mexico Fishery Special Accommodations and prudent measure required in the Management Council will convene a recent turtle biological opinion, fishery These meetings are physically public meeting of the Outreach and specifications for both the limited accessible to people with disabilities. Education Advisory Panel (AP). access and general category fleets, area Requests for sign language DATES: The Outreach and Education AP rotation adjustments including interpretation or other auxiliary aids meeting is scheduled to begin at 1 p.m. consideration of a new scallop access should be directed to Ms. Carolyn Porter on Wednesday, November 4, 2009 and area on Georges Bank, and other at (503) 820–2280 at least 5 days prior end by 5 p.m. on Thursday, November measures including minor adjustments to the meeting date. 5, 2009. to the observer set-aside program. The Dated: October 9, 2009. ADDRESSES: The meeting will be held at Council is scheduled to make final the Hilton, 2225 N. Lois Ave. Tampa, FL Tracey L. Thompson, decision on this action at the November 33607. Acting Director, Office of Sustainable Council meeting and the Scallop Council address: Gulf of Mexico Fisheries, National Marine Fisheries Service. Committee may identify preferred Fishery Management Council, 2203 N. [FR Doc. E9–24741 Filed 10–14–09; 8:45 am] alternatives for the Council to consider. Lois Avenue, Suite 1100, Tampa, FL BILLING CODE 3510–22–S The committee may discuss other topics 33607. at their discretion. Although non-emergency issues not FOR FURTHER INFORMATION CONTACT: DEPARTMENT OF COMMERCE contained in this agenda may come Charlene Ponce, Public Information before this group for discussion, those Officer; telephone: (813) 348–1630. National Oceanic and Atmospheric issues may not be the subject of formal SUPPLEMENTARY INFORMATION: During Administration action during this meeting. Action will this Advisory Panel meeting, the RIN: 0648–XS37 be restricted to those issues specifically Outreach and Education AP will receive listed in this notice and any issues updates on past recommendations. In New England Fishery Management arising after publication of this notice addition, the panel will discuss strategic Council; Public Meeting that require emergency action under planning for priority recommendations, section 305(c) of the Magnuson-Stevens the redesign of the Council web site, AGENCY: National Marine Fisheries Fishery Conservation and Management educational meetings regarding Service (NMFS), National Oceanic and Act, provided the public has been potential management changes for gag Atmospheric Administration (NOAA), notified of the Council’s intent to take grouper, and opportunities for outreach. Commerce. final action to address the emergency. Although other non-emergency issues ACTION: Notice of a public meeting. not on the agenda may come before the Special Accommodations Outreach and Education AP for SUMMARY: The New England Fishery This meeting is physically accessible discussion, in accordance with the Management Council (Council) is to people with disabilities. Requests for Magnuson-Stevens Fishery scheduling a public meeting of its sign language interpretation or other Conservation and Management Act Scallop Committee in November, 2009 auxiliary aids should be directed to Paul (Magnuson-Stevens Act), those issues to consider actions affecting New J. Howard, Executive Director, at (978) may not be the subject of formal action England fisheries in the exclusive 465–0492, at least 5 days prior to the during these meetings. Actions of the economic zone (EEZ). meeting date. Outreach and Education AP will be Recommendations from this group will Authority: 16 U.S.C. 1801 et seq. restricted to those issues specifically be brought to the full Council for formal identified in the agenda and any issues consideration and action, if appropriate. Dated: October 9, 2009. arising after publication of this notice DATES: This meeting will be held on Tracey L. Thompson, that require emergency action under Tuesday, November 3, 2009, at 9 a.m. Acting Director, Office of Sustainable Section 305(c) of the Magnuson-Stevens ADDRESSES: This meeting will be held at Fisheries, National Marine Fisheries Service. Act, provided the public has been the Hilton Providence, 21 Atwells [FR Doc. E9–24826 Filed 10–14–09; 8:45 am] notified of the Council’s intent to take Avenue, Providence, RI 02903; BILLING CODE 3510–22–S action to address the emergency.

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Copies of the agenda can be obtained meetings and deliberations. The SSC Gulf of Mexico Fishery Management by calling (813) 348–1630. and the Selection Committee will meet Council’s website at jointly to develop recommendations for Special Accommodations www.gulfcouncil.org for instructions. policies and procedures to promote the Council address: Gulf of Mexico This meeting is physically accessible SSC fulfilling its mandates effectively Fishery Management Council, 2203 N. to people with disabilities. Requests for and efficiently, to provide a clear policy Lois Avenue, Suite 1100, Tampa, FL sign language interpretation or other for submission and consideration of auxiliary aids should be directed to Tina technical information and critiques to 33607. O’Hern at the Council (see ADDRESSES) the Council and SSC, and to ensure the FOR FURTHER INFORMATION CONTACT: at least 5 working days prior to the Council receives the scientific advice Steven Atran, Population Dynamics meeting. necessary to support its management Statistician; Gulf of Mexico Fishery Dated: October 9, 2009. recommendations. Management Council; telephone: (813) Although non-emergency issues not Tracey L. Thompson, contained in this agenda may come 348–1630. Acting Director, Office of Sustainable before this group for discussion, in SUPPLEMENTARY INFORMATION: Fisheries, National Marine Fisheries Service. The ABC accordance with the Magnuson-Stevens Control Rule Working Group is an ad [FR Doc. E9–24827 Filed 10–14–09; 8:45 am] Fishery Conservation and Management hoc group composed of members of the BILLING CODE 3510–22–S Act (Magnuson-Stevens Act), those Standing Scientific and Statistical issues may not be the subject of formal Committee (SSC), Council members and action during this meeting. Actions will DEPARTMENT OF COMMERCE Council staff that has been tasked with be restricted to those issues specifically developing a framework, or control rule, National Oceanic and Atmospheric identified in this notice and any issues for setting acceptable biological catch Administration arising after publication of this notice (ABC) levels for stocks and stock that require emergency action under complexes managed by the Council. The RIN 0648–XS10 Section 305(c) of the Magnuson-Stevens Working Group will meet to discuss a Act, provided the public has been draft of the ABC control rule being Fisheries of the South Atlantic and notified of the Council’s intent to take Gulf of Mexico; South Atlantic Fishery final action to address the emergency. developed. The discussion will include Management Council (SAFMC); Public a review of Council recommendations to Meetings Special Accommodations the group on acceptable levels of risk This meeting is physically accessible and a discussion of productivity- AGENCY: National Marine Fisheries to people with disabilities. Requests for susceptibility analyses (PSA) methods Service (NMFS), National Oceanic and sign language interpretation or other for adoption into the control rule. The Atmospheric Administration (NOAA), auxiliary aids should be directed to the Working Group will also develop an Commerce. Council office (see ADDRESSES) at least 3 outline for a presentation of its draft ACTION: Notice of South Atlantic Fishery business days prior to the meeting. control rule by an SSC representative at Management Council’s (Council) joint Dated: October 9, 2009. the National SSC Workshop in Scientific and Statistical Committee and November. SSC Selection Committee meeting. William D. Chappell, Acting Director, Office of Sustainable Copies of the agenda and other related SUMMARY: The SAFMC will hold a joint Fisheries, National Marine Fisheries Service. materials can be obtained by calling meeting of its SSC and SSC Selection [FR Doc. E9–24775 Filed 10–14–09; 8:45 am] (813) 348–1630. Committee to discuss SSC BILLING CODE 3510–22–S Although other non-emergency issues responsibilities and procedures under not on the agenda may come before the the Magnuson-Stevens Reauthorized ABC Control Rule Working Group for Act. The meeting will be held in DEPARTMENT OF COMMERCE discussion, in accordance with the Charleston, SC. See SUPPLEMENTARY Magnuson-Stevens Fishery INFORMATION. National Oceanic and Atmospheric Administration Conservation and Management Act DATES: The meeting will be held (Magnuson-Stevens Act), those issues RIN: 0648–XS32 October 29, 2009, from 9 a.m. until 4 may not be the subject of formal action p.m. Gulf of Mexico Fishery Management during this meeting. Actions of the ADDRESSES: The meeting will be held at Council; Public Meeting Working Group will be restricted to the Charleston Marriott, 170 Lockwood those issues specifically identified in Boulevard, Charleston, SC 29403; AGENCY: National Marine Fisheries the agenda and any issues arising after telephone: (843) 723–3000. Service (NMFS), National Oceanic and publication of this notice that require Atmospheric Administration (NOAA), emergency action under Section 305(c) FOR FURTHER INFORMATION CONTACT: Kim Commerce. Iverson, Public Information Officer, of the Magnuson-Stevens Act, provided ACTION: Notice of a public meeting. 4055 Faber Place Drive, Suite 201, North the public has been notified of the Charleston, SC 29405; telephone: (843) SUMMARY: The Gulf of Mexico Fishery Council’s intent to take action to 571–4366; e-mail: Management Council will convene a address the emergency. [email protected]. web based meeting of the ABC Control Special Accommodations SUPPLEMENTARY INFORMATION: Under the Rule Working Group. Magnuson-Stevens Reauthorized Act, DATES: The webinar meeting will This webinar is accessible to people the SSC is the body responsible for convene at 10 a.m. Eastern Time on with disabilities. For assistance with reviewing the Council’s scientific Friday, October 30, 2009 and is any of our webinars contact Tina materials. The Act places additional expected to end at 1 p.m. O’Hern at the Council (see ADDRESSES) responsibilities on the SSC which have ADDRESSES: The webinar will be at least 5 working days prior to the led to increased interest in SSC accessible via internet. Please go to the webinar.

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Dated: October 9, 2009. DEPARTMENT OF ENERGY conduct the meeting to facilitate the Tracey L. Thompson, orderly conduct of business. Public Acting Director, Office of Sustainable Advanced Scientific Computing comment will follow the 10-minute Fisheries, National Marine Fisheries Service. Advisory Committee rule. Minutes: The minutes of this meeting [FR Doc. E9–24740 Filed 10–14–09; 8:45 am] AGENCY: Department of Energy, Office of will be available for public review and BILLING CODE 3510–22–S Science. copying within 30 days at the Freedom ACTION: Notice of open meeting. of Information Public Reading Room; SUMMARY: This notice announces a 1E–190, Forrestal Building; 1000 Independence Avenue, SW.; COMMODITY FUTURES TRADING meeting of the Advanced Scientific Washington, DC 20585; between 9 a.m. COMMISSION Computing Advisory Committee (ASCAC). The Federal Advisory and 4 p.m., Monday through Friday, Notice; Agricultural Advisory Committee Act (Pub. L. 92–463, 86 Stat. except holidays. Committee Meeting 770) requires that public notice of these Issued in Washington, DC on October 8, meetings be announced in the Federal 2009. The Commodity Futures Trading Register. Rachel Samuel, Commission’s Agricultural Advisory DATES: Tuesday, November 3, 2009, 9 Deputy Committee Management Officer. Committee will conduct a public a.m. to 5 p.m.; Wednesday, November 4, [FR Doc. E9–24796 Filed 10–14–09; 8:45 am] meeting on Thursday, October 29, 2009. 2009, 9 a.m. to 12 p.m. BILLING CODE 6450–01–P The meeting will take place in the first ADDRESSES: Oak Ridge National floor hearing room of the Commission’s Laboratory, 1 Bethel Valley Road, Oak Washington, DC headquarters, Three Ridge, TN 37831. DEPARTMENT OF ENERGY Lafayette Centre, 1155 21st Street, NW., FOR FURTHER INFORMATION CONTACT: Hydrogen and Fuel Cell Technical Washington, DC 20581 from 9 a.m. to 1 Melea Baker, Office of Advanced Advisory Committee (HTAC) p.m. At this meeting, the committee will Scientific Computing Research; SC–21/ discuss convergence issues relating to Germantown Building; U.S. Department AGENCY: Department of Energy, Office of the Chicago Board of Trade’s wheat of Energy; 1000 Independence Avenue, Energy Efficiency and Renewable contract. SW., Washington, DC 20585–1290; Energy. The meeting is open to the public. Telephone 301–903–7486 (E-mail: ACTION: Notice of open meeting. [email protected]). The meeting will be Web cast on the SUMMARY: The Hydrogen and Fuel Cell SUPPLEMENTARY INFORMATION: Commission’s Web site, http:// Technical Advisory Committee (HTAC) Purpose of the Meeting: The purpose www.cftc.gov. Members of the public was established under section 807 of the of this meeting is to provide advice and also can listen to the meeting by Energy Policy Act of 2005 (EPACT), guidance with respect to the advanced telephone. The public access call-in Public Law No. 109–58; 119 Stat. 849. numbers are (866) 811–0403 (U.S.) and scientific computing research program. Tentative Agenda: Agenda will The Federal Advisory Committee Act, (404) 537–3349 (International). When include discussions of the following: Public Law No. 92–463, 86 Stat. 770, calling in, please request Conference requires that agencies publish notice of No. 34979957. Any member of the Tuesday, November 3, 2009: View from an advisory committee meeting in the public who wishes to file a written Washington. Office of Science Federal Register. To attend the meeting Update. ASCR Update. Scaling statement with the committee should and/or to make oral statements during Computational Biology. Tour of Oak mail a copy of the statement to the the public comment period, please e- Ridge National Laboratory and attention of: Agricultural Advisory mail [email protected] at least 5 business Leadership Computing Facility. days before the meeting. Please indicate Committee, c/o Chairman Michael V. Public Comment. Committee Dinner— Dunn, Commodity Futures Trading if you will be attending the meeting, Open to the Public. whether you want to make an oral Commission, Three Lafayette Centre, Wednesday, November 4, 2009: ASCR statement on November 4, 2009, and 1155 21st Street, NW., Washington, DC Annual Performance Metric—Code what organization you represent. 20581, before the meeting. Members of Improvements. New Charge to the public who wish to make oral ASCAC. Recovery Act Update. Public DATES: Wednesday, November 4, 2009, statements should inform Chairman Comment. from 8:30 a.m.–5:30 p.m and Thursday, November 5, 2009 from 8:30 a.m.–3 p.m. Dunn in writing at the foregoing address Public Participation: The meeting is at least three business days before the open to the public. If you would like to ADDRESSES: Radisson Reagan National, meeting. Reasonable provision will be file a written statement with the 2020 Jefferson Davis Highway, made, if time permits, for oral Committee, you may do so either before Arlington, VA. presentations of no more than five or after the meeting. If you would like FOR FURTHER INFORMATION CONTACT: minutes each in duration. to make oral statements regarding any of [email protected]. For further information concerning the items on the agenda, or participate SUPPLEMENTARY INFORMATION: this meeting, please contact Nicole in the tour or committee dinner, you Purpose of the Meeting: To provide McNair at (202) 418–5070. should contact Melea Baker via FAX at advice, information, and 301–903–4846 or via e-mail recommendations to the Secretary on Issued by the Commission in Washington, ([email protected]). You the program authorized by title VIII of DC on October 8, 2009. must make your request for an oral EPACT. David A. Stawick, statement at least 5 business days prior Tentative Agenda (Subject to change; Secretary of the Commission. to the meeting. Reasonable provision updates will be posted on http:// [FR Doc. E9–24728 Filed 10–14–09; 8:45 am] will be made to include the scheduled hydrogen.energy.gov and copies of the BILLING CODE P oral statements on the agenda. The final agenda will available the date of Chairperson of the Committee will the meeting).

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The following items will be covered on ACTION: Agency information collection The EIA, as part of its effort to comply the agenda: activities: Proposed collection; with the Paperwork Reduction Act of • DOE Program Update Comment request. 1995 (44 U.S.C. 3501, et seq.), provides the general public and other Federal • U.S. and Global Update on Hydrogen SUMMARY: The EIA is soliciting agencies with opportunities to comment Fuel Cell Vehicle Industry comments on the proposed revisions • on collections of energy information International Status of Fuel Cells and and three-year extension to the Forms: conducted by or in conjunction with the Hydrogen Technologies EIA–411, ‘‘Coordinated Bulk Power EIA. Also, the EIA will later seek • Role of Fuel Cells in Smart Gris Supply Program Report,’’ approval for this collection by the Office Programs EIA–826, ‘‘Monthly Electric Sales and of Management and Budget (OMB) • Update on Battery Technology for Revenue with State Distributions under Section 3507(a) of the Paperwork Vehicles Report,’’ Reduction Act of 1995. • 2009 HTAC Report Development EIA–860, ‘‘Annual Electric Generator The EIA collects information about • Open Discussion Report,’’ the electric power industry for use by EIA–860M, ‘‘Monthly Update to the government and private sector analysts. Public Participation: In keeping with Annual Electric Generator Report,’’ The survey information is disseminated procedures, members of the public are EIA–861, ‘‘Annual Electric Power in a variety of electronic products and welcome to observe the business of the Industry Report,’’ and files. For details on the EIA electric meeting of HTAC and to make oral EIA–923, ‘‘Power Plant Operations power information program, please visit statements during the specified period Report.’’ the electricity page of the EIA Internet for public comment. The public DATES: Comments must be filed by site at http://www.eia.doe.gov/ comment period will take place between December 14, 2009. If you anticipate fuelelectric.html. 8:30 a.m. and 9:30 a.m. on November 4, difficulty in submitting comments The EIA has completed an extensive 2009. To attend the meeting and/or to within that period, contact the person review and update of the electric power make oral statements regarding any of listed below as soon as possible. survey collection instruments. The the items on the agenda, e-mail ADDRESSES: Send comments to Ms. result of the update reflects input from [email protected] at least 5 business days the electric power industry, other before the meeting. Please indicate if Elizabeth Panarelli. To ensure receipt of the comments by the due date, industry users of the data, government you will be attending the meeting, agencies, consumer groups, and private whether you want to make an oral submission by FAX (202–287–1938) or an e-mail to Ms. Panarelli at sector analysts. The form changes are statement, and what organization you explained below. represent. Members of the public will be [email protected] is recommended. The mailing address is Please refer to the proposed forms and heard in the order in which they sign up instructions for more information about for the public comment period. Oral Energy Information Administration, Electric Power Division, EI–53, Forrestal the purpose, who must report, when to comments should be limited to two report, where to submit, the elements to minutes in length. Reasonable provision Building, U.S. Department of Energy, Washington, DC 20585. Alternatively, be reported, detailed instructions, will be made to include the scheduled provisions for confidentiality, and uses oral statements on the agenda. The chair Ms. Panarelli may be contacted by telephone at 202–586–2234. (including possible non-statistical uses) of the committee will make every effort of the information. For instructions on FOR FURTHER INFORMATION CONTACT: to hear the views of all interested parties FOR FURTHER Requests for additional information or obtaining materials, see the and to facilitate the orderly conduct of INFORMATION CONTACT section. business. If you would like to file a copies of any forms and instructions written statement with the committee, should be directed to Ms. Elizabeth II. Current Actions you may do so either by submitting a Panarelli at the address listed above. To Specifically, the EIA is soliciting hard copy at the meeting or by review the proposed forms and comments on the following revisions to submitting an electronic copy to instructions, please visit: http:// and extension of existing forms, [email protected]. www.eia.doe.gov/cneaf/electricity/page/ _ including: Minutes: The minutes of the meeting fednotice/elect 2011.html. Form EIA–411, ‘‘Coordinated Bulk will be available for public review at SUPPLEMENTARY INFORMATION: Power Supply Program Report’’ http://hydrogen.energy.gov. I. Background Change form name to ‘‘Coordinated Issued at Washington, DC on October 8, II. Current Actions 2009. III. Request for Comments Bulk Power Supply & Demand Program Report;’’ return to collecting projected Rachel Samuel, I. Background reliability data on a 10-year basis as Deputy Committee Management Officer. The Federal Energy Administration opposed to 5 years; change ‘‘Council’’ to [FR Doc. E9–24776 Filed 10–14–09; 8:45 am] Act of 1974, specifically 15 U.S.C. 790a, ‘‘Regional Entity;’’ and add submission BILLING CODE 6450–01–P and the DOE Organization Act, of Sub-regional level breakout of data. specifically 42 U.S.C. 7135, require the Adopt the current NERC 2009 EIA to carry out a centralized, Schedule 3 for summer and winter DEPARTMENT OF ENERGY comprehensive, and unified energy aggregated demand and supply Energy Information Administration information program. This program information. Changes are as follows: collects, evaluates, assembles, analyzes, Demand category additions include Agency Information Collection and disseminates information on energy ‘‘Demand Response,’’ ‘‘Critical Peak- Activities: Proposed Collection; resource reserves, production, demand, Pricing with Control,’’ and ‘‘Load as a Comment Request technology, and related economic and Capacity Resource;’’ supply category statistical information. This information additions include ‘‘Existing-Certain,’’ AGENCY: Energy Information is used to assess the adequacy of energy ‘‘Existing-Other,’’ ‘‘Existing-Inoperable,’’ Administration (EIA), Department of resources to meet near and longer term ‘‘Future-Planned,’’ ‘‘Future-Other,’’ and Energy (DOE). domestic demands. ‘‘Conceptual’’ categories; break out

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capacity categories of Wind, Solar, reactive power output (MVAR) with expand directions to include definitions Hydro, and Biomass to cover both new questions related to reactive power of diversion, withdrawal, consumption, expected on-peak and derated values; output. Schedule 6 Part F. Cooling and discharge. Expand respondent pool and expand coverage of types of reserve System Information: Add new codes to to include any thermoelectric power margin calculations. Delete Schedule capture additional cooling system types, plant greater than or equal to 100 MW. 4—Regional Imports and Export detail. source of cooling water and type of (Transaction summaries are added to cooling water; add a question to collect III. Request for Comments Schedule 3). For Schedule 5, permit the the percentage of cooling load served by Prospective respondents and other submission of Computer-Aided Design dry cooling components (for hybrid interested parties should comment on and/or Computer-Aided Design and cooling systems); and expand the survey the actions discussed in Item II. The Drafting (CAD/CADD) file types. frame for cooling system data collection following guidelines are provided to Schedule 6 changes include: Part A will to include all thermoelectric plants assist in the preparation of comments. now collect the following Existing greater than or equal to 100 MW in size. Please indicate to which form(s) your Transmission Circuit Miles values: AC comments apply. Form EIA–860M, ‘‘Monthly Update to (kV)—115, 138, 161, 230, 345, 500, 765; the Annual Electric Generator Report’’ As a Potential Respondent to the DC (kV) 100–299, 300, 400, 450, 500; Request for Information Part B will now collect Projected Schedule 2 (Updates To Proposed Transmission Additions starting at New Generators) and Schedule 3 A. Is the proposed collection of 100kV and information on the reasons (Updates To Proposed Changes To information necessary for the proper why Projected Transmission Additions Existing Generators): Make revisions performance of the functions of the are being added; and change reporting (prime movers and energy sources) to agency and does the information have of selected transmission outage data to distinguish the reporting of energy practical utility? a mandatory basis on Schedule 7. storage technologies; and make B. What actions could be taken to revisions (prime movers and energy help ensure and maximize the quality, Form EIA–826, ‘‘Monthly Electric Sales sources) to distinguish the reporting of objectivity, utility, and integrity of the and Revenue With State Distributions hydrokinetic technologies and related information collected? Report’’ information. C. Are the instructions and definitions Schedule 2 Part B. Sales to Ultimate clear and sufficient? If not, which Form EIA–861, ‘‘Annual Electric Power Customers—Energy-Only Service: instructions need clarification? Industry Report’’ Collect the names of the companies that D. Can the information be submitted deliver electricity on behalf of power Schedule 2 Part C. Green Pricing: by the due dates? marketers and retail service providers. Add, by State and sector, the green E. Public reporting burden for this Schedule 3 Part A. Green Pricing: pricing sales and revenue from collection is estimated to average: Form Collect, by State and sector, the number Renewable Energy Certificates (REC). EIA–411, ‘‘Bulk Power Supply Program of green pricing customers, green Schedule 2 Part D. Net Metering: By Report,’’ 15.9 hours per response pricing sales and revenue as well as State and sector, add the capacity and (Annual); Form EIA–826, ‘‘Monthly green pricing sales and revenue from technology type for net metering Electric Sales and Revenue with State Renewable Energy Certificates (REC). generating facilities. Schedule 6 Distributions Report,’’ 1.6 hours per Schedule 3 Part B. Net Metering: Demand-Side Management Information: response; Form EIA–860, ‘‘Annual Collect, by State and sector, the number Collect Demand-Side Management Electric Generator Report,’’ 6.75 hours of net metering customers, net metering (DSM) information from all per response for respondents without capacity and technology type, as well as respondents, regardless of size; and environmental information and 12.5 energy displaced by net metered expand collection of DSM data to hours per response for respondents with generating facilities. Schedule 3 Part C. include State- and sector-level environmental information; Form EIA– Advanced Metering: Collect, by State breakdown of costs, energy efficiency, 860M, ‘‘Monthly Update to the Annual and sector, the number of Advanced and load management effects. Schedule Electric Generator Report,’’ 0.3 hours Meter Reading (AMR) and Advanced 7 Distributed and Dispersed Generation: per response; Form EIA–861, ‘‘Annual Metering Infrastructure (AMI) meters Collect the capacity for distributed and Electric Power Industry Report,’’ 9.0 installed, as well as the energy served dispersed generating technologies by hours per response; Form EIA–923, through AMI meters. State (replaces the percentage for each ‘‘Power Plant Operations Report,’’ 3.2 technology); and add ‘‘Photovoltaic hours per response (Monthly for a Form EIA–860, ‘‘Annual Electric (PV)’’ and ‘‘Storage’’ as choices for sample, Annually for plants not in the Generator Report’’ reporting distributed and dispersed sample). The estimated burden includes Change the collection of planning generation types. the total time necessary to provide the horizon from 5 years to 10 years. requested information. In your opinion, Form EIA–923, ‘‘Power Plant Operations Schedule 3 Generator Information: Make how accurate are these estimates? revisions (prime movers and energy Report’’ F. The agency estimates that the only sources) to distinguish the reporting of Schedule 2. Cost and Quality of Fuel cost to a respondent is for the time it energy storage technologies; make Receipts, Plant-Level: Collect receipts of will take to complete the collection. revisions (prime movers and energy uranium ownership transfers and Will a respondent incur any start-up sources) to distinguish the reporting of enrichment services. Schedule 7. Total costs for reporting, or any recurring hydrokinetic technologies and related Plant Efficiency for Combined Heat and annual costs for operation, maintenance, information; add geothermal to the Power Plants (CHP): Add the annual and purchase of services associated with technologies for which tested heat rate average total CHP efficiency (i.e., the the information collection? data are required; add the data element, energy output’s percentage of the energy G. What additional actions could be ‘‘Annual Average Operating Efficiency,’’ input) from CHP plants only. Schedule taken to minimize the burden of this for solar photovoltaic, wind, and 8D. Cooling System Information, collection of information? Such actions hydroelectric generators to the data Annual Operations: Add a column to may involve the use of automated, collection; and replace the questions on collect amount of water diverted; and electronic, mechanical, or other

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technological collection techniques or e. Name of Project: Swalley Irrigation the Public Reference Room, Room 2A, other forms of information technology. District Project. 888 First Street, NE., Washington, DC H. Does any other Federal, State, or f. Location: The proposed Swalley 20426. The filing may also be viewed on local agency collect similar information? Irrigation District Project would be the Web at http://www.ferc.gov using If so, specify the agency, the data located on the Swalley Main Canal in the ‘‘eLibrary’’ link. Enter the docket element(s), and the methods of Deschutes County, Oregon. The land in number, P–13470, in the docket number collection. which all the project structures are field to access the document. For located is owned by the applicant. assistance, call toll-free 1–866–208– As a Potential User of the Information g. Filed Pursuant to: Federal Power 3676 or e-mail To Be Collected Act 16 U.S.C. 791a–825r. [email protected]. For TTY, A. Is the proposed collection of h. Applicant Contact: Mr. Gary Blake, call (202) 502–8659. A copy is also information necessary for the proper Chairmen, Swalley Irrigation District, available for review and reproduction at performance of the functions of the 64672 Cook Avenue, Suite 1, Bend, OR the address in item h above. Agency and does the information have 97701, phone (541) 388–0658. n. Development Application—Any practical utility? i. FERC Contact: Robert Bell, (202) qualified applicant desiring to file a B. What actions could be taken to 502–6062, [email protected]. competing application must submit to help ensure and maximize the quality, j. Status of Environmental Analysis: the Commission, on or before the objectivity, utility, and integrity of the This application is ready for specified deadline date for the information disseminated? environmental analysis at this time, and particular application, a competing C. Is the information useful at the the Commission is requesting development application, or a notice of levels of detail to be collected? comments, reply comments, intent to file such an application. D. For what purpose(s) would the recommendations, terms and Submission of a timely notice of intent information be used? Be specific. conditions, and prescriptions. allows an interested person to file the E. Are there alternate sources for the k. Deadline for filing responsive competing development application no information and are they useful? If so, documents: The Commission directs, later than 120 days after the specified what are their weaknesses and/or pursuant to section 4.34(b) of the deadline date for the particular strengths? Regulations (see Order No. 533, issued application. Applications for Comments submitted in response to May 8, 1991, 56 FR 23,108 (May 20, preliminary permits will not be this notice will be summarized and/or 1991)) that all comments, motions to accepted in response to this notice. included in the request for OMB intervene, protests, recommendations, o. Notice of Intent—A notice of intent approval of the form. They also will terms and conditions, and prescriptions must specify the exact name, business become a matter of public record. concerning the application be filed with address, and telephone number of the Statutory Authority: Section 13(b) of the the Commission: 60 days from the prospective applicant, and must include Federal Energy Administration Act of 1974, issuance of this notice. All reply an unequivocal statement of intent to P.L. 93–275, codified at 15 U.S.C. 772(b). comments must be filed with the submit a competing development Issued in Washington, DC on October 8, Commission: 105 days from the application. A notice of intent must be 2009. issuance of this notice. served on the applicant(s) named in this Renee Miller, Comments, protests, and public notice. Director, Forms Clearance and Information, interventions may be filed electronically p. Protests or Motions to Intervene— Quality Division, Statistics and Methods via the Internet in lieu of paper; see 18 Anyone may submit a protest or a Group, Energy Information Administration. CFR 385.2001(a)(1)(iii) and the motion to intervene in accordance with instructions on the Commission’s Web the requirements of Rules of Practice [FR Doc. E9–24777 Filed 10–14–09; 8:45 am] site under the ‘‘e-Filing’’ link. The and Procedure, 18 CFR 385.210, BILLING CODE 6450–01–P Commission strongly encourages 385.211, and 385.214. In determining electronic filings. the appropriate action to take, the The Commission’s Rules of Practice Commission will consider all protests DEPARTMENT OF ENERGY and Procedure require all intervenors filed, but only those who file a motion Federal Energy Regulatory filing documents with the Commission to intervene in accordance with the Commission to serve a copy of that document on Commission’s Rules may become a each person in the official service list party to the proceeding. Any protests or [Project No. 13470–000] for the project. Further, if an intervenor motions to intervene must be received files comments or documents with the on or before the specified deadline date Swalley Irrigation District; Notice of Commission relating to the merits of an for the particular application. Application Accepted for Filing and issue that may affect the responsibilities q. All filings must (1) Bear in all Soliciting Comments, Motions To of a particular resource agency, they capital letters the title ‘‘PROTEST’’, Intervene, Protests, must also serve a copy of the document ‘‘MOTION TO INTERVENE’’, ‘‘NOTICE Recommendations, and Terms and on that resource agency. OF INTENT TO FILE COMPETING Conditions l. Description of Project: The proposed APPLICATION’’, ‘‘COMPETING October 7, 2009. Swalley Irrigation District Project APPLICATION’’, ‘‘COMMENTS’’, Take notice that the following consists of: (1) A proposed powerhouse ‘‘REPLY COMMENTS,’’ hydroelectric application has been filed containing one generating unit having ‘‘RECOMMENDATIONS,’’ ‘‘TERMS with the Commission and is available an installed capacity of 750 kilowatts, AND CONDITIONS,’’ or for public inspection: and (2) appurtenant facilities. The ‘‘PRESCRIPTIONS;’’ (2) set forth in the a. Type of Application: Conduit Swalley Irrigation District, estimates the heading the name of the applicant and Exemption. project would have an average annual the project number of the application to b. Project No.: 13470–000. generation of 2.7 gigawatt-hours that which the filing responds; (3) furnish c. Date filed: May 21, 2009. would be sold to a local utility. the name, address, and telephone d. Applicant: Swalley Irrigation m. This filing is available for review number of the person protesting or District. and reproduction at the Commission in intervening; and (4) otherwise comply

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with the requirements of 18 CFR 22–000; (3) the exemption orders However, a person does not have to 385.2001 through 385.2005. All authorizing Atmos to conduct intervene in order to have comments comments, recommendations, terms and temporary acts and operations issued in considered. The second way to conditions or prescriptions must set Docket Nos. CP09–34–000,2 CP09–34– participate is by filing with the forth their evidentiary basis and 001,3 and the extension of time granted Secretary of the Commission, as soon as otherwise comply with the requirements in Docket No. CP09–34–001 on possible, an original and two copies of of 18 CFR 4.34(b). Agencies may obtain September 9, 2009; and (4) Fort comments in support of or in opposition copies of the application directly from Necessity seeks section 7(c) to this project. The Commission will the applicant. Any of these documents authorization to assume full ownership consider these comments in must be filed by providing the original and operational control of the Fort determining the appropriate action to be and eight copies to: The Secretary, Necessity Storage Project, all as more taken, but the filing of a comment alone Federal Energy Regulatory Commission, fully set forth in the application which will not serve to make the filer a party 888 First Street, NE., Washington, DC is on file with the Commission and open to the proceeding. The Commission’s 20426. An additional copy must be sent to public inspection. The filing may also rules require that persons filing to Director, Division of Hydropower be viewed on the Web at http:// comments in opposition to the project Administration and Compliance, Office www.ferc.gov using the ‘‘eLibrary’’ link. provide copies of their protests only to of Energy Projects, Federal Energy Enter the docket number excluding the the party or parties directly involved in Regulatory Commission, at the above last three digits in the docket number the protest. address. A copy of any protest or motion field to access the document. For Persons who wish to comment only to intervene must be served upon each assistance, contact FERC at on the environmental review of this representative of the applicant specified [email protected] or call project should submit an original and in the particular application. A copy of toll-free, (886) 208–3676 or TTY, (202) two copies of their comments to the all other filings in reference to this 502–8659. Secretary of the Commission. application must be accompanied by Atmos states that the purpose of the Environmental commenters will be proof of service on all persons listed in authorization requested herein is to placed on the Commission’s the service list prepared by the facilitate the transfer of the facilities, environmental mailing list, will receive Commission in this proceeding, in certificate authorizations, and copies of the environmental documents, accordance with 18 CFR 4.34(b) and exemption authority from Atmos to Fort and will be notified of meetings 385.2010. Necessity, a new wholly owned associated with the Commission’s subsidiary formed for the purpose of environmental review process. Kimberly D. Bose, owning and operating the Fort Necessity Environmental commenters will not be Secretary. Storage Project. required to serve copies of filed Any questions regarding this [FR Doc. E9–24800 Filed 10–14–09; 8:45 am] documents on all other parties. application should be directed to James BILLING CODE 6717–01–P However, the non-party commenters H. Jeffries, IV, Moore & Van Allen PLLC, will not receive copies of all documents Bank of America Corporate Center, 100 filed by other parties or issued by the DEPARTMENT OF ENERGY North Tryon Street, Suite 4700, Commission (except for the mailing of Charlotte, North Carolina 28202–4003, environmental documents issued by the Federal Energy Regulatory telephone (704) 331–1000, or via e-mail: Commission) and will not have the right Commission [email protected]. to seek court review of the [Docket No. CP09–469–000] There are two ways to become involved in the Commission’s review of Commission’s final order. Comments, protests and interventions Atmos Pipeline and Storage, LLC and this project. First, any person wishing to obtain legal status by becoming a party may be filed electronically via the Fort Necessity Gas Storage, LLC; Internet in lieu of paper. See, 18 CFR Notice of Application to the proceedings for this project should, on or before the comment date 385.2001(a)(1)(iii) and the instructions October 7, 2009. stated below, file with the Federal on the Commission’s Web site under the Take notice that on September 28, Energy Regulatory Commission, 888 ‘‘e-Filing’’ link. 2009, Atmos Pipeline and Storage, LLC First Street, NE., Washington, DC 20426, Comment Date: October 28, 2009. (Atmos) and Fort Necessity Gas Storage, a motion to intervene in accordance Kimberly D. Bose, LLC (Fort Necessity), Three Lincoln with the requirements of the Secretary. Centre, Suite 1800, 5430 LBJ Freeway, Commission’s Rules of Practice and [FR Doc. E9–24802 Filed 10–14–09; 8:45 am] Dallas, Texas 75240, filed a joint Procedure (18 CFR 385.214 or 385.211) BILLING CODE 6717–01–P application in Docket No. CP09–469– and the Regulations under the NGA (18 000 pursuant to sections 7(b) and 7(c) of CFR 157.10). A person obtaining party the Natural Gas Act (NGA) and Part 157 status will be placed on the service list DEPARTMENT OF ENERGY of the Commission’s regulations for maintained by the Secretary of the permission and approval to abandon by Commission and will receive copies of Federal Energy Regulatory transfer to Fort Necessity: (1) The all documents filed by the applicant and Commission section 7(c) certificate authorization by all other parties. A party must submit granted to Atmos in Docket No. CP09– 14 copies of filings made with the Combined Notice of Filings #1 22–000 1 to construct and operate the Commission and must mail a copy to October 7, 2009. Fort Necessity Storage Project facilities the applicant and to every other party in in Franklin Parish, Louisiana; (2) the the proceeding. Only parties to the Take notice that the Commission Part 157, Subpart F, and Part 284, proceeding can ask for court review of received the following electric rate Subpart G, blanket certificates also Commission orders in the proceeding. filings: granted to Atmos in Docket No. CP09– Docket Numbers: ER09–1049–002. 2 122 FERC ¶ 61,100 (2008). Applicants: Midwest Independent 1 127 FERC ¶ 61,260 (2009). 3 125 FERC ¶ 61,148 (2008). Transmission System Operator, Inc.

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Description: Midwest Independent Filed Date: 10/06/2009. mail [email protected]. or Transmission System Operator, Inc Accession Number: 20091007–0151. call (866) 208–3676 (toll free). For TTY, submits revisions to the Open Access Comment Date: 5 p.m. Eastern Time call (202) 502–8659. Transmission, Energy and Operating on Tuesday, October 27, 2009. Nathaniel J. Davis, Sr., Reserve Markets Tariff. Docket Numbers: ER10–35–000. Deputy Secretary. Filed Date: 10/02/2009. Applicants: Xcel Energy Services Inc. Accession Number: 20091005–0084. Description: Public Service Company [FR Doc. E9–24795 Filed 10–14–09; 8:45 am] Comment Date: 5 p.m. Eastern Time of Colorado et al submits the PSC0 BILLING CODE 6717–01–P on Friday, October 23, 2009. Electric Coordination Service Tariff Docket Numbers: ER09–1462–000. FERC Electric, Original Volume 2 etc. DEPARTMENT OF ENERGY Applicants: Lake Benton Power Filed Date: 10/06/2009. Partners II, LLC. Accession Number: 20091007–0083. Federal Energy Regulatory Description: NextEra Energy Comment Date: 5 p.m. Eastern Time Commission Resources, LLC Submits Lake Benton on Tuesday, October 27, 2009. Power Partners II, LLC Amendment to Any person desiring to intervene or to [Docket No. EL10–1–000] Request for Authorization to Sell Energy protest in any of the above proceedings and Capacity at Market-based Rates and Notice of Filing; Southern California must file in accordance with Rules 211 Edison Company Waiver of the 60-day Requirement. and 214 of the Commission’s Rules of Filed Date: 10/07/2009. Practice and Procedure (18 CFR 385.211 October 7, 2009. Accession Number: 20091007–5036. and 385.214) on or before 5 p.m. Eastern Take notice that on October 1, 2009, Comment Date: 5 p.m. Eastern Time time on the specified comment date. It Southern California Edison Company, on Wednesday, October 28, 2009. is not necessary to separately intervene pursuant to Rule 207 of the Docket Numbers: ER09–1473–002. again in a subdocket related to a Commission’s Rules of Practice and Applicants: NorthWestern compliance filing if you have previously Procedure 18 CFR 385.207, filed a Corporation. intervened in the same docket. Protests Petition for Declaratory Order for Description: Northwestern will be considered by the Commission Incentive Rate Treatment, requesting the Corporation submits replacement page in determining the appropriate action to Commission to issue a declaratory order to the Large Generator Interconnection be taken, but will not serve to make approving specific incentive rate Agreement showing the amended protestants parties to the proceeding. treatments for the proposed Eldorado- Section 30.4 in the context of the Anyone filing a motion to intervene or Ivanpah Transmission Project (EITP) unchanged Section 30.2 etc. protest must serve a copy of that they are proposing to construct that will Filed Date: 10/06/2009. document on the Applicant. In reference facilitate the development of roughly Accession Number: 20091007–0084. to filings initiating a new proceeding, 1,400 MW of solar generation. SCE also Comment Date: 5 p.m. Eastern Time interventions or protests submitted on request the Commission to declare that on Tuesday, October 27, 2009. or before the comment deadline need the facilities will be network facilities Docket Numbers: ER10–1–000. not be served on persons other than the eligible for rolled-in rate treatment. Applicants: High Majestic Wind Applicant. Any person desiring to intervene or to Energy Center, LLC. The Commission encourages protest this filing must file in Description: High Majestic Wind electronic submission of protests and accordance with Rules 211 and 214 of Energy Center, LLC submits request for interventions in lieu of paper, using the the Commission’s Rules of Practice and authorization to sell energy and capacity FERC Online links at http:// Procedure (18 CFR 385.211, 385.214). at market based rates. www.ferc.gov. To facilitate electronic Protests will be considered by the Filed Date: 10/06/2009. service, persons with Internet access Commission in determining the Accession Number: 20091007–0153. who will eFile a document and/or be appropriate action to be taken, but will Comment Date: 5 p.m. Eastern Time listed as a contact for an intervenor not serve to make protestants parties to on Tuesday, October 27, 2009. must create and validate an the proceeding. Any person wishing to Docket Numbers: ER10–2–000. eRegistration account using the become a party must file a notice of Applicants: Butler Ridge Wind Energy eRegistration link. Select the eFiling intervention or motion to intervene, as Center, LLC. link to log on and submit the appropriate. Such notices, motions, or Description: Butler Ridge Wind intervention or protests. protests must be filed on or before the Energy Center, LLC submits application Persons unable to file electronically comment date. On or before the for authorization to make market-based should submit an original and 14 copies comment date, it is not necessary to sales of energy, capacity and certain of the intervention or protest to the serve motions to intervene or protests ancillary services under a market-based Federal Energy Regulatory Commission, on persons other than the Applicant. rate tariff. 888 First St., NE., Washington, DC The Commission encourages Filed Date: 10/06/2009. 20426. electronic submission of protests and Accession Number: 20091007–0152. The filings in the above proceedings interventions in lieu of paper using the Comment Date: 5 p.m. Eastern Time are accessible in the Commission’s ‘‘eFiling’’ link at http://www.ferc.gov. on Tuesday, October 27, 2009. eLibrary system by clicking on the Persons unable to file electronically Docket Numbers: ER10–3–000. appropriate link in the above list. They should submit an original and 14 copies Applicants: Wessington Wind Energy are also available for review in the of the protest or intervention to the Center, LLC. Commission’s Public Reference Room in Federal Energy Regulatory Commission, Description: Wessington Wind Energy Washington, DC. There is an 888 First Street, NE., Washington, DC Center, LLC submits application for eSubscription link on the Web site that 20426. authorization to make market-based enables subscribers to receive e-mail This filing is accessible on-line at sales of energy, capacity and certain notification when a document is added http://www.ferc.gov, using the ancillary services under a market-based to a subscribed docket(s). For assistance ‘‘eLibrary’’ link and is available for rate tariff. with any FERC Online service, please e- review in the Commission’s Public

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Reference Room in Washington, DC. (telephone) or (303) 605–2226 (fax), to this project. The Commission will There is an ‘‘eSubscription’’ link on the [email protected]. consider these comments in Web site that enables subscribers to Pursuant to section 157.9 of the determining the appropriate action to be receive e-mail notification when a Commission’s rules, 18 CFR 157.9, taken, but the filing of a comment alone document is added to a subscribed within 90 days of this Notice the will not serve to make the filer a party docket(s). For assistance with any FERC Commission staff will either: Complete to the proceeding. The Commission’s Online service, please e-mail its environmental assessment (EA) and rules require that persons filing [email protected], or call place it into the Commission’s public comments in opposition to the project (866) 208–3676 (toll free). For TTY, call record (eLibrary) for this proceeding, or provide copies of their protests only to (202) 502–8659. issue a Notice of Schedule for the party or parties directly involved in Comment Date: 5 p.m. Eastern Time Environmental Review. If a Notice of the protest. on November 2, 2009. Schedule for Environmental Review is Persons who wish to comment only Nathaniel J. Davis, Sr., issued, it will indicate, among other on the environmental review of this milestones, the anticipated date for the Deputy Secretary. project should submit an original and Commission staff’s issuance of the final two copies of their comments to the [FR Doc. E9–24797 Filed 10–14–09; 8:45 am] environmental impact statement (FEIS) BILLING CODE 6717–01–P Secretary of the Commission. or EA for this proposal. The filing of the Environmental commenters will be EA in the Commission’s public record placed on the Commission’s DEPARTMENT OF ENERGY for this proceeding or the issuance of a environmental mailing list, will receive Notice of Schedule for Environmental copies of the environmental documents, Federal Energy Regulatory Review will serve to notify federal and and will be notified of meetings Commission state agencies of the timing for the associated with the Commission’s completion of all necessary reviews, and [Docket No. CP09–1–001] environmental review process. the subsequent need to complete all Environmental commenters will not be Collbran Valley Gas Gathering, LLC; federal authorizations within 90 days of required to serve copies of filed Notice of Filing the date of issuance of the Commission documents on all other parties. staff’s FEIS or EA. However, the non-party commenters There are two ways to become October 7, 2009. will not receive copies of all documents involved in the Commission’s review of Take notice that on September 24, filed by other parties or issued by the this project. First, any person wishing to 2009, Collbran Valley Gas Gathering, Commission (except for the mailing of obtain legal status by becoming a party LLC (Collbran), 370 17th Street, Suite environmental documents issued by the to the proceedings for this project 2775, Denver, Colorado 80202, filed in Commission) and will not have the right should, on or before the comment date Docket No. CP09–1–001, a request, to seek court review of the stated below, file with the Federal pursuant to section 7(b) of the Natural Commission’s final order. Gas Act (NGA) and Part 157 of the Energy Regulatory Commission, 888 Commission’s regulations, for First Street, NE., Washington, DC 20426, Motions to intervene, protests and authorization to abandon its 9.2-mile a motion to intervene in accordance comments may be filed electronically long, 16-inch diameter Anderson Gulch with the requirements of the via the internet in lieu of paper; see, 18 Residue Line located in Mesa County, Commission’s Rules of Practice and CFR 385.2001(a)(1)(iii) and the Colorado and to vacate the order issued Procedure (18 CFR 385.214 or 385.211) instructions on the Commission’s Web on August 25, 2009 in Docket No. CP09– and the Regulations under the NGA (18 site under the ‘‘e-Filing’’ link. The 1–000 which granted Colbran a CFR 157.10). A person obtaining party Commission strongly encourages certificate to transport gas through the status will be placed on the service list electronic filings. line, all as more fully set forth in the maintained by the Secretary of the Comment Date: October 22, 2009. application which is on file with the Commission and will receive copies of Commission and open to public all documents filed by the applicant and Kimberly D. Bose, inspection. This filing may also be by all other parties. A party must submit Secretary. viewed on the Commission’s Web site at 14 copies of filings made with the [FR Doc. E9–24804 Filed 10–14–09; 8:45 am] http://www.ferc.gov using the Commission and must mail a copy to BILLING CODE 6717–01–P ‘‘eLibrary’’ link. Enter the docket the applicant and to every other party in number, excluding the last three digits, the proceeding. Only parties to the in the docket number field to access the proceeding can ask for court review of DEPARTMENT OF ENERGY document. For assistance, call (866) Commission orders in the proceeding. Federal Energy Regulatory 208–3676 or TTY, (202) 502–8659. However, a person does not have to Any questions regarding this intervene in order to have comments Commission application should be directed to Katie considered. The second way to Florida Gas Transmission Company, Rice, Director, Regulatory Affairs, participate is by filing with the LLC, et al.; Notice of Onsite Collbran Valley Gas Gathering, LLC, 370 Secretary of the Commission, as soon as Environmental Review 17th Street, Suite 2500, Denver, possible, an original and two copies of Colorado, or by calling (303) 605–2166 comments in support of or in opposition October 7, 2009.

Florida Gas Transmission Company, LLC ...... Docket No. CP09–455–000. Florida Gas Transmission Company, LLC and Transcontinental Gas Pipe Line Company, LLC ...... Docket No. CP09–456–000.

On October 21, 2009, the Office of Alabama to gather data related to the and the Pascagoula Expansion Project. Energy Projects staff will be in Jackson environmental analysis of the proposed Staff will examine locations along the County, Mississippi and Mobile County, Mobile Bay Lateral Extension Project proposed pipeline routes filed by

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Florida Gas Transmission Company, commodity charge of $0.00 per MMBtu or protests on persons other than the LLC and Transcontinental Gas Pipe Line of gas transported; (2) a maximum Applicant. Company, LLC focusing on where the interruptible rate of $0.0736 per MMBtu The Commission encourages pipelines would cross residential areas of gas transported on its Import/Export electronic submission of protests and in Jackson County, Mississippi; Mobile Facility; (3) a two-part maximum firm interventions in lieu of paper using the County, Alabama; and a residence on transportation rate for service on ‘‘eFiling’’ link at http://www.ferc.gov. Rainbow Lake Road, Grand Bay, capacity leased from other intrastate Persons unable to file electronically Alabama. This will assist staff in pipelines consisting of a demand a should submit an original and 14 copies completing its evaluation of charge $1.5208 per MMBtu of reserved of the protest or intervention to the environmental impacts of the two Maximum Daily Transportation Federal Energy Regulatory Commission, projects. Quantity and a commodity charge of 888 First Street, NE., Washington, DC All interested parties planning to $0.00 per MMBtu of gas transported; 20426. attend must provide their own and (4) a maximum interruptible rate of This filing is accessible on-line at transportation. Those attending should $0.05 per MMBtu of gas transported on http://www.ferc.gov, using the meet at the following location: such leased capacity. ‘‘eLibrary’’ link and is available for Wednesday October 21, 2009 at 1 p.m. KM Border further proposes to review in the Commission’s Public (CST): continue to retain as reimbursement for Reference Room in Washington, DC. Holiday Inn Express Moss Point compressor fuel varying amounts There is an ‘‘eSubscription’’ link on the parking lot, 4800 Amoco Drive, Moss ranging from 0.57 percent to 1.55 Web site that enables subscribers to Point, MS 39563. percent, depending on the Points of receive email notification when a Please use the FERC’s free Redelivery used. KM Border states that document is added to a subscribed eSubscription service to keep track of all the foregoing existing zone rates will, if docket(s). For assistance with any FERC formal issuances and submittals in these approved by the Commission, be Online service, please email dockets. This can reduce the amount of applicable to firm and interruptible [email protected], or call (866) 208–3676 (toll free). For TTY, call time you spend researching proceedings transportation services provided by KM (202) 502–8659. by automatically providing you with Border pursuant to section 311(a)(2) of notification of these filings, document Comment Date: 5 p.m. Eastern Time the Natural Gas Policy Act through the on Friday, October 16, 2009. summaries, and direct links to the pipeline owned and operated by KM documents. To register for this service, Border (The Import/Export Facility), Kimberly D. Bose, go to http://www.ferc.gov/ and through pipeline capacity leased by Secretary. esubscribenow.htm. KM Border (The Leased Capacity). [FR Doc. E9–24798 Filed 10–14–09; 8:45 am] Information about specific onsite The Import/Export Facility consist of BILLING CODE 6717–01–P environmental reviews is posted on the approximately 97 mile of 24-inch Commission’s calendar at http:// pipeline that extends from a point of www.ferc.gov/EventCalendar/ interconnection in Hidalgo County, ENVIRONMENTAL PROTECTION EventsList.aspx. For additional Texas, with the pipeline facilities of AGENCY information contact Office of External PEMEX Gas and Petroquimica Basica at Affairs at 1–866–208–FERC (3372). the International Border between the [EPA–HQ–RCRA–2008–0912, FRL–8969–3] Kimberly D. Bose, United States and Mexico to a point of Agency Information Collection Secretary. interconnection with the intrastate Activities; Submission to OMB for [FR Doc. E9–24803 Filed 10–14–09; 8:45 am] pipeline facilities of Kinder Morgan Review and Approval; Comment Tejas Pipeline LLC (KM Tejas) located BILLING CODE 6717–01–P Request; Notification of Regulated on the King Ranch, Kleberg County, Waste Activity and 2009 Hazardous Texas. The Leased Capacity is capacity Waste Report (Renewal); EPA ICR DEPARTMENT OF ENERGY leased on the intrastate pipeline Number 0976.14; OMB Control Number facilities of KM Tejas. 2050–0024 Federal Energy Regulatory Any person desiring to participate in Commission this rate proceeding must file a motion AGENCY: Environmental Protection to intervene or to protest this filing must Agency (EPA). [Docket No. PR09–33–000] file in accordance with Rules 211 and ACTION: Notice. 214 of the Commission’s Rules of Kinder Morgan Border Pipeline LLC; SUMMARY: In compliance with the Notice of Petition for Rate Approval Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be Paperwork Reduction Act (PRA) (44 October 7, 2009. considered by the Commission in U.S.C. 3501 et seq.), this document Take notice that on September 29, determining the appropriate action to be announces that an Information 2009, Kinder Morgan Border Pipeline taken, but will not serve to make Collection Request (ICR) has been LLC (KM Border) filed a petition for rate protestants parties to the proceeding. forwarded to the Office of Management approval pursuant to section Any person wishing to become a party and Budget (OMB) for review and 284.123(b)(2) of the Commission’s must file a notice of intervention or approval. This is a request to renew an regulation. KM Border requests the motion to intervene, as appropriate. existing approved collection. The ICR, Commission to approve the Such notices, motions, or protests must which is abstracted below, describes the continuation of its existing rates, which be filed on or before the date as nature of the information collection and are: (1) A two part maximum firm indicated below. Anyone filing an its estimated burden and cost. transportation rate for service on its intervention or protest must serve a DATES: Additional comments may be Import/Export Facility consisting of a copy of that document on the Applicant. submitted on or before November 16, demand charge of $2.2381 per MMBtu Anyone filing an intervention or protest 2009. of reserved Maximum Daily on or before the intervention or protest ADDRESSES: Submit your comments, Transportation Quantity, and a date need not serve motions to intervene referencing Docket ID No. EPA–HQ–

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RCRA–2008–0912, to (1) EPA, either information about the electronic docket, handled. This form is also known as the online using http://www.regulations.gov go to http://www.regulations.gov. Notification form. (our preferred method), or by e-mail to Title: Notification of Regulated Waste EPA has revised the Hazardous Waste [email protected], or by mail to: Activity and 2009 Hazardous Waste Report form this cycle, particularly the RCRA Docket (28221T), U.S. Report. RCRA subtitle C Site Identification Environmental Protection Agency, 1200 ICR Numbers: EPA ICR No. 0976.14, portion, because of recent promulgated Pennsylvania Avenue, NW., OMB Control No. 2050–0024. rules affecting the RCRA universe, as Washington, DC 20460; and (2) OMB, by ICR Status: This ICR is scheduled to well as ongoing efforts by the Agency mail to: Office of Information and expire on November 30, 2009. Under and States to improve the forms and Regulatory Affairs, Office of OMB regulations, the Agency may their instructions. Management and Budget (OMB), continue to conduct or sponsor the Burden Statement: The reporting Attention: Desk Officer for EPA, 725 collection of information while this burden for the 2009 Hazardous Waste 17th Street, NW., Washington, DC submission is pending at OMB. An Report is estimated to average 16.63 20503. Agency may not conduct or sponsor, hours per respondent, and includes time and a person is not required to respond FOR FURTHER INFORMATION CONTACT: for reviewing instructions, gathering to, a collection of information, unless it data, completing and reviewing the Peggy Vyas, Environmental Protection displays a currently valid OMB control Agency, 1200 Pennsylvania Ave., NW., forms, and submitting the report. The number. The OMB control numbers for recordkeeping requirement is estimated Washington, DC 20460; telephone EPA’s regulations in title 40 of the CFR, number: 703–308–5477; fax number: to average 3.97 hours per response and after appearing in the Federal Register includes the time for filing and storing 703–308–8433; e-mail address: when approved, are listed in 40 CFR [email protected]. the 2009 Hazardous Waste Report part 9, are displayed either by submission for three years. SUPPLEMENTARY INFORMATION: EPA has publication in the Federal Register or The annual public reporting and submitted the following ICR to OMB for by other appropriate means, such as on recordkeeping burden for the review and approval according to the the related collection instrument or Notification of Regulated Waste Activity procedures prescribed in 5 CFR 1320.12. form, if applicable. The display of OMB is estimated to average 2 hours per On May 15, 2009 (74 FR 22922), EPA control numbers in certain EPA response for the initial notification, and sought comments on this ICR pursuant regulations is consolidated in 40 CFR 1 hour per response for any subsequent to 5 CFR 1320.8(d). EPA received no part 9. notifications. comments. Any additional comments on Abstract: This ICR combines two Burden means the total time, effort, or this ICR should be submitted to EPA separate ICRs into one: The biennial financial resources expended by persons and OMB within 30 days of this notice. ‘‘Hazardous Waste Report’’ ICR and the to generate, maintain, retain, or disclose EPA has established a public docket ‘‘Notification of Regulated Waste or provide information to or for a for this ICR under Docket ID No. EPA– Activities’’ ICR. Federal agency. This includes the time HQ–RCRA–2008–0912, which is Both sections 3002 and 3004 of RCRA needed to review instructions; develop, available for online viewing at http:// require EPA to establish standards for acquire, install, and utilize technology www.regulations.gov, or in person recordkeeping and reporting of and systems for the purposes of viewing at the Resource Conservation hazardous waste generation and collecting, validating, and verifying and Recovery Act (RCRA) Docket in the management. Section 3002 applies to information, processing and EPA Docket Center (EPA/DC), EPA hazardous waste generators, and section maintaining information, and disclosing West, Room 3334, 1301 Constitution 3004 applies to hazardous waste and providing information; adjust the Ave., NW., Washington, DC. The EPA/ treatment, storage, and disposal existing ways to comply with any DC Public Reading Room is open from facilities. The implementing regulations previously applicable instructions and 8:30 a.m. to 4:30 p.m., Monday through are found at 40 CFR 262.40(b) and (d); requirements which have subsequently Friday, excluding legal holidays. The 262.41(a)(1)–(5), (a)(8), and (b); changed; train personnel to be able to telephone number for the Reading Room 264.75(a)–(e) and (j); 265.75(a)–(e) and respond to a collection of information; is (202) 566–1744, and the telephone (j); and 270.30(l)(9). This is mandatory search data sources; complete and number for the RCRA Docket is (202) reporting by the respondents. This review the collection of information; 566–0270. collection is done on a two-year cycle as and transmit or otherwise disclose the Use EPA’s electronic docket and required by Sections 3002 and 3004 of information. comment system at http:// RCRA. The information is collected via Respondents/Affected Entities: www.regulations.gov, to submit or view a mechanism known as the Hazardous Entities potentially affected by this public comments, access the index Waste Report for the required reporting action are businesses or other for-profits listing of the contents of the docket, and year (EPA Form 8700–13 A/B). This as well as State, Local, or Tribal to access those documents in the docket form is also known as the Biennial governments. that are available electronically. Once in Report form. Estimated Number of Respondents: the system, select ‘‘docket search,’’ then The beginning part of the Hazardous 56,763. key in the docket ID number identified Waste Report form is the RCRA subtitle Frequency of Response: Biennially. above. Please note that EPA’s policy is C Site Identification Form (EPA Form Estimated Total Annual Hour Burden: that public comments, whether 8700–12). This form is also a stand 422,133 hours. submitted electronically or in paper, alone form which is used to comply Estimated Total Annual Cost: will be made available for public with section 3010 of RCRA, which $16,510,025, includes $16,309,358 viewing at http://www.regulations.gov requires any person who generates or annualized labor costs and $200,667 as EPA receives them and without transports regulated waste or who owns annualized capital or O&M costs. change, unless the comment contains or operates a facility for the treatment, Changes in the Estimates: There is a copyrighted material, confidential storage, or disposal of regulated waste to decrease of 263,063 hours in the total business information (CBI), or other notify EPA of their activities, including estimated burden currently identified in information whose public disclosure is the location and general description of the OMB Inventory of Approved ICR restricted by statute. For further activities and the regulated wastes Burdens.

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The decrease in respondent burden Authority: Federal Advisory Committee • Open Discussion for Notification of Regulated Waste Act, Public Law 92–463. Public Participation: In keeping with Activity has occurred for two primary Dated: October 9, 2009. procedures, members of the public are reasons. First, there was a decrease in Charles Jackson, welcome to observe the business of the the estimated total number of Federal Register Liaison Officer. meeting of HTAC and to make oral notifications under RCRA section 3010; [FR Doc. E9–24794 Filed 10–14–09; 8:45 am] statements during the specified period 40 CFR part 273, subpart C; and 40 CFR BILLING CODE 1610–02–P for public comment. The public part 279. Second, the burden associated comment period will take place between with the notification activities 8:30 a.m. and 9:30 a.m. on November 4, decreased because of adjustments made DEPARTMENT OF ENERGY 2009. To attend the meeting and/or to to the hourly burden estimates for the make oral statements regarding any of Site ID Form. In addition, adjustments Hydrogen and Fuel Cell Technical the items on the agenda, e-mail were made to the hourly burden Advisory Committee (HTAC) [email protected] at least 5 business days estimates for the Site ID Form to take before the meeting. Please indicate if into account the option given to AGENCY: Department of Energy, Office of you will be attending the meeting, respondents in the Site ID Form’s Energy Efficiency and Renewable whether you want to make an oral instructions to use their most recently Energy. statement, and what organization you submitted form in making a subsequent ACTION: Notice of Open Meeting. represent. Members of the public will be notification. These optional procedures heard in the order in which they sign up relieve them of the need to complete the SUMMARY: The Hydrogen and Fuel Cell for the public comment period. Oral form in its entirety. These adjustments Technical Advisory Committee (HTAC) comments should be limited to two do not reflect any change in was established under section 807 of the minutes in length. Reasonable provision requirements; they represent instead a Energy Policy Act of 2005 (EPACT), will be made to include the scheduled more accurate representation of the Public Law No. 109–58; 119 Stat. 849. oral statements on the agenda. The chair burden that respondents will incur as a The Federal Advisory Committee Act, of the committee will make every effort result of this information collection. Public Law No. 92–463, 86 Stat. 770, to hear the views of all interested parties The decrease in respondent burden requires that agencies publish notice of and to facilitate the orderly conduct of and State agency burden estimates for an advisory committee meeting in the business. If you would like to file a the Hazardous Waste Report occurred Federal Register. To attend the meeting written statement with the committee, because there was a decrease in the and/or to make oral statements during you may do so either by submitting a projected number of respondents and the public comment period, please e- hard copy at the meeting or by Hazardous Waste Report forms. mail [email protected] at least 5 business submitting an electronic copy to Dated: October 8, 2009. days before the meeting. Please indicate [email protected]. John Moses, if you will be attending the meeting, Minutes: The minutes of the meeting whether you want to make an oral Director, Collection Strategies Division. will be available for public review at statement on November 4, 2009, and http://hydrogen.energy.gov. [FR Doc. E9–24814 Filed 10–14–09; 8:45 am] what organization you represent. BILLING CODE 6560–50–P Issued at Washington, DC, on October 8, DATES: Wednesday, November 4, 2009, 2009. from 8:30 a.m.–5:30 p.m and Thursday, Rachel Samuel, November 5, 2009 from 8:30 a.m.–3 p.m. FEDERAL ACCOUNTING STANDARDS Deputy Committee Management Officer. ADDRESSES: ADVISORY BOARD Radisson Reagan National, [FR Doc. E9–24776 Filed 10–14–09; 8:45 am] 2020 Jefferson Davis Highway, BILLING CODE 6450–01–P Renewal of FASAB Charter Arlington, VA. FOR FURTHER INFORMATION CONTACT: AGENCY: Federal Accounting Standards [email protected]. Advisory Board. FEDERAL MARITIME COMMISSION SUPPLEMENTARY INFORMATION: ACTION: Notice. Purpose of the Meeting: To provide Ocean Transportation Intermediary Board Action: Pursuant to 31 U.S.C. advice, information, and License Applicants 3511(d), the Federal Advisory recommendations to the Secretary on Committee Act (Pub. L. 92–463), as the program authorized by title VIII of Notice is hereby given that the amended, and the FASAB Rules of EPACT. following applicants have filed with the Procedure, as amended in April, 2004, Tentative Agenda (Subject to change; Federal Maritime Commission an notice is hereby given that under the updates will be posted on http:// application for license as a Non-Vessel- authority and in furtherance of the hydrogen.energy.gov and copies of the Operating Common Carrier and Ocean objectives of 31 U.S.C. 3511(d), the final agenda will available the date of Freight Forwarder—Ocean Secretary of the Treasury, the Director of the meeting). The following items will be Transportation Intermediary pursuant to OMB, and the Comptroller General (the covered on the agenda: section 19 of the Shipping Act of 1984 Sponsors) have established and agreed • DOE Program Update as amended (46 U.S.C. Chapter 409 and to continue an advisory committee to • U.S. and Global Update on 46 CFR 515). consider and recommend accounting Hydrogen Fuel Cell Vehicle Industry Persons knowing of any reason why standards and principles for the Federal • International Status of Fuel Cells the following applicants should not government. and Hydrogen Technologies receive a license are requested to For Further Information, or to Obtain • Role of Fuel Cells in Smart Gris contact the Office of Transportation a Copy of the Charter, Contact: Wendy Programs Intermediaries, Federal Maritime Payne, Executive Director, 441 G St., • Update on Battery Technology for Commission, Washington, DC 20573. NW., Mail Stop 6K17V, Washington, DC Vehicles Non-Vessel-Operating Common Carrier 20548, or call (202) 512–7350. • 2009 HTAC Report Development and Ocean Freight Forwarder

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Transportation Intermediary of Clive, Iowa; to acquire 100 percent of The following individuals have been Applicants: the voting shares of The Members designated to serve on the Commission’s Interport Company, Inc. dba Interport Group, Inc., Clive, Iowa, and thereby Performance Review Board: Lines, 2300 E. Higgins Road, Ste. engage in data procesing, real estate ∑ Charles H. Schneider, Executive 312, Elk Grove Village, IL 60007. leasing, and asset management, Director, Chairman Officer: Antonio J. Alvaro, President servicing, and collection activities, ∑ Willard K. Tom, General Counsel (Qualifying Individual). pursuant to sections 225.28(2)(vi), (b)(3), ∑ Pauline M. Ippolito, Deputy Consolidators International, Inc., dba and (b)(14)(i) of Regulation Y. Director, Bureau of Economics Corrigan’s Express Freight dba 2. Iowa Credit Union League, and Backstage Cargo USA, 8900 Affiliates Management Company, both By direction of the Commission. Bellanca Avenue, Los Angeles, CA of Clive, Iowa; to acquire 53 percent of Donald S. Clark 90045. Officer: Ronen Donde, Vice the voting shares of Community Secretary President (Qualifying Individual). Business Lenders, L.L.C., Clive, Iowa, [FR Doc. E9–24731 Filed 10–14–09: 9:55 am] Dated: October 9, 2009. and thereby engage in extending credit BILLING CODE 6750–01–S and servicing loans, pursuant to section Tanga S. FitzGibbon, 225.28(b)(1) of Regulation Y. Assistant Secretary. 3. Iowa Credit Union League, and DEPARTMENT OF HEALTH AND [FR Doc. E9–24835 Filed 10–14–09; 8:45 am] Affiliates Management Company, both HUMAN SERVICES BILLING CODE 6730–01–P of Clive, Iowa; to acquire 89 percent of the voting shares of TMG Financial Office of Inspector General; Notice for Services,Inc., Clive, Iowa, and thereby Potential Monitors for Quality-of-Care FEDERAL RESERVE SYSTEM engage in extending credit and servicing Corporate Integrity Agreements loans, pursuant to section 225.28(b)(1) Notice of Proposals to Engage in of Regulation Y. AGENCY: Office of Inspector General Permissible Nonbanking Activities or 4. Iowa Credit Union League, and (OIG), Department of Health and Human to Acquire Companies that are Affiliates Management Company, both Services (HHS). Engaged in Permissible Nonbanking of Clive, Iowa; to acquire 90 percent of ACTION: Notice. Activities the voting shares of Coopera Consulting, SUMMARY: The Office of Inspector The companies listed in this notice L.L.C., Clive, Iowa, and thereby engage in community development advisory General (OIG) is seeking to identify have given notice under section 4 of the potential organizations to monitor Bank Holding Company Act (12 U.S.C. activities, pursuant to section 225.28(b)(12)(ii) of Regulation Y. health care entities under quality-of-care 1843) (BHC Act) and Regulation Y (12 Corporate Integrity Agreements (CIA) CFR Part 225) to engage de novo, or to Board of Governors of the Federal Reserve with OIG. OIG is interested in receiving System, October 9, 2009. acquire or control voting securities or information from organizations that assets of a company, including the Jennifer J. Johnson, believe they have the capability to be companies listed below, that engages Secretary of the Board. monitors for quality-of-care CIAs. This either directly or through a subsidiary or [FR Doc. E9–24766 Filed 10–14–09; 8:45 am] is not a request for proposals and does other company, in a nonbanking activity BILLING CODE 6210–01–S?≤ not commit OIG to select or consider a that is listed in § 225.28 of Regulation Y particular organization to be a monitor. (12 CFR 225.28) or that the Board has Any information provided to OIG in determined by Order to be closely FEDERAL TRADE COMMISSION response to this notice is strictly related to banking and permissible for voluntary. The Government will not pay bank holding companies. Unless Senior Executive Service Performance for information submitted in response to otherwise noted, these activities will be Review Board this notice. conducted throughout the United States. DATES: Responses may be submitted on Each notice is available for inspection AGENCY: Federal Trade Commission. an ongoing basis. at the Federal Reserve Bank indicated. ACTION: Notice. The notice also will be available for ADDRESSES: Please mail or deliver any inspection at the offices of the Board of SUMMARY: Notice is hereby given of the response to the following address: Governors. Interested persons may appointment of members to the Federal Office of Counsel to the Inspector express their views in writing on the Trade Commission’s Performance General, Department of Health and question whether the proposal complies Review Board. Human Services, Room 5527, Cohen with the standards of section 4 of the FOR FURTHER INFORMATION CONTACT: Building, 330 Independence Avenue, BHC Act. Additional information on all Karen Leydon, Director of Human SW., Washington, DC 20201. bank holding companies may be Resources, 600 Pennsylvania Avenue Prominently identify the title of notice obtained from the National Information NW, Washington, DC 20580, (202) 326- on the first page of any submitted Center website at www.ffiec.gov/nic/. 3633. response. Electronic responses may be Unless otherwise noted, comments SUPPLEMENTARY INFORMATION: sent to [email protected]. regarding the applications must be Publication of the Performance Review FOR FURTHER INFORMATION CONTACT: received at the Reserve Bank indicated Board (PRB) membership is required by Katie A. Arnholt, Senior Counsel, Office or the offices of the Board of Governors 5 U.S.C. 4314 (c)(4). The PRB reviews of Counsel to the Inspector General, not later than October 29, 2009. and evaluates the initial appraisal of a (202) 205–3203, or A. Federal Reserve Bank of Chicago senior executive’s performance by the [email protected]. (Colette A. Fried, Assistant Vice supervisor, and makes SUPPLEMENTARY INFORMATION: President) 230 South LaSalle Street, recommendations regarding Chicago, Illinois 60690–1414: performance ratings, performance Background 1. Iowa Credit Union League, and awards, and pay-for-performance pay OIG often negotiates compliance Affiliates Management Company, both adjustments to the Chairman. obligations with health care providers

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and other entities as part of the plans and the timeliness of such actions; any given quality-of-care CIA requires settlement of Federal health care (4) proactive steps to ensure that each consideration of unique and program fraud investigations arising patient receives care in accordance with individualized factors. In order to select under civil and administrative false basic care, treatment, and protection- an appropriate monitor for any claims statutes. These obligations are set from-harm standards; the governing individual quality-of-care CIA, OIG may forth in a CIA. A provider or an entity regulations; and the policies and contact an organization that submitted consents to a CIA in conjunction with procedures required to be adopted information in response to this notice to a civil or administrative settlement and under the CIA; and (5) in residential request additional information. In in exchange for OIG’s agreement not to settings, compliance with staffing selecting a monitor, OIG will not be seek to exclude that health care provider requirements. In making these limited to organizations that submitted or entity from participation in Medicare, assessments, the monitor conducts site information in response to this notice. Medicaid, and other Federal health care visits, analyzes available data, observes Any organization submitting programs under 42 U.S.C. 1320a–7. facility and corporate-level committee information in response to this notice False claims submitted in violation of meetings, and reviews relevant should identify any information that it the False Claims Act or Civil Monetary documents. The monitor submits believes is trade secret, or commercial Penalties Law give rise to OIG’s regular written reports to the provider or financial information, and privileged permissive exclusion authority under 42 and OIG. or confidential under exemption four of U.S.C. 1320a–7(b)(7). the Freedom of Information Act (FOIA). The typical term of a CIA is 5 years. Responses to This Notice Consistent with the HHS FOIA CIAs seek to ensure the integrity of OIG is interested in hearing from regulations, set forth in 45 CFR Part 5, Federal health care program claims organizations that believe they have the when OIG receives a request for such submitted by the provider. CIAs capability to be a monitor for quality-of- records and OIG determines that OIG generally include requirements to, care CIAs. Please include in any may be required to disclose them, OIG among other things: (1) Hire a response to this notice the following: will make reasonable efforts to notify compliance officer; (2) appoint a 1. The name of the organization; compliance committee; (3) develop 2. The size and location(s) of the the organization about these facts. written standards and policies; (4) organization; Daniel R. Levinson, implement a comprehensive employee 3. The qualifications of the Inspector General. training program; (5) establish a organization to serve as a monitor for [FR Doc. E9–24715 Filed 10–14–09; 8:45 am] confidential disclosure program; (6) quality-of-care CIAs; BILLING CODE 4152–01–P restrict employment of ineligible 4. The organization’s capacity to persons; (7) report overpayments, monitor large providers with locations reportable events, and ongoing in multiple States; DEPARTMENT OF HEALTH AND investigations/legal proceedings; and (8) 5. The organization’s clinical HUMAN SERVICES provide an implementation report and experience and expertise; annual reports to OIG on the status of 6. The organization’s experience with Food and Drug Administration the entity’s compliance activities. quality assessment, assurance, and When resolving cases that involve improvement; [Docket No. FDA–2009–N–0483] quality-of-care allegations, OIG often 7. The organization’s prior monitoring requires health care providers to enter experience, including, but not limited Agency Information Collection into quality-of-care CIAs. OIG may enter to, systems reviews and auditing; and Activities; Proposed Collection; 8. An indication of whether the into quality-of-care CIAs with many Comment Request; Medical Device organization has any current or prior different types of health care providers, User Fee Cover Sheet; Form FDA 3601 including, but not limited to, skilled (within the last 5 years) Federal nursing facilities, assisted-living Government contracts or is on any AGENCY: Food and Drug Administration, facilities, psychiatric facilities, General Services Administration or HHS HHS. intermediate care facilities for the list of approved contractors. mentally retarded, hospitals, physician OIG will review each response ACTION: Notice. practices, dental practices, and submitted to this notice to assess management companies. Under these whether the organization may be SUMMARY: The Food and Drug quality-of-care CIAs, health care appropriate to serve as a monitor for Administration (FDA) is announcing an providers agree to compliance quality-of-care CIAs. The assessment opportunity for public comment on the obligations that include quality will not be for the purpose of making proposed collection of certain assurance and improvement. One such any definitive determination regarding information by the agency. Under the obligation is to retain an appropriately whether a particular organization is Paperwork Reduction Act of 1995 (the qualified monitor, which is appointed qualified to be a monitor or creating a PRA), Federal agencies are required to by OIG after consultation with the list of pre-approved monitors. Factors publish notice in the Federal Register health care provider. The monitor that OIG considers when assessing concerning each proposed collection of selected contracts directly with the whether an organization may be an information, including each proposed provider. The monitor does not enter appropriate monitor for a particular CIA extension of an existing collection of into any contractual relationship with include, among other things, the information, and to allow 60 days for OIG or act as an agent for OIG. organization’s clinical expertise, public comment in response to the The monitor typically is responsible capacity to handle a particular notice. This notice solicits comments on for assessing the effectiveness, monitoring relationship, quality Form FDA 3601 entitled ‘‘Medical reliability, and thoroughness of the monitoring experience, geographic Device User Fee Cover Sheet,’’ which provider’s: (1) Internal quality control location, and independence and must be submitted along with certain systems; (2) response to quality-of-care objectivity. Each provider and quality- medical device product applications, issues; (3) development and of-care CIA is unique. Accordingly, the supplements, and fee payment of those implementation of corrective action selection of an appropriate monitor for applications.

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DATES: Submit written or electronic is necessary for the proper performance unique number tracking system. The comments on the collection of of FDA’s functions, including whether information collected is used by FDA’s information by December 14, 2009. the information will have practical Center for Devices and Radiological ADDRESSES: Submit electronic utility; (2) the accuracy of FDA’s Health (CDRH) and the Center for comments on the collection of estimate of the burden of the proposed Biologics Evaluation and Research information to http:// collection of information, including the (CBER) to initiate the administrative www.regulations.gov. Submit written validity of the methodology and screening of new medical device comments on the collection of assumptions used; (3) ways to enhance applications and supplemental information to the Division of Dockets the quality, utility, and clarity of the applications. Management (HFA–305), Food and Drug information to be collected; and (4) The total number of annual responses Administration, 5630 Fishers Lane, rm. ways to minimize the burden of the is based on the number of cover sheet 1061, Rockville, MD 20852. All collection of information on submissions received by FDA in fiscal comments should be identified with the respondents, including through the use year (FY) 2008. CDRH received docket number found in brackets in the of automated collection techniques, approximately 5,095 annual responses heading of this document. when appropriate, and other forms of that included the following FOR FURTHER INFORMATION CONTACT: information technology. submissions: 16 premarket approval Denver Presley Jr., Office of Information Medical Device User Fee Cover Sheet; applications (PMA) (PMA, PDP, PMR, Management (HFA–710), Food and Drug Form FDA 3601 (OMB Control Number BLA),1 3,625 premarket notifications, 8 Administration, 5600 Fishers Lane, 0910–0511)–Extension modular premarket applications, 9 Rockville, MD 20857, 301–796–3793. panel track supplements, 201 real-time SUPPLEMENTARY INFORMATION: Under the The Federal Food, Drug, and Cosmetic supplements, 173 one hundred eighty- PRA (44 U.S.C. 3501–3520), Federal Act (the act), as amended by the day supplements, 633 thirty-day agencies must obtain approval from the Medical Device User Fee and notices, ninety-three 513(g) requests, Office of Management and Budget Modernization Act of 2002 (Public Law and 337 annual fees for periodic (OMB) for each collection of 107–250), and the Medical Device User reporting. information they conduct or sponsor. Fee Amendments of 2007 (Title II of the Food and Drug Administration CBER received approximately 97 ‘‘Collection of information’’ is defined annual responses that included the in 44 U.S.C. 3502(3) and 5 CFR Amendments Act of 2007), authorizes following submissions: 2 premarket 1320.3(c) and includes agency requests FDA to collect user fees for certain approval applications (PMA, PDP, PMR, or requirements that members of the medical device applications. Under this BLA), 1 BLA efficacy supplement, 50 public submit reports, keep records, or authority, companies pay a fee for premarket notifications, 3 one hundred provide information to a third party. certain new medical device applications eighty-day supplements, 2 real-time Section 3506(c)(2)(A) of the PRA (44 or supplements submitted to the agency supplements, 20 thirty-day notices, U.S.C. 3506(c)(2)(A)) requires Federal for review. Because the submission of 3hree 513(g) requests, and 16 annual agencies to provide a 60-day notice in user fees concurrently with applications fees for periodic reporting. the Federal Register concerning each and supplements is required, the review proposed collection of information, of an application cannot begin until the The number of received annual including each proposed extension of an fee is submitted. Form FDA 3601, the responses in FY 2008 included the existing collection of information, ‘‘Medical Device User Fee Cover Sheet,’’ cover sheets for applications that were before submitting the collection to OMB is designed to provide the minimum qualified for small businesses and fee for approval. To comply with this necessary information to determine waivers or reductions. The estimated requirement, FDA is publishing notice whether a fee is required for review of hours per response are based on past of the proposed collection of an application, to determine the amount FDA experience with the various cover information set forth in this document. of the fee required, and to account for sheet submissions, and range from 5 to With respect to the following and track user fees. The form provides 30 minutes. The hours per response are collection of information, FDA invites a cross-reference between the fees based on the average of these estimates. comments on these topics: (1) Whether submitted for an application with the FDA estimates the burden of this the proposed collection of information actual submitted application by using a collection of information as follows:

TABLE 1.—ESTIMATED ANNUAL REPORTING BURDEN1

No. of Annual Frequency Total Annual Hours per Form FDA No. Respondents per Response Responses Response Total Hours

3601 5,192 1 5,192 .30 1,557.6

Total Hours 1,557.6 1There are no capital costs or operating and maintenance costs associated with this collection of information.

1 PDP means product development protocol; PMR means postmarketing requirements; and BLA means biologics license applications.

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Dated: October 7, 2009. SUPPLEMENTARY INFORMATION: Under the surveillance is important because data David Horowitz, PRA (44 U.S.C. 3501–3520), Federal previously submitted to FDA may not be Assistant Commissioner for Policy. agencies must obtain approval from the adequate, as animal drug effects can [FR Doc. E9–24825 Filed 10–14–09; 8:45 am] Office of Management and Budget change over time and less apparent BILLING CODE 4160–01–S (OMB) for each collection of effects may take years to manifest. information they conduct or sponsor. Under § 514.80(d), an applicant must ‘‘Collection of information’’ is defined report adverse drug experiences and DEPARTMENT OF HEALTH AND in 44 U.S.C. 3502(3) and 5 CFR product/manufacturing defects on Form HUMAN SERVICES 1320.3(c) and includes agency requests FDA 1932, ‘‘Veterinary Adverse Drug or requirements that members of the Reaction, Lack of Effectiveness, Product Food and Drug Administration public submit reports, keep records, or Defect Report.’’ Periodic drug provide information to a third party. experience reports and special drug [Docket No. FDA–2009–N–0488] Section 3506(c)(2)(A) of the PRA (44 experience reports must be U.S.C. 3506(c)(2)(A)) requires Federal accompanied by a completed Form FDA Agency Information Collection agencies to provide a 60-day notice in 2301, ‘‘Transmittal of Periodic Reports Activities; Proposed Collection; the Federal Register concerning each and Promotional Material for New Comment Request; Records and proposed collection of information, Animal Drugs’’ (see § 514.80(d)). Form Reports Concerning Experience With including each proposed extension of an FDA 1932a, ‘‘Veterinary Adverse Drug Approved New Animal Drugs; Adverse existing collection of information, Reaction, Lack of Effectiveness or Event Reports on Forms FDA 1932, before submitting the collection to OMB Product Defect Report’’ allows for 1932a, and 2301 for approval. To comply with this voluntary reporting of adverse drug requirement, FDA is publishing notice experiences or product/manufacturing AGENCY: Food and Drug Administration, of the proposed collection of defects. HHS. information set forth in this document. The electronic versions of Forms FDA ACTION: Notice. With respect to the following 1932 and 1932a have been incorporated collection of information, FDA invites into the agency-wide information SUMMARY: The Food and Drug comments on these topics: (1) Whether collection (MedWatchPlus Portal and Administration (FDA) is announcing an the proposed collection of information Rational Questionnaire) that was opportunity for public comment on the is necessary for the proper performance announced for public comment in the proposed collection of certain of FDA’s functions, including whether Federal Register of October 23, 2008 (73 information by the agency. Under the the information will have practical FR 63153). MedWatchPlus Portal and Paperwork Reduction Act of 1995 (the utility; (2) the accuracy of FDA’s Rational Questionnaire is part of a new PRA), Federal agencies are required to estimate of the burden of the proposed electronic system for collecting, publish notice in the Federal Register collection of information, including the submitting, and processing adverse concerning each proposed collection of validity of the methodology and event reports and other safety information, including each proposed assumptions used; (3) ways to enhance information for all FDA-regulated extension of an existing collection of the quality, utility, and clarity of the products. In the Federal Register of May information, and to allow 60 days for information to be collected; and (4) 20, 2009 (74 FR 23721), FDA announced public comment in response to the ways to minimize the burden of the the submission for OMB review and notice. This notice solicits comments on collection of information on clearance of the electronic data requirements for recordkeeping and respondents, including through the use collection using MedWatchPlus Portal reports concerning experience with of automated collection techniques, and Rational Questionnaire. approved new animal drugs. The when appropriate, and other forms of information contained in the reports information technology. Burden hours for the electronic required by the regulation enables FDA versions of these forms were included as Records and Reports Concerning Plus to monitor the use of new animal drugs part of the MedWatch Portal and Experience With Approved New Rationale Questionnaire information after approval and to ensure their Animal Drugs; Adverse Event Reports continued safety and efficacy. collection approved under OMB control on Forms FDA 1932, 1932a, and 2301— number 0910–0645. It is estimated that, DATES: Submit written or electronic 21 CFR Section 514.80 (OMB No. 0910– during the first 3 years that the comments on the collection of 0284)—Extension MedWatchPlus Portal is in use, half of information by December 14, 2009. Sections 512(l) of the Federal Food, the reports will be submitted in paper ADDRESSES: Submit electronic Drug, and Cosmetic Act (the act) (21 format and half will be submitted comments on the collection of U.S.C. 360b(l)) and § 514.80 (21 CFR electronically. In order to avoid double information to http:// 514.80) of FDA regulations require counting, an estimated 50 percent of www.regulations.gov. Submit written applicants of approved new animal drug total annual responses for FDA Form comments on the collection of applications (NADAs) and abbreviated 1932 (404) and FDA Form 1932a (81.5) information to the Division of Dockets new animal drug applications are counted here as part of OMB control Management (HFA–305), Food and Drug (ANADAs) to report adverse drug number 0910–0284 for the paper Administration, 5630 Fishers Lane, rm. experiences and product/manufacturing versions of Forms FDA 1932 and 1932a, 1061, Rockville, MD 20852. All defects (see § 514.80(b)). and an estimated 50 percent of the total comments should be identified with the This continuous monitoring of annual responses (404) and (81.5) for docket number found in brackets in the approved NADAs and ANADAs affords Form FDA 1932 and FDA Form 1932a heading of this document. the primary means by which FDA respectively, are counted as part of OMB FOR FURTHER INFORMATION CONTACT: obtains information regarding potential control number 0910–0645 for the Denver Presley Jr, Office of Information problems with the safety and efficacy of electronic reporting of these adverse Management (HFA–710), Food and Drug marketed approved new animal drugs as reports using the MedWatchPlus Portal. Administration, 5600 Fishers Lane, well as potential product/manufacturing The paper versions of Forms FDA Rockville, MD 20857, 301–796–3793. problems. Postapproval marketing 1932 and 1932a, as well as Form FDA

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2301, will continue to be counted as on the submission of reports to the as the total annual responses divided by part of OMB control number 0910–0284. Division of Surveillance, Center for the number of respondents. The reporting and recordkeeping Veterinary Medicine. The annual FDA estimates the burden of this burden estimates, including the total frequency of responses was calculated collection of information as follows: number of annual responses, are based

TABLE 1.—ESTIMATED ANNUAL REPORTING BURDEN1

21 CFR Section or Section of No. of Annual Frequency Total Annual Hours per the Act FDA Form No. Respondents per Response Responses Response Total Hours

514.80(b)(1), (b)(2)(i), (b)(2)(ii), and (b)(3) 19322 404 44 .26 17,882.5 1 17,882 .5

Voluntary reporting FDA Form 1932a for the public 1932a2 81 .5 1 81 .5 13 81 .5

514.80(b)(4) 2301 84 17 .0 1,428 16 22,848

514.80(b)(5)(i) 2301 84 0.31 26 2 52

514.80(b)(5)(ii) 2301 84 33 .92 2,849 2 5,698

514.80(b)(5)(iii) 2301 646 0.08 49 2 98

Total Hours 46,660 1 There are no capital costs or operating and maintenance costs associated with this collection of information. 2 Burden hours were determined as explained above. 3 The hours per response for paper versions of Forms FDA 1932 and 1932a are assumed to be 1 hour. The hours per response for the elec- tronic version of Form FDA 1932 is assumed to be 1 hour, while the electronic version of Form FDA 1932a is assumed to take .6 hours to com- plete the form and gather the required information as part of the MedWatchPlus Portal information collection (see 74 FR 23721 at 23727, May 20, 2009).

TABLE 2.—ESTIMATED ANNUAL RECORDKEEPING BURDEN1

No. of Annual Frequency Total Annual Hours per 21 CFR Section Recordkeepers per Recordkeeping Records Record Total Hours

514.80(e)2 646 7.20 4651 14 65,116 .8

Total 1,541 1 There are no capital costs or operating and maintenance costs associated with this collection of information. 2 Section 514.80(e) covers all recordkeeping hours for all adverse event reporting.

Dated: October 7, 2009. 30333, Building 19, Auditorium B1, Global Disparities Subcommittee, ACD, CDC, 1600 David Horowitz, Communications Center. Please see Clifton Road, NE., M/S E–67, Atlanta, Assistant Commissioner for Policy. Supplementary Information for details on Georgia 30333. Telephone 404/498–2310, E- accessing the meeting location. [FR Doc. E9–24734 Filed 10–14–09; 8:45 am] mail: http://[email protected]. Status: Open to the public, limited only by The Director, Management Analysis and BILLING CODE 4160–01–S the availability of space. The meeting room Services Office, has been delegated the accommodates approximately 90 people. authority to sign Federal Register notices Purpose: The Subcommittee will provide pertaining to announcements of meetings and DEPARTMENT OF HEALTH AND advice to the CDC Director through the HUMAN SERVICES Advisory Committee to the Director on other committee management activities, for strategic and other broad issues facing CDC. both the Centers for Disease Control and Centers for Disease Control and Matters To Be Discussed: ACD Health Prevention and the Agency for Toxic Prevention Disparities Subcommittee 2009 Action Substances and Disease Registry. Agenda; CDC Director’s Health Disparity Dated: October 8, 2009. Health Disparities Subcommittee, Indicator Project Update, Director’s Priorities Advisory Committee to the Director and Reorganization/Structure. Andre Tyler, (ACD), Centers for Disease Control Agenda items are subject to change as Acting Director, Management Analysis and (CDC); Notice of Meeting priorities dictate. Services Office, Centers for Disease Control Supplementary Information: To participate and Prevention. In accordance with section 10(a)(2) of in the meeting, please plan to register with [FR Doc. E9–24859 Filed 10–14–09; 8:45 am] CDC Security Officials at the Visitor’s Center the Federal Advisory Committee Act BILLING CODE 4163–18–P (Pub. L. 92–463), the Centers for Disease at least one hour prior to the meeting. A Control and Prevention (CDC) government-issued picture ID will be announces the following meeting of the required. All persons who do not have a CDC/Health and Human Services aforementioned subcommittee. identification will have to be escorted to the Time and Date: 2 p.m.–4:30 p.m., October meeting. 28, 2009. Contact Person for More Information: Place: The meeting will be convened at the Walter W. Williams, M.D., M.P.H., CDC, 1600 Clifton Road, NE., Atlanta, GA Designated Federal Officer, Health

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DEPARTMENT OF HEALTH AND basis. Persons needing a sign language default.htm approximately 45 days after HUMAN SERIVCES interpreter or other special the workshop. accommodations should notify Dated: October 7, 2009. Food and Drug Administration Christine Kellerman (see Contact Jeffrey Shuren, Person) at least 7 days in advance. [Docket No. FDA–2009–N–0664] Acting Director, Center for Devices and Additional information is also available Radiological Health. at http://www.fda.gov/MedicalDevices/ Advancing Clinical Development of [FR Doc. E9–24828 Filed 10–14–09; 8:45 am] Molecular and Other Diagnostic Tests NewsEvents/WorkshopsConferences/ BILLING CODE 4160–01–S for Respiratory Tract Infections; Notice ucm181140.htm. of Public Workshop SUPPLEMENTARY INFORMATION: AGENCY: Food and Drug Administration. I. Background DEPARTMENT OF HOMELAND ACTION: Notice. SECURITY New diagnostic technologies offer SUMMARY: The Food and Drug opportunities to guide the appropriate Coast Guard Administration (FDA) is announcing a clinical use of anti-infective agents, [USCG–2009–0362] public workshop, co-sponsored with the facilitate the study of new anti-infective Infectious Diseases Society of America agents, and aid in tracking the spread of Collection of Information Under (IDSA), regarding scientific issues in the infectious diseases. To explore issues Review by Office of Management and development of molecular and other regarding the development and Budget: OMB Control Numbers: 1625– tests for the diagnosis of respiratory adoption of emerging diagnostic tests, 0014, 1625–0038, and 1625–0069 infections, entitled ‘‘Advancing Clinical FDA is announcing a public workshop, Development of Molecular and Other co-sponsored with IDSA to address AGENCY: Coast Guard, DHS. Diagnostic Tests for Respiratory Tract scientific issues in the development of ACTION: Thirty-day notice requesting Infections.’’ The purpose of the public in vitro diagnostic tests for respiratory comments. workshop is to provide an opportunity infections. SUMMARY: to share information and perspectives In compliance with the II. Topics for Discussion at the Public Paperwork Reduction Act of 1995, this with health care providers, academia, Workshop and industry on various aspects of request for comments announces that diagnostic test development for Topics to be discussed at the the U.S. Coast Guard is forwarding three respiratory infections. Topics for workshop include: Information Collection Requests (ICRs), • discussion will include the role of Principles of clinical trial design abstracted below, to the Office of emerging diagnostic tests in promoting and their application to studies of new Information and Regulatory Affairs appropriate use of antibiotics by diagnostics, or studies where new (OIRA), Office of Management and physicians, the use of novel diagnostic diagnostics and new drugs are Budget (OMB) requesting an extension tests in the study of new drugs for investigated simultaneously; of its approval for the following • respiratory infections, and the possible Test characteristics for emerging collections of information: (1) 1625– contribution of biomarkers in the tests that would promote clinical 0014, Request for Designation and approach to treatment of respiratory adoption and improve antibiotic Exemption of Oceanographic Research infections. stewardship; Vessels; (2) 1625–0038, Plan Approval Date and Time: The public workshop • Principles for including specific and Records for Tank, Passenger, Cargo will be held on November 12, 2009, viral or bacterial pathogens in multiplex and Miscellaneous Vessels, Mobile from 8 a.m. to 6 p.m. and on November diagnostic test panels; Offshore Drilling Units, Nautical School 13, 2009, from 8 a.m. to 4:30 p.m. • Discussion of approaches to Vessels and Oceanographic Research Location: The public workshop will developing a new molecular method Vessels—46 CFR Subchapters D, H, I, be held at the Hilton Washington DC when there is no ‘‘gold standard’’ I–A, R and U; and (3) 1625–0069, Ballast North/Gaithersburg, The Ballrooms, 620 reference method; and Water Management for Vessels with Perry Pkwy., Gaithersburg, MD 20877. • The use of biomarkers in respiratory Ballast Tanks Entering U.S. Waters. Seating is limited and available only on infections. Review and comments by OIRA ensure a first-come, first-served basis. The input from this public workshop we only impose paperwork burdens Contact Person: Christine Kellerman, will help in developing topics for commensurate with our performance of Center for Devices and Radiological further discussion. The agency duties. Health, Food and Drug Administration, encourages individuals, patient DATES: Please submit comments on or Office of In Vitro Diagnostic Devices, advocates, industry, consumer groups, before November 16, 2009. 10903 New Hampshire Ave., Building health care professionals, researchers, ADDRESSES: You may submit comments 66, rm. 5677, Silver Spring, MD 20993– and other interested persons to attend identified by Coast Guard docket 0002, 301–796–5711. this public workshop. number [USCG–2009–0362] to the Registration: To register Transcripts: Transcripts of the public Docket Management Facility (DMF) at electronically, e-mail registration workshop may be requested in writing the U.S. Department of Transportation information (including: Name, title, firm from the Freedom of Information Office (DOT) or to OIRA. To avoid duplication, name, address, telephone, and fax (HFI–35), Food and Drug please submit your comments by only numbers) to [email protected] Administration, 5600 Fishers Lane, rm. one of the following means: by November 8, 2009. Persons without 6–30, Rockville, MD 20857, (1) Electronic submission. (a) To Coast access to the Internet can call 301–796– approximately 20 working days after the Guard docket at http:// 5711 to register. Registration is free for public workshop at a cost of 10 cents www.regulation.gov. (b) To OIRA by e- the public workshop. Interested parties per page. A link to the transcripts will mail via: [email protected]. are encouraged to register early because also be available on the Internet at (2) Mail or Hand delivery. (a) DMF space is limited. Seating will be http://www.fda.gov/MedicalDevices/ (M–30), DOT, West Building Ground available on a first-come, first-served NewsEvents/WorkshopsConferences/ Floor, Room W12–140, 1200 New Jersey

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Avenue, SE., Washington, DC 20590– Public participation and request for Previous Request for Comments 0001. Hand deliver between the hours of comments: We encourage you to This request provides a 30-day 9 a.m. and 5 p.m., Monday through respond to this request by submitting comment period required by OIRA. The Friday, except Federal holidays. The comments and related materials. We Coast Guard has published the 60-day telephone number is 202–366–9329. (b) will post all comments received, notice (74 FR 26875, June 4, 2009) To OIRA, 725 17th Street, NW., without change, to http:// required by 44 U.S.C. 3506(c)(2). That Washington, DC 20503, attention Desk www.regulations.gov. They will include Notice elicited no comments. Officer for the Coast Guard. any personal information you provide. (3) Fax. (a) To DMF, 202–493–2251. We have an agreement with DOT to use Information Collection Request (b) To OIRA at 202–395–5806. To their DMF. Please see the ‘‘Privacy Act’’ 1. Title: Request for Designation and ensure your comments are received in a paragraph below. Exemption of Oceanographic Research timely manner, mark the fax, attention Submitting comments: If you submit a Vessels. Desk Officer for the Coast Guard. comment, please include the docket OMB Control Number: 1625–0014. The DMF maintains the public docket number [USCG–2009–0362], indicate Type of Request: Revision of a for this Notice. Comments and material the specific section of the document to currently approved collection. received from the public, as well as which each comment applies, providing Respondents: Owners/operators of documents mentioned in this Notice as a reason for each comment. We vessels. being available in the docket, will recommend you include your name, Abstract: This information is become part of the docket and will be mailing address, an e-mail address, or necessary to ensure a vessel qualifies for available for inspection or copying at other contact information in the body of the designation. Room W12–140 on the West Building your document so that we can contact Forms: None. Ground Floor, 1200 New Jersey Avenue, you if we have questions regarding your Burden Estimate: The estimated SE., Washington, DC, between 9 a.m. submission. You may submit comments burden has decreased from 51 hours to and 5 p.m., Monday through Friday, and material by electronic means, mail, 35 hours a year. except Federal holidays. You may also fax, or delivery to the DMF at the 2. Title: Plan Approval and Records find the docket on the Internet at http:// address under ADDRESSES; but please for Tank, Passenger, Cargo and www.regulations.gov. submit them by only one means. If you Miscellaneous Vessels, Mobile Offshore Copies of the ICRs are available submit them by mail or delivery, submit Drilling Units, Nautical School Vessels through the docket on the Internet at them in an unbound format, no larger and Oceanographic Research Vessels— http://www.regulations.gov. than 81⁄2 by 11 inches, suitable for 46 CFR Subchapters D, H, I, I–A, R and Additionally, copies are available from: copying and electronic filing. If you U. Commandant (CG–611), Attn: submit them by mail and would like to OMB Control Number: 1625–0038. Paperwork Reduction Act Manager, U.S. know that they reached the Facility, Type of Request: Revision of a Coast Guard, 2100 2nd St., SW., Stop please enclose a stamped, self-addressed currently approved collection. Respondents: Shipyards, designers, 7101, Washington, DC 20593–7101. postcard or envelope. In response to and manufacturers of certain vessels. FOR FURTHER INFORMATION: Contact Mr. your comments, we may revise the ICR Abstract: Under 46 U.S.C. 3301 and Arthur Requina, Office of Information or decide not to seek an extension of 3306, the Coast Guard is responsible for Management, telephone 202–475–3523 approval for this collection. The Coast enforcing regulations promoting safety or fax 202–475–3929, for questions on Guard and OIRA will consider all of life and property in marine these documents. Contact Ms. Renee V. comments and material received during transportation. The Coast Guard uses Wright, Program Manager, Docket the comment period. this information to ensure a vessel Operations, 202–366–9826, for Viewing comments and documents: meets the applicable standards for questions on the docket. Go to http://www.regulations.gov to construction, arrangement, and SUPPLEMENTARY INFORMATION: view documents mentioned in this equipment. The Coast Guard invites comments on Notice as being available in the docket. Forms: None. whether these ICRs should be granted Click on the ‘‘read comments’’ box, Burden Estimate: The estimated based on it being necessary for the which will then become highlighted in burden has decreased from 13,790 hours proper performance of Departmental blue. In the ‘‘Keyword’’ box insert to 2,970 hours a year. functions. In particular, the Coast Guard ‘‘USCG–2009–0362’’ and click 3. Title: Ballast Water Management for would appreciate comments addressing: ‘‘Search.’’ Click the ‘‘Open Docket Vessels with Ballast Tanks Entering U.S. (1) The practical utility of the Folder’’ in the ‘‘Actions’’ column. You Waters. collections; (2) the accuracy of the may also visit the DMF in room W12– OMB Control Number: 1625–0069. estimated burden of the collections; (3) 140 on the West Building Ground Floor, Type of Request: Revision of a ways to enhance the quality, utility, and 1200 New Jersey Avenue, SE., currently approved collection. clarity of information subject to the Washington, DC, between 9 a.m. and 5 Respondents: Owners and operators collections; and (4) ways to minimize p.m., Monday through Friday, except of certain vessels. the burden of collections on Federal holidays. Abstract: The information is needed respondents, including the use of Privacy Act: Anyone can search the to ensure compliance with requirements automated collection techniques or electronic form of all comments in 33 CFR Part 151, Subparts C and D. other forms of information technology. received in dockets by the name of the The information will also be used for Comments to Coast Guard or OIRA individual submitting the comment (or research and periodic reporting to must contain the OMB Control Number signing the comment, if submitted on Congress. of the ICR. They must also contain the behalf of an association, business, labor Forms: CG–5662. docket number of this request, [USCG union, etc.). You may review the Burden Estimate: The estimated 2009–0362]. For your comments to Privacy Act statement regarding our burden has decreased from 60,769 hours OIRA to be considered, it is best if they public dockets in the January 17, 2008 to 60,727 hours a year. are received on or before November 16, issue of the Federal Register (73 FR Authority: The Paperwork Reduction Act 2009. 3316). of 1995; 44 U.S.C. Chapter 35, as amended.

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Dated: October 7, 2009. • E-mail: [email protected]. (8) Boats and Associated Equipment M.B. Lytle, Include the docket number (USCG– Subcommittee meeting. 2009–0934) in the subject line of the Captain, U.S. Coast Guard, Acting Assistant Sunday, November 1, 2009: Commandant for Command, Control, message. Communications, Computers and • Fax: (202) 372–1932. (9) Prevention through People Information Technology. • Mail: Mr. Jeff Ludwig, COMDT Subcommittee meeting. [FR Doc. E9–24742 Filed 10–14–09; 8:45 am] (CG–54221), 2100 2nd Street, SW., Stop (10) Recreational Boating Safety BILLING CODE 4910–15–P 7581, Washington, DC 20593. Strategic Planning Subcommittee Instructions: All submissions received meeting. must include the words ‘‘U.S. Coast DEPARTMENT OF HOMELAND Guard’’ and docket number USCG– Monday, November 2, 2009: SECURITY 2009–0934. All submissions received (11) Prevention through People will be posted without alteration at Subcommittee report. Coast Guard http://www.regulations.gov, including any personal information provided. (12) Boats and Associated Equipment [Docket No. USCG–2009–0934] Anyone can search the electronic form Subcommittee report. National Boating Safety Advisory of comments received into any of our (13) Recreational Boating Safety Council dockets by the name of the individual Strategic Planning Subcommittee report. submitting the comment (or signing the A more detailed agenda can be found AGENCY: Coast Guard, DHS. comment, if submitted on behalf of an at: http://homeport.uscg.mil/NBSAC, ACTION: Committee management; notice association, business, labor union, etc.) after October 26, 2009. of meeting. You may review a Privacy Act notice regarding our public dockets in the B. NBSAC Subcommittees SUMMARY: The National Boating Safety January 17, 2008 issue of the Federal Prevention Through People Advisory Council (NBSAC) and its Register (73 FR 3316). Subcommittee: Discuss current subcommittees will meet on October 31 Docket: For access to the docket to regulatory projects, grants, contracts, and November 1 and 2, 2009, in read background documents or and new issues affecting the prevention Arlington, VA. The meetings will be submissions received by the NBSAC, go of boating accidents through outreach open to the public. to http://www.regulations.gov. and education of boaters. DATES: NBSAC will meet October 31, FOR FURTHER INFORMATION CONTACT: Mr. Boats and Associated Equipment 2009, from 9 a.m. to 12 p.m. and on Jeff Ludwig, COMDT (CG–54221), 2100 Subcommittee: Discuss current November 2, 2009, from 9 a.m. to 5 p.m. 2nd Street, SW., Stop 7581, Washington, regulatory projects, grants, contracts, The Boats and Associated Equipment DC 20593; (202) 372–1061; and new issues affecting boats and Subcommittee will meet on October 31, [email protected]. associated equipment. from 1:30 p.m. to 2:45 p.m. The SUPPLEMENTARY INFORMATION: Notice of Prevention Through People Recreational Boating Safety Strategic this meeting is given under the Federal Subcommittee will meet on October 31, Planning Subcommittee: Discuss current Advisory Committee Act, 5 U.S.C. App. 2009, from 3 p.m. to 5 p.m., and the status of the strategic planning process (Pub. L. 92–463). NBSAC was Recreational Boating Safety Strategic and any new issues or factors that could established by the Federal Boat Safety Planning Subcommittee will meet on impact, or contribute to, the Act of 1971. That law requires the November 1, 2009 from 9 a.m. to 5 p.m. development of the strategic plan for the Secretary of Homeland Security, and the Please note that the meetings may recreational boating safety program. Commandant of the Coast Guard by conclude early if the Council has delegation, to consult with NBSAC in C. Meeting Procedure completed its business. prescribing Federal regulations, and on All written materials, comments, and This meeting is open to the public. At other major matters regarding boating requests to make oral presentations at the discretion of the Chair, members of safety. See 46 U.S.C. 4302(c) and the meetings should reach Mr. Jeff the public may make oral presentations 13110(c). Ludwig by October 26, 2009, via one of during the meeting. If you would like to NBSAC will meet for the purpose of the methods described in ADDRESSES. make an oral presentation at the discussing issues related to recreational Requests to have a copy of your material meeting, please notify Mr. Jeff Ludwig boating safety. distributed to each member of the as described in the ADDRESSES section Council prior to the meeting should A. Tentative Agendas of Meetings above. If you would like a copy of your material distributed to each member of reach Mr. Ludwig by October 26, 2009. National Boating Safety Advisory the Council in advance of the meeting, ADDRESSES: The meeting will be held at Council (NBSAC): the Holiday Inn Arlington, 4610 N please submit thirty (30) of copies to Mr. Fairfax Drive, Arlington, VA 22203. Saturday, October 31, 2009: Jeff Ludwig by October 26, 2009. Please send written material, (1) Remarks—Mr. James P. Muldoon, Please note that the meeting may comments, and requests to make oral NBSAC Chairman; conclude early if all business is presentations to Mr. Jeff Ludwig by one (2) Chief, Office of Auxiliary and finished. of the submission methods described Boating Safety Update on NBSAC D. Information on Services for below. All materials, comments, and Resolutions and Recreational Boating Individuals With Disabilities requests must be identified by docket Safety Program report. number USCG–2009–0934. (3) Executive Secretary’s report. For information on facilities or Submission Methods: Please use only (4) Chairman’s session. services for individuals with disabilities one of the following methods: (5) TSAC Liaison’s report. or to request special assistance at the • Federal eRulemaking Portal: http:// (6) NAVSAC Liaison’s report. meeting, contact Mr. Jeff Ludwig as www.regulations.gov. Follow the (7) National Association of State described in the ADDRESSES section instructions for submitting comments. Boating Law Administrators report. above as soon as possible.

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Dated: October 6, 2009. DATES: Comments Due Date: November practical utility; (2) Evaluate the K.S. Cook, 16, 2009. accuracy of the agency’s estimate of the Rear Admiral, U.S. Coast Guard, Director of ADDRESSES: Interested persons are burden of the proposed collection of Prevention Policy. invited to submit comments regarding information; (3) Enhance the quality, [FR Doc. E9–24832 Filed 10–14–09; 8:45 am] this proposal. Comments should refer to utility, and clarity of the information to BILLING CODE 4910–15–P the proposal by name and/or OMB be collected; and (4) Minimize the approval Number (2502–0275) and burden of the collection of information should be sent to: HUD Desk Officer, on those who are to respond; including Office of Management and Budget, New through the use of appropriate DEPARTMENT OF HOUSING AND Executive Office Building, Washington, automated collection techniques or URBAN DEVELOPMENT DC 20503; fax: 202–395–5806. other forms of information technology, FOR FURTHER INFORMATION CONTACT: e.g., permitting electronic submission of [Docket No. FR–5281–N–75] Lillian Deitzer, Reports Management responses. This notice also lists the following Application for the Transfer of Physical Officer, QDAM, Department of Housing information: Assets and Urban Development, 451 Seventh Street, SW., Washington, DC 20410; e- Title of Proposal: Application for the AGENCY: Office of the Chief Information mail Lillian Deitzer at Transfer of Physical Assets. Officer, HUD. [email protected] or OMB Approval Number: 2502–0275. ACTION: Notice. telephone (202) 402–8048. This is not a Form Numbers: HUD–92266. toll-free number. Copies of available Description of the Need for the SUMMARY: The proposed information documents submitted to OMB may be Information and Its Proposed Use: The collection requirement described below obtained from Ms. Deitzer. Application for the Transfer of Physical has been submitted to the Office of SUPPLEMENTARY INFORMATION: This Assets is completed and submitted to Management and Budget (OMB) for notice informs the public that the HUD by prospective purchasers of review, as required by the Paperwork Department of Housing and Urban properties with mortgage either HUD- Reduction Act. The Department is Development has submitted to OMB a insured or HUD-held prior to conveying soliciting public comments on the request for approval of the Information the title. The form cites all the subject proposal. collection described below. This notice supportive documentation that must be The Application for the Transfer of is soliciting comments from members of submitted to HUD for approval. Physical Assets is completed and the public and affecting agencies Frequency of Submission: Other, TPA submitted to HUD by prospective concerning the proposed collection of is only submitted when a property purchasers of properties with mortgage information to: (1) Evaluate whether the experiences a change in ownership. either HUD-insured or HUD-held prior proposed collection of information is Many projects only experience this to conveying the title. The form cites all necessary for the proper performance of change once during the life of its the supportive documentation that must the functions of the agency, including mortgage. Data collection is only as be submitted to HUD for approval. whether the information will have frequent as the ownership changes.

Number of Annual × Hours per respondents responses response = Burden hours

Reporting burden ...... 14,758 0.0199 88.34 26,061

Total Estimated Burden Hours: SUMMARY: The proposed information the proposal by name and/or OMB 26,061. collection requirement described below Approval Number (2577–NEW) and Status: Extension of a currently has been submitted to the Office of should be sent to: HUD Desk Officer, approved collection. Management and Budget (OMB) for Office of Management and Budget, New Authority: Section 3507 of the Paperwork review, as required by the Paperwork Executive Office Building, Washington, Reduction Act of 1995, 44 U.S.C. 35, as Reduction Act. The Department is DC 20503; fax: 202–395–5806. amended. soliciting public comments on the FOR FURTHER INFORMATION CONTACT: Dated: October 08, 2009. subject proposal. Lillian Deitzer, Reports Management In order for HAs to be approved for Lillian Deitzer, Officer, QDAM, Department of Housing a mortgage of security interest in any and Urban Development, 451 Seventh Departmental Reports Management Officer, public housing real estate or other Office of the Chief Information Officer. Street, SW., Washington, DC 20410; e- assets, a proposal must be submitted to [FR Doc. E9–24805 Filed 10–14–09; 8:45 am] mail Lillian Deitzer at HUD. After approval and execution of [email protected] or BILLING CODE 4210–67–P any legal documents associated with the telephone (202) 402–8048. This is not a loan and related construction activity, a toll-free number. Copies of available copy of the executed documents is DEPARTMENT OF HOUSING AND documents submitted to OMB may be submitted. Quarterly reports on the URBAN DEVELOPMENT obtained from Ms. Deitzer. progress of the loan payout and payoff SUPPLEMENTARY INFORMATION: This [Docket No. FR–5281–N–73] as well as the construction activity will notice informs the public that the be submitted. Department of Housing and Urban Public Housing Mortgage Program DATES: Comments Due Date: Development has submitted to OMB a November 16, 2009. AGENCY: Office of the Chief Information request for approval of the Information Officer, HUD. ADDRESSES: Interested persons are Collection described below. This notice invited to submit comments regarding is soliciting comments from members of ACTION: Notice. this proposal. Comments should refer to the public and affected agencies

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concerning the proposed collection of on those who are to respond; including order for HAs to be approved for a information to: (1) Evaluate whether the through the use of appropriate mortgage of security interest in any proposed collection of information is automated collection techniques or public housing real estate or other necessary for the proper performance of other forms of information technology, assets, a proposal must be submitted to the functions of the agency, including e.g., permitting electronic submission of HUD. After approval and execution of whether the information will have responses. any legal documents associated with the practical utility; (2) Evaluate the This notice also lists the following loan and related construction activity, a accuracy of the agency’s estimate of the information: copy of the executed documents is Title of Proposal: Public Housing burden of the proposed collection of submitted. Quarterly reports on the Mortgage Program. progress of the loan payout and payoff information; (3) Enhance the quality, OMB Approval Number: 2577–NEW. utility, and clarity of the information to Form Numbers: None. as well as the construction activity will be collected; and (4) Minimize the Description of the Need for the be submitted. burden of the collection of information Information and Its Proposed Use: In Frequency of Submission: Quarterly.

Number of Annual × Hours per Burden respondents responses response = hours

Reporting burden ...... 30 3 41.7 3,760

Total Estimated Burden Hours: 3,760. to calculate and collect monitoring the functions of the agency, including Status: New Collection. inspection fees for manufactured whether the information will have Authority: Section 3507 of the Paperwork housing. practical utility; (2) Evaluate the Reduction Act of 1995, 44 U.S.C. 35, as DATES: Comments Due Date: November accuracy of the agency’s estimate of the amended. 16, 2009. burden of the proposed collection of information; (3) Enhance the quality, Dated: October 8, 2009. ADDRESSES: Interested persons are utility, and clarity of the information to Lillian Deitzer, invited to submit comments regarding be collected; and (4) Minimize the Departmental Reports Management Officer, this proposal. Comments should refer to burden of the collection of information Office of the Chief Information Officer. the proposal by name and/or OMB on those who are to respond; including [FR Doc. E9–24808 Filed 10–14–09; 8:45 am] approval Number (2502–0233) and through the use of appropriate BILLING CODE 4210–67–P should be sent to: HUD Desk Officer, automated collection techniques or Office of Management and Budget, New other forms of information technology, Executive Office Building, Washington, e.g., permitting electronic submission of DEPARTMENT OF HOUSING AND DC 20503; fax: 202–395–5806. responses. URBAN DEVELOPMENT FOR FURTHER INFORMATION CONTACT: This notice also lists the following Lillian Deitzer, Reports Management [Docket No. FR–5281–N–74] information: Officer, QDAM, Department of Housing Manufactured Home Construction and and Urban Development, 451 Seventh Title of Proposal: Manufactured Home Safety Standards Program Street, SW., Washington, DC 20410; e- Construction and Safety Standards mail Lillian Deitzer at Program. AGENCY: Office of the Chief Information [email protected] or OMB Approval Number: 2502–0233. Officer, HUD. telephone (202) 402–8048. This is not a Form Numbers: HUD–101, HUD–203, ACTION: Notice. toll-free number. Copies of available HUD–203–B, HUD–301, HUD–302, SUMMARY: The proposed information documents submitted to OMB may be HUD–303, HUD–304. collection requirement described below obtained from Ms. Deitzer. Description of the Need for the has been submitted to the Office of SUPPLEMENTARY INFORMATION: This Information and Its Proposed Use: The Management and Budget (OMB) for notice informs the public that the National Manufactured Home review, as required by the Paperwork Department of Housing and Urban Construction and Safety Standards Act, Reduction Act. The Department is Development has submitted to OMB a 42 U.S.C. authorizes HUD to promulgate soliciting public comments on the request for approval of the Information and enforce reporting standards for the subject proposal. collection described below. This notice production of manufactured housing. The National Manufactured Home is soliciting comments from members of HUD uses these information collections Construction and Safety Standards Act, the public and affecting agencies to calculate and collect monitoring 42 U.S.C. authorizes HUD to promulgate concerning the proposed collection of inspection fees for manufactured and enforce reporting standards for the information to: (1) Evaluate whether the housing. production of manufactured housing. proposed collection of information is Frequency of Submission: On HUD uses these information collections necessary for the proper performance of occasion, Monthly.

Number of Annual × Hours per respondents responses response = Burden hours

Reporting Burden ...... 176 31.94 0.5 2,811

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Total Estimated Burden Hours: 2,811. DATES: The scoping period will Acres Status: Extension of a currently commence with the publication of this Administration ownership (rounded) approved collection. notice. The formal scoping period will BLM–Jarbidge Field Office, Twin Authority: Section 3507 of the Paperwork end on November 16, 2009. Comments regarding issues relative to the proposed Falls District, Idaho ...... 15,300 Reduction Act of 1995, 44 U.S.C. 35, as BLM–Wells Field Office, Elko amended. project and possible plan amendment District, Nevada ...... 4,700 Dated: October 8, 2009. should be received on or before State of Idaho ...... 2,000 November 16, 2009 using one of the Lillian Deitzer, Private ...... 8,700 methods listed below. Departmental Reports Management Officer, Total ...... 30,700 Office of the Chief Information Officer. The BLM will announce public scoping meetings through local news [FR Doc. E9–24806 Filed 10–14–09; 8:45 am] media, newsletters, and the BLM Web The turbines proposed for the project BILLING CODE 4210–67–P site: http://www.blm.gov/id/st/en/fo/ would have tower heights ranging from jarbidge.html at least 15 days prior to 200 to 250 feet and rotor diameters the first meeting. The BLM will provide ranging from 250 to 300 feet. Each DEPARTMENT OF THE INTERIOR additional opportunities for public turbine would be set on a large concrete foundation. Turbines would be Bureau of Land Management participation upon publication of the Draft EIS, including a public comment connected by underground electrical [LLID2100000 L16100000.DO0000] period. cable to one or two substations. Each substation would be sited on a two-acre Notice of Intent To Prepare an ADDRESSES: You may submit comments area and would consist of a graveled, Environmental Impact Statement and a on issues related to the proposed project fenced area containing transformer and Possible Land Use Plan Amendment to by any of the following methods: switching equipment and an area to • _ _ the Jarbidge Resource Management E-mail: id chinamtn [email protected]. park utility vehicles. Up to 25 miles of • Plan for the Proposed China Mountain Fax: (208) 735–2076. new three-phase 138 kV or 345 kV Wind Project • Mail: Project Manager, China overhead electric transmission line Mountain EIS, Jarbidge Field Office, would be constructed from each AGENCY: Bureau of Land Management, 2536 Kimberly Road, Twin Falls, Idaho substation to a switching station at the Interior. 83301. point of interconnection with an ACTION: Notice of Intent. Comments can also be hand-delivered existing transmission line. The new to the Jarbidge Field Office at the transmission line would be supported SUMMARY: The Bureau of Land address above. Documents pertinent to by single steel or double wood poles Management (BLM) Jarbidge Field this proposal may be examined at the with a distance of 400 to 500 feet Office, Twin Falls District, Idaho, Jarbidge Field Office. between poles. Other required facilities intends to prepare an Environmental would include one or two fenced, FOR FURTHER INFORMATION CONTACT: Impact Statement (EIS) for the proposed graveled switching stations of China Mountain Wind Project, which China Mountain Wind Project Manager, Jarbidge Field Office, 2536 Kimberly approximately two acres each; one or may include a land use plan more Operations and Maintenance Road, Twin Falls, Idaho 83301, amendment to the 1987 Jarbidge buildings; approximately 40 miles of telephone (208) 235–2072. Resource Management Plan (RMP), and new access roads; approximately 30 by this notice is announcing the SUPPLEMENTARY INFORMATION: The EIS miles of improved existing road; and a beginning of the scoping process and will be prepared in accordance with the temporary concrete batch plant. This soliciting input on the identification of Federal Land Policy and Management concrete batch plant would be centrally issues. The China Mountain Wind Act of 1976 (FLPMA) (43 U.S.C. 1701 et located on the site, occupying an area of Project is located on 30,700 acres of seq.), as amended; the National approximately five acres, and would public, state, and private lands in the Environmental Policy Act of 1969 operate during project construction. The Jarbidge Foothills, southwest of the (NEPA) (42 U.S.C. 4321 et seq.), as proposed project would disturb up to town of Rogerson in Twin Falls County, amended; and the Council on 540 acres on a temporary basis and up Idaho, and west of the town of Jackpot Environmental Quality (CEQ) to 180 acres on a permanent basis, in Elko County, Nevada. The EIS will regulations (40 CFR parts 1500–1508). following reclamation of construction analyze the potential environmental China Mountain Wind, LLC, has disturbance. impacts of the construction and submitted a right-of-way application to Approximately 60% of both the operation of a proposed wind power BLM to build a commercial wind power temporary and permanent impacts generation facility, associated electric generation facility capable of generating would be on lands under the transmission facilities and access roads, up to 425 megawatts (MW) of electricity. administration of the BLM and and a possible land use plan Up to 185 wind turbines, each having a approximately 40% would be on State amendment associated with the project. generating capacity between 2.3 and 3.0 of Idaho and private lands. The This notice initiates a 30-day public MW, would be installed on an area proposed project would operate year scoping period to identify relevant covering approximately 30,700 acres in round for a minimum of 30 years. issues associated with the proposed the Jarbidge Foothills, southwest of The purpose of the China Mountain project and possible land use plan Rogerson, Idaho, and west of Jackpot, Wind project, if determined to be amendment. Nevada. The proposed project area appropriate, is to construct a wind A prior notice dated April 21, 2008, includes public land administered by power generation facility that uses wind initiated a 60-day public scoping the BLM Elko District, Wells Field energy resources in an environmentally process to identify relevant issues Office in northeastern Nevada, public sound manner to meet existing and associated with the proposed project. land administered by the BLM Twin future electricity demands in Idaho and That scoping process was subsequently Falls District, Jarbidge Field Office, Nevada. The proposed project also extended for an additional 30 days, State of Idaho lands, and private lands provides for development of renewable ending July 21, 2008. in south-central Idaho. energy resources as encouraged by the

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Energy Policy Act of 2005 and is writing to the BLM at any public Commission, 500 E Street, SW., consistent with the BLM’s Wind Energy scoping meeting, or you may submit Washington, DC 20436, telephone (202) Development Policy, as described in the them to the BLM using one of the 205–3065. Copies of non-confidential Record of Decision for the Final methods listed in the ADDRESSES section documents filed in connection with this Programmatic EIS on Wind Energy above. E-mailed comments, including investigation are or will be available for Development on BLM Administered attachments, should be provided in inspection during official business Lands in the Western United States .doc, .pdf, .html, or .txt format. hours (8:45 a.m. to 5:15 p.m.) in the (December 2005). Electronic submissions in other formats Office of the Secretary, U.S. At this project’s original inception the or containing viruses will be rejected. International Trade Commission, 500 E Jarbidge RMP revision process was Before including your address, phone Street, SW., Washington, DC 20436, already well underway (initiated number, e-mail address, or other telephone (202) 205–2000. General January 10, 2006). The RMP revision personal identifying information in your information concerning the Commission process had identified the need to revise comment, you should be aware that may also be obtained by accessing its the previous land use planning your entire comment—including your Internet server (http://www.usitc.gov). guidance provided by the 1987 Jarbidge personal identifying information—may The public record for this investigation RMP—specifically with regards to be made publicly available at any time. may be viewed on the Commission’s rights-of-way, including wind energy While you can ask us in your comment electronic docket (EDIS) at http:// and utility corridors. With the RMP to withhold your personal identifying edis.usitc.gov. Hearing-impaired revision and this project on two parallel information from public review, we persons are advised that information on yet staggered timelines, the BLM cannot guarantee that we will be able to this matter can be obtained by originally expected that the RMP do so. contacting the Commission’s TDD revision (including new rights-of-way The EIS process will be a terminal on (202) 205–1810. guidance) would be complete prior to collaborative effort that will consider SUPPLEMENTARY INFORMATION: This issuance of a decision for this project local, regional, and national needs and investigation was instituted on March (consistent with that guidance). concerns. The BLM will work closely 31, 2008, based upon a complaint filed Unforeseen delays in the RMP revision with interested parties to identify the on behalf of General Electric Company process have extended the timeline, management decisions that are best (‘‘GE’’) of Fairfield, Connecticut on including: wildfire and subsequent suited to the needs of the public. After February 7, 2008. The complaint alleged restoration planning and response, gathering public comments, the BLM litigation, and other delays. The violations of section 337 of the Tariff will identify and provide rationale on Act of 1930 (19 U.S.C. 1337) in the issuance of a specific amendment to the those issues that will be addressed in 1987 RMP for the project, consistent importation into the United States, the the EIS or those issues beyond the scope sale for importation, and the sale within with analysis developed during the of the EIS. RMP revision process, will allow the the United States after importation of BLM to process the China Mountain Peter J. Ditton, certain variable speed wind turbines application, unimpeded by delays Acting State Director, Bureau of Land and components thereof that infringe associated with the RMP revision. If the Management, Idaho. claims 121–125 of U.S. Patent No. RMP revision is completed prior to [FR Doc. E9–24858 Filed 10–14–09; 8:45 am] 5,083,039 (‘‘the ‘039 patent’’) and claims issuance of a decision for this project, BILLING CODE 4310–GG–P 1–12, 15–18, and 21–28 of U.S. Patent then a land use plan amendment for the No. 6,921,985 (‘‘the ‘985 patent’’). project would not be necessary. The notice of investigation named as However, any further delays in the RMP INTERNATIONAL TRADE respondents Mitsubishi Heavy revision such as scheduling, protest COMMISSION Industries, Ltd. (‘‘MHI’’) of Tokyo, response, or litigation would require Japan; Mitsubishi Heavy Industries [Investigation No. 337–TA–641] continuing with the land use plan America, Inc. (‘‘MHIA’’) of New York, amendment for the project so as to New York; and Mitsubishi Power In the Matter of Certain Variable Speed Systems, Inc. (‘‘MPSA’’) of Lake Mary, minimize delays in processing China Wind Turbines and Components Wind’s application for this project. Florida. Thereof; Notice of Commission On October 8, 2008, the Commission The purpose of the public scoping Determination To Review a Final Initial process is to determine relevant issues issued notice of its determination not to Determination of the Administrative review an ID (Order No. 10) granting that will influence the scope of the Law Judge environmental analysis and EIS GE’s motion to amend its complaint and alternatives including a possible land AGENCY: U.S. International Trade the notice of investigation to add claims use plan amendment for the project. Commission. 1–19 of United States Patent No. General concerns in the following ACTION: Notice. 7,321,221 (‘‘the ‘221 patent’’) to this categories have been identified to date: investigation. Tribal concerns; wildlife (including SUMMARY: Notice is hereby given that On April 21, 2009, the Commission birds and bats); vegetation (including the U.S. International Trade issued notice of its determination not to noxious and invasive weeds); Commission has determined to review review an ID (Order No. 30) granting threatened, endangered and sensitive the final initial determination (‘‘ID’’) of GE’s amended motion for summary plants and animals, including sage the presiding administrative law judge determination that it had satisfied the grouse; public safety; public access; (‘‘ALJ’’) in the above-captioned economic prong of the domestic recreational opportunities; visual investigation under section 337 of the industry requirement with respect to all resources; cultural resources; rangeland Tariff Act of 1930, as amended, 19 three asserted patents. resources; geology and soils; water U.S.C. 1337 (‘‘section 337’’). The ALJ The ALJ conducted an evidentiary quality; climate change and variability; found a violation of section 337. hearing commencing on May 11, 2009. hazardous materials; air quality; noise; FOR FURTHER INFORMATION CONTACT: At the hearing, GE narrowed the number fire management; and socioeconomics. James A. Worth, Office of the General of asserted claims to: claim 121 of the You may submit comments on issues in Counsel, U.S. International Trade ‘039 patent; claims 5, 7, and 8 of the

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‘221 patent; and claim 15 of the ‘985 from entry into the United States for Reply submissions must be filed no later patent. purposes other than entry for than the close of business on November On August 7, 2009, the ALJ issued a consumption, the party should so 2, 2009. No further submissions will be final ID finding a violation of section indicate and provide information permitted unless otherwise ordered by 337 in this investigation. The ALJ found establishing that activities involving the Commission. that there was a violation in the sale for other types of entry either are adversely Persons filing written submissions importation, importation, or sale after affecting it or are likely to do so. For must file with the Office of the Secretary importation by respondents MHI and background information, see the the original and 12 true copies thereof MPSA with respect to claim 121 of the Commission Opinion, In the Matter of on or before the deadlines stated above. ‘039 patent and claim 15 of the ‘985 Certain Devices for Connecting Any person desiring to submit a patent. The ALJ found that there was no Computers via Telephone Lines, Inv. document (or portion thereof) to the violation with respect to these claims by No. 337–TA–360. Commission in confidence must request MHIA. The ALJ also found that there If the Commission contemplates some confidential treatment unless the was no violation of section 337 by any form of remedy, it must consider the information has already been granted party with respect to claims 5, 7, and 8 effects of that remedy upon the public such treatment during the proceedings. of the ‘221 patent. interest. The factors the Commission All such requests should be directed to On August 24, 2009, the parties filed will consider include the effect that an the Secretary of the Commission and three petitions and/or contingent exclusion order and/or cease and desist must include a full statement of the petitions for review: (1) MHI, MPSA, orders would have on (1) the public reasons why the Commission should and MHIA; (2) GE; and (3) the health and welfare, (2) competitive grant such treatment. See 19 CFR 201.6. Commission investigative attorney. On conditions in the U.S. economy, (3) U.S. Documents for which confidential September 1, 2009, each of the parties production of articles that are like or treatment is granted by the Commission filed responses thereto. directly competitive with those that are will be treated accordingly. All Having examined the final ID, the subject to investigation, and (4) U.S. nonconfidential written submissions petitions for review, the responses consumers. The Commission is will be available for public inspection at thereto, and the relevant portions of the therefore interested in receiving written the Office of the Secretary. record in this investigation, the submissions that address the This action is taken under the Commission has determined to review aforementioned public interest factors authority of section 337 of the Tariff Act the final ID, except the issue of in the context of this investigation. of 1930, as amended (19 U.S.C. 1337), importation and the intent finding If the Commission orders some form and under sections 210.42–.46 of the underlying the ALJ’s inequitable of remedy, the President has 60 days to Commission’s Rules of Practice and conduct determination. approve or disapprove the Procedure (19 CFR 210.42–.46). The Commission requests briefing Commission’s action. During this based on the evidentiary record on the period, the subject articles would be Issued: October 8, 2009. issues on review. The Commission is entitled to enter the United States under By order of the Commission. particularly interested in responses to a bond, in an amount to be determined Marilyn R. Abbott, the following questions: by the Commission and prescribed by Secretary to the Commission. (1) If the Commission were to adopt the Secretary of the Treasury. The [FR Doc. E9–24787 Filed 10–14–09; 8:45 am] the claim constructions presented to the Commission is therefore interested in BILLING CODE 7020–02–P administrative law judge by Mitsubishi receiving submissions concerning the or the Commission investigative amount of the bond that should be attorney, would the Mitsubishi Wind imposed. INTERNATIONAL TRADE Turbines or the GE Wind Turbines Written Submissions: The parties to COMMISSION satisfy these claim constructions under the investigation are requested to file the doctrine of equivalents? written submissions on the issues under [USITC SE–09–027] (2) Does the Commission need to review. The submissions should be address the issue of inventorship to concise and thoroughly referenced to Government in the Sunshine Act determine whether GE has standing to the record in this investigation, Meeting Notice assert infringement of the ‘985 patent? including references to exhibits and AGENCY HOLDING THE MEETING: United (3) Does claim 15 of the ‘985 patent testimony. Additionally, the parties to States International Trade Commission. require that the device shunt current the investigation, interested government away from both the inverter and the agencies, and any other interested TIME AND DATE: October 19, 2009 at generator rotor? Can the shunt circuit be persons are encouraged to file written 11 a.m. located within the inverter? submissions on the issues of remedy, PLACE: Room 101, 500 E Street, SW., In connection with the final the public interest, and bonding. Such Washington, DC 20436, Telephone: disposition of this investigation, the submissions should address the ALJ’s (202) 205–2000. Commission may issue (1) an order that recommended determination on remedy STATUS: Open to the public. could result in the exclusion of the and bonding. Complainant and the subject articles from entry into the Commission investigative attorney are Matters To Be Considered United States, and/or (2) cease and also requested to submit proposed 1. Agenda for future meetings: none. desist orders that could result in remedial orders for the Commission’s 2. Minutes. respondents being required to cease and consideration. Complainant is requested 3. Ratification List. desist from engaging in unfair acts in to supply the expiration dates of the 4. Inv. No. 701–TA–460 (Final) (Ni- the importation and sale of such patents at issue and the HTSUS Resist Piston Inserts from Argentina)— articles. Accordingly, the Commission is numbers under which the accused briefing and vote. (The Commission is interested in receiving written products are imported. The written currently scheduled to transmit its submissions that address the form of submissions and proposed remedial determination and Commissioners’ remedy, if any, that should be ordered. orders must be filed no later than the opinions to the Secretary of Commerce If a party seeks exclusion of an article close of business on October 22, 2009. on or before October 29, 2009.)

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5. Outstanding action jackets: none. 205–3263 or [email protected]). currently approved collection, In accordance with Commission For information on the legal aspects of Employee Possessor Questionnaire. policy, subject matter listed above, not this investigation, contact William disposed of at the scheduled meeting, Gearhart of the Commission’s Office of The Department of Justice (DOJ), may be carried over to the agenda of the the General Counsel (202–205–3091 or Bureau of Alcohol, Tobacco, Firearms, following meeting. [email protected]). The media and Explosives (ATF) will be submitting By order of the Commission should contact Margaret O’Laughlin, the following information collection Issued: October 8, 2009. Office of External Relations (202–205– request to the Office of Management and 1819 or [email protected]). William R. Bishop, Budget (OMB) for review and approval Hearing-impaired individuals may in accordance with the Paperwork Hearings and Meetings Coordinator. obtain information on this matter by [FR Doc. E9–24906 Filed 10–13–09; 4:15 pm] Reduction Act of 1995. The proposed contacting the Commission’s TDD information collection is published to BILLING CODE 7020–02–P terminal at 202–205–1810. General obtain comments from the public and information concerning the Commission affected agencies. This proposed may also be obtained by accessing its information collection was previously INTERNATIONAL TRADE Internet site (http://www.usitc.gov). COMMISSION published in the Federal Register Persons with mobility impairments who Volume 72, Number 152, page 39974, on [Investigation No. 332–505] will need special assistance in gaining August 10, 2009, allowing for a 60-day access to the Commission should comment period. Use of the ‘‘First Sale Rule’’ for contact the Office of the Secretary at Customs Valuation of U.S. Imports 202–205–2000. The purpose of this notice is to allow Background: Section 15422(c)(1) of for an additional 30 days for public AGENCY: United States International the Food, Conservation, and Energy Act comment until November 16, 2009. This Trade Commission. of 2008 (‘‘2008 Act’’), enacted on May process is conducted in accordance with ACTION: Notice of earlier-than-expected 22, 2008, requires the Commission to 5 CFR 1320.10. transmittal of report to Congress. submit a report to the House Committee Written comments and/or suggestions SUMMARY: On January 2, 2009, the on Ways and Means and the Senate regarding the items contained in this Commission published a notice in the Committee on Finance that contains notice, especially the estimated public Federal Register (74 FR 119) certain customs transaction valuation burden and associated response time, announcing that it had instituted information compiled by the should be directed to The Office of investigation No. 332–505, Use of the Commission from information furnished Management and Budget, Office of ‘‘First Sale Rule’’ for Customs Valuation to the Commission by CBP. Section Information and Regulatory Affairs, of U.S. Imports, for the purpose of 15422(b) of the 2008 Act requires that Attention: Department of Justice Desk preparing the report required by section CBP provide monthly reports to the Officer, Washington, DC 20503. 15422(c)(1) of the Food, Conservation, Commission. The 2008 Act requires the Additionally, comments may be and Energy Act of 2008 (Pub. L. 110– Commission to submit its report 90 days submitted to OMB via facsimile to 234). The Commission indicated that it after receipt of the final monthly report (202)–395–7285. expected to transmit its report to from CBP. On September 25, 2009, the Commission received the final monthly Written comments and suggestions Congress in February 2010, based on the from the public and affected agencies expectation it would receive the last of report from CBP and will transmit its report to the Committees on December concerning the proposed collection of several monthly reports from the information are encouraged. Your Commissioner of U.S. Customs and 23, 2009. The Commission anticipates that the report it sends to the comments should address one or more Border Protection (CBP) in November of the following four points: 2009. The Commission received the Committees in this investigation will be final report from CBP on September 25, made available to the public in its (1) Evaluate whether the proposed 2009, and now expects to deliver its entirety. collection of information is necessary report to Congress by December 23, By order of the Commission. for the proper performance of the 2009. Issued: October 8, 2009. functions of the agency, including Marilyn R. Abbott, whether the information will have DATES: December 23, 2009: New date for practical utility; anticipated transmittal of Commission Secretary to the Commission. report to Congress. [FR Doc. E9–24793 Filed 10–14–09; 8:45 am] (2) Evaluate the accuracy of the agency’s estimate of the burden of the ADDRESSES: BILLING CODE 7020–02–P All Commission offices, proposed collection of information, including the Commission’s hearing including the validity of the rooms, are located in the United States methodology and assumptions used; International Trade Commission Building, 500 E Street, SW., DEPARTMENT OF JUSTICE (3) Enhance the quality, utility, and Washington, DC. The public record for clarity of the information to be Bureau of Alcohol, Tobacco, Firearms, collected; and this investigation may be viewed on the and Explosives Commission’s electronic docket (EDIS) (4) Minimize the burden of the at http://www.usitc.gov/secretary/ collection of information on those who [OMB Number 1140–0072] edis.htm. are to respond, including through the FURTHER INFORMATION: For information Agency Information Collection use of appropriate automated, specific to this investigation, contact Activities: Proposed Collection; electronic, mechanical, or other project leader Michael Ferrantino (202– Comments Requested technological collection techniques or 205–3241 or other forms of information technology, [email protected]) or deputy ACTION: 30–Day Notice of Information e.g., permitting electronic submission of project leader Nannette Christ (202– Collection Under Review: Revision of a responses.

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Overview of This Information announces the Fall meeting of the with the Acting Administrator; Collection Federal Advisory Committee on Summary and Close. (Open Session) (1) Type of Information Collection: Juvenile Justice (FACJJ), which will be 3. Saturday, October 31, 2009, 8 a.m. Revision of a currently approved held in Austin TX October 29 to October to 10:30 a.m. • collection. 31, 2009. Call to Order; Discussion—Topics (2) Title of the Form/Collection: Dates and Locations: The meeting of Concern: Impact on States and Employee Possessor Questionnaire times and locations are as follows: Advice to OJJDP; Sub Committee Report (3) Agency form number, if any, and Thursday, October 29, 2009, 4:15 p.m. Outs; Next Steps, Summary and the applicable component of the to 6:15 p.m.; Friday, October 30, 2009, Adjournment (Open Session) Department of Justice sponsoring the 8:30 a.m. to 5:30 p.m.; and Saturday, For security purposes, members of the collection: Form Number: ATF F October 31, 2009, 8 a.m. to 10:30 a.m. FACJJ and of the public who wish to 5400.28. Bureau of Alcohol, Tobacco, The meeting will take place at the attend, must pre-register online at Firearms and Explosives. Hilton Garden Inn Austin Downtown, http://www.facjj.org. Should problems (4) Affected public who will be asked 500 North IH 35, Austin, TX 78701. arise with web registration, call Daryel or required to respond, as well as a brief FOR FURTHER INFORMATION CONTACT: Dunston at 240–221–4343. Members of abstract: Primary: Individuals or Robin Delany-Shabazz, Designated the public must register by Monday, households. Other: Business or other Federal Official, OJJDP, Robin.Delany- October 26, 2009. [Note: these are not for-profit. Abstract: Each employee [email protected], or 202–307–9963. toll-free telephone numbers.] Additional possessor in the explosives business or [Note: This is not a toll-free number.] identification documents may be operations required to ship, transport, SUPPLEMENTARY INFORMATION: The required. Space is limited. Please note: receive, or possess (actual or Federal Advisory Committee on Photo identification will be required for constructive), explosive materials must Juvenile Justice (FACJJ), established admission to the meeting. submit this form. ATF F 5400.28 will pursuant to Section 3(2)A of the Federal Written Comments determine the eligibility of the Advisory Committee Act (5 U.S.C. App. employee possessor to possess 2), will meet to carry out its advisory Interested parties may submit written explosives. functions under Section 223(f)(2)(C–E) comments by Monday, October 26, (5) An estimate of the total number of of the Juvenile Justice and Delinquency 2009, to Robin Delany-Shabazz, respondents and the amount of time Prevention Act of 2002. The FACJJ is Designated Federal Official for the estimated for an average respondent to composed of one representative from Federal Advisory Committee on respond: There will be an estimated each state and territory. FACJJ duties Juvenile Justice, OJJDP, at Robin.Delany- 10,000 respondents, who will complete include: reviewing Federal policies [email protected]. If e-mail is not the form within approximately 20 regarding juvenile justice and available, please fax your comments to minutes. delinquency prevention; advising the 202–307–2819 and call Joyce Mosso at (6) An estimate of the total burden (in OJJDP Administrator with respect to 202–305–4445 to ensure that the fax was hours) associated with the collection: particular functions and aspects of received. [Note: These are not toll-free There are an estimated 3,334 total OJJDP; and advising the President and numbers.] No oral presentations will be burden hours associated with this Congress with regard to State permitted at the meeting. However, collection. perspectives on the operation of OJJDP written questions and comments from If additional information is required and Federal legislation pertaining to members of the public attending the contact: Ms. Lynn Bryant, Department juvenile justice and delinquency meeting may be invited. Clearance Officer, United States prevention. More information, including Department of Justice, Policy and Dated: October 9, 2009. a member list, may be found at http:// Jeff Slowikowski, Planning Staff, Justice Management www.facjj.org. Division, Suite 1600, Patrick Henry Acting Administrator, Office of Juvenile Building, 601 D Street NW., Meeting Agenda Justice and Delinquency Prevention. Washington, DC 20530. 1. Thursday, October 29, 2009, 4:15 [FR Doc. E9–24836 Filed 10–14–09; 8:45 am] Dated: October 9, 2009. p.m. to 6:15 p.m. BILLING CODE 4410–18–P • Lynn Bryant, Presentations on Law Enforcement Approaches to Disproportionate Department Clearance Officer, PRA, United States Department of Justice. Minority Confinement in the Juvenile DEPARTMENT OF LABOR Justice System (Open Session) [FR Doc. E9–24846 Filed 10–14–09; 8:45 am] 2. Friday, October 30, 2009, 8 a.m. to Office of the Secretary BILLING CODE 4810–FX–P 5:30 p.m. • 8:30 a.m. to 11:45 a.m. Registration, Job Corps: Preliminary Finding of No Significant Impact (FONSI) for the DEPARTMENT OF JUSTICE Call to Order; Welcome; Report on Responses to 2009 Annual Request for Installation of a Small Wind Turbine at the North Texas Job Corps Center Office of Justice Programs Information; Report from the Annual Report Sub Committee; Roundtable Located at 1701 North Church Street, [OJP (OJJDP) Docket No. 1506] Sessions with Staff of the Office of McKinney, TX Meeting of the Federal Advisory Juvenile Justice and Delinquency AGENCY: Office of the Secretary, Committee on Juvenile Justice Prevention (Open Session) Department of Labor. • 11:45 a.m. to 1:30 p.m. Working RECOVERY: This project will be wholly AGENCY: Office of Juvenile Justice and Lunch and Sub Committee Meetings funded under the American Recovery Delinquency Prevention, Office of (Closed Session) and Reconstruction Act of 2009. Justice Programs, Justice. • 1:30 p.m. to 4:30 p.m. The Future ACTION: ACTION: Notice of meeting. of FACJJ: Options for Consideration Preliminary Finding of No (Open Session) Significant Impact (FONSI) for a Small SUMMARY: The Office of Juvenile Justice • 4:30 p.m. to 5:30 p.m. Recognition, Wind Turbine Installation to be located and Delinquency Prevention (OJJDP) Reflections and Questions: A Discussion at the North Texas Job Corps Center,

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1701 North Church Street, McKinney, significant adverse impacts on the I. Background Texas. environment. Section 115 (e) of the Federal Mine SUMMARY: Pursuant to the Council on Dated: October 7, 2009. Safety and Health Act of 1977 (Mine Environmental Quality Regulations (40 Lynn Intrepidi, Act) required the Secretary of Labor CFR part 1500–08) implementing Interim National Director of Job Corps. (Secretary) to publish proposed procedural provisions of the National [FR Doc. E9–24749 Filed 10–14–09; 8:45 am] regulations which provide that mine Environmental Policy Act (NEPA), the BILLING CODE 4510–23–P rescue teams be available for rescue and Department of Labor, Office of the recovery work to each underground Secretary (OSEC) in accordance with 29 mine in the event of an emergency. In CFR 11.11(d), gives notice that an DEPARTMENT OF LABOR addition, the costs of making advance Environmental Assessment (EA) has arrangements for such teams are to be been prepared for a proposed Wind Mine Safety and Health Administration borne by the operator of each such Turbine Installation to be located at the mine. North Texas Job Corps Center, 1701 Proposed Information Collection Congress considered the ready North Church Street, McKinney, Texas, Request Submitted for Public availability of mine rescue in the event and that the proposed plan for the Comment and Recommendations; of an accident to be vital protection for construction of a wind turbine at the Mine Rescue Teams; Arrangements for miners. Congress was concerned that North Texas Job Corps Center will have Emergency Medical Assistance; and too often in the past, rescue efforts at a no significant environmental impact. Arrangements for Transportation for disaster site have had to await the This Preliminary Finding of No Injured Persons delayed arrival of skilled mine rescue Significant Impact (FONSI) will be teams. In responding to Congressional ACTION: Notice. made available for public review and concerns, the Mine Safety and Health comment for a period of 30 days. Administration (MSHA) promulgated 30 SUMMARY: The Department of Labor, as CFR Part 49, Mine Rescue Teams. The DATES: Comments must be submitted by part of its continuing effort to reduce regulations set standards related to the November 16, 2009. paperwork and respondent burden availability of mine rescue teams; ADDRESSES: Any comment(s) are to be conducts a pre-clearance consultation alternate mine rescue capability for submitted to William A Dakshaw, P.E., program to provide the general public small and remote mines and mines with Division of Facilities and Asset and Federal agencies with an special mining conditions; inspection Management, Department of Labor, 200 opportunity to comment on proposed and maintenance records of mine rescue Constitution Avenue, NW., Room N– and/or continuing collections of equipment and apparatus; physical 4460, Washington, DC 20210, (202) 693– information in accordance with the requirements for mine rescue team 2867 (this is not a toll-free number). Paperwork Reduction Act of 1995 members and alternates; and experience FOR FURTHER INFORMATION CONTACT: (PRA95) [44 U.S.C. 3506 (c)(2)(A)]. This and training requirements for team Copies of the EA are available to program helps to ensure that requested members and alternates. interested parties by contacting William data can be provided in the desired A Dakshaw, P.E., Division of Facilities format, reporting burden (time and II. Desired Focus of Comments and Asset Management, Department of financial resources) is minimized, MSHA is particularly interested in Labor, 200 Constitution Avenue, NW., collection instruments are clearly comments that: Room N–4460, Washington, DC 20210, understood, and the impact of collection • Evaluate whether the proposed (202) 693–2867 (this is not a toll-free requirements on respondents can be collection of information is necessary number). properly assessed. for the proper performance of the SUPPLEMENTARY INFORMATION: This EA Currently, the Mine Safety and Health functions of the agency, including summary addresses the proposed Administration (MSHA) is soliciting whether the information will have construction of a single 50 kW rated comments concerning the extension of practical utility; • wind turbine at the North Texas Job the information collection related to the Evaluate the accuracy of the Corps Center. 30 CFR Sections 49.2, 49.3 49.4, 49.5 agency’s estimate of the burden of the The wind turbine will be installed on 49.6, 49.7, 49.8 and 49.9. proposed collection of information, self-supporting towers approximately DATES: Submit comments on or before including the validity of the 120′ above the ground. The wind December 14, 2009. methodology and assumptions used; • Enhance the quality, utility, and turbine will produce clean energy for ADDRESSES: Send comments to U.S. clarity of the information to be the North Texas Job Corps center, Department of Labor, Mine Safety and collected; and demonstrate renewable energy Health Administration, John Rowlett, • Minimize the burden of the capabilities to Job Corps Students and Director, Management Services collection of information on those who help the program meet federal Division, 1100 Wilson Boulevard, Room are to respond, including through the requirements in Executive Order 13423 2134, Arlington, VA 22209–3939. use of appropriate automated, for renewable energy production. Commenters are encouraged to send electronic, mechanical, or other This project is not expected to have a their comments on a computer disk, or technological collection techniques or negative impact on population via E-mail to [email protected], other forms of information technology, demographics, the surrounding area, along with an original printed copy. Mr. e.g., permitting electronic submissions environmental quality, or natural Rowlett can be reached at (202) 693– of responses. systems and heritage. 9827 (voice), or (202) 693–9801 Based on the information gathered (facsimile). A copy of the proposed information during the preparation of the EA, the collection request can be obtained by construction of the Wind Turbine FOR FURTHER INFORMATION CONTACT: contacting the employee listed in the Installation at the North Texas Job Corps Contact the employee listed in the For Further Information Contact section Center, 1701 North Church Street, ADDRESSES section of this notice. of this notice, or viewed on the internet McKinney, Texas will not create any SUPPLEMENTARY INFORMATION: by accessing the MSHA home page

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(http://www.msha.gov/) and selecting team member is required to be on file NATIONAL SCIENCE FOUNDATION ‘‘Rules & Regs’’, and then selecting at the mine rescue station for a period ‘‘FedReg. Docs’’. On the next screen, of one year. Advisory Committee for Education and select ‘‘Paperwork Reduction Act Frequency: On occasion. Human Resources; Notice of Meeting Supporting Statement’’ to view Affected Public: Business or other for- In accordance with the Federal documents supporting the Federal profit. Advisory Committee Act (Pub. L. 92– Register Notice. Respondents: 224. 463, as amended), the National Science Responses: 20,563. Current Actions Foundation announces the following Burden Hours: 8,825. meeting: Under 30 CFR part 49, Mine Rescue Total Burden Cost: $243,049. Teams, the regulations set standards Comments submitted in response to Name: Advisory Committee for Education related to the availability of mine rescue this notice will be summarized and/or and Human Resources (#1119). teams; alternate mine rescue capability Date/Time: November 4, 2009; 8:30 a.m. to included in the request for Office of for small and remote mines and mines 5 p.m., November 5, 2009; 8:30 a.m. to 1 p.m. Management and Budget approval of the with special mining conditions; Place: National Science Foundation information collection request; they will inspection and maintenance records of Headquarters, Stafford Place II—Room 555, also become a matter of public record. mine rescue equipment and apparatus; 4201 Wilson Boulevard, Arlington, VA physical requirements for mine rescue Dated at Arlington, Virginia, this 9th day 22230. of October 2009. Type of Meeting: Open. team members and alternates; and Contact Person: James Colby, National John Rowlett, experience and training requirements Science Foundation, 4201 Wilson Boulevard, for team members and alternates. Parts Director, Management Services Division. Arlington, VA 22230, (703) 292–5331 75 and 77 requires that coal mine [FR Doc. E9–24748 Filed 10–14–09; 8:45 am] [email protected]. operators make arrangements with a BILLING CODE 4510–43–P If you are attending the meeting and need licensed physician, medical service, access to the NSF, please contact the medical clinic, or hospital and with an individual listed above so your name may be ambulance service to provide 24-hour added to the building access list. Please emergency medical assistance and NATIONAL SCIENCE FOUNDATION report to the North Doors of NSF [corner of N. Stuart and N. Ninth Streets]. After transportation. That information is to be Advisory Committee Mathematical and receiving a Visitors Badge, staff will guide posted at the mine. you to conference room 555 in the adjacent Type of Review: Extension. Physical Sciences; Notice of Meeting Stafford II annex of NSF]. Agency: Mine Safety and Health In accordance with Federal Advisory Purpose of Meeting: To provide advice Administration. with respect to the Foundation’s science, Title: Mine Rescue Teams; Committee Act (Pub. L. 92–463, as technology, engineering, and mathematics Arrangements for Emergency Medical amended), the National Science (STEM) education and human resources Assistance; and Arrangements for Foundation announces the following programming. meeting: Transportation for Injured Persons. Agenda OMB Number: 1219–0078. Name: Advisory Committee Mathematical Recordkeeping: § 49.6 states that and Physical Sciences (#66). November 4, 2009 rescue apparatus and equipment shall Date/Time: November 4, 2009 2 p.m.– I. Acting Assistant Director’s Remarks. be maintained and that a person trained 4 p.m., November 5, 2009 8 a.m.–6 p.m., II. Discussion of Interagency Collaborations: in the use and care of breathing November 6, 2009 8 a.m.–3 p.m. U.S. Department of Education. apparatus shall inspect and test the Place: National Science Foundation, 4201 III. Discussion of Cyberlearning: International apparatus at lease every 30 days and Wilson Boulevard, Arlington, VA 22230. Context. November 5, Room 1005, November 6 & 7, shall certify by signature and date that IV. Visit From the Office of the NSF Director. Room 1235. V. Discussion of Interagency Collaborations the inspections and tests were done. Type of Meeting: Open. (continued): National Oceanic and The certification and the record of Contact Person: Dr. Morris L. Aizenman, Atmospheric Administration and corrective action taken, if any, shall be Senior Science Associate, Directorate for National Aeronautics and Space maintained at the mine rescue station Mathematical and Physical Sciences, Room Administration. for a period of one year. § 49.7 requires 1005, National Science Foundation, 4201 VI. Discussion of NSF-wide Collaborations. that each team member and alternate be Wilson Boulevard, Arlington, VA 22230. VII. Review and Acceptance of Committee of examined within 60 days of the (703) 292–8807. Visitor Reports: • beginning of the initial training, and Purpose of Meeting: To provide advice and Advanced Technological Education. recommendations concerning NSF science • annually thereafter by a physician who Research on Gender in Science and and education activities within the Engineering. shall certify the physical fitness of the Directorate for Mathematical and Physical • Research in Disabilities Education. team member to perform mine rescue Sciences. • Graduate Research Fellowships. and recovery work for prolonged Agenda: Briefing to new members about • Discovery Research K–12. periods under strenuous conditions. NSF and Directorate (11/4). Update on • Research and Evaluation on Education in The operator shall have MSHA Form current status of Directorate. Reports from Science and Engineering. 5000–3 on file for each team member. liaisons with other Advisory Committees. • Course, Curriculum, and Laboratory These forms shall be kept on file at Meeting of MPSAC with Divisions within Improvement Program. either the mine or the mine rescue MPS Directorate. Discussion of MPS Long- term Planning Areas. November 5, 2009 station for a period of one year. § 49.8 Summary Minutes: May be obtained from I. Subcommittee Meetings and Reports. requires that prior to serving on a mine the contact person listed above. II. Future Issues for Consideration. rescue team, each member must complete an initial 20-hour course of Dated: October 9, 2009. Dated: October 9, 2009. instruction and all team members are Susanne E. Bolton, Susanne Bolton, required to receive 40 hours of refresher Committee Management Officer. Committee Management Officer. training annually. A record of the [FR Doc. E9–24743 Filed 10–14–09; 8:45 am] [FR Doc. E9–24816 Filed 10–14–09; 8:45 am] training received by each mine rescue BILLING CODE 7555–01–P BILLING CODE P

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NATIONAL SCIENCE FOUNDATION ACTION: Correction. to a request by WCS dated December 10, 2007. The November 5, 2004 Order was Proposal Review Panel for Physics; SUMMARY: This document corrects a published in the Federal Register on Notice of Meeting notice appearing in the Federal Register November 12, 2004 (69 FR 65468). The on October 7, 2009 (74 FR 51622), in November 5, 2004 Order, which In accordance with the Federal which NRC issues an Environmental modified an initial Order issued to WCS Advisory Committee Act (Pub. L. 92– Assessment and Draft Finding of No on November 21, 2001, exempted WCS 463, as amended), the National Science Significant Impact for modification of from certain NRC regulations and Foundation announces the following an exemption from certain NRC permitted WCS, under specified meeting. licensing requirements for special conditions, to possess waste containing Name: Rutgers University Site Visit (1208). nuclear material for EnergySolutions, special nuclear material (SNM), in Date and Time: Tuesday, October 27, 2009; LLC, Clive, UT. This action is necessary greater quantities than specified in 10 8 a.m.–5 p.m. Wednesday, October 28, 2009; to correct an erroneous reference. CFR Part 150, at WCS’s facility located 8 a.m.–1 p.m. Place: Rutgers University, Piscataway, NJ. FOR FURTHER INFORMATION CONTACT: in Andrews County, Texas, without Type of Meeting: Partially Closed. Michael T. Lesar, Chief, Rulemaking obtaining an NRC license pursuant to 10 Contact Person: Dr. James Reidy, Program and Directives Branch, Office of CFR part 70. Director for Elementary Particle Physics, Administration, U.S. Nuclear Regulatory FOR FURTHER INFORMATION CONTACT: National Science Foundation, 4201 Wilson Commission, Telephone 301–492–3663, Nishka Devaser, Project Manager, Blvd., Arlington, VA 22230. Telephone: (703) e-mail [email protected]. Environmental and Performance 292–7392. SUPPLEMENTARY INFORMATION: In FR Doc. Assessment Directorate, Division of Purpose of Meeting: To provide an Waste Management and Environmental evaluation concerning the proposal E9–24208, published on October 7, submitted to the National Science 2009, on page 51622, in the center Protection, Office of Federal and State Foundation. column, in the SUMMARY paragraph, Materials and Environmental Agenda: 22nd line, ‘‘WCS’’ is corrected to read Management Programs, U.S. Nuclear ‘‘EnergySolutions’’. Regulatory Commission, Washington, Tuesday, October, 27, 2009 DC 20555. Telephone: (301) 415–5196; Open: 0800–0930—Orientation, Introduction Dated at Rockville, Maryland, this 9th day of October 2009. Fax number: (301) 415–5369; e-mail: of Panel, Welcome; 0930–1145—Tevatron [email protected]. presentations. For the Nuclear Regulatory Commission. NRC’s Agency-Wide Documents Closed: 1145–0100—Meeting with the Michael T. Lesar, Department Chair, Dean, and Students; Access and Management System Chief, Rules and Directives Branch, Office (ADAMS): Publicly available documents 0100–0130—Executive Session. of Administration. Open: 0130–0230—CMS—M&O/PLT created or received at the NRC are presentations; 0245–0300—Computing and [FR Doc. E9–24772 Filed 10–14–09; 8:45 am] available electronically at the NRC’s Networks; 0315–0415—CMS and Facilities BILLING CODE 7590–01–P Electronic Reading Room at http:// Tour. www.nrc.gov/reading-rm/adams.html. Closed: 0415–0600—Executive Session. From this page, the public can gain NUCLEAR REGULATORY Wednesday, October 27, 2009 entry into ADAMS, which provides text COMMISSION Open: 0745–1015—CMS Physics and image files of NRC’s public Presentations. [Docket No. 70–7005; NRC–2009–0283] documents. If you do not have access to Closed: 1015–0100—Executive Session. ADAMS or if there are problems in Reason for Closing: The proposal contains Issuance of Environmental accessing the documents located in proprietary or confidential material, Assessment and Final Finding of No ADAMS, contact the NRC’s Public including technical information on Significant Impact for Modification of Document Room reference staff at personnel. These matters are exempt under 5 Exemption From Certain NRC 1–899–397–4209, 301–415–4737, or by U.S.C. 552b(c)(2)(4) and (6) of the Licensing Requirements for Special e-mail to [email protected]. Government in the Sunshine Act. Nuclear Material for Waste Control SUPPLEMENTARY INFORMATION: Specialists, LLC, Andrews County, TX Dated: October 9, 2009. I. Environmental Assessment Susanne Bolton, AGENCY: Nuclear Regulatory Committee Management Officer. Commission. Background [FR Doc. E9–24817 Filed 10–14–09; 8:45 am] ACTION: Environmental Assessment and As stated above, the 2004 Order BILLING CODE 7555–01–P Final Finding of No Significant Impact. exempted WCS from certain NRC regulations and permitted WCS, under SUMMARY: The U.S. Nuclear Regulatory specified conditions, to possess waste NUCLEAR REGULATORY Commission (NRC) has prepared an containing SNM, in greater quantities COMMISSION Environmental Assessment for the than specified in 10 CFR Part 150, at issuance of an Order under Section WCS’s facility located in Andrews [NRC–2009–0440; Docket No. 40–8989] 274(f) of the Atomic Energy Act that County, Texas, without obtaining a NRC Issuance of Environmental would modify an Order issued to Waste license pursuant to 10 CFR part 70. The Assessment and Draft Finding of No Control Specialists, LLC (WCS) on 2004 Order permits WCS to possess Significant Impact for Modification of November 5, 2004. In accordance with SNM without regard for mass. Rather Exemption From Certain U.S. Nuclear 10 CFR 51.33, the NRC prepared a draft than relying on mass to ensure Regulatory Commission Licensing Finding of No Significant Impact criticality safety, concentration-based Requirements for Special Nuclear (FONSI) for public review and comment limits were applied, such that Material for EnergySolutions LLC, that was issued on July 9, 2009 (74 FR accumulations of SNM at or below these Clive, UT; Correction 34983). The public comment period concentration limits would not pose a closed on August 10, 2009. NRC criticality safety concern. The AGENCY: Nuclear Regulatory received comments from one resident of methodology used to establish these Commission. Texas. The current action is in response limits is discussed in two Safety

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Evaluation Reports (SERs) prepared by Wallach Quarry (crushed stone, sand is expected to be canister disposal and NRC in support of the initial Order and gravel) and Sundance, Inc. (oil 506,872 m3 (662,963 yd3) is expected to issued in November 2001 and an recovery and solids disposal), both be non-canister (bulk) disposal; and amended Order issued in November located about 1.6 kilometers (one mile) • 65,412 m3 (85,556 yd3) of LLW 2004. west of the facility. The Lea County generated within the Texas Compact. In its December 2007 request, WCS Landfill is located approximately 1.6 Other WCS permits and authorizations seeks NRC approval to modify the kilometers (one mile) southwest of the are summarized below: conditions of the 2004 Order to: facility. In addition, construction of the Byproduct Material Disposal Facility Discontinue confirmation sampling Louisiana Enrichment Services (LES) License upon receipt of waste that WCS verifies uranium enrichment facility is currently is adequately characterized by a waste underway in Lea County, NM and is • Issued: May 29, 2008, by the Texas generator to be uniform and which located approximately 1.6 kilometers Commission on Environmental Quality contains less than one-thousandth of the (one mile) west of the WCS facility. (TCEQ). SNM concentration limits presented in Major structures at the WCS facility • Authorization: Receipt and disposal Condition 1; and to meet the include: of byproduct material as defined in Title confirmatory sampling requirements of • On-site rail spur and rail-unloading 25 of the Texas Administrative Code, Condition 7 of the Order for sealed facility for hazardous waste only; Section 289.260(c)(4). sources using surface smear surveys. By • Maintenance Building; • Authorization covers dry, discrete letter dated January 22, 2008, the NRC • Administration building with solid objects and containerized bulk informed WCS that it would also clarify analytical and radiological laboratories; (i.e., soil or soil-like) byproduct material Condition 2, which states that waste • Container Storage Building; received by road only (no rail). must not contain ‘‘pure forms’’ of • Stabilization and Mixed Waste • Containers shall be flexible or rigid chemicals containing carbon, fluorine, Treatment (Combined) Building; drums, pails, boxes, sacks, or similar magnesium, or bismuth in bulk • Bulk/Bin Storage Units; containers that are sealed and do not quantities. As a result of its review of • RCRA subtitle C landfill; tear, split, or rupture upon handling, WCS’ December 10, 2007 request, the • Ten-acre storage area for low- placement, and compaction in the NRC, upon its own initiative, is specific-activity (LSA) waste; disposal unit, or lose their structural clarifying the requirements for spatial • 11e(2) byproduct material landfill strength and integrity when contacting uniformity of SNM concentrations in Facility (Authorized May 2008—under water. Acceptable containers include the waste, as described in Conditions 1, construction); (but are not limited to) U.S. Department 6, and 7 of the Order. In addition, NRC • Federal LLW/MW landfill Facility of Transportation (U.S. DOT) containers. is revising Condition 4 of the Order, (license issuance pending); Containers shall not contain free liquids which limits the amount of highly water • Texas Compact LLW landfill or more than 15% void space. soluble SNM WCS may possess. Facility (license issuance pending); and • Chemical oxidation (Proposed). Low Level Radioactive Waste Site and Facility Description Treatment, Processing & Storage License WCS operates a 5.4 km2 (1,338-acre) Licenses and Permits Issued Under (License R04971) Various Federal and State Laws hazardous waste disposal facility and a • Issued: February 1997. hazardous waste, low-level radioactive On January 14, 2009, WCS received a • Amended: April 29, 2009 by the waste (LLW), and mixed waste (MW) licensing order that denied hearing TCEQ. processing and storage facility in requests, and allowed a license for • Authorization: Treatment, western Andrews County, TX and disposal of Low Level Waste (LLW) to processing, and storage of low-level eastern Lea County, NM. The WCS be issued once ownership in fee can be radioactive wastes shipped by road only facility is located near the southwestern demonstrated by the applicant. The (including Greater Than Class C (GTCC), edge of the Southern High Plains where LLW disposal license may not be issued, sealed sources, solids, and liquids). surface elevations range from about signed, or granted until surface and • November 5, 2004—Exemption 1,040 to 1,070 meters (3,415 to 3,500 ft) mineral ownership can be from Part 70 (Special Nuclear Material above mean sea level. The site lies on demonstrated. WCS has proposed two (SNM) concentration-based limitations). a broad topographic ridge that forms a separate LLW disposal facilities: surface water drainage divide between 1. The compact waste disposal facility Industrial Solid Waste and Hazardous the Pecos and Colorado Rivers. The (CWF) would be allowed to accept LLW Waste Storage, Processing, and Disposal region receives approximately 23 cm (9 as defined in Section 401.004 of the Resource Conservation and Recovery inches) of rain annually and is atop a Texas Health and Safety Code for Act Wastes (RCRA) Permit solid base of Triassic red bed clay commercial disposal of compact waste; • Issued: August 5, 1994 by the Texas ¥ (Hydraulic Conductivity: 10 8 cm/s, [3 and National Resource Conservation ¥ × 10 5 ft/day]) with the first regional 2. The Federal Waste Facility (FWF) Commission (TNRCC). groundwater, which is not potable and would be allowed to accept LLW that is • Renewed: October 5, 2005 by the too salty for irrigation use, found 180– the responsibility of the federal TCEQ. 210 m (600–700 ft) below the surface. government under the Low-Level • Authorization: Treatment, storage, The primary land use within an eight- Radioactive Waste Policy Act, as and land disposal of over 2,000 RCRA kilometer (five-mile) radius of the WCS amended by the Low-Level Radioactive waste codes. facility is grazing and ranching. Future Waste Policy Amendments Act of 1985. • WCS holds a RCRA part B water uses in the area will include The LLW land disposal facilities have equivalent permit to receive ignitable, industrial, domestic, livestock, and the following limits in the pending corrosive, toxic, and select reactive agricultural purposes. Oil and gas license: hazardous waste. exploration and production activities • 736,238 m3 (962,963 yd3) of LLW have also been conducted in the vicinity and MW generated/owned by the Texas Pollutant Discharge Elimination of the WCS facility. Other businesses in Federal government of which System Permit proximity to the site include the approximately 229,366 m3 (300,000 yd3) • Issued: December 2, 1999 by TCEQ.

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• Renewed: May 31, 2005. December 10, 2007, request to modify its are known by other means to be very • Authorization: Treatment and 2004 Order and additional actions low. discharge of liquid wastes. taken by NRC staff to: The second issue identified by WCS (1) Clarify Condition 2 of the also pertains to how the confirmatory Toxic Substances Control Act Land November 2004 Order; sampling requirements of the Order Disposal Authorization (2) Clarify the requirements for spatial should be applied to sealed sources. • Issued: November 22, 1999 by the uniformity of the waste; and WCS states that direct confirmatory United States Environmental Protection (3) Revise Condition 4 of the 2004 sampling is not practical, and Agency (EPA). Order, which limits the amount of recommends that it perform surface • Renewed: September 19, 2005 by highly water soluble SNM WCS may smear surveys in lieu of destructive the EPA. possess. direct sampling. • Authorization: Treatment, storage, This EA does not approve nor deny In its December 10, 2007 request, and land disposal of Toxic Substances the requested action. A separate SER has WCS also informed the NRC that it Control Act (TSCA) wastes, including been prepared in support of approval of plans to accept bulk quantities of waste polychlorinated biphenyl (PCB) and the requested action. The 2004 Order is containing very low concentrations of PCB contaminated materials such as only applicable to activities authorized SNM that have been homogeneously debris, spill solids, transformers by TCEQ License R04971 for processing commingled by the generator with inert (drained and flushed), and transformer and storage of LLW. compounds so that the final waste no carcasses. Proposed Action longer contains just SNM or ‘‘pure • PCB liquids are acceptable for forms’’ of carbon, fluorine, magnesium, bulking and off-site treatment. The proposed action is to grant WCS’s and bismuth. Condition 2 of the December 10, 2007, request to modify November 2004 Order prohibits receipt Comprehensive Environmental the conditions of the 2004 Order, with of ‘‘pure forms’’ of these chemicals. In Response, Compensation, and Liability certain additional modifications. As its review of this information, the NRC Act (CERCLA) modified by NRC staff, the proposed determined that Condition 2 of the • March 21, 1997 letter from EPA, action is to discontinue confirmation November 2004 Order should be more Region 6. sampling upon receipt of waste that clearly stated. As noted in a letter to • Authorization: EPA determination WCS verifies is adequately WCS dated January 22, 2008, the NRC under 40 CFR 300.440 that the WCS characterized by a waste generator to be stated that it finds no criticality safety facility is acceptable for receipt of uniform and which contains less than concerns with the waste that WCS plans hazardous substances, pollutants or one-tenth of the SNM concentration to accept, provided the waste is less contaminants from CERCLA response limits presented in Condition 1, and to than 40 percent magnesium fluoride by actions. discontinue the confirmatory sampling volume and less then 50 percent Under the State and Federal permits requirements of Condition 7 of the 2004 magnesium fluoride by weight. In its and authorizations described above, Order for sealed sources. By letter dated January 22, 2008 letter, the NRC also WCS is authorized to use the following January 22, 2008, the NRC informed stated that it plans to clarify the waste treatment technologies: WCS that it would also clarify meaning of Condition 2 in this • Chemical oxidation. Condition 2, which states that waste modification to the 2004 Order. • Chemical reduction. must not contain ‘‘pure forms’’ of During review of the proposed • Deactivation. chemicals containing carbon, fluorine, changes requested by WCS, the NRC • Micro- and macro-encapsulation magnesium, or bismuth in bulk staff also decided to clarify the (debris only). quantities. The NRC is also clarifying requirements for spatial uniformity of • Neutralization. the requirements for spatial uniformity SNM concentrations in waste received • Stabilization. of SNM concentrations in the waste, as by WCS contained within Conditions 1, • Controlled reaction. described in Conditions 1, 6, and 7 of 6, and 7 of the 2004 Order. The spatial Waste shipments are received in a the 2004 Order, and revising Condition uniformity requirement in Condition 1 variety of sealed packages such as 4 of the 2004 Order, that limits the states that, ‘‘The SNM must be standard 208-liter (55-gallon) steel amount of highly water soluble SNM homogeneously distributed throughout drums, rectangular steel boxes, WCS may possess pursuant to TCEQ the waste. If the SNM is not intermodal, roll-offs, waste generator- License R04971 for processing and homogeneously distributed, then the designed canisters, or from a list of 400 storage of LLW. limiting concentrations must not be radioactive material packages certified exceeded on average in any contiguous by the DOE for transport by road only. Purpose and Need for Proposed Action mass of 600 kilograms.’’ This The facility is accessible by rail or WCS is making this request as a result requirement is based on an NRC nuclear nearby interstate highway. It can of two issues it has identified with the criticality safety evaluation described in accommodate over 110 rail cars within implementation of the 2004 Order. The the SER for the November 2001 Order. its secured and guarded fence perimeter. first issue pertains to the potential for However, there is a second requirement It has a ten-kilometer (approximately WCS workers to receive radiation dose in Conditions 6 and 7 of the 2004 Order, six-mile) private rail spur leading to the without commensurate benefit to overall that prescribe a statistical test for spatial site and on-site rail and truck off- public and worker safety. This issue uniformity that would be performed on loading capabilities. Although rail arises when certain high dose rate and sample results. The statistical test states facilities are available on-site, debris waste is received by WCS and that waste is non-homogeneous when radioactive waste is currently not WCS workers, in accordance with the the maximum sample result, that cannot authorized to be received at the site by requirements of the 2004 Order, are in exceed the limits in Condition 1, and rail. close proximity to, or in contact with, minimum testing values performed by the waste for the purpose of taking the generator, is greater than five times Review Scope confirmatory samples to measure SNM the average value. The definition of The purpose of this EA is to assess the concentrations in the waste, even when spatial uniformity in Condition 1 has a environmental impacts of WCS’s the SNM concentration in these wastes technical basis founded on principles of

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nuclear criticality safety. The 2004 Order, and as described further in made to either the Condition 1 SNM requirement in Condition 6 and 7 does the SER for the current modification to concentration limits, or the maximum not. Therefore, the NRC is removing the the Order, the NRC believes that when contiguous mass of waste over which second requirement contained in SNM concentrations in waste are the limiting concentrations of Condition Conditions 6 and 7 and making expected to be below 10% of the limits 1 must be met (i.e., 600 kilograms). conforming changes to the remainder of in Condition 1, as determined by a Therefore, these modifications to the the Order. waste generator in support of the 2004 Order do not alter in any way the The NRC is also revising Condition 4 written certification required by types, amounts, or characteristics of of the 2004 Order, as described in a Condition 6, the radiation hazard to wastes received at the facility, and separate Safety Evaluation Report, to: workers involved in both generator worker doses would remain unchanged. (1) Eliminate the individual package sampling and WCS confirmatory waste As a result, there would be no mass limits for highly water soluble sampling activities will, in many cases, substantive changes in the handling, SNM, because 10 CFR part 71 and 49 outweigh the benefit to criticality safety. storage, or treatment of wastes at the CFR provide sufficient regulation of As a result, the NRC, in consultation facility. packaging and transportation of fissile with WCS and the TCEQ, will remove No detrimental environmental materials, from which this Order does the graded-approach to sampling impacts are expected as a result of not exempt WCS; and requirements from the Order, in favor of revising the requirements for highly (2) Impose a limit on the total mass of a simpler threshold for sampling water soluble forms of SNM in wastes highly water soluble SNM that may be requirements, which applies to both the received at WCS. There is a reduction of possessed pursuant to this Order to generator and WCS, at 10% of the the risk of container leaks involving amounts less than those of SNM of low Condition 1 limits. highly water soluble forms of SNM, strategic significance, as defined in 10 No detrimental environmental given that the Order now limits the total CFR 73.2. impacts are expected as a result of possession of highly water soluble forms Therefore, the purpose and need for modifying the waste generator and of SNM to amounts of SNM less than the proposed action is four-fold: confirmatory sampling requirements of SNM of low strategic significance, as (1) To revise and clarify certain the Order. Sampling requirements do defined by 10 CFR 73.2. As a result, requirements of the November 2004 not alter in any way the types, amounts, there would be no substantive changes Order to address potential worker safety or characteristics of wastes received at in the handling, storage, or treatment of concerns associated with the the facility. As a result, there would be wastes at the facility, and no significant implementation of waste generator and no substantive changes in the handling, changes in radiation hazards to workers. WCS confirmatory sampling storage, or treatment of wastes at the Other conditions of the Order would requirements; facility. The change in sampling remain unchanged. As before, WCS is (2) To clarify the prohibition on the requirements is not expected to permitted to possess SNM without presence of certain chemicals contained significantly alter the need for labor regard for mass, except that possession in the waste, as stated in Condition 2 of resources at WCS. However, as further of highly water soluble forms of SNM is the 2004 Order; described in the SER for this modified limited to amounts of SNM less than (3) To clarify the requirements in the Order, there is a benefit to overall SNM of low strategic significance, as 2004 Order for spatial uniformity of worker radiological safety as a result of defined by 10 CFR 73.2. To ensure SNM concentrations in waste; and reducing generator and WCS criticality safety, an SNM concentration (4) To revise Condition 4, which confirmatory sampling requirements for limit is applied to wastes containing pertains to limits on highly water high dose rate and debris waste both soluble and insoluble forms, such soluble forms of SNM. containing low concentrations of SNM, that accumulations of SNM at or below and not requiring destructive direct this concentration limit would not pose Alternatives sampling of sealed sources. a criticality safety concern. In addition to the proposed action, the No detrimental environmental Effluent releases and potential doses NRC considered one alternative. The impacts are expected as a result of to the public are regulated by the State alternative action was to deny WCS’ clarifying Condition 2 of the Order. As of Texas and are not anticipated to request and thus not revise the Order described further in the SER, Condition change as a result of this action. WCS (i.e., the no-action alternative). 2 is modified such that specific mass will continue to conduct its radiation Environmental Impacts of No Action limits for carbon, fluorine and bismuth protection program with an emphasis on Alternative: in the waste are provided in lieu of a maintaining doses as low as reasonably For the no-action alternative, the vague general prohibition on ‘‘pure achievable. Occupational exposure is environmental impacts would be the forms’’ of magnesium, carbon, fluorine expected to remain within regulatory same as those evaluated in the EA that and bismuth. This clarification is not limits, and may decrease as a result of supports the 2004 Order. The 2004 EA expected to significantly alter the types, eliminating sampling intervals for high concluded that the 2004 Order would amounts, or characteristics of wastes dose rate and debris waste. have no significant radiological or non- received at the facility. In addition, The proposed action would not result radiological environmental impacts. worker radiation doses are not expected in any changes in the transportation However, as noted above, the current to change as a result of a change in impacts identified in the 2001 EA. All confirmatory sampling requirement for specific mass limits for carbon, fluorine other environmental impacts would be high dose and debris waste may result and bismuth. As a result, there would be the same as evaluated in the EAs that in doses to workers without a little or no substantive changes in the support the 2001 and 2004 Orders. commensurate benefit to overall nuclear handling, storage, or treatment of wastes Agencies and Persons Consulted safety. at the facility. No detrimental environmental A draft copy of this EA was provided Environmental Impacts of Proposed impacts are expected as a result of to officials from the Texas Commission Action clarifying the requirements for spatial on Environmental Quality (TCEQ). By With regard to the confirmatory uniformity of SNM concentrations in e-mails dated March 11 and April 14, sampling requirements of the November wastes received at WCS. No changes are 2009, the TCEQ recommended certain

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changes to clarify the descriptions of protection of groundwater resources, to WCS’ exemption from the certain WCS facilities, to identify the stating that the ‘‘overall proposal to requirements of 10 CFR part 70 is, correct State agencies having authority permanently dispose of the SNM and pursuant to 10 CFR 70.17, authorized by in certain areas, and to clarify the status LLRW at WCS is of a greater determent law and will not endanger life or of the pending LLW disposal facility [sic] to a larger population.’’ property or the common defense and license. The NRC staff has modified the Specifically, she also expresses security and is otherwise in the public EA to address the TCEQ comments. concerns that a complex system of interest. The proposed action does not involve aquifers underlies the WCS site, which The NRC has prepared this EA in the development of additional land. she describes as a system of ‘‘contiguous support of the proposed action to Hence, the NRC has determined that the hydrologically connected units.’’ Ms. modify WCS’ November 2004 Order, proposed action will not affect listed Polk further states that the hydrogeology which grants an exemption from the species or critical habitat. Therefore, no of the site is ‘‘sufficiently complex as to requirements of 10 CFR Part 70. On the further consultation is required under halt disposal of these materials until the basis of this EA, NRC has concluded Section 7 of the Endangered Species mapping incongruities can be resolved that there are no significant Act. Likewise, the NRC staff has by way of an unbiased team of environmental impacts and the issuance determined that the proposed action hydrologists and geologists.’’ of a modified Order does not warrant does not have the potential to adversely As noted in the section of the EA the preparation of an Environmental affect cultural resources. Therefore, no titled ‘‘Review Scope,’’ the amended Impact Statement. Accordingly, it has consultation is required under Section Order applies only to activities been determined that a Finding of No 106 of the National Historic authorized by TCEQ License R04971 for Significant Impact is appropriate. Preservation Act. processing and storage of LLW. The Order does not apply to disposal of Public Comments III. Further Information LLW. Therefore, since processing and During a 30-day public comment storage of LLW occurs above ground in Documents related to this action, period that ended August 10, 2009, NRC facilities for which liquid and air including the application for received comments from Ms. Laray effluent controls are required, the staff amendment and supporting Polk, a resident of Texas (ADAMS does not believe that amendments to the documentation, are available Accession Number ML092240577). Ms. Order considered in this EA will have electronically at the NRC’s Electronic Polk expressed concerns that the WCS significant adverse affects on Reading Room at http://www.nrc.gov/ site is ‘‘unsuitable for disposal of groundwater quality at the WCS site. reading-rm/adams.html. From this site, uranium byproduct and low-level you can access the NRC’s ADAMS, waste.’’ Though she acknowledges one II. Draft Finding of No Significant which provides text and image files of purpose for amending the Order was to Impact NRC’s public documents. The ADAMS reduce worker radiation doses, Ms. Polk The NRC has concluded that the accession numbers for the documents expressed concerns regarding adequate proposed action to grant a modification related to this notice are:

Document description Accession number

January 2009 Safety Evaluation Report ...... ML081550674 January 22, 2008, NRC acknowledgement of WCS request ...... ML080150622 December 10, 2007, WCS request for modification to Order ...... ML073550638 November 2004 Letter to WCS re: SNM exemption request ...... ML043020621 November 2001 Letter to WCS re: SNM exemption request ...... ML030130085

If you do not have access to ADAMS For the U.S. Nuclear Regulatory The entire meeting will be open to or if there are problems in accessing the Commission. public attendance, with the exception of documents located in ADAMS, contact Patrice M. Bubar, a portion that may be closed pursuant the NRC’s Public Document Room (PDR) Deputy Director, Environmental Protection to 5 U.S.C. 552b(c)(2) and (6) to discuss Reference staff at 1–800–397–4209, 301– and Performance Assessment Directorate, organizational and personnel matters 415–4737, or by e-mail to [email protected]. Division of Waste Management and that relate solely to the internal Environmental Protection, Office of Federal These documents may also be viewed and State Materials and Environmental personnel rules and practices of the electronically on the public computers Management Programs. ACRS, and information the release of located at the NRC’s PDR, O1 F21, One [FR Doc. E9–24774 Filed 10–14–09; 8:45 am] which would constitute a clearly White Flint North, 11555 Rockville BILLING CODE 7590–01–P unwarranted invasion of personal Pike, Rockville, MD 20852. The PDR privacy. reproduction contractor will copy The agenda for the subject meeting documents for a fee. NUCLEAR REGULATORY shall be as follows: COMMISSION Dated at Rockville, Maryland, this 7th day Wednesday, November 4, 2009, of October 2009. Advisory Committee on Reactor 12 p.m.–1 p.m. Safeguards (ACRS) Subcommittee Meeting on Planning and Procedures; The Subcommittee will discuss Notice of Meeting proposed ACRS activities and related matters. The Subcommittee will gather The ACRS Subcommittee on Planning information, analyze relevant issues and and Procedures will hold a meeting on facts, and formulate proposed positions November 4, 2009, Room T2–B3, 11545 and actions, as appropriate, for Rockville Pike, Rockville, Maryland. deliberation by the full Committee.

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Members of the public desiring to Federal Official, Dr. John H. Flack, interested persons regarding this matter. provide oral statements and/or written (telephone: 301–415–0426, e-mail: The Subcommittee will gather comments should notify the Designated [email protected]) five days prior to information, analyze relevant issues and Federal Officer, Mr. Sam Duraiswamy, the meeting, if possible, so that facts, and formulate proposed positions (Telephone: 301–415–7364, E-mail: appropriate arrangements can be made. and actions, as appropriate, for [email protected]) five days Thirty-five hard copies of each deliberation by the full Committee. prior to the meeting, if possible, so that presentation or handout should be Members of the public desiring to appropriate arrangements can be made. provided to the Designated Federal provide oral statements and/or written Electronic recordings will be permitted Official 30 minutes before the meeting. comments should notify the Designated only during those portions of the In addition, one electronic copy of each Federal Official, Mr. Derek Widmayer meeting that are open to the public. presentation should be e-mailed to the (Telephone 301–415–7366, E-mail: Detailed procedures for the conduct of Designated Federal Official 1 day before [email protected]) five days and participation in ACRS meetings the meeting. If an electronic copy prior to the meeting, if possible, so that were published in the Federal Register cannot be provided within this appropriate arrangements can be made. on October 6, 2008, (73 FR 58268– timeframe, presenters should provide Thirty-five hard copies of each 58269). the Designated Federal Official with a presentation or handout should be Further information regarding this CD containing each presentation at least provided to the Designated Federal meeting can be obtained by contacting 30 minutes before the meeting. Official 30 minutes before the meeting. the Designated Federal Official between Electronic recordings will be permitted. In addition, one electronic copy of each 7:30 a.m. and 4 p.m. (ET). Persons Detailed procedures for the conduct of presentation should be e-mailed to the planning to attend this meeting are and participation in ACRS meetings Designated Federal Official 1 day before urged to contact the above named were published in the Federal Register the meeting. If an electronic copy individual at least two working days on October 6, 2008 (73 FR 58268– cannot be provided within this prior to the meeting to be advised of any 58269). timeframe, presenters should provide potential changes in the agenda. Further information regarding this the Designated Federal Official with a Dated: October 8, 2009. meeting can be obtained by contacting CD containing each presentation at least Antonio F. Dias, the Designated Federal Official between 30 minutes before the meeting. 7 a.m. and 3:45 p.m. (ET). Persons Chief, Reactor Safety Branch B, Advisory Electronic recordings will be permitted. Committee on Reactor Safeguards. planning to attend this meeting are Detailed procedures for the conduct of urged to contact the above named [FR Doc. E9–24771 Filed 10–14–09; 8:45 am] and participation in ACRS meetings individual at least two working days were published in the Federal Register BILLING CODE 7590–01–P prior to the meeting to be advised of any on October 6, 2008 (73 FR 58268– potential changes to the agenda. 58269). NUCLEAR REGULATORY Dated: October 7, 2009. Further information regarding this COMMISSION Antonio F. Dias, meeting can be obtained by contacting Chief, Reactor Safety Branch B, Advisory the Designated Federal Official between Advisory Committee on Reactor Committee on Reactor Safeguards. 8 a.m. and 5:15 p.m. (ET). Persons Safeguards (ACRS) Meeting of the [FR Doc. E9–24782 Filed 10–14–09; 8:45 am] planning to attend this meeting are urged to contact the above named ACRS Subcommittee; Notice of BILLING CODE 7590–01–P Meeting individual at least two working days prior to the meeting to be advised of any The ACRS Subcommittee on potential changes to the agenda. Radiation Protection and Nuclear NUCLEAR REGULATORY Materials will hold a meeting on COMMISSION Dated: October 8, 2009. Antonio Dias, November 4, 2009, Room T2–B3, 11545 Advisory Committee on Reactor Rockville Pike, Rockville, Maryland. Chief, Reactor Safety Branch B, Advisory Safeguards (ACRS) Meeting of the Committee on Reactor Safeguards. The meeting will be open to public ACRS Subcommittee; Notice of [FR Doc. E9–24781 Filed 10–14–09; 8:45 am] attendance. Meeting The agenda for the subject meeting BILLING CODE 7590–01–P shall be as follows: The ACRS U.S. Evolutionary Power Reactor (EPR) Subcommittee will hold a Wednesday, November 4, 2009—1:30 NUCLEAR REGULATORY p.m.–5 p.m. meeting on November 3, 2009, 11545 Rockville Pike, T2–B3, Rockville, COMMISSION The Subcommittee will review Maryland. proposed changes to NUREG–1520 The entire meeting will be open to [NRC–2009–0455] ‘‘Standard Review Plan for Review of a public attendance. Notice of Opportunity for Public License Application for a Fuel Cycle The agenda for the subject meeting Comment on the Proposed Models for Facility.’’ The Subcommittee will hear shall be as follows: Plant-Specific Adoption of Technical presentations by and hold discussions Specification Task Force Traveler-508, with NRC staff and other interested Tuesday, November 3, 2009, 8:30 a.m.– Revision 1, ‘‘Revise Control Room persons regarding this matter. The 5 p.m. Habitability Actions To Address Subcommittee will gather information, The Subcommittee will review Lessons Learned From TSTF–448 analyze relevant issues and facts, and selected chapters of the Safety Implementation’’ formulate proposed positions and Evaluation with Open Items concerning actions, as appropriate, for deliberation the U.S. EPR Design Certification AGENCY: Nuclear Regulatory by the full Committee. Application. The Subcommittee will Commission. Members of the public desiring to hear presentations by and hold ACTION: Notice of opportunity for public provide oral statements and/or written discussions with representatives of comment. comments should notify the Designated AREVA, the NRC staff and other

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SUMMARY: The NRC is requesting public Mail comments to: Michael T. Lesar, Background comment on the enclosed proposed Chief, Rulemaking and Directives This notice provides an opportunity model safety evaluation, model no Branch (RDB), Division of for the public to comment on proposed significant hazards consideration Administrative Services, Office of changes to the Standard TS (STS) after determination, and model application Administration, Mail Stop: TWB–05– a preliminary assessment and finding by for plant-specific adoption of Technical B01M, U.S. Nuclear Regulatory the NRC staff that the agency will likely Specification Task Force (TSTF) Commission, Washington, DC 20555– offer the changes for adoption by Traveler-508, Revision 1, ‘‘Revise 0001, or by fax to RDB at (301) 492– licensees. This notice solicits comment Control Room Habitability Actions to 3446. on a proposed change to the STS that Address Lessons Learned from TSTF– You can access publicly available modifies the TS. The NRC staff will 448 Implementation.’’ The TSTF documents related to this notice using evaluate any comments received for the Traveler-508, Revision 1, is available in the following methods: proposed change to the STS and the Agencywide Documents Access reconsider the change or announce the Management System (ADAMS) under NRC’s Public Document Room (PDR): availability of the change for adoption Accession Number ML091690643. The The public may examine and have by licensees. Licensees opting to apply proposed changes would revise copied for a fee publicly available for this TS change are responsible for Technical Specification (TS) [3.7.10, documents at the NRC’s PDR, Public reviewing the NRC staff’s evaluation, ‘‘Control Room Emergency Filtration File Area O1 F21, One White Flint referencing the applicable technical System]’’ the Bases for TS [3.7.10], and North, 11555 Rockville Pike, Rockville, justifications, and providing any TS [5.5.18], ‘‘Control Room Envelope Maryland. necessary plant-specific information. Habitability Program,’’ to pursue TS NRC’s Agencywide Documents Access The NRC will process and note each improvements consistent with the and Management System (ADAMS): amendment application responding to justification in TSTF–448, Revision 3, Publicly available documents created or the notice of availability according to ‘‘Control Room Habitability,’’ while received at the NRC are available applicable NRC rules and procedures. addressing inconsistencies with TSTF electronically at the NRC’s Electronic Applicability Traveler-448. This model safety Reading Room at http://www.nrc.gov/ evaluation will facilitate expedited reading-rm/adams.html. From this page, TSTF Traveler-508, Revision 1, is approval of plant-specific adoption of the public can gain entry into ADAMS, applicable to pressurized and boiling TSTF Traveler-508, Revision 1. which provides text and image files of water reactors. The Traveler revises the DATES: Comment period expires NRC’s public documents. If you do not TS and TS Bases for TS [3.7.10] November 16, 2009. Comments received have access to ADAMS or if there are Condition B, TS [3.7.10] Condition [E], after this date will be considered, if it problems in accessing the documents and TS [5.5.18], ‘‘Control Room is practical to do so, but the located in ADAMS, contact the NRC’s Habitability Program.’’ Commission is able to ensure PDR reference staff at 1–800–397–4209, The proposed change does not consideration only for comments 301–415–4737, or by e-mail to prevent licensees from requesting an received on or before this date. [email protected]. The Proposed alternate approach or proposing changes ADDRESSES: You may submit comments Model Safety Evaluation for Plant- other than those proposed in TSTF by any one of the following methods. Specific Adoption of TSTF Traveler- Traveler-508, Revision 1. However, Please include Docket ID NRC–2009– 508, Revision 1, is available significant deviations from the approach 0455 in the subject line of your electronically under ADAMS Accession recommended in this notice or the inclusion of additional changes to the comments. Comments submitted in Number ML092570577. writing or in electronic form will be license require additional NRC staff Federal Rulemaking Web site: Public review. This may increase the time and posted on the NRC Web site and on the comments and supporting materials Federal rulemaking Web site resources needed for the review or related to this notice can be found at Regulations.gov. Because your result in NRC staff rejection of the LAR. http://www.regulations.gov by searching comments will not be edited to remove Licensees desiring significant deviations on Docket ID: NRC–2009–0455. any identifying or contact information, or additional changes should instead the NRC cautions you against including FOR FURTHER INFORMATION CONTACT: Ms. submit an LAR that does not claim to any information in your submission that Michelle C. Honcharik, Senior Project adopt TSTF Traveler-508, Revision 1. you do not want to be publicly Manager, Special Projects Branch, Mail Dated at Rockville, Maryland, this 1st day disclosed. Stop: O–12D1, Division of Policy and of October 2009. The NRC requests that any party Rulemaking, Office of Nuclear Reactor For the Nuclear Regulatory Commission. soliciting or aggregating comments Regulation, U.S. Nuclear Regulatory Stacey L. Rosenberg, received from other persons for Commission, Washington, DC 20555– Chief, Special Projects Branch, Division of submission to the NRC inform those 0001; telephone 301–415–1774 or e-mail Policy and Rulemaking, Office of Nuclear persons that the NRC will not edit their at [email protected]. For Reactor Regulation. comments to remove any identifying or technical questions please contact Mr. The following example of an application contact information, and therefore, they Matthew Hamm, Reactor Systems was prepared by the NRC staff to facilitate should not include any information in Engineer, Technical Specifications the adoption of technical specifications task their comments that they do not want Branch, Division of Inspection and force (TSTF) Traveler-508, Revision 1, publicly disclosed. Regional Support, Office of Nuclear ‘‘Revise control room habitability actions to Federal Rulemaking Web site: Go to Reactor Regulation, U.S. Nuclear address lessons learned from TSTF–448 implementation.’’ The model provides the http://www.regulations.gov and search Regulatory Commission, Washington, for documents filed under Docket ID expected level of detail and content for an DC 20555–0001; telephone 301–415– application to adopt Traveler-508, Revision NRC–2009–0455. Address questions 1472 or e-mail at 1. Licensees remain responsible for ensuring about NRC dockets to Carol Gallagher, [email protected]. that their actual application fulfills their 301–492–3668; e-mail administrative requirements as well as NRC [email protected]. SUPPLEMENTARY INFORMATION: regulations.

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U.S. Nuclear Regulatory Commission, 2. Proposed Technical Specification changes are proposed for TS [3.7.10] Document Control Desk, Changes (Mark-Up) Condition [E]: Washington, DC 20555. 3. Proposed Technical Specification • Add the phrase ‘‘for conditions Subject: PLANT NAME Bases Changes (Mark-Up) other than Condition B.’’ to the end of DOCKET NO. 50–[xxx] 4. Proposed Technical Specification the first Condition statement. APPLICATION FOR TECHNICAL Change (Re-Typed) • Change the second Condition SPECIFICATION IMPROVEMENT 5. Proposed Technical Specification statement to ‘‘[Required Actions and TO ADOPT TSTF TRAVELER–508, Bases Changes (Re-Typed) associated Completion Times of cc: [NRR Project Manager] REVISION 1, ‘‘REVISE CONTROL Condition B not met [in MODE 5 or 6, [Regional Office] or] during movement of [recently] ROOM HABITABILITY ACTIONS [Resident Inspector] TO ADDRESS LESSONS LEARNED [State Contact] irradiated fuel assemblies./Required FROM TSTF–448 Robert Elliot, NRR/DIRS/ITSB Branch Actions and associated Completion IMPLEMENTATION. Chief. Times of Condition B not met during movement of [recently] irradiated fuel Dear Sir or Madam: Attachment 1—Evaluation of Proposed assemblies in the [secondary/primary or In accordance with the provisions of Change secondary] containment or during Section 50.90 of Title 10 of the Code of OPDRVs.]’’ Federal Regulations (10 CFR), 1.0 Description Consistent with NRC-approved TSTF [LICENSEE] is submitting a request for This letter is a request to amend Traveler-508, Revision 1, the following an amendment to the Technical Operating License(s) [LICENSE changes are proposed for TS [5.5.18], Specifications (TS) for [PLANT NAME, NUMBER(S)] for [PLANT/UNIT ‘‘Control Room Habitability Program’’: UNIT NOS.]. The proposed changes NAME(S)]. The proposed changes • would address inconsistencies in Revise the last sentence of would revise Technical Specification Paragraph [d] of TS [5.5.18], ‘‘Control [PLANT NAME] TS due to the adoption (TS) [3.7.10, ‘‘Control Room Emergency of TSTF Traveler-448, Revision 3, TS Room Habitability Program’’ from ‘‘The Filtration System]’’ the Bases for TS results shall be trended and used as part changes. The changes are consistent [3.7.10], and TS [5.5.18], ‘‘Control Room with NRC-approved Industry Technical of the [18] month assessment of the CRE Envelope Habitability Program,’’ to boundary.’’ to ‘‘The results shall be Specification Task Force (TSTF) pursue TS improvements consistent Standard Technical Specification trended and used as part of the periodic with the justification in Technical assessment of the CRE boundary.’’ Change Traveler-508 Revision 1. The Specification Task Force (TSTF) change This application is being made in availability of this TS improvement was Traveler-448, Revision 3, ‘‘Control accordance with the CLIIP. [LICENSEE] announced in the Federal Register on Room Habitability,’’ while addressing is [not] proposing variations or [DATE] ([ ] FR [ ]) as part of the inconsistencies with TSTF–448. deviations from the TS changes consolidated line item improvement TSTF Traveler-508, Revision 1, described in TSTF Traveler-508, process (CLIIP). ‘‘Revise Control Room Habitability Revision 1, or the NRC staff’s model Attachment 1 provides a description Actions to Address Lessons Learned safety evaluation published on [DATE] of the proposed change. Attachment 2 from TSTF–448 Implementation,’’ was ([ ] FR [ ]) as part of the CLIIP Notice provides the existing TS pages marked announced for availability in the of Availability. [Discuss any differences to show the proposed change. Federal Register on [DATE] as part of with TSTF Traveler-508, Revision 1, Attachment 3 provides the existing TS the consolidated line item improvement and the effect of any changes on the Bases pages marked up to show the process (CLIIP). proposed change. Attachment 4 NRC staff’s model safety evaluation.] 2.0 Proposed Changes provides the proposed TS changes in 3.0 Background final typed format. Attachment 5 Consistent with NRC-approved TSTF provides the proposed TS Bases changes Traveler-508, Revision 1, the following The background for this application is in final typed format. changes are proposed for TS [3.7.10] as stated in the model safety evaluation [LICENSEE] requests approval of the Condition B: in NRC’s Notice of Availability proposed license amendment by • Delete the mode restrictions in the published on [DATE ] ([ ] FR [ ]) and [DATE], with the amendment being Condition statement. TSTF Traveler-508, Revision 1. • implemented [BY DATE OR WITHIN X Add new Required Action B.[2] 4.0 Technical Analysis DAYS]. which requires immediate suspension of [LICENSEE] has reviewed TSTF In accordance with 10 CFR 50.91, movement of [recently] irradiated fuel. Traveler-508, Revision 1, and the model ‘‘Notice for Public Comment; State • [add new Required Action B.[3], safety evaluation published on [DATE] Consultation,’’ a copy of this which requires immediate initiation of ([ ] FR [ ]) as part of the CLIIP Notice application, with attachments, is being actions to suspend OPDRVs.] • of Availability. [LICENSEE] has provided to the designated [STATE] Renumber Required Actions in concluded that the justifications Official. Condition B. • presented in TSTF Traveler-508, I declare [or certify, verify, state] Change language in renumbered Revision 1, and the model safety under penalty of perjury that the Required Action B.[4] from, ‘‘verify evaluation prepared by the NRC staff are foregoing is true and correct. mitigating actions ensure CRE occupant applicable to [PLANT, UNIT NOS.], and Executed on [Date] [Signature] exposures to radiological, chemical, and justify this amendment for the If you should have any questions smoke hazards will not exceed limits.’’ incorporation of the changes to the about this submittal, please contact to ‘‘verify mitigating actions ensure CRE [PLANT] TS. [NAME, TELEPHONE NUMBER]. occupant radiological exposures will not exceed limits, and CRE occupants [LICENSEE] [will] adopt[ed] and Sincerely, are protected from chemical and smoke implement[ed] changes to the TS for [Name, Title] hazards.’’ [PLANT, UNIT NOS.] based on TSTF Attachments: 1. Evaluation of Consistent with NRC-approved TSTF Traveler-448, Revision 3, [on DATE— Proposed Change Traveler-508, Revision 1, the following or—concurrent with adoption and

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implementation of TS changes based on occupational radiation exposure. or] during movement of [recently] TSTF Traveler-508, Revision 1]. Accordingly, the proposed change meets irradiated fuel assemblies./Required [Provide discussion and justification the eligibility criterion for categorical Actions and associated Completion for any plant-specific items not exclusion set forth in 10 CFR Times of Condition B not met during addressed in the NRC staff’s model 51.22(c)(9). Therefore, pursuant to 10 movement of [recently] irradiated fuel safety evaluation.] CFR 51.22(b), no environmental impact assemblies in the [secondary/primary or statement or environmental assessment secondary] containment or during 5.0 Regulatory Analysis need be prepared in connection with the OPDRVs.]’’ 5.1 No Significant Hazards proposed change. The proposed changes would revise Determination TS [5.5.18], ‘‘Control Room Habitability 7.0 References Program’’ as follows: [LICENSEE] has reviewed the no 1. Federal Register Notice, Notice of • Revise the last sentence of significant hazards determination Availability published on [DATE] paragraph [d] of TS [5.5.18], ‘‘Control published on [DATE] ([ ] FR [ ]) as ([ ] FR [ ]). Room Habitability Program’’ from ‘‘The part of the CLIIP Notice of Availability. 2. TSTF Traveler-508, Revision 1, results shall be trended and used as part [LICENSEE] and has concluded that the ‘‘Revise Control Room Habitability of the [18] month assessment of the CRE determination presented in the notice is Actions to Address Lessons Learned boundary.’’ to ‘‘The results shall be applicable to [PLANT, UNIT NO.]. from TSTF–448 Implementation.’’ trended and used as part of the periodic [LICENSEE] has evaluated the proposed [3. Other References] assessment of the CRE boundary.’’ changes to the TS using the criteria in The licensee stated that the 10 CFR 50.92 and has determined that Proposed Model Safety Evaluation for application is consistent with NRC- the proposed changes do not involve a Plant-Specific Adoption of TSTF approved Revision 1 to TSTF Traveler- significant hazards consideration. An Traveler-508, Revision 1, ‘‘Revise 508, Revise Control Room Habitability analysis of the issue of no significant Control Room Habitability Actions To Actions to Address Lessons Learned hazards consideration is presented Address Lessons Learned From TSTF– from TSTF–448 Implementation.’’ below: 448 Implementation’’ [Discuss any differences with TSTF– [LICENSEE INSERT ANALYSIS 1.0 Introduction 508, Revision 1.] The availability of this HERE.] TS improvement was announced in the By letter dated [DATE], [LICENSEE] Federal Register on [Date] ([ ] FR [ ]) as 5.2 Applicable Regulatory (the licensee) proposed changes to the Requirements/Criteria part of the consolidated line item technical specifications (TS) for [PLANT improvement process (CLIIP). A description of this proposed change NAME]. The proposed changes would and its relationship to applicable allow [PLANT NAME] to address 2.0 Regulatory Evaluation regulatory requirements and guidance inconsistencies in Technical Section 182a of the Atomic Energy was provided in the NRC Notice of Specification Task Force (TSTF) Act (the ‘‘Act’’) requires applicants for Availability published on [DATE] ([ ] Improved Standard Technical nuclear power plant operating licenses FR [ ]), and TSTF–508, Revision 1. Specification (STS) Change Traveler- to include TS as part of the license. The [LICENSEE] has reviewed the NRC 448, Revision 3. TS ensure the operational capability of staff’s model safety evaluation The proposed changes would revise structures, systems and components that published on [DATE] ([ ] FR[ ]) as TS [3.7.10] Condition B as follows: are required to protect the health and part of the CLIIP Notice of Availability • Delete the mode restrictions in the safety of the public. The Commission’s and concluded that the regulatory Condition statement. regulatory requirements related to the evaluation section is applicable to • Add new Required Action B.[2] content of the TS are contained in Title [PLANT, UNIT NO.] which requires immediate suspension of 10 of the Code of Federal Regulations movement of [recently] irradiated fuel. 6.0 Environmental Evaluation (10 CFR) Section 50.36. This regulation • [add new Required Action B.[3], requires that the TS include items in the [LICENSEE] has reviewed the which requires immediate initiation of following specific categories: (1) Safety environmental consideration included actions to suspend OPDRVs.] limits, limiting safety systems settings, in the model SE published in the • Renumber Required Actions in and limiting control settings (10 CFR Federal Register on [DATE] ([ ] FR Condition B. 50.36(c).(1)); (2) limiting conditions for [ ]) as part of the CLIIP. [LICENSEE] • Change language in renumbered operation (10 CFR 50.36(c).(2)); (3) has concluded that the staff’s findings Required Action B.[4] from, ‘‘verify surveillance requirements (10 CFR presented therein are applicable to mitigating actions ensure CRE occupant 50.36(c)(3)); (4) design features (10 CFR [PLANT] and the determination is exposures to radiological, chemical, and 50.36(c)(4)); and (5) administrative hereby incorporated by reference for smoke hazards will not exceed limits.’’ controls (10 CFR 50.36(c).(5)). this application. to ‘‘verify mitigating actions ensure CRE In general, there are two classes of The proposed change would change a occupant radiological exposures will changes to TS: (1) Changes needed to requirement with respect to installation not exceed limits, and CRE occupants reflect modifications to the design basis or use of a facility component located are protected from chemical and smoke (TS are derived from the design basis), within the restricted area, as defined in hazards.’’ and (2) voluntary changes to take 10 CFR part 20, and would change an The proposed changes would revise advantage of the evolution in policy and inspection or surveillance requirement. TS [3.7.10] Condition [E] as follows: guidance as to the required content and However, the proposed change does not • Add the phrase ‘‘for conditions preferred format of TS over time. This involve (i) a significant hazards other than Condition B.’’ to the end of amendment deals with the second class consideration, (ii) a significant change the first Condition statement. of changes. in the types or significant increase in • Change the second Condition Licensees may revise the TS to adopt the amounts of any effluent that may be statement to ‘‘[Required Actions and current improved STS format and released offsite, or (iii) a significant associated Completion Times of content provided that plant-specific increase in individual or cumulative Condition B not met [in MODE 5 or 6, review supports a finding of continued

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adequate safety because: (1) The change Required Action B.[2] states ‘‘Not MODE restrictions of Condition B. is editorial, administrative or provides required following completion of Condition [E] is currently worded as clarification (i.e., no requirements are Required Action B.[3].’’ [The licensee such: ‘‘[Two CREVS trains inoperable materially altered); (2) the change is also proposed adding new Required [in MODE 5 or 6, or] during movement more restrictive than the licensee’s Action B.3 and a Note. New Required of [recently] irradiated fuel assemblies current requirement; or (3) the change is Action B.3 requires the licensee to [in the secondary containment or during less restrictive than the licensee’s immediately initiate action to suspend OPDRVs] OR One or more CREVS trains current requirement, but nonetheless Operations with the Potential to Drain inoperable due to an inoperable CRE still affords adequate assurance of safety the Reactor Vessel (OPDRVs) when one boundary [in MODE 5 or 6, or] during when judged against current regulatory or more [CREVS] is inoperable due to an movement of [recently] irradiated fuel standards. The detailed application of inoperable Control Room Envelope assemblies [in the secondary this general framework, and additional (CRE) boundary. The Note above new containment or during OPDRVs].’’ The specialized guidance, are discussed in Required Action B.3 states ‘‘Not proposed rewording is: ‘‘[Two CREVS Section 3.0 in the context of specific required following completion of trains inoperable [in MODE 5 or 6, or] proposed changes. Required Action B.[4].] Finally, the during movement of [recently] licensee proposed rewording the 3.0 Technical Evaluation irradiated fuel assemblies [in the renumbered Required Action [3] from secondary containment or during The NRC staff has found changes ‘‘Verify mitigating actions ensure CRE OPDRVs] for reasons other than made by TSTF Traveler-508, Revision 1, occupant exposures to radiological, Condition B OR Required Actions and to the STS, as amended by TSTF chemical, and smoke hazards will not Traveler-448, Revision 3, to satisfy associated Completion Times of exceed limits’’ to ‘‘Verify mitigating Condition B not met [in MODE 5 or 6, applicable regulatory requirements, as actions ensure CRE occupant described above in Section 2.0. The or] during movement of [recently ] radiological exposures will not exceed irradiated fuel assemblies [in the NRC staff reviewed the licensee’s limits, and CRE occupants are protected secondary containment or during proposed TS changes against the from chemical and smoke hazards.’’ corresponding changes made by TSTF The NRC staff reviewed the licensee’s OPDRVs].’’ Traveler-508, Revision 1. proposed TS changes. The NRC staff The NRC staff reviewed the proposed rewording of Condition [E] and 3.1 Proposed Changes determined that the removal of MODE restrictions and the addition of the [two] determined that the rewording was The NRC staff compared the proposed new Required Action[s] constituted a editorial because it was necessary to TS changes to the STS and the STS relaxation compared to the STS as maintain consistency with the changes markups and evaluations in TSTF amended by TSTF Traveler-448. The made to Condition B and no Traveler-508. [The NRC staff verified NRC staff also determined that the STS requirements or restrictions on that differences from the STS as as amended by TSTF Traveler-448 were operations were altered. Therefore the amended by TSTF Traveler-448 were overly restrictive in that movement of proposed changes are acceptable. adequately justified on the basis of [irradiated] fuel [and OPDRVs] is [are] plant-specific design or retention of not allowed when a CRE is inoperable, 3.4 S [5.5.18], ‘‘Control Room current licensing basis.] The NRC staff even if compensatory measures are Habitability Program’’ also reviewed the proposed changes to taken to confirm CRE occupants will be The licensee proposed replacing the the TS Bases for consistency with the protected in the event of a Design Basis term ‘‘18 month’’ with the term STS Bases and the plant-specific design Accident (DBA). The NRC staff ‘‘periodic’’ in the last sentence of TS and licensing bases, although approval determined that the relaxation is [5.5.18] Paragraph d. The NRC staff of the TS Bases is not a condition for justified and acceptable because the determined that the term ‘‘18 month’’ in accepting the proposed amendment. addition of the new Required Action[s] the last sentence of Paragraph d of TS 3.2 TS [3.7.10, ‘‘Control Room ensure that CRE occupants would [5.518] was inconsistent with the Emergency Ventilation System (CREVS)] continue to be protected from licensee’s Control Room Habitability Condition B radiological, chemical, and smoke Program. The NRC staff determined that hazards during the time a CRE may be As stated in Section 1.0, the licensee the STS, as amended by TSTF Traveler- inoperable. The NRC staff also 448 incorrectly used the term ‘‘18 proposed several changes to Condition determined that changing the language month’’ to describe the assessment B. The first proposed change would of Required Action B.[3] was acceptable referred to in the last sentence of delete the phrase ‘‘in MODE 1, 2, 3, or since quantifiable limits on smoke and Paragraph d of the Control Room 4’’ from the Condition B statement. This chemicals hazards do not exist in the Habitability Program. The NRC staff change would mean the licensee would safety evaluation for TSTF Traveler-448, determined that the proposed change is have to complete the Required Actions and the proposed change addresses the editorial since no requirements are of Condition B within the associated inconsistency between the STS as materially altered and the change will Completion Times while in all MODES amended by TSTF Traveler-448 and the address an inconsistency in TSTF and situations listed in the model safety evaluation for TSTF Traveler-448. Therefore the change is APPLICABILITY statement. The Traveler-448. licensee also proposed adding new acceptable. 3.3 TS [3.7.10, ‘‘Control Room Required Action B.2 and a Note as well 4.0 State Consultation as renumbering Required Actions B.2 Emergency Ventilation System and B.3. New Required Action B.2 (CREVS)’’] Condition [E] In accordance with the Commission’s requires the licensee to immediately The licensee proposed rewording the regulations, the [STATE NAME] State suspend movement of [recently] two condition statements separated by official was notified of the proposed irradiated fuel assemblies when one or the OR operator that make up Condition issuance of the amendment. The State more [CREVS] is inoperable due to an [E] of TS [3.7.10]. The proposed changes official had [(1) no comments or (2) the inoperable Control Room Envelope are necessary to make the conditions following comments—with subsequent (CRE) boundary. The Note above new consistent with the removal of the disposition by the NRC staff].

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5.0 Environmental Consideration Proposed Model No Significant Hazards are protected by the required mitigating Consideration Determination for Plant- actions. The amendment[s] change[s] a Specific Adoption of TSTF Traveler- Therefore, the proposed change does not requirement with respect to the 508, Revision 1, ‘‘Revise Control Room involve a significant increase in the installation or use of a facility probability or consequences of an accident Habitability Actions To Address previously evaluated. component located within the restricted Lessons Learned From TSTF–448 Criterion 2: Does the Proposed Change area as defined in 10 CFR part 20 or Implementation’’ Create the Possibility of a New or Different surveillance requirements. The NRC Kind of Accident from any Previously Description of Amendment Request: staff has determined that the Evaluated? [Plant name] requests adoption of an amendment involves no significant Response: No. approved change to the standard increase in the amounts, and no This revision will not impact the accident technical specifications (STS), as analysis. The changes will not alter the significant change in the types, of any amended by Technical Specification requirements of the CRE ventilation system effluents that may be released offsite, Task Force (TSTF) Standard Technical or its function during accident conditions. and that there is no significant increase Specification Change Traveler-448, No new or different accidents result from in individual or cumulative Revision 3, ‘‘Control Room Habitability’’ performing the new surveillance or following occupational radiation exposure. The the new program. The changes do not involve and TSTF Traveler-508, Revision 1, a physical alteration of the plant (i.e., no new Commission has previously issued a ‘‘Revise Control Room Habitability or different type of equipment will be proposed finding that the amendment Actions to Address Lessons Learned installed) or a significant change in the involves no significant hazards from TSTF–448 Implementation.’’ TSTF methods governing normal plant operation. consideration and there has been no Traveler-508, Revision 1, revised the The changes do not alter assumptions made public comment on such finding STS, as previously amended by TSTF in the safety analysis. The proposed changes Traveler-448, Revision 3, to address are consistent with the safety analysis published [DATE] ([ ] FR [ ]). assumptions and current plant operating Accordingly, the amendment meets the inconsistencies with TSTF Traveler-448, practice. eligibility criteria for categorical Revision 3. The licensee’s proposed Therefore, the proposed amendment does exclusion set forth in 10 CFR changes are consistent with NRC- not create the possibility of a new or different 51.22(c)(9). Pursuant to 10 CFR 51.22(b), approved TSTF Traveler-508, Revision kind of accident from any accident no environmental impact statement or 1. previously evaluated. Criterion 3: Does the Proposed Change environmental assessment need be Basis for proposed no significant hazards consideration determination: As Involve a Significant Reduction in the Margin prepared in connection with the of Safety? issuance of the amendment. required by Title10 of the Code of Response: No. Federal Regulations (10 CFR) Section The proposed changes do not alter the 6.0 Conclusion 50.91(a), the [LICENSEE] analysis of the manner in which safety limits, limiting safety issue of no significant hazards system settings or limiting conditions for The NRC staff has concluded, based consideration is presented below: operation are determined. The safety analysis on the considerations discussed above, acceptance criteria are not affected by these that: (1) There is reasonable assurance Criterion 1: Does the Proposed Change changes. The proposed changes will not Involve a Significant Increase in the result in plant operation in a configuration that the health and safety of the public Probability or Consequences of an Accident will not be endangered by operation in outside the design basis. Compensatory Previously Evaluated? measures are required to be established in the proposed manner; (2) such activities Response: No. order to maintain plant operation in a will be conducted in compliance with The proposed changes do not adversely configuration that is within the design basis. the Commission’s regulations; and (3) affect accident initiators or precursors nor The proposed changes do not adversely affect the issuance of the amendments will not alter the design assumptions, conditions, or systems that respond to safely shutdown the be inimical to the common defense and configuration of the facility. The proposed plant and to maintain the plant in a safe changes do not alter or prevent the ability of security or to the health and safety of shutdown condition. structures, systems, and components (SSCs) Therefore, the proposed amendment would the public. to perform their intended function to mitigate not involve a significant reduction in a the consequences of an initiating event 7.0 References margin of safety. within the assumed acceptance limits. This Based on the NRC staff’s review of the 1. License Amendment Request dated is a revision to the TSs for the control room licensee’s analysis, the NRC staff concludes ventilation system, which is a mitigation [DATE], [Title of Amendment that the proposed amendment presents no system designed to minimize unfiltered air significant hazards consideration under the Request], ADAMS Accession No. inleakage into the control room envelope standards set forth in 10 CFR 50.92(c) and, [MLXXXXXXXXX]. (CRE) and to filter the CRE atmosphere to accordingly, a finding of ‘‘no significant 2. Federal Register Notice of protect the CRE occupants following hazards consideration’’ is justified. accidents previously analyzed. An important Availability for TSTF Traveler-448 part of the system is the CRE boundary. [FR Doc. E9–24773 Filed 10–14–09; 8:45 am] Revision 3, ‘‘Control Room Under the proposed change, the movement of BILLING CODE 7590–01–P Habitability,’’ dated January 17, irradiated fuel and operations with the 2007 (72 FR 2022). potential to drain the reactor vessel may be 3. Federal Register Notice of resumed following confirmation that the CRE OFFICE OF PERSONNEL occupants will be protected in the event of MANAGEMENT Availability for TSTF Traveler-508, a DBA. This ensures that the consequences Revision 1, ‘‘Revise Control Room of an accident previously evaluation are not [(OMB Control No. 3206–0138; Form RI 30– Habitability Actions to Address significantly increased. The CRE ventilation 9)] Lessons Learned from TSTF–448 system is not an initiator or precursor to any Implementation,’’ dated [DATE] ([ ] accident previously evaluated. Therefore, the Submission for OMB Review; FR [ ]).]. probability of any accident previously Comment Request for Review of a evaluated is not increased. The consequences Revised Information Collection of an accident during the proposed Actions are not significantly increased as the Actions AGENCY: Office of Personnel require verification that the CRE occupants Management.

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ACTION: Notice. OFFICE OF PERSONNEL Office of Personnel Management. MANAGEMENT John Berry, SUMMARY: In accordance with the Director. Paperwork Reduction Act of 1995 (Pub. [OMB Control No. 3206–0042; RI 25–15] [FR Doc. E9–24850 Filed 10–14–09; 8:45 am] L. 104–13, May 22, 1995), this notice BILLING CODE 6325–38–P announces that the Office of Personnel Submission for OMB Review; Request Management (OPM) has submitted to for Review of a Revised Information the Office of Management and Budget Collection RAILROAD RETIREMENT BOARD (OMB) a request for review of a revised information collection. This information AGENCY: Office of Personnel Sunshine Act collection, ‘‘Reinstatement of Disability Management. Annuity Previously Terminated Because ACTION: Notice. Notification of Item Added to the of Restoration to Earning Capacity’’ Agenda, U.S. Railroad Retirement (OMB Control No. 3206–0138; Form RI SUMMARY: In accordance with the Board 30–9), informs former disability Paperwork Reduction Act of 1995 (Pub. On October 9, 2009, by recorded vote annuitants of their right to request L. 104–13, May 22, 1995 and 5 CFR the Board has voted to add the following restoration under title 5, U.S.C. Sections 1320), this notice announces that the item to its agenda for the October 14, 8337 and 8455. It also specifies the Office of Personnel Management (OPM) 2009: conditions to be met and the has submitted to the Office of (2) Employer Status Determination documentation required for a person to Management and Budget (OMB) a (Decision on Reconsideration)—Trinity request reinstatement. request for review of a revised Railway Express—Train Dispatching— information collection. This information We estimate 200 forms are completed Herzog Transit Services, Inc. collection, ‘‘Notice of Change in annually. The form takes approximately The person to contact for more Student’s Status’’ (OMB Control No. 60 minutes to respond, including a information is Beatrice Ezerski, 3206–0042; Form RI 25–15), is used to medical examination. The annual Secretary to the Board, Phone No. 312– collect sufficient information from adult estimated burden is 200 hours. Burden 751–4920. children of deceased Federal employees may vary depending on the time Dated: October 9, 2009. or annuitants to assure that the child required for a medical examination. continues to be eligible for payments Beatrice Ezerski, For copies of this proposal, contact from OPM. Secretary to the Board. Cyrus S. Benson on (202) 606–4808, We estimate 2,500 certifications are [FR Doc. E9–24904 Filed 10–13–09; 11:15 FAX (202) 606–0910 or via E-mail to processed annually. Each form takes am] [email protected]. Please include approximately 20 minutes to complete. BILLING CODE 7905–01–P a mailing address with your request. The annual estimated burden is 835 DATES: Comments on this proposal hours. SMALL BUSINESS ADMINISTRATION should be received within 30 calendar For copies of this proposal, contact Cyrus S. Benson by telephone (202) days from the date of this publication. Telegraph Hill Partners SBIC, L.P., 606–4808, FAX (202) 606–0910 or by e- License No. 09/79–0453; Notice ADDRESSES: Send or deliver comments mail to [email protected]. Please Seeking Exemption Under Section 312 to— include a mailing address with your of the Small Business Investment Act, request. James K. Freiert, Deputy Assistant Conflicts of Interest Director, Retirement Services DATES: Comments on this proposal Program, Center for Retirement and should be received within 30 calendar Notice is hereby given that Telegraph Insurance Services, U.S. Office of days from the date of this publication. Hill Partners SBIC, L.P., 360 Post Street, Personnel Management, 1900 E Street, Suite 601, San Francisco, CA 94108, a ADDRESSES: Send or deliver comments NW., Room 3305, Washington, DC Federal Licensee under the Small to— 20415–3500; and Business Investment Act of 1958, as James K. Freiert, Deputy Assistant amended (‘‘the Act’’), in connection OMB Desk Officer, Office of Information Director, Retirement Services with the financing of a small concern, & Regulatory Affairs, Office of Program, Center for Retirement and has sought an exemption under Section Management and Budget, New Insurance Services, U.S. Office of 312 of the Act and Section 107.730, Executive Office Building, NW., 725 Personnel Management, 1900 E Street, Financings which Constitute Conflicts 17th Street, NW., Room 10235, NW., Room 3305, Washington, DC of Interest of the Small Business Washington, DC 20503. 20415–3500; and Administration (‘‘SBA’’) Rules and For information regarding OPM Desk Officer, Office of Information Regulations (13 CFR 107.730). administrative coordination contact: & Regulatory Affairs, Office of Telegraph Hill Partners SBIC, L.P. Cyrus S. Benson, Team Leader, Management and Budget, New proposes to provide equity security Publications Team, RIS Support Executive Office Building, 725 17th financing to AltheaDx, Inc., 3550 Services/Support Group, U.S. Office of Street, NW., Room 10235, Dunhill Street, San Diego, CA 92121. Personnel Management, 1900 E Street, Washington, DC 20503. The financing is contemplated for NW., Room 4H28, Washington, DC For information regarding working capital and general corporate 20415, (202) 606–0623. administrative coordination contact: purposes. Office of Personnel Management. Cyrus S. Benson, Team Leader, The financing is brought within the Publications Team, RIS Support purview of § 107.730(a)(1) of the John Berry, Services/Support Group, U.S. Office of Regulations because Telegraph Hill Director. Personnel Management, 1900 E Street, Partners II, L.P., THP II Affiliates Fund, [FR Doc. E9–24849 Filed 10–14–09; 8:45 am] NW., Room 4H28, Washington, DC L.P., and THP Affiliates Fund, L.P., all BILLING CODE 6325–P 20415, (202) 606–0623. Associates of Telegraph Hill Partners

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SBIC, L.P., own more than ten percent Kenneth A. Johnson, Management and II. Self-Regulatory Organization’s of AltheaDx, Inc. Program Analyst, Office of the Executive Statement of the Purpose of, and Therefore, this transaction is Director, at (202) 551–4300, Securities Statutory Basis for, the Proposed Rule considered a financing of an Associate and Exchange Commission, 100 F Change requiring an exemption. Notice is Street, NE., Washington, DC 20549– In its filing with the Commission, the hereby given that any interested person 2521. self-regulatory organization included may submit written comments on the Dated: October 8, 2009. statements concerning the purpose of, transaction within fifteen days of the By the Commission. and basis for, the proposed rule change date of this publication to the Associate Elizabeth M. Murphy, and discussed any comments it received Administrator for Investment, U.S. on the proposed rule change. The text Small Business Administration, 409 Secretary. of those statements may be examined at Third Street, SW., Washington, DC [FR Doc. E9–24713 Filed 10–14–09; 8:45 am] the places specified in Item IV below. 20416. BILLING CODE 8011–01–P The Exchange has prepared summaries, Dated: September 24, 2009. set forth in sections A, B, and C below, Sean J. Greene, SECURITIES AND EXCHANGE of the most significant parts of such Associate Administrator for Investment. COMMISSION statements. [FR Doc. E9–24844 Filed 10–14–09; 8:45 am] A. Self-Regulatory Organization’s BILLING CODE 8025–01–P [Release No. 34–60800; File No. SR– Statement of the Purpose of, and the NYSEAmex–2009–66] Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE Self-Regulatory Organizations; NYSE COMMISSION Amex LLC; Notice of Filing and 1. Purpose Immediate Effectiveness of Proposed NYSE Amex currently pays a rebate of [Release No. 34–60799] Rule Change To Amend Its Schedule of $0.0015 per share to customers Transaction Fees and Rebates Draft 2010–2015 Strategic Plan for providing liquidity in securities with a Securities and Exchange Commission October 8, 2009. trading price of at least $1.00 per share. With effect from October 1, 2009, this AGENCY: Pursuant to Section 19(b)(1) of the Securities and Exchange rebate will increase to $0.0030 per Commission. Securities Exchange Act of 1934 (the 1 2 share. The Exchange intends to ACTION: Request for comment. ‘‘Act’’) and Rule 19b–4 thereunder, notice is hereby given that, on reevaluate this rebate again in three months time and will submit an SUMMARY: The Securities and Exchange September 30, 2009, NYSE Amex LLC Commission (SEC) is providing notice (‘‘NYSE Amex’’ or the ‘‘Exchange’’) filed additional rule filing if it decides to that it is seeking comments on its draft with the Securities and Exchange change its rebate policy at that time. The 2010–2015 Strategic Plan. The draft Commission (the ‘‘Commission’’) the description of the rebate in the 2009 Strategic Plan includes a draft of the proposed rule change as described in NYSE Amex Price List is also amended SEC’s mission, vision, values, strategic Items I, II, and III below, which Items to clarify that it applies to both goals, planned initiatives, and have been prepared by the Exchange. displayed and non-displayed orders. performance metrics. The Exchange filed this proposal Floor brokers currently pay a fee of $0.0020 per share when taking liquidity DATES: Comments should be received on pursuant to Section 19(b)(3)(A) of the 3 4 from the Exchange. Effective October 1, or before November 16, 2009. Act and Rule 19b–4(f)(2) thereunder, which renders the proposal effective 2009, this fee will be increased to ADDRESSES: Comments may be upon filing with the Commission. The $0.0025 per share. submitted by any of the following Commission is publishing this notice to methods: 2. Statutory Basis solicit comments on the proposed rule Electronic Comments change from interested persons. The Exchange believes that the proposed rule change is consistent with • Send an e-mail to I. Self-Regulatory Organization’s the provisions of Section 6 of the Act,5 [email protected]. Statement of the Terms of Substance of in general, and Section 6(b)(4) of the Paper Comments the Proposed Rule Change Act,6 in particular, in that it is designed • Send paper comments in triplicate The Exchange proposes to (i) increase to provide for the equitable allocation of to Kenneth A. Johnson, Management from $0.0015 per share to $0.0030 per reasonable dues, fees, and other charges and Program Analyst, Securities and share the rebate it provides to customers among its members and other persons Exchange Commission, 100 F Street, adding liquidity and (ii) increase from using its facilities. The Exchange NE., Washington, DC 20549–2521. $0.0020 per share to $0.0025 per share believes that the proposal does not the fee charged to floor brokers when constitute an inequitable allocation of FOR FURTHER INFORMATION CONTACT: dues, fees and other charges as all Kenneth A. Johnson, Management and taking liquidity from the Exchange. These changes will take effect on similarly situated member organizations Program Analyst, Office of the Executive will be subject to the same fee structure. Director, at (202) 551–4300, Securities October 1, 2009. The text of the and Exchange Commission, 100 F proposed rule change is available at the B. Self-Regulatory Organization’s Street, NE., Washington, DC 20549– Exchange, the Commission’s Public Statement on Burden on Competition 2521. Reference Room, and http:// www.nyse.com. The Exchange does not believe that SUPPLEMENTARY INFORMATION: The draft the proposed rule change will impose strategic plan is available at the 1 15 U.S.C. 78s(b)(1). any burden on competition that is not Commission’s Web site at http:// 2 17 CFR 240.19b–4. www.sec.gov/about/ 3 15 U.S.C. 78s(b)(3)(A). 5 15 U.S.C. 78f(b). secstratplan1015.htm or by contacting 4 17 CFR 240.19b–4(f)(2). 6 15 U.S.C. 78f(b)(4).

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necessary or appropriate in furtherance amendments, all written statements designated this proposal as one of the purposes of the Act. with respect to the proposed rule establishing or changing a due, fee, or change that are filed with the other charge imposed by ISE under C. Self-Regulatory Organization’s Commission, and all written Section 19(b)(3)(A)(ii) of the Act 3 and Statement on Comments on the communications relating to the Rule 19b–4(f)(2) thereunder,4 which Proposed Rule Change Received From proposed rule change between the renders the proposal effective upon Members, Participants, or Others Commission and any person, other than filing with the Commission. The No written comments were solicited those that may be withheld from the Commission is publishing this notice to or received with respect to the proposed public in accordance with the solicit comments on the proposed rule rule change. provisions of 5 U.S.C. 552, will be change from interested persons. available for inspection and copying in III. Date of Effectiveness of the the Commission’s Public Reference I. Self-Regulatory Organization’s Proposed Rule Change and Timing for Section, 100 F Street, NE., Washington, Statement of the Terms of Substance of Commission Action DC 20549, on official business days the Proposed Rule Change The foregoing rule change is effective between the hours of 10 a.m. and 3 p.m. The ISE proposes to amend its upon filing pursuant to Section Copies of the filing will also be available payment for order flow program. The 19(b)(3)(A) 7 of the Act and for inspection and copying at the text of the proposed rule change is subparagraph (f)(2) of Rule 19b–4 8 Exchange’s principal office and on its available on the Exchange’s Web site thereunder, because it establishes a due, Internet Web site at http:// (http://www.ise.com), at the principal fee, or other charge imposed by NYSE www.nyse.com. All comments received office of the Exchange, and at the Amex. will be posted without change; the Commission’s Public Reference Room. At any time within 60 days of the Commission does not edit personal filing of the proposed rule change, the identifying information from II. Self-Regulatory Organization’s Commission may summarily abrogate submissions. You should submit only Statement of the Purpose of, and such rule change if it appears to the information that you wish to make Statutory Basis for, the Proposed Rule Commission that such action is available publicly. All submissions Change necessary or appropriate in the public should refer to File Number SR– In its filing with the Commission, the interest, for the protection of investors, NYSEAmex–2009–66 and should be self-regulatory organization included or otherwise in furtherance of the submitted on or before November 5, statements concerning the purpose of, purposes of the Act. 2009. and basis for, the proposed rule change and discussed any comments it received IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated on the proposed rule change. The text Interested persons are invited to authority.9 of these statements may be examined at submit written data, views, and Florence E. Harmon, the places specified in Item IV below. arguments concerning the foregoing, Deputy Secretary. The self-regulatory organization has including whether the proposed rule [FR Doc. E9–24738 Filed 10–14–09; 8:45 am] prepared summaries, set forth in change is consistent with the Act. sections A, B and C below, of the most BILLING CODE 8011–01–P Comments may be submitted by any of significant aspects of such statements. the following methods: A. Self-Regulatory Organization’s Electronic Comments SECURITIES AND EXCHANGE Statement of the Purpose of, and COMMISSION • Use the Commission’s Internet Statutory Basis for, the Proposed Rule comment form (http://www.sec.gov/ [Release No. 34–60801; File No. SR–ISE– Change 2009–70] rules/sro.shtml); or 1. Purpose • Send an e-mail to rule- [email protected]. Please include File Self-Regulatory Organizations; The Exchange currently has a Number SR–NYSEAmex–2009–66 on International Securities Exchange, payment-for-order-flow (‘‘PFOF’’) the subject line. LLC; Notice of Filing and Immediate program that helps its market makers Effectiveness of Proposed Rule establish PFOF arrangements with an Paper Comments Change Relating to Payment for Order EAM in exchange for that EAM • Send paper comments in triplicate Flow Fees preferencing some or all of its order flow to that market maker. This program to Elizabeth M. Murphy, Secretary, October 8, 2009. is funded through a fee paid by Securities and Exchange Commission, Pursuant to Section 19(b)(1) of the Exchange market makers for each 100 F Street, NE., Washington, DC Securities Exchange Act of 1934 (the customer contract they execute, and is 20549–1090. ‘‘Act’’),1 and Rule 19b–4 thereunder,2 administered by both Primary Market All submissions should refer to File notice is hereby given that on Makers (‘‘PMM’’) 5 and Competitive Number SR–NYSEAmex–2009–66. This September 29, 2009, the International Market Makers (‘‘CMM’’),6 depending file number should be included on the Securities Exchange, LLC (the on who the order is preferenced to. subject line if e-mail is used. To help the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the The Exchange now proposes to adopt Commission process and review your Securities and Exchange Commission an administrative fee to offset its costs comments more efficiently, please use (‘‘Commission’’) the proposed rule in administering the PFOF program. only one method. The Commission will change as described in Items I, II, and Specifically, ISE proposes to assess an post all comments on the Commission’s III below, which items have been Internet Web site (http://www.sec.gov/ prepared by the self-regulatory 3 rules/sro.shtml). Copies of the 15 U.S.C. 78s(b)(3)(A)(ii). organization. The Exchange has 4 17 CFR 240.19b–4(f)(2). submission, all subsequent 5 See Securities Exchange Act Release No. 43833 9 17 CFR 200.30–3(a)(12). (January 10, 2001), 66 FR 7822 (January 25, 2001). 7 15 U.S.C. 78s(b)(3)(A). 1 15 U.S.C. 78s(b)(1). 6 See Securities Exchange Act Release No. 53127 8 17 CFR 240.19b–4(f)(2). 2 17 CFR 240.19b–4. (January 13, 2006), 71 FR 3582 (January 23, 2006).

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administrative fee of 0.45% of the total arguments concerning the foregoing, For the Commission, by the Division of amount of funds collected each month. including whether the proposed rule Trading and Markets, pursuant to delegated 9 ISE will closely monitor the amount of change is consistent with the Act. authority. funds raised by this administrative fee Comments may be submitted by any of Florence E. Harmon, and amend the fee in the future if the following methods: Deputy Secretary. necessary, so that the fee provides [FR Doc. E9–24790 Filed 10–14–09; 8:45 am] sufficient funds to adequately offset Electronic Comments BILLING CODE 8011–01–P ISE’s costs in administering the PFOF • Use the Commission’s Internet program. The Chicago Board Options comment form (http://www.sec.gov/ Exchange currently assesses a similar rules/sro.shtml); or DEPARTMENT OF STATE fee to administer its PFOF program. ISE proposes to implement this fee • Send an e-mail to rule- [Public Notice 6786] beginning on October 1, 2009. ISE is not [email protected]. Please include File Department of State Performance making any other changes to its PFOF Number SR–ISE–2009–70 on the subject Review Board Members program. line. 2. Statutory Basis Paper Comments In accordance with section 4314(c)(4) of 5 United States Code, the Department The basis under the Securities • Send paper comments in triplicate of State has appointed the following Exchange Act of 1934 (the ‘‘Exchange to Elizabeth M. Murphy, Secretary, individuals to the Department of State Act’’) for this proposed rule change is Securities and Exchange Commission, Performance Review Board for career the requirement under Section 6(b)(4) 100 F Street, NE., Washington, DC Senior Executive Service members: that an exchange have an equitable Joan E. Donoghue, Principal Deputy allocation of reasonable dues, fees and 20549–1090. Legal Adviser, Office of the Legal other charges among its members and All submissions should refer to File Adviser, Department of State; other persons using its facilities. In Number SR–ISE–2009–70. This file Raymond D. Maxwell, Director, Bureau particular, the proposed fee change will number should be included on the of Near Eastern Affairs, Department of allow the Exchange to offset its costs of subject line if e-mail is used. To help the State; (Outside Member); administering its PFOF program. Commission process and review your James L. Millette, Deputy Assistant B. Self-Regulatory Organization’s comments more efficiently, please use Secretary, Bureau of Resource Statement on Burden on Competition only one method. The Commission will Management, Department of State; post all comments on the Commission’s The proposed rule change does not Margaret J. Pollack, Deputy Assistant Internet Web site (http://www.sec.gov/ impose any burden on competition that Secretary, Bureau of Population, is not necessary or appropriate in rules/sro.shtml). Copies of the Refugees and Migration, Department furtherance of the purposes of the Act. submission, all subsequent of State; and amendments, all written statements Ruth A. Whiteside, Director, Foreign C. Self-Regulatory Organization’s with respect to the proposed rule Service Institute, Department of State. Statement on Comments on the change that are filed with the Dated: October 7, 2009. Proposed Rule Change Received From Commission, and all written Steven A. Browning, Members, Participants, or Others communications relating to the Acting Director General of the Foreign Service The Exchange has not solicited, and proposed rule change between the and Director of Human Resources, does not intend to solicit, comments on Commission and any person, other than Department of State. this proposed rule change. The those that may be withheld from the [FR Doc. E9–24823 Filed 10–14–09; 8:45 am] Exchange has not received any public in accordance with the BILLING CODE 4710–15–P unsolicited written comments from provisions of 5 U.S.C. 552, will be members or other interested parties. available for inspection and copying in III. Date of Effectiveness of the the Commission’s Public Reference DEPARTMENT OF TRANSPORTATION Proposed Rule Change and Timing for Room, 100 F Street, NE., Washington, Commission Action DC 20549, on official business days Office of the Secretary between the hours of 10 a.m. and 3 p.m. The foregoing rule change has become Copies of the filing also will be available Notice of Applications for Certificates effective pursuant to Section 19(b)(3) of of Public Convenience and Necessity for inspection and copying at the the Act 7 and Rule 19b–4(f)(2) 8 and Foreign Air Carrier Permits Filed principal office of the Exchange. All thereunder. At any time within 60 days Under Subpart B (Formerly Subpart Q) of the filing of such proposed rule comments received will be posted During the Week Ending September 19, change the Commission may summarily without change; the Commission does 2009 abrogate such rule change if it appears not edit personal identifying to the Commission that such action is information from submissions. You The following Applications for necessary or appropriate in the public should submit only information that Certificates of Public Convenience and interest, for the protection of investors, you wish to make available publicly. All Necessity and Foreign Air Carrier or otherwise in furtherance of the submissions should refer to File Permits were filed under Subpart B purposes of the Act. Number SR–ISE–2009–70 and should be (formerly Subpart Q) of the Department submitted on or before November 5, of Transportation’s Procedural IV. Solicitation of Comments 2009. Regulations (See 14 CFR 301.201 et. Interested persons are invited to seq.). The due date for Answers, submit written data, views, and Conforming Applications, or Motions to Modify Scope are set forth below for 7 15 U.S.C. 78s(b)(3)(A). [sic] each application. Following the Answer 8 17 CFR 240.19b–4(f)(2). 9 17 CFR 200.30–3(a)(12). period DOT may process the application

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by expedited procedures. Such DEPARTMENT OF TRANSPORTATION Therefore, you may want to review procedures may consist of the adoption DOT’s complete Privacy Act Statement of a show-cause order, a tentative order, Pipeline and Hazardous Materials in the Federal Register published on or in appropriate cases a final order Safety Administration April 11, 2000 (65 FR 19477) or visit without further proceedings. [Docket No. PHMSA–2009–0304] http://dms.dot.gov before submitting Docket Number: DOT–OST–2009– any such comments. 0222. Pipeline Safety: Information Collection Docket: For access to the docket or to Activities Date Filed: September 14, 2009. read background documents or comments, go to http://dms.dot.gov at Due Date for Answers, Conforming AGENCY: Pipeline and Hazardous any time or to Room W12–140 on the Applications, or Motion to Modify Materials Safety Administration ground level of the West Building, 1200 Scope: October 5, 2009. (PHMSA), DOT. ACTION: Notice and request for New Jersey Avenue, SE., Washington, Description: Application of Olympic comments. DC, between 9 a.m. and 5 a.m., Monday Air Anonymos Etaireia Aeroporikon through Friday, except on Wednesdays Metaforon d/b/a Olympic Air requesting SUMMARY: In accordance with the and Federal holidays. a foreign air carrier permit and Paperwork Reduction Act of 1995, If you wish to receive confirmation of corresponding exemption authority to PHMSA invites comments on an receipt of your written comments, the full extent authorization by the Air information collection under Office of please include a self-addressed, Transport Agreement between the Management and Budget (OMB) Control stamped postcard with the following United States and the European No. 2137–0584, titled ‘‘Gas and statement: ‘‘Comments on PHMSA– Community and the Member States of Hazardous Liquid Pipeline Safety 2009–0304’’. The Docket Clerk will the European Community to enable it to Program Certifications.’’ PHMSA will date-stamp the postcard prior to engage in: (i) Foreign scheduled and request approval from OMB for a returning it to you via the U.S. mail. charter air transportation of persons, revision of the current information Please note that due to delays in the property and mail from any point or collection. That revision relates to the delivery of U.S. mail to Federal offices points behind any Member State of the use of on-line certification media in Washington, DC, we recommend that European Union via any point or points containing questions which will persons consider an alternative method in any Member State and via improve PHMSA’s ability to efficiently (Internet, fax, or professional delivery intermediate points to any point or allocate grant monies to State programs, service) of submitting comments to the points in the United States or beyond; resulting in the creation of additional incentives for pipeline safety under the docket and ensuring their timely receipt (ii) foreign scheduled and charter air State’s jurisdiction. at DOT. transportation of persons, property and mail between any point or points in the DATES: Interested persons are invited to FOR FURTHER INFORMATION CONTACT: United States and any point or points in submit comments on or before Cameron Satterthwaite by telephone at any member of the European Common December 14, 2009. 202–366–1319, by fax at 202–366–4566, Aviation Area; (iii) other charters ADDRESSES: Comments may be or by mail at U.S. Department of pursuant to prior approval submitted in the following ways: Transportation, Pipeline and Hazardous requirements; and (iv) transportation E-Gov Web site: http:// Materials Safety Administration, 1200 authorized by any additional route www.regulations.gov. This site allows New Jersey Avenue, SE., PHP–30, rights made available to European the public to enter comments on any Washington, DC 20590–0001. Federal Register notice issued by any Community carriers in the future. agency. SUPPLEMENTARY INFORMATION: Section Docket Number: DOT–OST–2009– Fax: 1–202–493–2251. 1320.8(d), Title 5, Code of Federal 0224. Mail: Docket Management Facility, Regulations requires PHMSA to provide Date Filed: September 15, 2009. U.S. Department of Transportation, 1200 interested members of the public and New Jersey Avenue, SE., West Building, Due Date for Answers, Conforming affected agencies an opportunity to Room W12–140, Washington, DC Applications, or Motion to Modify comment on information collection and 20590–0001. Scope: September 30, 2009. recordkeeping requests. This notice Hand Delivery: Room W12–140 on the identifies an information collection Description: Application of Calm Air ground level of the West Building, 1200 request that PHMSA is submitting to International LP d/b/a (‘‘Calm Air’’), a New Jersey Avenue, SE., Washington, OMB for revision under OMB Control Canadian air carrier, requesting an DC, between 9 a.m. and 5 p.m., Monday No. 2137–0584. This information amendment to its air carrier permit to through Friday, except on Wednesdays collection is contained in 49 CFR Part engage in non-scheduled charter trips in and Federal holidays. 198. We are proposing to revise this foreign air transportation between Instructions: Identify the docket information collection to incorporate Canada and the United States as more number, PHMSA–2009–0304, at the changes to the tools used to determine beginning of your comments. Note that specifically set forth herein. the amount of funds received by each all comments received will be posted participating State. We believe these Renee V. Wright, without change to http://dms.dot.gov, Program Manager, Docket Operations, including any personal information revisions will improve PHMSA’s ability Federal Register Liaison. provided. You should know that anyone to efficiently allocate grant monies to [FR Doc. E9–24783 Filed 10–14–09; 8:45 am] is able to search the electronic form of States that are currently enhancing or seeking to enhance their respective BILLING CODE 4910–9X–P all comments received into any of our dockets by the name of the individual programs, thereby resulting in the submitting the comment (or signing the creation of additional incentives for comment, if submitted on behalf of an pipeline safety under the State’s association, business, labor union, etc.) jurisdiction.

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Gas and Hazardous Liquid Pipeline FOR FURTHER INFORMATION CONTACT: For the company’s products and Safety Program Certifications questions about this notice, please conformance with the City of Colorado For the hazardous liquids program, contact Mr. Gerald Yakowenko, FHWA Spring’s design criteria. Both parties the Office of Pipeline Safety (OPS) Office of Program Administration, (202) agreed that the company’s products would not meet the project currently has two States with an 366–1562, or via e-mail at [email protected]. For legal specifications. A copy of the City’s agreement under 49 U.S.C. 60106(a) and questions, please contact Mr. Michael September 16, 2009, letter to Mr. Schutz 15 State programs that are certified Harkins, FHWA Office of the Chief documenting this conversation and Mr. under 49 U.S.C. 60105(a) with six States Counsel, (202) 366–4928, or via e-mail Schutz’s confirmation is available upon acting as Interstate Agents. at [email protected]. Office request. For the natural gas program, the hours for the FHWA are from 7:45 a.m. During the 15-day comment period, Office of Pipeline Safety (OPS) currently to 4:15 p.m., e.t., Monday through the FHWA conducted an additional has one State with an agreement under Friday, except Federal holidays. review to locate potential domestic 49 U.S.C. 60106(a) and 51 State SUPPLEMENTARY INFORMATION: manufacturers for the butterfly valves. programs that are certified under 49 Based on all the information available to U.S.C. 60105(a) (Hawaii and Alaska are Electronic Access the agency, the FHWA concludes that exceptions) with nine States acting as An electronic copy of this document there are no domestic manufacturers for Interstate Agents. may be downloaded from the Federal the specified butterfly valves. Thus, the An estimate of the revised burden is Register’s home page at: http:// FHWA concludes that a Buy America as follows: www.archives.gov and the Government waiver is appropriate as provided by 23 Title: Pipeline Safety: Gas and Printing Office’s database at: http:// CFR 635.410(c)(1). Hazardous Liquid Pipeline Safety www.access.gpo.gov/nara. In accordance with the provisions of Program Certifications. section 117 of the SAFETEA–LU Background OMB Control Number: 2137–0584. Technical Corrections Act of 2008 (Pub. Type of Request: Revision of a The FHWA’s Buy America policy in L. 110–244, 122 Stat.1572), the FHWA currently approved information 23 CFR 635.410 requires a domestic is providing this notice as its finding collection. manufacturing process for any steel or that a waiver of Buy America Abstract: A State agency participating iron products (including protective requirements is appropriate. The FHWA in the pipeline safety program must coatings) that are permanently invites public comment on this finding maintain records to demonstrate that the incorporated in a Federal-aid for an additional 15 days following the agency is properly monitoring the construction project. The regulation also effective date of the finding. Comments operations of pipeline operators in that provides for a waiver of the Buy may be submitted to the FHWA’s Web State. The State agency must also America requirements when the site via the link provided to the City of submit an annual certificate to PHMSA application of such requirements would Colorado Springs waiver page noted verifying compliance. PHMSA uses the be inconsistent with the public interest above. information collected to evaluate the or when satisfactory quality domestic State’s eligibility for Federal grants. steel and iron products are not (Authority: 23 U.S.C. 313; Pub. L. 110–161, 23 CFR 635.410) Estimated number of respondents: 67. sufficiently available. This notice Estimated annual burden hours: 3,920 provides information regarding the Issued on: October 8, 2009. hours. FHWA’s finding that a Buy America King Gee, Frequency of collection: Annually. waiver is appropriate for the acquisition Associate Administrator for Infrastructure. Issued in Washington, DC on October 7, of butterfly valves for the Woodmen [FR Doc. E9–24851 Filed 10–14–09; 8:45 am] 2009. Road Corridor Improvement Project in BILLING CODE 4910–22–P John A. Gale, the City of Colorado Springs, Colorado. Specifically, the City of Colorado Director of Regulations. Springs was not able to find a domestic DEPARTMENT OF TRANSPORTATION [FR Doc. E9–24838 Filed 10–14–09; 8:45 am] supplier for a 42 inch Vanessa Zero BILLING CODE 4910–60–P Leakage 30,000 Series Butterfly Valve. Federal Aviation Administration This project is funded under the Consensus Standards, Light-Sport American Recovery and Reinvestment DEPARTMENT OF TRANSPORTATION Aircraft Act of 2009. Federal Highway Administration In accordance with the Division I, AGENCY: Federal Aviation section 126 of the ‘‘Omnibus Administration, DOT. Buy America Waiver Notification Appropriations Act, 2009’’ (Pub. L. 111– ACTION: Notice of availability; request 8), the FHWA published a notice of for comments. AGENCY: Federal Highway intent to issue a waiver for the butterfly Administration (FHWA), DOT. valves (http://www.fhwa.dot.gov/ SUMMARY: This notice announces the ACTION: Notice. construction/contracts/ availability of four revised consensus waivers.cfm?id=37) on August 24, 2009. standards to previously accepted SUMMARY: This notice provides The FHWA received one comment in consensus standards relating to the information regarding the FHWA’s response to this notice which suggested provisions of the Sport Pilot and Light- finding that a Buy America waiver is that the butterfly valves may be Sport Aircraft rule issued July 16, 2004, appropriate for the purchase of foreign available domestically. This comment and effective September 1, 2004. ASTM butterfly valves for a Federal-aid/ was provided by Mr. Edward J. Schutz, International Committee F37 on Light American Recovery and Reinvestment Director of Sales with the Henry Pratt Sport Aircraft developed the revised Act (ARRA) project for the City of Company. standards with Federal Aviation Colorado Springs, Colorado. Mr. Adam Baker with the City of Administration (FAA) participation. By DATES: The effective date of the waiver Colorado Springs contacted Mr. Shutz this notice, the FAA finds the revised is October 16, 2009. with the Henry Pratt Company regarding standards acceptable for certification of

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the specified aircraft under the above. All communications received on maintains a listing of all accepted provisions of the Sport Pilot and Light- or before the closing date for comments standards on the FAA Web site. Sport Aircraft rule. will be forwarded to ASTM The Revised Consensus Standard and International Committee F37 for DATES: Comments must be received on Effective Period of Use or before December 14, 2009. consideration. The standard may be changed in light of the comments ADDRESSES: Comments may be mailed The following previously accepted received. The FAA will address all to: Federal Aviation Administration, consensus standards have been revised, comments received during the recurring Small Airplane Directorate, Programs and this NOA is accepting the later review of the consensus standard and and Procedures Branch, ACE–114, revision. Either the previous revision or will participate in the consensus Attention: Terry Chasteen, Room 301, the later revision may be used for the standard revision process. initial certification of special light-sport 901 Locust, Kansas City, Missouri Background: Under the provisions of 64106. Comments may also be e-mailed aircraft until April 1, 2010. This the Sport Pilot and Light-Sport Aircraft overlapping period of time will allow to: [email protected]. rule, and revised Office of Management All comments must be marked: aircraft that have started the initial and Budget (OMB) Circular A–119, certification process using the previous Consensus Standards Comments, and ‘‘Federal Participation in the must specify the standard being revision level to complete that process. Development and Use of Voluntary After April 1, 2010, manufacturers must addressed by ASTM designation and Consensus Standards and in Conformity title. use the later revision and must identify Assessment Activities’’, dated February the later revision in the Statement of FOR FURTHER INFORMATION CONTACT: 10, 1998, industry and the FAA have Compliance for initial certification of Terry Chasteen, Light-Sport Aircraft been working with ASTM International special light-sport aircraft unless the Program Manager, Programs and to develop consensus standards for FAA publishes a specific notification Procedures Branch (ACE–114), Small light-sport aircraft. These consensus otherwise. The following Consensus Airplane Directorate, Aircraft standards satisfy the FAA’s goal for Standard may not be used after April 1, Certification Service, Federal Aviation airworthiness certification and a 2010: Administration, 901 Locust, Room 301, verifiable minimum safety level for Kansas City, Missouri 64106; telephone light-sport aircraft. Instead of ASTM Designation F2240–05, titled: (816) 329–4147; e-mail: developing airworthiness standards Standard Specification for Manufacturer [email protected]. through the rulemaking process, the Quality Assurance Program for Powered FAA participates as a member of Parachute Aircraft. SUPPLEMENTARY INFORMATION: This Committee F37 in developing these ASTM Designation F2244–05, titled: notice announces the availability of four standards. The use of the consensus Standard Specification for Design and revised consensus standards to standard process assures government Performance for Powered Parachute previously accepted consensus and industry discussion and agreement Aircraft. standards relating to the provisions of on appropriate standards for the ASTM Designation F 2245–07a, titled: the Sport Pilot and Light-Sport Aircraft required level of safety. rule. ASTM International Committee Standard Specification for Design and F37 on Light Sport Aircraft developed Comments on Previous Notices of Performance of a Light Sport Airplane. the new and revised standards. The Availability ASTM Designation F 2316–06, titled: FAA expects a suitable consensus In the Notice of Availability (NOA) Standard Specification for Airframe standard to be reviewed at least every issued on July 28, 2008, and published Emergency Parachutes for Light Sport two years. The two-year review cycle in the Federal Register on July 28, 2008, Aircraft. will result in a standard revision or the FAA asked for public comments on The Consensus Standards reapproval. A standard is issued under the new and revised consensus a fixed designation (i.e., F2244); the standards accepted by that NOA. The The FAA finds the following revised number immediately following the comment period closed on September consensus standards acceptable for designation indicates the year of 26, 2008. No public comments were certification of the specified aircraft original adoption or, in the case of received regarding the standards under the provisions of the Sport Pilot revision, the year of last revision. A accepted by this NOA. and Light-Sport Aircraft rule. The number in parentheses indicates the consensus standards listed below may year of last reapproval. A reapproval Consensus Standards in This Notice of be used unless the FAA publishes a indicates a two-year review cycle Availability specific notification otherwise. completed with no technical changes. A The FAA has reviewed the standards a. ASTM Designation F2240–08, superscript epsilon (e) indicates an presented in this NOA for compliance titled: Standard Specification for editorial change since the last revision with the regulatory requirements of the Manufacturer Quality Assurance or reapproval. A notice of availability rule. Any light-sport aircraft issued a Program for Powered Parachute Aircraft. (NOA) will only be issued for new or special light-sport airworthiness b. ASTM Designation F2244–08, revised standards. Reapproved certificate, which has been designed, titled: Standard Specification for Design standards issued with no technical manufactured, operated and and Performance for Powered Parachute changes or standards issued with maintained, in accordance with this and Aircraft. editorial changes only (i.e., superscript previously accepted ASTM consensus epsilon (e)) are considered accepted by standards provides the public with the c. ASTM Designation F 2245–09, the FAA without need for a NOA. appropriate level of safety established titled: Standard Specification for Design Comments Invited: Interested persons under the regulations. Manufacturers and Performance of a Light Sport are invited to submit such written data, who choose to produce these aircraft Airplane. views, or arguments, as they may desire. and certificate these aircraft under 14 d. ASTM Designation F 2316–08, Communications should identify the CFR part 21, §§ 21.190 or 21.191 are titled: Standard Specification for consensus standard number and be subject to the applicable consensus Airframe Emergency Parachutes for submitted to the address specified standard requirements. The FAA Light Sport Aircraft.

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Availability business that uses U.S.-flag vessels in By Order of the Maritime Administrator. These consensus standards are that business, a waiver will not be Christine Gurland, copyrighted by ASTM International, 100 granted. Comments should refer to the Secretary, Maritime Administration. Barr Harbor Drive, P.O. Box C700, West docket number of this notice and the [FR Doc. E9–24785 Filed 10–14–09; 8:45 am] Conshohocken, PA 19428–2959. vessel name in order for MARAD to BILLING CODE 4910–81–P Individual reprints of a standard (single properly consider the comments. or multiple copies, or special Comments should also state the compilations and other related technical commenter’s interest in the waiver DEPARTMENT OF TRANSPORTATION information) may be obtained by application, and address the waiver Maritime Administration contacting ASTM at this address, or at criteria given in § 388.4 of MARAD’s (610) 832–9585 (phone), (610) 832–9555 regulations at 46 CFR part 388. [Docket No. MARAD–2009–0137] (fax), through [email protected] (e-mail), DATES: Submit comments on or before Requested Administrative Waiver of or through the ASTM Web site at http:// November 16, 2009. www.astm.org. To inquire about the Coastwise Trade Laws standard content and/or membership, or ADDRESSES: Comments should refer to AGENCY: Maritime Administration, about ASTM International Offices docket number MARAD–2009–0136 Department of Transportation. abroad, contact Daniel Schultz, Staff Written comments may be submitted by Manager for Committee F37 on Light hand or by mail to the Docket Clerk, ACTION: Invitation for public comments Sport Aircraft: (610) 832–9716, U.S. Department of Transportation, on a requested administrative waiver of [email protected]. Docket Operations, M–30, West the Coastwise Trade Laws for the vessel WYSPA. Issued in Kansas City, Missouri on October Building Ground Floor, Room W12–140, 1, 2009. 1200 New Jersey Avenue, SE., SUMMARY: As authorized by 46 U.S.C. Scott Horn, Washington, DC 20590. You may also 12121, the Secretary of Transportation, Acting Manager, Small Airplane Directorate, send comments electronically via the as represented by the Maritime Aircraft Certification Service. Internet at http://www.regulations.gov. Administration (MARAD), is authorized [FR Doc. E9–24746 Filed 10–14–09; 8:45 am] All comments will become part of this to grant waivers of the U.S.-build BILLING CODE 4910–13–P docket and will be available for requirement of the coastwise laws under inspection and copying at the above certain circumstances. A request for address between 10 a.m. and 5 p.m., such a waiver has been received by DEPARTMENT OF TRANSPORTATION E.T., Monday through Friday, except MARAD. The vessel, and a brief Federal holidays. An electronic version description of the proposed service, is Maritime Administration of this document and all documents listed below. The complete application [Docket No. MARAD–2009–0136] entered into this docket is available on is given in DOT docket MARAD–2009– the World Wide Web at http:// 0137 at http://www.regulations.gov. Requested Administrative Waiver of www.regulations.gov. Interested parties may comment on the the Coastwise Trade Laws effect this action may have on U.S. FOR FURTHER INFORMATION CONTACT: vessel builders or businesses in the U.S. AGENCY: Maritime Administration, Joann Spittle, U.S. Department of that use U.S.-flag vessels. If MARAD Department of Transportation. Transportation, Maritime determines, in accordance with 46 ACTION: Invitation for public comments Administration, 1200 New Jersey U.S.C. 12121 and MARAD’s regulations on a requested administrative waiver of Avenue, SE., Room W21–203, at 46 CFR part 388 (68 FR 23084; April the coastwise trade laws for the vessel Washington, DC 20590. Telephone 30, 2003), that the issuance of the POCH MA HON. 202–366–5979. waiver will have an unduly adverse SUMMARY: As authorized by 46 U.S.C. SUPPLEMENTARY INFORMATION: As effect on a U.S.-vessel builder or a 12121, the Secretary of Transportation, described by the applicant the intended business that uses U.S.-flag vessels in as represented by the Maritime service of the vessel POCH MA HON is: that business, a waiver will not be Administration (MARAD), is authorized granted. Comments should refer to the Intended Commercial Use of Vessel: docket number of this notice and the to grant waivers of the U.S.-build ‘‘Take a maximum of 6 paying requirement of the coastwise laws under vessel name in order for MARAD to passengers on sailing charters from a properly consider the comments. certain circumstances. A request for few hours to several days.’’ Geographic such a waiver has been received by Comments should also state the Region: ‘‘West Coast of Florida from commenter’s interest in the waiver MARAD. The vessel, and a brief Tampa Bay to Key West’’. description of the proposed service, is application, and address the waiver listed below. The complete application Privacy Act criteria given in § 388.4 of MARAD’s is given in DOT docket MARAD–2009– regulations at 46 CFR part 388. Anyone is able to search the 0136 http://www.regulations.gov. DATES: Submit comments on or before electronic form of all comments Interested parties may comment on the November 16, 2009. received into any of our dockets by the effect this action may have on U.S. ADDRESSES: Comments should refer to name of the individual submitting the vessel builders or businesses in the U.S. docket number MARAD–2009–0137. that use U.S.-flag vessels. If MARAD comment (or signing the comment, if Written comments may be submitted by determines, in accordance with 46 submitted on behalf of an association, hand or by mail to the Docket Clerk, U.S.C. 12121 and MARAD’s regulations business, labor union, etc.). You may U.S. Department of Transportation, at 46 CFR part 388 (68 FR 23084; April review DOT’s complete Privacy Act Docket Operations, M–30, West 30, 2003), that the issuance of the Statement in the Federal Register Building Ground Floor, Room W12–140, waiver will have an unduly adverse published on April 11, 2000 (Volume 1200 New Jersey Avenue, SE., effect on a U.S.-vessel builder or a 65, Number 70; Pages 19477–78). Washington, DC 20590. You may also Dated: October 6, 2009. send comments electronically via the

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Internet at http://www.regulations.gov. October 1, 2009, as published in the contracting practices or U.S. All comments will become part of this Federal Register on November 7, 2007 Government treaty agreements. docket and will be available for (72 FR 62898). The Maritime VISA Annual Enrollment Open Season inspection and copying at the above Administration has requested approval address between 10 a.m. and 5 p.m., from the Department of Justice (DOJ) for The purpose of this notice is to invite E.T., Monday through Friday, except an extension of VISA for another two interested, qualified U.S.-flag vessel Federal holidays. An electronic version years. DOJ is currently reviewing the operators that are not currently enrolled of this document and all documents extension request, and we expect that in the VISA program to participate. The entered into this docket is available on approval will be forthcoming. annual enrollment is intended to link the World Wide Web at http:// As implemented, the VISA program is the VISA enrollment cycle with DOD’s www.regulations.gov. open to U.S.-flag vessel operators of peacetime cargo contracting to ensure eligible participants priority FOR FURTHER INFORMATION CONTACT: oceangoing militarily useful vessels, to consideration for DOD awards of cargo. Joann Spittle, U.S. Department of include tugs and barges. An operator is Alignment of VISA enrollment and Transportation, Maritime defined as an owner or bareboat eligibility for VISA priority will solidify Administration, 1200 New Jersey charterer of a vessel. Tug enrollment the linkage between commitment of Avenue, SE., Room W21–203, alone does not satisfy VISA eligibility. contingency assets by VISA participants Washington, DC 20590. Telephone 202– Operators include vessel owners and and receiving VISA priority 366–5979. bareboat charter operators if satisfactory consideration for the award of DOD SUPPLEMENTARY INFORMATION: As signed agreements are in place committing the assets of the owner to peacetime cargo. This is the only described by the applicant the intended planned enrollment period for carriers service of the vessel WYSPA is: the bareboat charterer for purposes of VISA. Voyage and space charterers are to join the VISA program and derive Intended Commercial Use of Vessel: benefits for DOD peacetime contracts ‘‘Charter: Bareboat Charter, Charter with not considered U.S.-flag vessel operators for purposes of VISA eligibility. during the time frame of October 1, 2009 Captain.’’ through September 30, 2010. The only Geographic Region: ‘‘CA, OR, WA’’. VISA Concept exception to this open season period for Privacy Act The mission of VISA is to provide VISA enrollment will be for a non-VISA Anyone is able to search the commercial sealift and intermodal carrier that reflags a vessel into U.S. electronic form of all comments shipping services and systems, registry. That carrier may submit an received into any of our dockets by the including vessels, vessel space, application to participate in the VISA name of the individual submitting the intermodal systems and equipment, program at any time upon completion of comment (or signing the comment, if terminal facilities, and related reflagging. submitted on behalf of an association, management services, to the Department Advantages of Peacetime Participation business, labor union, etc.). You may of Defense (DOD), as necessary, to meet Because enrollment of carriers in the review DOT’s complete Privacy Act national defense contingency VISA program provides DOD with Statement in the Federal Register requirements or national emergencies. assured access to sealift services during published on April 11, 2000 (Volume VISA provides for the staged, time- contingencies based on a level of 65, Number 70; Pages 19477–78). phased availability of participants’ commitment, as well as a mechanism shipping services/systems to meet Dated: October 6, 2009. for joint planning, DOD awards contingency requirements through By Order of the Maritime Administrator. peacetime cargo contracts to VISA prenegotiated contracts between the Christine Gurland, participants on a priority basis. This Government and participants. Such Secretary, Maritime Administration. applies to liner trades and charter arrangements are jointly planned with contracts alike. Award of DOD cargoes [FR Doc. E9–24786 Filed 10–14–09; 8:45 am] the Maritime Administration, U.S. to meet DOD peacetime and BILLING CODE 4910–81–P Transportation Command contingency requirements is made on (USTRANSCOM), and participants in the basis of the following priorities: peacetime to allow effective and best DEPARTMENT OF TRANSPORTATION • U.S.-flag vessel capacity operated valued use of commercial sealift by VISA participants and U.S.-flag Maritime Administration capacity, to provide DOD assured Vessel Sharing Agreement (VSA) contingency access, and to minimize capacity held by VISA participants. Voluntary Intermodal Sealift commercial disruption, whenever • U.S.-flag vessel capacity operated Agreement (VISA) possible. by non-participants. There are three time-phased stages in • AGENCY: Maritime Administration, DOT. Combination U.S.-flag/foreign-flag the event of VISA activation. VISA vessel capacity operated by VISA ACTION: Notice of open season for Stages I and II provide for prenegotiated enrollment in the VISA program. participants, and combination U.S.-flag/ contracts between DOD and participants foreign-flag VSA capacity held by VISA to provide sealift capacity to meet all Introduction participants. projected DOD contingency • Combination U.S.-flag/foreign-flag The VISA program was established requirements. These contracts are vessel capacity operated by non- pursuant to section 708 of the Defense executed in accordance with approved participants. Production Act of 1950, as amended DOD contracting methodologies. VISA • U.S.-owned or operated foreign-flag (DPA), which provides for voluntary Stage III will provide for additional vessel capacity and VSA capacity held agreements for emergency preparedness capacity to DOD when Stages I and II by VISA participants. programs. VISA was approved for a two commitments or volunteered capacity • U.S.-owned or operated foreign-flag year term on January 30, 1997, and are insufficient to meet contingency vessel capacity and VSA capacity held published in the Federal Register on requirements, and adequate shipping by non-participants. February 13, 1997 (62 FR 6837). services from non-participants are not • Foreign-owned or operated foreign- Approval is currently extended until available through established DOD flag vessel capacity of non-participants.

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Participation Agreements (CCAs) to satisfy for purposes of committing assets to the Any U.S.-flag vessel operator commercial or DOD requirements. VISA VISA program. organized under the laws of a state of provides a defense against antitrust laws New VISA applicants are required to the United States, or the District of in accordance with the DPA. CCAs must submit their applications for the VISA Columbia, who is able and willing to be submitted to the Maritime program as described in this Notice no commit militarily useful sealift assets Administration for coordination with later than 60 days after the date of and assume the related consequential the Department of Justice for approval, publication of this Federal Register risks of commercial disruption, may be before they can be utilized. notice. Applicants must provide the eligible to participate in the VISA following: Vessel Position Reporting • U.S. citizenship documentation; program. The term ‘‘operator’’ is defined If VISA applicants have the capability • Copy of their Articles of in the VISA document as ‘‘an ocean to track their vessels, they must state Incorporation and/or By Laws; common carrier or contract carrier that which system is used in their VISA • Copies of loadline documents from owns, controls or manages vessels by application and will be required to a recognized classification society to which ocean transportation is provide the Maritime Administration validate oceangoing vessel capability; provided’’. Applicants wishing to with access to their vessel tracking • U.S. Coast Guard Certificates of become participants must provide systems upon approval of their VISA Documentation for all vessels in their satisfactory evidence that the vessels application. If VISA applicants do not fleet. being committed to the VISA program have a tracking system, they must • Copy of Bareboat Charters, if are operational and that vessels are indicate this in their VISA application. applicable, valid through the period of intended to be operated by the applicant The VISA program requires enrolled enrollment, which state that the owner in the carriage of commercial or ships to comply with 46 CFR Part 307, will not interfere with the charterer’s government preference cargoes. While Establishment of Mandatory Position obligation to commit chartered vessel(s) vessel brokers, freight forwarders and Reporting System for Vessels. to the VISA program for the duration of agents play an important role as a the charter. conduit to locate and secure appropriate Compensation • Copy of Time Charters, valid vessels for the carriage of DOD cargo, In addition to receiving priority in the through the period of enrollment, for tug they may not become participants in the award of DOD peacetime cargo, a services to barge operators, if sufficient VISA program due to lack of requisite participant will receive compensation tug service is not owned or bareboat vessel ownership or operation. during contingency activation for that chartered by the VISA applicant. Barge However, brokers, freight forwarders capacity activated under Stage I, II and operators must provide evidence to and agents should encourage the III. The amount of compensation will MARAD that tug service of sufficient carriers they represent to join the depend on the Stage at which capacity horsepower will be available for all program. is activated. During enrollment, each barges enrolled in the VISA program. participant must select one of several Approved VISA participants will be Commitment compensation methodologies. The responsible for ensuring that Any U.S.-flag vessel operator desiring compensation methodology selection information submitted with their to receive priority consideration in the will be completed with the appropriate application remains up to date beyond award of DOD peacetime contracts must DOD agency, resulting in prices in the approval process. Any changes to commit no less than 50 percent of its contingency contracts between DOD and VISA commitments must be reported to total U.S.-flag militarily useful capacity the participant. the Maritime Administration and in Stage III of the VISA program. USTRANSCOM not later than seven Application for VISA Participation Participants operating vessels in days after the change. If charter international trade may receive top tier New applicants may apply to agreements are due to expire, consideration in the award of DOD participate by obtaining a VISA participants must provide the Maritime peacetime contracts by committing the application package (Form MA–1020 Administration with charters that minimum percentages of capacity to all (OMB Approval No. 2133–0532)) from extend the charter duration for another three stages of VISA or bottom tier the Director, Office of Sealift Support, at 12 months or longer. consideration by committing the the address indicated below. Form MA– Once the Maritime Administration minimum percentage of capacity to only 1020 includes instructions for has reviewed the application and Stage III of VISA. USTRANSCOM and completing and submitting the determined VISA eligibility, the the Maritime Administration will application, blank VISA Application Maritime Administration will sign the coordinate to ensure that the amount of forms and a request for information VISA application document which sealift assets committed to Stages I and regarding the operations and U.S. completes the eligibility phase of the II will not have an adverse national citizenship of the applicant company. A VISA enrollment process. economic impact. To minimize copy of the VISA document as After VISA eligibility is approved by domestic commercial disruption, published in the Federal Register on the Maritime Administration, approved participants operating vessels November 7, 2007, will also be provided applicants are required to execute a exclusively in the domestic Jones Act with the package. This information is joint VISA Enrollment Contract (VEC) trades are not required to commit the needed in order to assist the Maritime with DOD [USTRANSCOM and the capacity of those U.S. domestic trading Administration in making a Military Sealift Command (MSC)] which vessels to VISA Stages I and II. Overall determination of the applicant’s will specify the participant’s Stage III VISA commitment requirements are eligibility. An applicant company must commitment, and appropriate Stage I based on annual enrollment. provide an affidavit that demonstrates and/or II commitments for the period In order to protect a U.S.-flag vessel that the company is qualified to October 1, 2009 through September 30, operator’s market share during document a vessel under 46 U.S.C., 2010. Once the VEC is completed, the contingency activation, VISA allows section 12103, and that it owns, or applicant completes the DOD participants to join with other vessel bareboat charters and controls, contracting process by executing a operators in Carrier Coordination oceangoing, militarily useful vessel(s) Drytime Contingency Contract (DCC)

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with MSC and, if applicable, a VISA ACTION: Notice with request for ADDRESSES: Requests for the list of Contingency Contract (VCC) with comments. names of employees on the panel and USTRANSCOM (for Liner Operators). written comments may be directed to: The Maritime Administration reserves SUMMARY: Section 203 of the Department Secretary of Veterans Affairs (051), the right to revalidate all eligibility of Veterans Affairs Health Care Department of Veterans Affairs, 810 requirements without notice. Personnel Act of 1991 (Pub. L. 102–40), Vermont Avenue, NW., Washington, DC For Additional Information and dated May 7, 1991, revised the 20420. Requests and comments may Applications Contact: Jerome D. Davis, disciplinary grievance and appeal also be faxed to (202) 273–9776. Director, Office of Sealift Support, U.S. procedures for employees appointed Maritime Administration, 1200 New under 38 U.S.C. 7401(1). It also required FOR FURTHER INFORMATION CONTACT: Jersey Avenue, SE., Washington, DC the periodic designation of employees of Latoya Smith, Employee Relations 20590. Telephone (202) 366–0688; Fax the Department who are qualified to Specialist (051), Office of Human (202) 366–5904. Other information serve on Disciplinary Appeals Boards. Resources Management, Department of about the VISA can be found on the These employees constitute the Veterans Affairs, 810 Vermont Avenue, Maritime Administration’s Internet Web Disciplinary Appeals Board panel from NW., Washington, DC 20420. Ms. Smith Page at http://www.marad.dot.gov. which Board members in a case are may be reached at (202) 461–7975. (Authority: 49 CFR 1.66) appointed. This notice announces that the roster of employees on the panel is SUPPLEMENTARY INFORMATION: Public Dated: October 8, 2009. available for review and comment. Law 102–40 requires that the By Order of the Maritime Administrator. Employees, employee organizations, availability of the roster be posted in the Murray Bloom, and other interested parties shall be Federal Register periodically, and not Acting Secretary, Maritime Administration. provided, without charge, a list of the less than annually. [FR Doc. E9–24788 Filed 10–14–09; 8:45 am] names of employees on the panel upon Dated: October 7, 2009. BILLING CODE 4910–81–P request and may submit comments John R. Gingrich, concerning the suitability for service on the panel of any employee whose name Chief of Staff, Department of Veterans Affairs. DEPARTMENT OF VETERANS is on the list. [FR Doc. E9–24733 Filed 10–14–09; 8:45 am] BILLING CODE 8320–01–P AFFAIRS DATES: Names that appear on the panel Disciplinary Appeals Board Panel may be selected to serve on a Board or as a grievance examiner after November AGENCY: Department of Veterans Affairs. 16, 2009.

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Part II

Internal Revenue Service 26 CFR Parts 1 and 602 Measurement of Assets and Liabilities for Pension Funding Purposes; Benefit Restrictions for Underfunded Pension Plans; Final Rule

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DEPARTMENT OF THE TREASURY 1. The information required under FR 47713) and section 3002(c) of ERISA, §§ 1.436–1(f) and 1.436–1(h) is required the Secretary of the Treasury has Internal Revenue Service in order for a qualified defined benefit interpretive jurisdiction over the subject plan’s enrolled actuary to provide a matter addressed in these regulations for 26 CFR Parts 1 and 602 timely certification of the plan’s purposes of ERISA, as well as the Code. [TD 9467] adjusted funding target attainment Thus, these final Treasury Department percentage (AFTAP) for each plan year regulations issued under sections 430 RIN 1545–BG72; RIN 1545–BH07 to avoid certain benefit restrictions. and 436 of the Code apply for purposes An agency may not conduct or of sections 206(g) and 303 of ERISA. Measurement of Assets and Liabilities sponsor, and a person is not required to If the value of plan assets (less the for Pension Funding Purposes; Benefit respond to, a collection of information sum of the plan’s prefunding balance Restrictions for Underfunded Pension unless it displays a valid control and funding standard carryover balance) Plans number. is less than the funding target, section AGENCY: Internal Revenue Service (IRS), Books or records relating to a 430(a)(1) defines the minimum required Treasury. collection of information must be contribution as the sum of the plan’s retained as long as their contents may target normal cost and the shortfall and ACTION: Final regulations. become material in the administration waiver amortization charges for the plan SUMMARY: This document contains final of any internal revenue law. Generally, year. If the value of plan assets (less the regulations providing guidance tax returns and tax return information sum of the plan’s prefunding balance regarding the determination of the value are confidential, as required by 26 and funding standard carryover balance) of plan assets and benefit liabilities for U.S.C. 6103. equals or exceeds the funding target, purposes of the funding requirements Background section 430(a)(2) defines the minimum that apply to single employer defined required contribution as the plan’s This document contains final Income benefit plans, regarding the use of target normal cost for the plan year Tax Regulations (26 CFR part 1) under certain funding balances maintained for reduced (but not below zero) by the sections 430(d), 430(f), 430(g), 430(h)(2), those plans, and regarding benefit amount of the excess. 430(i), and 436, as added to the Internal restrictions for certain underfunded Under section 430(d), except as Revenue Code (Code) by the Pension defined benefit pension plans. These otherwise provided in section 430(i)(1) Protection Act of 2006 (PPA ’06), Public regulations reflect provisions added by (regarding at-risk status), a plan’s Law 109–280 (120 Stat. 780), and funding target for a plan year is the the Pension Protection Act of 2006, as amended by the Worker, Retiree, and amended by the Worker, Retiree, and present value of all benefits accrued or Employer Recovery Act of 2008 earned under the plan as of the Employer Recovery Act of 2008. These (WRERA ’08), Public Law 110–458 (122 regulations affect sponsors, beginning of the plan year. Stat. 5092). Prior to amendment by WRERA ’08, administrators, participants, and Section 412 provides minimum section 430(b) defined a plan’s target beneficiaries of single employer defined funding requirements that generally normal cost for a plan year as the benefit pension plans. apply for pension plans (including both present value of all benefits expected to DATES: Effective Date: These regulations defined benefit pension plans and accrue or be earned under the plan are effective on October 15, 2009. money purchase pension plans). PPA during the plan year (with any increase Applicability Date: These regulations ’06 makes extensive changes to those in any benefit attributable to services apply to plan years beginning on or after minimum funding requirements for performed in a preceding plan year by January 1, 2010. defined benefit plans that generally reason of a compensation increase FOR FURTHER INFORMATION CONTACT: apply for plan years beginning on or during the current plan year treated as Michael P. Brewer, Lauson C. Green, or after January 1, 2008. Section 430, having accrued during the current plan Linda S.F. Marshall at (202) 622–6090 which was added by PPA ’06, specifies year). Section 101(b)(2) of WRERA ’08 (not a toll-free number). the minimum funding requirements that amended section 430(b) to modify the SUPPLEMENTARY INFORMATION: apply to single employer defined benefit definition of a plan’s target normal cost pension plans (including multiple by adding the amount of plan-related Paperwork Reduction Act employer plans) pursuant to section expenses expected to be paid from plan The collections of information 412. Section 436, which was also added assets during the plan year, and by contained in these final regulations have by PPA ’06, sets forth certain limitations subtracting the amount of mandatory been reviewed and approved by the on benefits that may apply to a single employee contributions expected to be Office of Management and Budget in employer defined benefit plan based on made during the plan year. This accordance with the Paperwork its funded status. Neither section 430 modification applies to plan years Reduction Act of 1995 (44 U.S.C. nor section 436 applies to beginning after December 31, 2008; 3507(d)) under control number 1545– multiemployer plans. however, a plan sponsor is permitted to 2095. The collections of information in Section 302 of the Employee elect to apply this modification this final regulation are in §§ 1.430(f)– Retirement Income Security Act of 1974, beginning with the first plan year 1(f), 1.430(h)(2)–1(e), 1.436–1(f), and as amended (ERISA), sets forth funding beginning after December 31, 2007. 1.436–1(h). The information required rules that are parallel to those in section Under section 430(f)(3), certain under § 1.430(f)–1(f) is required in order 412 of the Code, and section 303 of funding balances—referred to as the for plan sponsors to make elections ERISA sets forth additional funding prefunding balance and the funding regarding a plan’s credit balances upon rules for single employer plans that are standard carryover balance—are occasion. The information required parallel to those in section 430 of the permitted to be used to reduce the under § 1.430(h)(2)–1(e) is required in Code. In addition, section 206(g) of otherwise applicable minimum required order for a plan sponsor to make an ERISA sets forth benefit limitations that contribution for a plan year in certain election to use an alternative interest are parallel to those in section 436 of the situations. Under section 430(f)(6), the rate for purposes of determining a plan’s Code. Under section 101 of prefunding balance represents the funding obligations under § 1.430(h)(2)– Reorganization Plan No. 4 of 1978 (43 accumulation of the contributions that

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an employer makes for a plan year that plan’s valuation date. Section 430(g)(2) effective interest rate for a plan year is exceed the minimum required provides that, other than for plans with defined as the single interest rate that, contribution for the year. An employer 100 or fewer participants (determined as if used to determine the present value that makes contributions for a plan year provided in section 430(g)(2)(B) and of the benefits taken into account in that exceed the minimum required (C)), the valuation date for a plan year determining the plan’s funding target for contribution for the year is permitted in must be the first day of the plan year. the plan year in lieu of the interest rates certain circumstances to use those Under section 430(g)(2)(B), all defined under section 430(h)(2), would result in excess contributions in order to satisfy benefit pension plans (other than an amount equal to the plan’s funding the minimum funding requirement in a multiemployer plans) maintained by the target determined for the plan year subsequent plan year. However, section employer, a predecessor employer, or by under section 430(d). 430(f)(6)(iii) provides that contributions any member of the employer’s Under section 430(h)(1), the required to avoid a benefit restriction controlled group are treated as a single determination of any present value or under section 436 are disregarded for plan for this purpose, but only other computation under section 430 is purposes of determining the extent to participants with respect to the to be made on the basis of actuarial which contributions for a plan year employer or member of the controlled assumptions and methods each of exceed the minimum required group are taken into account. which is reasonable (taking into account contribution for the plan year. Under Section 430(g)(3) provides rules the experience of the plan and section 430(f)(7), the funding standard regarding the determination of the value reasonable expectations) and which, in carryover balance is based on the of plan assets for purposes of section combination, offer the actuary’s best funding standard account credit balance 430. Under section 430(g)(3)(A), except estimate of anticipated experience as determined under section 412 for a as otherwise provided in section under the plan. plan as of the last day of the last plan 430(g)(3)(B), the fair market value of Section 430(h)(2) specifies the interest year beginning in 2007. plan assets must be used for this rates that must be used in determining The treatment of these balances under purpose. As an alternative to the use of a plan’s target normal cost and funding section 430 reflects Congressional fair market value, section 430(g)(3)(B) target. Under section 430(h)(2)(B), concern with the treatment of a funding permits the use of an actuarial value of present value is determined using three standard account credit balance under assets based on the average of fair interest rates (segment rates) for the the section 412 rules in effect prior to market values, but only if such method applicable month, each of which applies PPA ’06. Accordingly, section 430(f)(3) is permitted under regulations to benefit payments expected to be paid sets forth a new restriction on the ability prescribed by the Secretary, does not during a certain period. The first of a poorly funded plan to use the provide for averaging of such values segment rate applies to benefits prefunding balance and the funding over more than the period beginning on reasonably determined to be payable standard carryover balance as a credit the last day of the 25th month preceding during the 5-year period beginning on against the minimum required the month in which the valuation date the first day of the plan year. The contribution for a plan year. Under occurs and ending on the valuation date second segment rate applies to benefits section 430(f)(3)(C), the prefunding (or a similar period in the case of a reasonably determined to be payable balance or funding standard carryover valuation date that is not the 1st day of during the 15-year period following the balance can only be used for a plan year a month), and does not result in a initial 5-year period. The third segment if the value of plan assets for the determination of the actuarial value of rate applies to benefits reasonably preceding plan year (after subtracting plan assets that, at any time, is lower determined to be payable after the end the prefunding balance) was at least 80 than 90 percent or greater than 110 of that 15-year period. percent of the funding target percent of the fair market value of plan Section 430(h)(2)(C) defines each (determined without regard to the at- assets as of the valuation date. segment rate as a single interest rate risk rules of section 430(i)) for that Under section 430(g)(4), if a determined for a month by the Treasury preceding plan year. In addition, section contribution made after the valuation Department on the basis of the corporate 430(f)(4) requires that the prefunding date for the current plan year is a bond yield curve for the month. Under balance and the funding standard contribution for a preceding plan year, section 430(h)(2)(D), the corporate bond carryover balance be subtracted from the the contribution is taken into account in yield curve for a month is to be value of plan assets for certain purposes determining the value of plan assets for prescribed by the Treasury Department (including the determination of the the current plan year. For 2009 and and is to reflect the average, for the 24- plan’s funding target attainment future plan years, only the present value month period ending with the preceding percentage (FTAP), as defined under (determined as of the valuation date for month, of yields on investment grade section 430(d)(2)), and section 430(f)(8) the current plan year, using the plan’s corporate bonds with varying maturities requires that the prefunding balance and effective interest rate for the preceding that are in the top three quality levels the funding standard carryover balance plan year) of the contributions made for available. Section 430(h)(2)(D)(ii) be adjusted for actual investment return the preceding plan year is taken into provides an alternative to the use of the on plan assets. In order to give account. If any contributions for the three segment rates, under which the employers the opportunity to minimize current plan year are made before the corporate bond yield curve (determined the impact of the requirement to valuation date (which could only occur without regard to the 24 month average) subtract the prefunding balance and for a small plan with a valuation date is substituted for the segment rates. funding standard carryover balance that is not the first day of the plan year), Section 430(h)(2)(G) provides a from plan assets, section 430(f)(5) plan assets as of the valuation date must transition rule for plan years beginning permits an employer to elect to reduce exclude those contributions and also in 2008 and 2009 (other than for plans those balances. must exclude interest on those where the first plan year begins on or Section 430(g)(1) provides that all contributions (determined at the plan’s after January 1, 2008). Under this determinations made with respect to effective interest rate for the plan year) transition rule, the interest rates to be minimum required contributions for a for the period between the date of the used in the valuation are based on a plan year (such as the value of plan contribution and the valuation date. blend of the segment rates and the long- assets and liabilities) are made as of the Under section 430(h)(2)(A), a plan’s term corporate bond rates used for plan

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years prior to the effective date of PPA benefits accrued or earned as of the event benefit means any benefit payable ’06. Under section 430(h)(2)(G)(iv), a beginning of the plan year determined solely by reason of (1) a plant shutdown plan sponsor may elect to have this using the special assumptions described (or a similar event), or (2) an event other transition rule not apply. in this preamble; and (2) in the case of than attainment of age, performance of Section 430(i) sets forth special rules a plan that has been in at-risk status for service, receipt or derivation of that apply to a plan that is in at-risk at least 2 of the 4 preceding plan years, compensation, or the occurrence of status. If a plan is in at-risk status, then a loading factor. That loading factor is death or disability. Under section special assumptions must be used in equal to the sum of: (1) $700 multiplied 436(b)(2), the limitation does not apply determining the plan’s funding target by the number of participants in the for a plan year if the plan sponsor makes and target normal cost, a loading factor plan; plus (2) 4 percent of the funding a specified contribution (in addition to is applied to the plan’s liabilities in target determined as if the plan were not any minimum required contribution). If certain cases, and, under section in at-risk status. The target normal cost the AFTAP for a plan year is less than 409A(b)(3), restrictions apply to the of a plan in at-risk status for a plan year 60 percent, then the specified employer’s ability to set aside assets for is generally the sum of: (1) The present contribution is equal to the amount of purposes of paying deferred value of benefits expected to accrue or the increase in the plan’s funding target compensation to a covered employee be earned under the plan during the for the plan year attributable to the under a nonqualified deferred plan year; determined using the special occurrence of the event. If the AFTAP compensation plan. assumptions described in this preamble; for a plan year is 60 percent or more but Under section 430(i)(4), a plan is in and (2) in the case of a plan that has would be less than 60 percent taking at-risk status for a year if, for the been in at-risk status for at least 2 of the into account the occurrence of the preceding year: (1) The plan’s FTAP, 4 preceding plans years, a loading factor event, then the specified contribution is determined without regard to the at-risk of 4 percent of the present value of all the amount sufficient to result in an assumptions, was less than 80 percent benefits under the plan that accrue, are AFTAP of 60 percent taking into (with a transition rule discussed in the earned, or are otherwise allocated to account the occurrence of the event. next sentence); and (2) the plan’s FTAP, service for the plan year (determined as Under section 436(c), a plan determined using the at-risk if the plan were not in at-risk status). amendment that has the effect of assumptions (without regard to whether The target normal cost of a plan in at- increasing the liabilities of the plan by the plan was in at-risk status for the risk status is adjusted for plan-related reason of any increase in benefits preceding year), was less than 70 expenses expected to be paid from plan (including changes in vesting) may not percent. Under a transition rule, assets during the plan year and take effect if the plan’s AFTAP for the reduced percentages apply for plan mandatory employee contributions plan year is less than 80 percent or years beginning before 2011 instead of expected to be made during the plan would be less than 80 percent taking 80 percent in the first part of the test for year under the same rules that apply to into account the amendment. Under determining at-risk status. Under plans that are not in at-risk status. section 436(c)(2), the limitation does not section 430(i)(4), in the case of plan Under section 430(i)(3), the funding apply for a plan year if the plan sponsor years beginning in 2008, the plan’s target of a plan in at-risk status and the makes a specified contribution (in FTAP for the preceding plan year is to target normal cost of a plan in at-risk addition to any minimum required be determined under rules provided by status are never less than the respective contribution). If the plan’s AFTAP for the Treasury Department. funding target and target normal cost the plan year is less than 80 percent, Under section 430(i)(6), the at-risk determined without regard to the at-risk then the specified contribution is equal rules do not apply if a plan had 500 or rules. In addition, if a plan has been in to the amount of the increase in the fewer participants on each day during at-risk status for fewer than 5 plan’s funding target for the plan year the preceding plan year. For this consecutive plan years, a phase-in rule attributable to the amendment. If the purpose, the number of participants is applies to the determination of the plan’s AFTAP for the plan year is 80 determined using the same rules as funding target and the target normal cost percent or more but would be less than apply for determining whether a plan is under section 430(i)(5). 80 percent taking into account the a small plan for purposes of eligibility Section 401(a)(29) requires that a amendment, then the specified for the use of a valuation date other than defined benefit plan (other than a contribution is the amount sufficient to the first day of the plan year. If a plan multiemployer plan) satisfy the result in an AFTAP of 80 percent taking is in at-risk status, the plan’s funding requirements of section 436. Section 436 into account the amendment. In target and target normal cost are sets forth a series of limitations on the addition, under section 436(c)(3), the determined (under section 430(i)(1) and accrual and payment of benefits under limitation does not apply to an (2)) using special actuarial assumptions. an underfunded plan. Under section amendment that provides for a benefit Under these assumptions, all employees 436(g), these limitations (other than the increase under a formula that is not who are not otherwise assumed to retire limitations on accelerated benefit based on compensation, but only if the as of the valuation date, but who will be payments under section 436(d)) do not rate of increase does not exceed the eligible to elect to commence benefits in apply to a plan for the first 5 plan years contemporaneous rate of increase in the current and 10 succeeding plan of the plan, taking into account any average wages of participants covered years, are assumed to retire at the predecessor plan. by the amendment. earliest retirement date under the plan, Section 436(b) sets forth a limitation Under section 436(d), a plan is but not before the end of the current on plant shutdown and other required to set forth certain limitations plan year. In addition, all employees are unpredictable contingent event benefits on accelerated benefit distributions. If assumed to elect the form of retirement in situations where the plan’s adjusted the plan’s AFTAP for a plan year is less benefit available under the plan for each funding target attainment percentage than 60 percent, the plan must not make assumed retirement age that results in (AFTAP) for the plan year is less than any prohibited payments after the the highest present value. 60 percent or would be less than 60 valuation date for the plan year. If the The funding target of a plan in at-risk percent taking into account the plan’s AFTAP for a plan year is at least status for a plan year is generally the occurrence of the event. For this 60 percent but is less than 80 percent, sum of: (1) The present value of all purpose, an unpredictable contingent the plan must not pay any prohibited

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payment to the extent the payment contribution and the employer may not AFTAP by the first day of the 10th exceeds the lesser of (1) 50 percent of use a prefunding balance or funding month of the current plan year, section the amount otherwise payable under the standard carryover balance in lieu of 436(h)(2) provides that the plan’s plan and (2) the present value of the making the specified contribution. AFTAP is conclusively presumed to be maximum PBGC guarantee with respect Section 436(f)(3) describes certain less than 60 percent as of that day (and to a participant. In addition, if the plan situations in which an employer is that day is deemed to be the valuation sponsor is in bankruptcy proceedings, deemed to have made the election in date for purposes of applying the benefit the plan may not pay any prohibited section 430(f)(5) to reduce the plan’s limitations). payment unless the plan’s enrolled funding standard carryover balance or Under section 436(i), unless the plan actuary certifies that the AFTAP of the prefunding balance. Such an election provides otherwise, if a limitation on plan is at least 100 percent. However, has the effect of increasing the plan’s prohibited payments or future benefit section 436(d) does not apply to a plan AFTAP to avoid a benefit limitation accruals under section 436(d) or (e) for a plan year if the terms of the plan under section 436 (because the result of ceases to apply to a plan, those provide for no benefit accruals with the election is a higher asset value used payments and benefit accruals resume, respect to any participant for the period to determine the AFTAP). In particular, effective as of the day following the beginning on September 1, 2005, and if the limitation under section 436(d) close of the limitation period. extending throughout the plan year. would otherwise apply to a plan, the Section 436(j) provides definitions Under section 436(d)(5), a prohibited plan sponsor is treated as having made that are used under section 436, payment is (1) any payment in excess of an election (a deemed election) to including the definition of AFTAP. In the monthly amount paid under a single reduce any prefunding balance or general, a plan’s AFTAP is based on the life annuity (plus any social security funding standard carryover balance by plan’s FTAP for the plan year. However, supplements that are provided under the amount necessary to prevent the the plan’s AFTAP is determined by the plan) to a participant or beneficiary, benefit limitation from applying. A adding the aggregate amount of (2) any payment for the purchase of an comparable rule applies to the other purchases of annuities for employees irrevocable commitment from an insurer benefit limitations under sections other than highly compensated to pay benefits, or (3) any other payment 436(b), 436(c), and 436(e), but only in employees (within the meaning of specified by the Secretary by the case of a plan maintained pursuant section 414(q)) made by the plan during regulations. to a collective bargaining agreement. In the two preceding plan years to the Under section 436(e), a plan is any of these cases (the election with numerator and the denominator of the required to provide that if the plan’s respect to the limitations under section fraction used to determine the FTAP. In AFTAP is less than 60 percent for a plan 436(d) or a deemed election in the case addition, section 436(j)(3) provides a year, all benefit accruals under the plan of a plan maintained pursuant to a special rule which applies to certain must cease as of the valuation date for collective bargaining agreement), the well-funded plans under which the the plan year.1 Under section 436(e)(2), deeming rule applies only if the plan’s FTAP for purposes of section 436 the limitation ceases to apply with prefunding balance and funding (and hence the plan’s AFTAP) is respect to any plan year, effective as of standard carryover balances are large determined by using the plan’s assets the first day of the plan year, if the plan enough to avoid the application of the without reduction for the prefunding sponsor makes a contribution (in section 436 limitation. balance and the funding standard addition to any minimum required Section 436(h) sets forth a series of carryover balance. Section 436(j)(3)(B) contribution for the plan year) equal to presumptions that apply during the sets forth a transition rule for the amount sufficient to result in an portion of the plan year that is before determining eligibility for this special the plan’s enrolled actuary has certified rule. AFTAP of 60 percent. Section 436(k), as added by WRERA Section 436(f) sets forth a series of the plan’s AFTAP for the year. Under ’08, provides the Secretary with rules relating to contributions required section 436(h)(1), if a plan was subject authority to issue special rules for the to avoid benefit restrictions. Under to a limitation under section 436(b), application of section 436 in the case of section 436(f)(1), an employer is 436(c), 436(d), or 436(e) for the plan year preceding the current plan year, the a plan that uses a valuation date other permitted to provide security to the plan plan’s AFTAP for the current year is than the first day of the plan year. (in the form of a surety bond, cash, presumed to be the same as for the Section 436(m) (designated section United States obligations that mature in preceding year until the plan’s enrolled 436(k) prior to amendment by WRERA 3 years or less, or other form satisfactory actuary certifies the plan’s AFTAP for ’08) provides that, for plan years that to the Treasury Department and the the current year (or until the first day of begin in 2008, the determination of the parties involved) that is treated as an the 10th month, if earlier). Under plan’s FTAP for the preceding year is to asset of the plan for purposes of section 436(h)(3), if any of these be made pursuant to guidance issued by determining the plan’s AFTAP. Under limitations did not apply to the plan for the Secretary. section 436(f)(2), if an employer uses the the preceding year, but would have Under section 101(j) of ERISA, as option in section 436(b)(2), 436(c)(2), or applied if the plan’s AFTAP for the amended by PPA ’06, the plan 436(e)(2) to make the specified preceding year was 10 percentage points administrator of a single employer plan contribution that would avoid a lower, the plan’s AFTAP is presumed to is required to provide a written notice limitation under section 436, the be 10 percentage points lower than the to participants and beneficiaries within specified contribution must be an actual AFTAP for the prior plan year as of the 30 days after certain specified dates. first day of the 4th month of the current These dates include the date the plan 1 Pursuant to section 203 of WRERA, for the first plan year beginning during the period beginning on plan year (and that day is deemed to be has become subject to a restriction October 1, 2008, and ending on September 30, 2009, the plan’s valuation date for purposes of described in the ERISA provisions that section 436(e)(1) is applied by substituting the applying the benefit limitations), unless are parallel to Code sections 436(b) and plan’s adjusted funding target attainment the plan’s enrolled actuary has certified 436(d) and, in the case of a plan that is percentage for the preceding plan year for such percentage for such plan year but only if the the plan’s AFTAP for the current year subject to the ERISA provisions that are adjusted funding target attainment percentage for by that day. If the plan’s enrolled parallel to Code section 436(e), the the preceding plan year is greater. actuary has not certified the plan’s valuation date for the plan year for

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which the plan’s AFTAP is less than 60 Revenue Bulletin. Notice 2008–21 also plan year, subject to certain special percent (or, if earlier, the date the provides that the IRS will not challenge adjustments as added by section AFTAP is presumed to be less than 60 a reasonable interpretation of an 101(b)(2) of WRERA ’08. These special percent under the ERISA provisions that applicable provision under section 430 adjustments are optional for plan years parallel the presumption rules in Code or 436 for a plan year beginning in 2008 beginning during 2008, but are required section 436(h)). Under section 101(j) of and provides transitional guidance with to be made for later plan years. ERISA, the Secretary of the Treasury can respect to years before the regulations Under the special adjustments, the specify other dates under which notice are effective. target normal cost of the plan for the is to be provided. Any notice under On December 23, 2008, WRERA ’08 plan year is adjusted (not below zero) by section 101(j) of ERISA must be was enacted. WRERA ’08 contains adding the amount of plan-related provided in writing, except that the technical corrections and other changes expenses expected to be paid from plan notice may be in electronic or other to the rules of sections 430 and 436, assets during the plan year, and by form to the extent that such form is including a modification to the asset subtracting the amount of any reasonably accessible to the recipient. valuation method set forth in section mandatory employee contributions Sections 430 and 436 generally apply 430(g)(3)(B). Notice 2009–22 (2009–14 expected to be made during the plan to plan years beginning on or after IRB 741) provides interim rules year. For this purpose, the final January 1, 2008. The applicability of regarding the asset valuation method as regulations reserve the issue of the section 430 for purposes of determining modified by WRERA ’08. definition of plan-related expenses, the minimum required contribution and Explanation of Provisions which is expected to be addressed in the application of section 436 is delayed forthcoming proposed regulations. for certain plans in accordance with I. Overview The regulations clarify that the sections 104 through 106 of PPA ’06. benefits taken into account in Under section 1107 of PPA ’06, a plan These regulations finalize the rules determining target normal cost are the sponsor is permitted to delay adopting proposed in REG–113891–07 (published benefits that are accrued, earned, or a plan amendment pursuant to statutory August 31, 2007), regarding funding otherwise allocated to service beginning provisions under PPA ’06 (or pursuant balances and benefit restrictions for with the first day of the plan year to any regulation issued under PPA ’06) underfunded plans, and the rules through the valuation date, plus benefits until the last day of the first plan year proposed in REG–139236–07 (published beginning on or after January 1, 2009 December 31, 2007), regarding that are expected to accrue, be earned, (January 1, 2011, in the case of measurement of assets and liabilities for or otherwise allocated to service during governmental plans). If section 1107 of pension funding purposes, with certain the remainder of the plan year. Thus, for PPA ’06 applies to an amendment of a revisions. The Treasury Department and a plan with a valuation date other than plan, section 1107 provides that the the IRS published proposed regulations the first day of the plan year, the actual plan does not fail to meet the anti- relating to other portions of the rules benefits earned during the part of the cutback requirements of section under section 430 (including sections year before the valuation date must be 411(d)(6) by reason of such amendment, 430(a), (c), and (j)) on April 15, 2008 included in the target normal cost. The except as otherwise provided by the (REG–108508–08, 72 FR 20203). Those final regulations generally adopt the Secretary of the Treasury. regulations will be finalized separately. definition of the funding target for a Proposed regulations regarding the plan that is not in at-risk status as set II. Section 1.430(d)–1 Determination of forth in the proposed regulations, but rules for funding balances under section Funding Target and Target Normal Cost 430(f) and the benefit restrictions for with a few clarifications that take into underfunded plans under section 436 Section 1.430(d)–1 generally adopts account comments received on the were published on August 31, 2007 the rules set forth in the proposed proposed regulations. Under the (REG–113891–07, 72 FR 50544). The regulations for determining the funding regulations, the funding target of a plan regulations were proposed to apply to target and the target normal cost under for the plan year is the present value plan years beginning on or after January sections 430(b) and 430(d) for a plan (determined as of the valuation date) of 1, 2008. Comments were received that is not in at-risk status, including all benefits under the plan that have regarding the regulations, and a public rules relating to the application of been accrued, earned, or are otherwise hearing was held on January 28, 2008. actuarial assumptions described in allocated to years of service prior to the Proposed regulations regarding the sections 430(h)(1) and 430(h)(4). first day of the plan year. measurement of assets and liabilities for The final regulations generally adopt Under the proposed regulations, the pension funding purposes (generally the definition of target normal cost for definition of a plan’s FTAP was set forth covering the rules of sections 430(d), (g), a plan that is not in at-risk status that in proposed § 1.430(i)–1. These final (h)(2), and (i)) were published on was set forth in the proposed regulations include this definition in December 31, 2007 (REG–139236–07, 72 regulations. However, the final § 1.430(d)–1, and the definition is cross- FR 74215). The regulations were regulations contain modifications to this referenced in §§ 1.430(i)–1 and 1.436–1. proposed to apply to plan years definition to reflect amendments made Under the final regulations, except as beginning on or after January 1, 2009. by WRERA ’08. Under the proposed otherwise provided in a transition rule, Comments were received regarding the regulations, plan administrative the FTAP of a plan for a plan year is a regulations, and a public hearing was expenses would not have been taken fraction (expressed as a percentage), the held on May 29, 2008. into account in determining a plan’s numerator of which is the value of plan Notice 2008–21 (2008–1 CB 431) target normal cost or funding target for assets for the plan year after subtraction provides that the regulations under the plan year. Under the final of the plan’s funding balances under section 430(f) and 436 will not apply to regulations, the target normal cost of a section 430(f)(4)(B) and § 1.430(f)–1, and plan years beginning before January 1, plan for the plan year is the present the denominator of which is the funding 2009. See § 601.601(d)(2) relating to value (determined as of the valuation target of the plan for the plan year objectives and standards for publishing date) of all benefits under the plan that (determined without regard to the at- regulations, revenue rulings and accrue during, are earned during, or are risk rules under section 430(i) and revenue procedures in the Internal otherwise allocated to service for the § 1.430(i)–1).

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The regulations provide transition date and then discounting the resulting to be paid is not a function of the rules for determining a plan’s FTAP for product using the appropriate interest accrued benefit but is a function of the the 2007 plan year. These rules are rate. The probability that the benefit participant’s service, the portion of the generally the same as the rules set forth will be paid with respect to the benefit that is taken into account in in the proposed regulations under participant at that future date is determining the funding target for the section 430(i) for determining a plan’s determined using actuarial assumptions plan year under the final regulations is FTAP for the last plan year before as to the probability of future service, determined by applying that function to section 430 applies to the plan. advancement in age, and other events the participant’s service as of the first However, the final regulations differ (such as death, disability, termination of day of the plan year, and the portion of from the proposed regulations in the employment, and selection of an the benefit that is taken into account in transition rules that apply for the optional form of benefit) that affect determining the target normal cost for determination of a plan’s FTAP for a whether the participant or beneficiary the plan year is determined by applying plan year that begins on or after January will be eligible for the benefit and that function to the increase in the 1, 2008, but for which section 430 does whether the benefit will be paid at that participant’s years of service during the not apply for purposes of determining future date. plan year. For a benefit that is the plan’s minimum required As under the proposed regulations, determined as the excess of a function contribution. In such a case, the FTAP these regulations provide that the of the participant’s service over a is determined for that plan year in the benefits taken into account in function of the participant’s accrued same manner as for a plan to which determining the funding target and the benefit, the amount of the funding target section 430 applies to determine the target normal cost are all benefits earned and the target normal cost attributable to plan’s minimum required contribution, or accrued under the plan that have not the portion of the benefit that is a except that the value of plan assets that yet been paid as of the valuation date, function of the accrued benefit is forms the FTAP numerator is including retirement-type and ancillary determined pursuant to the rules that determined without subtraction of the benefits. The benefits taken into account apply to such benefits and the amount funding standard carryover balance or are based on the participant’s or of the funding target and the target the credit balance under the funding beneficiary’s status (such as active normal cost attributable to the net standard account. These rules are employee, vested or partially vested benefit (the excess of the benefit that is needed to enable a plan described in terminated employee, or disabled a function of service over the benefit sections 104 through 106 of PPA ’06 to participant) as of the valuation date, and that is a function of accrued benefit) is disclose its FTAP for purposes of the those benefits are allocated to funding determined pursuant to the rules that annual funding notice under section target or target normal cost. apply to a benefit that is a function of 2 101(f) of ERISA. In order to determine a plan’s funding service. The regulations adopt the special rule target and target normal cost, the future set forth in the proposed regulations for benefits to be paid from the plan must The proposed regulations included determining the FTAP for a new plan. be allocated among prior plan years (in rules for allocating benefits where the Under the final regulations, if the which case they will be taken into amount of a benefit that is expected to funding target of the plan is equal to account in determining the funding be paid is neither a function of the zero for the plan year, the FTAP is equal target for the current plan year), the accrued benefit at the time the benefit to 100 percent for the plan year. Unlike current plan year (in which case they is expected to be paid nor a function of the proposed regulations, the final will be taken into account in the participant’s service at that time. regulations do not limit the application determining the target normal cost for Under those rules, the benefit would of this rule to a plan that has no the current plan year), and future plan have been allocated proportionately predecessor plan because of concerns years (in which case they will not be over the years until the participant met that it is not always appropriate to carry taken into account in determining either the age and service conditions for over the FTAP from the predecessor the funding target or the target normal eligibility for the benefit. A number of plan. cost for the current plan year). The final commenters suggested that this The final regulations contain rules regulations adopt the rules set forth in allocation yielded inappropriate results regarding the determination of present the proposed regulations for this in certain cases. In response to these value in order to clarify the application allocation of benefits where benefits are comments, the final regulations provide of various rules that were set forth in the a function of the accrued benefit and that, to the extent the amount of a proposed regulations. Under the where benefits are a function of service, benefit that is expected to be paid is regulations, the present value of a but the final regulations modify those neither a function of the accrued benefit benefit with respect to a participant that rules for benefits in other nor a function of the participant’s is taken into account under the circumstances. service (and is not the excess of a regulations is determined as of the To the extent that the amount of a function of the participant’s service over valuation date by multiplying the benefit that is expected to be paid is a a function of the accrued benefit), the amount of that benefit by the probability function of the accrued benefit, the portion of the participant’s benefit that that the benefit will be paid at a future amount of the benefit taken into account is taken into account in determining the in determining the funding target for a funding target for a plan year is equal 2 Section 430(i)(4) provides for special rules to plan year under the final regulations is to the total benefit multiplied by the apply in determining a plan’s FTAP only for plan determined by applying that function to ratio of the participant’s years of service years beginning during 2008. Accordingly, the the accrued benefit as of the first day of as of the first day of the plan year to the regulations limit the use of the special rule under which the plan’s FTAP is determined based on the the plan year, and the portion of the years of service the participant will have plan’s current liability to the determination of the benefit that is taken into account in the at the time of the event that causes the plan’s FTAP for the 2007 plan year, even for a plan target normal cost for the plan year is benefit to be payable (whether the described in sections 104 through 106 of PPA ’06 determined by applying that function to benefit is expected to be paid at the time for which section 430 does not apply for purposes of determining a plan’s minimum required the increase in the accrued benefit of that decrement or at a future time), contribution until a plan year after the 2008 plan during the plan year. To the extent that and the portion of the benefit that is year. the amount of a benefit that is expected taken into account in determining the

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target normal cost for the plan year is As under the proposed regulations, it does not take effect until a future plan the increase in the proportionate benefit these regulations provide that a plan year. attributable to the increase in the generally is required to reflect in the The regulations apply the rules under participant’s years of service during the plan’s funding target and target normal section 436(c) (as described in section plan year. cost the liability for benefits that are VII.C of this preamble) to determine Under the proposed regulations, the funded through insurance contracts when an amendment that increases determination of the funding target and held by the plan, and to include the benefits takes effect. For an amendment the target normal cost would not have corresponding insurance contracts in that decreases benefits, the amendment taken into account any benefit plan assets.3 As an alternative treatment takes effect under a plan on the first limitations or anticipated benefit of benefits that are funded through date on which the benefits of any limitations under section 436. The insurance contracts, the regulations individual who is or could be a reason for this provision was to avoid provide that the plan is permitted to participant or beneficiary under the the circularity in calculations that exclude benefits provided under such plan would be decreased due to the would result from calculating the contracts from the plan’s funding target amendment if the individual were on funding target based on the imposition and target normal cost and to exclude that date to satisfy the applicable of benefit restrictions for purposes of the corresponding insurance contracts conditions for the benefits. determining whether the benefit from plan assets. This treatment is only The regulations provide that section restrictions need to be imposed. In available with respect to insurance 412(d)(2) applies for purposes of response to comments, the final purchased from an insurance company determining whether a plan amendment regulations contain modifications to the licensed under the laws of a State and is treated as having been adopted on the rules regarding recognition of the only to the extent that a participant’s or first day of the plan year (including a section 436 benefit restrictions. In beneficiary’s right to receive those plan amendment adopted no later than particular, the final regulations provide benefits is an irrevocable contractual 21⁄2 months after the close of the plan that benefits that were not paid or right under the insurance contract, year). This is consistent with the IRS’s accrued prior to the valuation date as a based on premiums paid to the prior interpretations of the pre-PPA ’06 result of the benefit limitations are insurance company prior to the counterpart to section 412(d)(2) (section generally not included in the funding valuation date under the insurance 412(c)(8) as in effect prior to target and the target normal cost, but contracts. Thus, the alternative amendments made by PPA ’06) as set that the determination of the funding treatment is not available if the plan forth in Rev. Rul. 79–325 (1979–2 CB target and the target normal cost is not trustee can surrender a contract to the 190), which provides that section permitted to anticipate any future insurer for its cash value because the 412(c)(8) applies to plan amendments applications of the section 436 benefit participant’s or beneficiary’s rights to made during the plan year (as well as to restrictions. receive those benefits is not an plan amendments made within 21⁄2 The final regulations retain the irrevocable contractual right. A plan’s months after the end of the plan year). treatment from the proposed regulations treatment of benefits funded through Thus, if an amendment is adopted after regarding the non-recognition of the insurance contracts pursuant to either of the valuation date for a plan year (and benefit accrual limitations of section these methods is part of the plan’s no later than 21⁄2 months after the close 436(e) in determining target normal funding method. Accordingly, that of the plan year) but takes effect during cost. This has the effect of requiring an treatment can be changed only with the that plan year, the full increase in employer sponsoring a plan that consent of the Commissioner. provides for ongoing benefit accruals to Except as otherwise provided, the liability is taken into account as of the include the present value of those determination under the regulations of a valuation date for that plan year if a accruals in the target normal cost, even plan’s funding target and target normal section 412(d)(2) election is made, and if the plan is temporarily not permitted cost for a plan year are determined none of the increase in liability is taken to provide for accruals, with the goal of based on plan provisions that are into account as of the valuation date for improving the plan’s funded status. adopted no later than the valuation date that plan year if no section 412(d)(2) However, if the plan sponsor actually for the plan year and that take effect election is made. adopts a plan freeze, the target normal during that plan year. For example, a Accordingly, the rule in section 2.02 cost will reflect that plan freeze. In plan amendment adopted on or before of Revenue Ruling 77–2 (1977–1 CB connection with this provision, the final the valuation date for the plan year that 120) under which the charges for a plan regulations provide that if the plan has an effective date occurring in the year are based on a blend of the charges contains a provision under which current plan year is taken into account determined with and without regard to missed benefit accruals are in determining the funding target and the plan amendment, and the alternative automatically restored once the plan’s the target normal cost for the current to that rule in section 3 of Revenue AFTAP is above 60 percent (taking into plan year if it is permitted to take effect Ruling 77–2, no longer apply. However, account the missed benefit accruals), under the rules of section 436(c) for the the rule in section 2.01 of Revenue then any missed benefit accruals for the current plan year; however, an Ruling 77–2 (under which a change in prior plan year are taken into account in amendment is not taken into account if benefit structure that does not become determining the funding target if, as of effective until a future plan year is the valuation date, the period of the 3 The PBGC has informed the IRS and Treasury disregarded) continues to apply. This is missed benefit accruals is 12 months or Department that this inclusion of insurance because section 430 does not contain less. The final regulations also contain contracts in plan assets and the associated benefit any provision that corresponds to liabilities in the funding target does not apply for rules regarding restrictions that arise as purposes of Title IV of ERISA and its regulations, section 412(c)(12) as in effect prior to a result of benefit limitations that are which generally require that, if an insurer makes an amendments made by PPA ’06 (under imposed under section 401(a)(32) as a irrevocable commitment to provide all benefit which the provisions of a collective result of a liquidity shortfall and benefit liabilities with respect to an individual, those bargaining agreement were taken into benefits cease to be benefit liabilities of the plan, limitations that are imposed under the individual is no longer a plan participant, and account for funding purposes before the § 1.401(a)(4)–5(b) with respect to certain the irrevocable commitment is excluded from plan corresponding plan amendments highly compensated employees. assets. became effective).

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The regulations clarify that if an to the exclusion of terminated methods are established by the timely amendment is taken into account for a employees who do not have a vested completion (and filing, if required) of plan year, then the allocation of benefits benefit under the plan and whose the actuarial report (Schedule SB, that is used for purposes of determining service might be taken into account in ‘‘Single-Employer Defined Benefit Plan the funding target and the target normal future years upon return to service, but Actuarial Information’’ of Form 5500, cost for the plan year is based on the only if the plan’s experience as to ‘‘Annual Return/Report of Employee plan as amended. Thus, the present separated employees returning to Benefit Plan’’) for a plan year under value of the increase in the participant’s service has been such that the exclusion section 6059. If the Schedule SB is not accrued benefit attributable to service would not be unreasonable) and the completed (and filed, if required) by the before the beginning of the plan year is rules of § 1.412(c)(3)–1(d)(2) (under deadline, then the prior plan year taken into account in the funding target which the future participation in the actuarial assumptions and methods will for the year.4 plan of current employees who are not continue to apply, unless the To address a concern regarding yet participants is permitted to be Commissioner permits or requires other avoidance of the benefit restrictions anticipated). Whether former employees actuarial assumptions or another under section 436(c), the final who are terminated with partially funding method permitted under regulations contain a new rule regarding vested benefits are assumed to return to section 430 to be used for the current amendments adopted after the valuation service is determined under the same plan year. date that increase the target normal cost rules that apply to former employees The regulations provide that a plan’s for the plan year. Under this rule, in any without vested benefits. funding method includes not only the case in which an increase in the target The regulations provide that the overall funding method used by the normal cost as the result of a plan determination of any present value or plan, but also each specific method of amendment made after the valuation other computation under section 430 computation used in applying the date would have caused the benefit must be made on the basis of actuarial overall method. However, the choice of restrictions of section 436(c) to apply if assumptions and a funding method. which actuarial assumptions are the increase were included in the plan’s Except as specifically provided, the appropriate to the overall method or to funding target (after taking into account same actuarial assumptions and funding the specific method of computation is all unpredictable contingent event method must be used for all not a part of the funding method. The benefits permitted to be paid for computations under sections 430 and assumed earnings rate used for purposes unpredictable contingent events that 436. of determining the actuarial value of occurred during the current plan year The final regulations cross reference assets under section 430(g)(3)(B) is and plan amendments that went into other regulations for the details of the treated as an actuarial assumption, effect in the current plan year), the statutorily specified interest rates, rather than as part of the funding amendment must be taken into account mortality tables, and actuarial method. in determining the plan’s funding target assumptions that apply to plans in at- In accordance with section 430(h)(4), and target normal cost for the plan year. risk status. Under the final regulations, the regulations provide rules relating to This rule is necessary to prevent the with respect to the actuarial the probability that benefit payments avoidance of the benefit restrictions of assumptions used for the plan other will be paid as single sums or other section 436(c) by means of a mid-year than those that are specified by statute, optional forms under a plan and the plan amendment that purports not to each of those actuarial assumptions impact of that probability on the must be reasonable (taking into account determination of the present value of increase benefits earned prior to the the experience of the plan and those benefit payments under section beginning of the plan year (so that the reasonable expectations). In addition, 430. In general, any determination of amendment does not increase the the actuarial assumptions (other than present value or any other computation funding target for the plan year and the the statutorily specified assumptions), under the regulations must take into amount required to ‘‘buy up’’ the in combination, must offer the plan’s account the probability that future amendment under section 436(c)(2) by enrolled actuary’s best estimate of benefit payments under the plan will be paying the increase to the funding target anticipated experience under the plan. made in the form of optional forms of on account of the amendment would be The final regulations provide that, in the benefits provided under the plan zero). case of a plan which has fewer than 100 (including single-sum distributions), Like the proposed regulations, the participants and beneficiaries who are determined on the basis of the plan’s regulations require all currently not in pay status, the actuarial experience and other related employed plan participants, formerly assumptions are permitted to assume no assumptions, and any difference in the employed plan participants (including pre-retirement mortality, but only if that present value of future benefit payments retirees and terminated vested assumption would be a reasonable that results from the use of actuarial participants), and other individuals assumption. assumptions in determining benefit currently entitled to benefits under the The regulations provide that actuarial payments in any such optional form of plan to be included in the valuation. assumptions established for a plan year benefits that are different from those Unlike § 1.412(c)(3)–1(c)(3)(ii), the cannot subsequently be changed for that prescribed by section 430(h). regulations do not permit exclusion plan year unless the Commissioner The proposed regulations would have from the valuation of those plan determines that the assumptions that provided that, in the case of a participants who could have been were used are unreasonable. Similarly, distribution that is subject to section excluded from participation in the plan the regulations provide that a funding 417(e)(3) and that is determined using under the rules of section 410(a). method established for a plan year the applicable interest rates and However, the final regulations adopt the cannot subsequently be changed for that applicable mortality table under section rules of § 1.412(c)(3)–1(c)(3)(iii) (relating plan year unless the Commissioner 417(e)(3), the computation of the determines that the use of that funding present value of that distribution is 4 The regulations do not address the effect on the determination of a plan’s funding shortfall of an method for that plan year is treated as having taken into account any amendment that is permitted to take effect on impermissible. For this purpose, difference in present value that results account of a contribution under section 436(c)(2). actuarial assumptions and funding from the use of actuarial assumptions

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that are different from those prescribed citing the situation where section 415 section 417(e)(3) that would apply to a by section 430(h) if the present value of may require the use of less favorable distribution with an annuity starting the distribution is determined by actuarial assumptions. In response to date occurring on the valuation date (in valuing, using special actuarial these concerns, the final regulations lieu of the mortality table under section assumptions, the annuity (either the provide that, if a distribution that is 430(h)(3) that would otherwise be used) deferred or immediate annuity) that is subject to section 417(e)(3) is and the valuation interest rates under used under the plan to determine the determined on a basis other than using section 430(h)(2) (as opposed to the amount of the distribution. The final the applicable interest rates and the interest rates under section 417(e)(3) regulations adopt that method and applicable mortality table under section which the plan uses to determine the clarify that its use is mandatory for 417(e)(3), then the computation of amount of the benefit). In determining benefits determined using the section present value must take into account the the amount of a future annuity for this 417(e) actuarial assumptions. extent to which the present value of the purpose, if a plan uses the generational Under this special computation, for distribution is different from the present mortality tables under § 1.430(h)(3)– the period beginning with the annuity value determined using this annuity 1(a)(4) or § 1.430(h)(3)–2, the plan is starting date for the distribution, the substitution method. permitted to use a 50–50 male-female applicable mortality table under section As under the proposed regulations, blend of the annuitant mortality rates 417(e)(3) that would apply to a the final regulations provide that, in the under the § 1.430(h)(3)–1(a)(4) distribution with an annuity starting case of an applicable defined benefit generational mortality tables in lieu of date occurring on the valuation date is plan described in section 411(a)(13)(C), the applicable mortality table under substituted for the mortality table under the amount of a future distribution is section 417(e)(3) that would apply to a section 430(h)(3) that would otherwise based on the amount determined by distribution with an annuity starting be used. In determining the present projecting the future interest credits or date occurring on the valuation date. In value of a distribution, the final equivalent amounts under the plan’s the case of a plan that determines an regulations adopt the rules in the interest crediting rules using actuarial annuity under the regulations using a proposed regulations and provide that if assumptions that satisfy the variable interest rate or rates other than a plan uses the generational mortality requirements of the regulations. Thus, the applicable interest rates under tables under § 1.430(h)(3)–1(a)(4) or the present value of a future distribution section 417(e)(3), the amount of the § 1.430(h)(3)–2, the plan is permitted to is not necessarily the current amount of annuity must be based on actuarial use a 50–50 male-female blend of the a participant’s hypothetical account assumptions that satisfy the annuitant mortality rates under the balance. Commenters requested that requirements of the regulations. § 1.430(h)(3)–1(a)(4) generational various safe harbors be provided for Some commenters maintained that mortality tables in lieu of the applicable making this determination. The IRS and unpredictable contingent event benefits mortality table under section 417(e)(3) the Treasury Department believe that should not be taken into account for that would apply to a distribution with this determination should be made minimum funding purposes before the an annuity starting date occurring on using the actuary’s best estimate of the occurrence of the unpredictable the valuation date. projected future interest credits, and contingent event. The final regulations In addition, under this special that the use of broadly applicable safe provide that any determination of computation, the valuation interest rates harbors for this purpose is not present value or any other computation under section 430(h)(2) are used for appropriate. under this section must take into purposes of discounting the projected In the case of a single-sum account, based on information as of the annuity payments from their expected distribution determined under the rules valuation date, the probability that payment dates to the valuation date of section 411(a)(13)(A), the amount of future benefits (or increased benefits) (rather than the interest rates under the future distribution is equal to the under the plan will become payable due section 417(e)(3) which the plan uses to projected account balance at the to the occurrence of an unpredictable determine the amount of the benefit). expected date of payment calculated in contingent event (as described in However, a plan is permitted to make accordance with the regulations. In the § 1.436–1(j)(9)). However, if, as of the adjustments to the interest rates in order case of a distribution determined as an valuation date, the likelihood of the to reflect differences between the phase- annuity, the regulations provide that the occurrence of the event is de minimis, in of the section 430(h)(2) segment rates amount of the future distribution must the regulations permit the use of a zero under section 430(h)(2)(G) and the be determined by converting the probability of the occurrence of the adjustments to the segment rates under projected account balance to an annuity event. section 417(e)(3)(D)(iii). using the plan’s annuity conversion The regulations provide that any The proposed regulations would have provisions and actuarial assumptions reasonable technique can be used to provided that, in the case of a that satisfy the requirements of the determine the present value of the distribution that is subject to section regulations. benefits expected to be paid during a 417(e)(3) but is determined as the The regulations provide that, if the plan year, based on the interest rates greater of the benefit determined using plan bases the conversion of the and mortality assumptions applicable the assumptions required under section projected account balance to an annuity for the plan year. For example, the 417(e)(3) and some other actuarial basis, using the applicable interest rates and present value of a monthly retirement the computation of present value must applicable mortality table under section annuity payable at the beginning of each take into account the extent to which 417(e)(3), the future annuity is month can be determined using the present value of the distribution is determined by dividing the projected estimating techniques such as the greater than the present value account balance (or accumulated standard actuarial approximation that determined using this annuity percentage of final average reflects 13/24ths of the discounted substitution method. Commenters compensation) by an annuity factor expected payments for the year as of the requested a similar rule where the value corresponding to the assumed form of beginning of the year and 11/24ths of of the distribution is lower because of payment using, for the period beginning the discounted expected payments for the use of different actuarial with the annuity starting date, the the year as of the end of the year; or by assumptions that are not more favorable, current applicable mortality table under assuming that the payment is made in

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the middle of the year. In the case of a approval for changes in funding method prefunding balance that was used to participant for whom there is a less than for the first plan year that a plan applies offset the minimum required 100 percent probability that the all the provisions of the regulations contribution of the plan for the participant will terminate employment under section 430(d), section 430(f), preceding plan year and any reduction during the plan year, for purposes of section 430(g), section 430(i), and in the prefunding balance for the plan determining the benefits expected to section 436 (which could be the first year. The plan sponsor’s initial election accrue, be earned, or otherwise plan year beginning on or after January to add to the prefunding balance allocated to service during the plan year 1, 2010 or an earlier plan year). Thus, constitutes an election to maintain a (which are used to determine the target a plan can receive automatic approval prefunding balance (so that no special normal cost), it is permissible to assume for a change in funding method for the election is necessary to establish a the participant will not terminate during first plan year beginning on or after prefunding balance). The prefunding the plan year, unless using this method January 1, 2009, if it applies all of these balance is adjusted further for actual of calculation would be unreasonable. regulation provisions, without regard to investment return for the plan year. Like the proposed regulations, the whether it applies the provisions of The regulations provide that if the final regulations reflect the provisions of § 1.430(h)(2)–1 for that plan year. In plan sponsor elects to add to the plan’s section 430(h)(5), requiring approval of addition, the regulations provide prefunding balance, as of the first day of the Commissioner for changes in automatic approval for a change of a plan year, the prefunding balance is actuarial assumptions for certain large funding method that is necessary to increased by the amount so elected by plans. Under the regulations, except as reflect the new allocation rules for the plan sponsor. The amount added to otherwise provided, any change in benefits under § 1.430(d)–1(c)(1)(ii). the prefunding balance cannot exceed actuarial assumptions used to determine the present value of the excess a plan’s funding target for a plan year III. Section 1.430(f)–1 Effect of contribution for the preceding plan year cannot be changed from the actuarial Prefunding Balance and Funding increased for interest. assumptions that were used for the Standard Carryover Balance The present value of the excess preceding year without the approval of Section 1.430(f)–1 of these regulations contribution for the preceding plan is the Commissioner if the plan is provides rules relating to the the excess, if any, of the present value sponsored by a member of a controlled application of prefunding and funding of the employer contributions (other group which maintains plans with over standard carryover balances under than contributions to avoid or terminate $50 million in unfunded vested benefits section 430(f). The regulations generally section 436 benefit limitations) to the and the change in assumptions results adopt the rules that were set forth in the plan for such preceding plan year over in a decrease in the plan’s funding corresponding proposed regulations. the minimum required contribution for shortfall (within the meaning of section Subject to the limitations otherwise such preceding plan year. In addition, a 430(c)(4)) for the current plan year provided, the regulations provide that in contribution for a plan year to correct an (disregarding the effect on the plan’s the case of any plan year with respect unpaid minimum required contribution funding shortfall resulting from changes to which the plan sponsor elects to use for a prior plan year is not treated as in interest and mortality assumptions) all or a portion of the prefunding part of the present value of excess that exceeds $50,000,000, or that balance or the funding standard contributions. This present value is exceeds $5,000,000 and is 5 percent or carryover balance to offset the minimum increased with interest from the more of the funding target of the plan required contribution for the plan year, valuation date for the preceding plan before such change. the minimum required contribution for year to the first day of the current plan The proposed regulations did not the plan year (determined after taking year. The regulations provide that the contain an exception to this rule for a into account any waiver under section plan’s effective interest rate under plan exiting at-risk status. Commenters 412(c)) is offset as of the valuation date section 430(h)(2)(A) for the preceding maintained that a plan exiting at-risk for the plan year by the amount so used. plan year is generally used to calculate status should be able to resume use of The regulations also provide rules that the present value of the contributions its previously used actuarial apply where the plan sponsor elects to for the preceding plan year and for assumptions without obtaining the use all or a portion of the prefunding adjusting the excess amount. Commissioner’s approval. To address balance or the funding standard The proposed regulations would have these concerns, the final regulations carryover balance to satisfy the prohibited an employer from adding to provide that a plan that is not in at-risk requirement to make quarterly the prefunding balance any amount of status for the current plan year and that contributions under section 430(j)(3) contributions that are excess was in at-risk status for the prior plan that are due after the valuation date. contributions for a plan year solely by year (but not for a period of 5 or more Rules with respect to use of the reason of a reduction in the minimum consecutive plan years) is granted prefunding balance or funding standard required contribution for the year automatic approval to use the actuarial carryover balance to satisfy quarterly through the use of the prefunding assumptions that were applied before contribution requirements with respect balance or funding standard carryover the plan entered at-risk status and that to installments due before the valuation balance. This rule was intended to were used in combination with the date are expected to be addressed in preclude an employer from avoiding the required at-risk assumptions during the future proposed regulations. requirement to adjust the prefunding period the plan was in at-risk status. Under the regulations, a plan sponsor balance and funding standard carryover These regulations provide automatic is permitted to elect to maintain a balance by the actual rate of return on approval for changes in funding method prefunding balance for a plan. A plan assets in the situation where the for the first plan year section 430 prefunding balance maintained for a plan assets have experienced a loss (or applies to determine the minimum plan consists of a beginning balance of a rate of return that is lower than the required contribution for the plan (the zero, increased by the amount of excess effective interest rate that is used for first plan year beginning in 2008, or a contributions to the extent the employer interest adjustment with respect to later year for plans described in sections elects to do so, and decreased (but not minimum required contributions for the 104 through 106 of PPA ’06). The below zero) by the sum of, as of the first plan year). Commenters argued that this regulations also provide automatic day of a plan year, any amount of the rule was unwarranted and would

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prevent plan sponsors from adding 412(b) (as in effect prior to PPA ’06) as plan assets for purposes of sections 430 excess contributions to the prefunding of the end of the pre-effective plan year and 436, except as otherwise provided balance in situations where balance for the plan. For subsequent plan years, in the regulations. For purposes of amounts were used to offset minimum the funding standard carryover balance determining whether a plan is exempt contributions earlier for reasons other is decreased (but not below zero) by the from the requirement to establish a new than interest arbitrage. The final sum of, as of the first day of each plan shortfall amortization base under regulations permit an excess year, any amount of the funding section 430(c)(5), the amount of the contribution to be added to the standard carryover balance that was prefunding balance is subtracted from prefunding balance for a plan year used to offset the minimum required the value of plan assets only if an notwithstanding that the amount is an contribution of the plan for the election to use all or any portion of the excess contribution solely because an preceding plan year and any reduction prefunding balance to offset the election is made for that plan year to use in the funding standard carryover minimum required contribution is made the funding standard carryover balance balance for the plan year. The for the plan year. In addition, for this or prefunding balance to offset regulations also provide that the purpose, the funding standard carryover minimum required contributions (or funding standard carryover balance is balance is not subtracted from the value required installments), but provide that adjusted further to reflect the actual rate of plan assets regardless of whether any the interest adjustment with respect to of return on plan assets for the portion of either the funding standard such a contribution is made using the preceding plan year. carryover balance or the prefunding plan’s actual investment experience for For both the funding standard balance is used to offset the minimum the plan year, rather than the effective carryover balance and the prefunding required contribution for the plan year. interest rate under section 430(h)(2)(A). balance, the regulations provide that the If there is in effect for a plan year a Thus, the funding standard carryover adjustment for investment return is binding written agreement with the balance and prefunding balance are applied to the balance as of the Pension Benefit Guaranty Corporation adjusted with the plan’s actual beginning of the preceding plan year (PBGC) which provides that all or a investment return when the balances are after subtracting amounts used to offset portion of the prefunding balance or not actually used to satisfy the the minimum required contribution for funding standard carryover balance (or minimum contribution requirement for the preceding plan year and after any both balances) is not available to offset a plan year, regardless of whether the reduction of balances for that preceding the minimum required contribution for plan sponsor makes an election to use plan year. For this purpose, the actual a plan year, the regulations provide that the balance to offset the minimum rate of return on plan assets for the the specified amount is not subtracted contribution requirement and preceding plan year is determined on from the value of plan assets for subsequently replenishes the the basis of fair market value and must purposes of determining the funding prefunding balance. take into account the amount and timing shortfall under section 430(c)(4). For The proposed regulations would have of all contributions, distributions, and this purpose, an agreement with the provided that the plan sponsor is other plan payments made during that PBGC is taken into account with respect permitted to maintain a funding period. to a plan year only if the agreement was standard carryover balance for a plan If a plan’s valuation date is not the executed prior to the valuation date for that had a positive balance in the first day of the plan year, then, for the plan year. funding standard account under section purposes determining a plan’s To address questions raised by 412(b) (as in effect prior to PPA ’06) as prefunding balance and funding commenters, the final regulations of the end of the plan’s pre-effective standard carryover balance as of the provide ordering rules regarding the plan year (the plan year immediately valuation date, the plan’s prefunding application of use and reduction preceding the first plan year that section balance and funding standard carryover elections with respect to prefunding and 430 applies for purposes of determining balance (if any) are increased to the funding standard carryover balances. the minimum required contribution for valuation date using the plan’s effective The regulations provide that the amount the plan). Some commenters suggested interest rate under section 430(h)(2)(A) of prefunding balance or funding that no formal election should be for the plan year. Any elections to standard carryover balance that may be required in order to maintain a funding reduce the prefunding balance and used to offset the minimum required standard carryover balance. In response, funding standard carryover balance, to contribution for the plan year must take the regulations provide that a funding use the prefunding balance and funding into account any decrease in those standard carryover balance is standard carryover balance to offset the balances which result from a prior automatically established for a plan that minimum required contribution for the election either to use the prefunding had a positive balance in the funding year, or to add to the prefunding balance balance or funding standard carryover standard account under section 412(b) occur as of the valuation date for the balance under section 430(f) or to (as in effect prior to PPA ’06) as of the plan year. After the elections are reduce those balances under section end of the pre-effective plan year for the applied as of the valuation date, the 430(f) (including deemed elections plan. A plan sponsor that does not wish resulting amount of the prefunding under section 436(f)(3) and § 1.436– to have the funding standard carryover balance and funding standard carryover 1(a)(5)). balance established can elect to reduce balance is adjusted to the first day of the The regulations describe the it to zero. plan year (discounted using the effective application of the ordering rules of The final regulations provide that the interest rate under section 430(h)(2)(A) section 430(f)(5)(A). Under these rules, plan’s funding standard carryover for that year) before applying the an election to reduce the funding balance as of the beginning of the first adjustments for investment experience standard carryover balance or effective plan year (the first plan year for the plan year. prefunding balance is deemed to occur beginning on or after the date section The regulations provide that, in the on the valuation date for the plan before 430 applies for purposes of determining case of any plan with a prefunding any election to use the balance to offset the minimum required contribution for balance or a funding standard carryover the minimum required contribution for the plan) is the positive balance in the balance, the amount of those balances the current year. Thus, if an election to funding standard account under section must be subtracted from the value of use the prefunding balance or funding

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standard carryover balance to offset the or decreased (by elections to use or election to reduce a plan’s prefunding minimum required contribution for the reduce the balances or by investment balance and funding standard carryover plan year (including an election to experience) at the first day of the next balance is taken into account in the satisfy the quarterly contribution plan year. These increases and determination of plan assets for the plan requirement) has been made prior to the decreases are made before any elections year and applies for all purposes under election to reduce the prefunding (whether made or deemed) are applied sections 430 and 436, including for balance or funding standard carryover for the next plan year. purposes of determining the plan’s prior balance, then the amount available for To the extent that a plan has a plan year funding ratio for the following use to offset the otherwise applicable funding standard carryover balance plan year. Section 436(f)(3) and § 1.436– minimum required contribution for the greater than zero, the regulations 1(a)(5) provide a rule under which the plan year will be retroactively reduced provide that no amount of the plan’s plan sponsor is deemed to make this and may result in a missed quarterly prefunding balance may be used to election. To the extent that a plan has contribution. offset the minimum required a funding standard carryover balance If an election is made to reduce the contribution. Thus, a plan’s funding greater than zero, no election is prefunding balance or funding standard standard carryover balance must be permitted to be made that reduces the carryover balance or to use the exhausted before the plan’s prefunding plan’s prefunding balance. Thus, a plan prefunding balance or funding standard balance may be used to offset the must exhaust its funding standard carryover balance to offset the minimum minimum required contribution. carryover balance before it is permitted required contribution with respect to a The regulations provide that an to make an election to reduce its plan year, a special rule applies to election to use the prefunding balance prefunding balance. determine the amount of remaining or funding standard carryover balance to Like the proposed regulations, these prefunding balance or funding standard offset the minimum required regulations provide that any election carryover balance that may be used to contribution is not available for a plan under this section by the plan sponsor offset the minimum required year if the plan’s prior plan year funding must be made by providing written contribution for the prior plan year. ratio is less than 80 percent. The plan’s notification of the election to the plan’s Under this special rule, an election to prior plan year funding ratio generally enrolled actuary and the plan reduce the prefunding balance or the is equal to the fraction (expressed as a administrator. The written notification funding standard carryover balance that percentage), the numerator of which is must set forth the relevant details of the is made with respect to the later plan the value of plan assets on the valuation election, including the specific dollar year is taken into account by decreasing date for the preceding plan year, amounts involved in the election. Thus, the funding standard carryover balance reduced by the amount of any a conditional or formula-based election or prefunding balance as of the prefunding balance (but not the amount generally does not satisfy the valuation date for the prior plan year by of any funding standard carryover requirements. the prior plan year equivalent of the balance), and the denominator of which The final regulations provide rules current year election. The prior plan is the funding target of the plan for the regarding the timing of elections to use year equivalent of the current year preceding plan year (determined or reduce the prefunding balance or election is determined by dividing the without regard to the at-risk rules of funding standard carryover balance that amount of the current year election by section 430(i)(1)). are generally the same as under the a number equal to 1 plus the rate of If the prior plan year was the first year proposed regulations. Under the final investment return for the prior plan of a new plan and the funding target for regulations, any election to add to the year. The funding standard carryover the prior plan year was zero, the prefunding balance or to use the balance and prefunding balance are regulations provide that the prior plan prefunding balance or funding standard nonetheless adjusted in accordance with year’s funding ratio is deemed to be 80 carryover balance to offset the minimum the rules described above, after percent for purposes of this limitation required contribution for a plan year adjusting for all elections for that prior on the use of the prefunding or funding must be made no later than the last date year. Thus, the amount used to offset standard carryover balances. Thus, the for making the minimum required the minimum required contribution for sponsor of a new plan that has no contribution for the plan year as the earlier plan year is subtracted from funding target in its first year can use a described in section 430(j)(1). Any the prefunding balance or funding prefunding balance that resulted from election to reduce the prefunding standard carryover balance as of the first year contributions in excess of the balance or funding standard carryover valuation date for that year prior to the target normal cost in order to offset the balance for a plan year (for example, in adjustment for investment return for otherwise minimum required order to avoid a benefit restriction under that plan year, and the amount by which contribution in the second year of the section 436) must be made by the end the prefunding balance or funding plan. Commentators requested rules of the plan year to which the election standard carryover balance is decreased with respect to plan mergers and spin- relates. These timing rules establish the for the second year is based on the offs. The IRS and the Treasury latest date that an election can be made. elections made for the second year. Department expect to address these An employer is permitted to make an Accordingly, under the final issues in future proposed regulations. earlier election, and, in certain regulations, a prefunding balance or a The regulations provide that a plan circumstances, may need to make such funding standard carryover balance is sponsor may make an election for a plan an earlier election in order to timely maintained in a manner that tracks the year to reduce any portion of a plan’s satisfy a quarterly contribution way the balances are reported on prefunding balance and funding requirement under section 430(j). Schedule SB, ‘‘Single-Employer Defined standard carryover balance. If such an In response to comments received on Benefit Plan Actuarial Information’’ of election is made, the amount of those the desirability of standing elections, Form 5500, ‘‘Annual Return/Report of balances that must be subtracted from the final regulations permit a plan Employee Benefit Plan’’. Thus, the the value of plan assets will be smaller sponsor to provide a standing election balances at the beginning of the year are and, accordingly, the value of plan in writing to the plan’s enrolled actuary increased (by investment experience or assets taken into account for purposes of to use the funding standard carryover by addition to the prefunding balance) sections 430 and 436 will be larger. This balance and the prefunding balance to

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the extent needed to avoid an unpaid Employer Defined Benefit Plan For purposes of making this minimum required contribution under Actuarial Information’’ of Form 5500, determination, all defined benefit plans section 4971(c)(4) taking into account ‘‘Annual Return/Report of Employee (other than multiemployer plans as any contributions that are or are not Benefit Plan.’’ Thus, a plan sponsor that defined in section 414(f)) maintained by made. In addition, the regulations allow made an election to use the funding an employer or members of the a plan sponsor to provide a standing standard carryover balance for the first controlled group are treated as one plan, election in writing to the plan’s enrolled plan year beginning in 2008 to offset the but only participants with respect to actuary to add the maximum amount minimum required contribution for that that employer are taken into account. possible each year to the prefunding plan year determined prior to the The regulations provide that, in the case balance.5 Any election made pursuant enactment of WRERA ’08 has an of the first plan year of any plan, this to a standing election is deemed to opportunity to revoke that election to exception for small plans is applied by occur on the last day available to make the extent it exceeds the minimum taking into account the number of the election for the plan year. The required contribution for that plan year participants that the plan is reasonably regulations provide that any standing taking into account WRERA ’08. expected to have on each day during the election remains in effect for the plan However, plan sponsors should note first plan year. with respect to the enrolled actuary that any such revocation made after the The regulations provide that the named in the election, unless the enrolled actuary has certified the selection of a plan’s valuation date is standing election is revoked by notice to AFTAP for the plan year, could result in part of the plan’s funding method and, the plan’s enrolled actuary and the plan a change in the AFTAP for that plan accordingly, may only be changed with administrator on or before the date the year, which could be a material change. the consent of the Commissioner. corresponding election is deemed to If such an excess election is not timely However, a change of a plan’s valuation occur, or the plan’s enrolled actuary revoked, it has the same effect as an date that is required by section 430 is who signs the Schedule SB is not the election to reduce the applicable treated as having been approved by the enrolled actuary named in the standing balance to the extent of the excess. Commissioner and does not require the election. If there is a change in enrolled The proposed regulations provided a Commissioner’s prior specific approval. actuary for the plan year which would transition rule for determining a plan’s Under the regulations, the value of result in a revocation of the standing funding ratio for the pre-effective plan plan assets for purposes of section 430 election, then the plan sponsor may year (that is, the plan’s prior year is determined in one of two ways: As reinstate the revoked standing election funding ratio with respect to the plan’s the fair market value of plan assets on by providing a replacement to the new first effective plan year). These the valuation date, or as the average of enrolled actuary by the due date of the regulations adopt this transition rule, the fair market values of assets on the Schedule SB of Form 5500. but limit its application to the 2007 plan valuation date and the adjusted fair In general, a plan sponsor’s election year (rather than apply it to a later plan market value of assets determined for with respect to the plan’s prefunding year for a plan described in sections 104 one or more earlier determination dates, balance or funding standard carryover through 106 of PPA ’06). Under the subject to a 90 to 110 percent corridor. balance is irrevocable (and must be regulations, a plan’s funding ratio for The method of determining the value of unconditional). However, an election to the plan year preceding the first plan assets is part of the plan’s funding use the prefunding balance or funding year beginning on or after January 1, method and, accordingly, may only be standard carryover balance to offset the 2008 (the ‘‘2007 plan year’’) is generally changed with the consent of the minimum required contribution for a the same as the computation of FTAP Commissioner. plan year (including an election to for the 2007 plan year. However, the The regulations provide that the fair satisfy the quarterly contribution assets are determined without market value of an asset is determined requirements for a plan year) is subtracting the funding standard as the price at which the asset would permitted to be revoked to the extent the account balance from the plan assets. change hands between a willing buyer amount the plan sponsor elected to use and a willing seller, neither being under IV. Section 1.430(g)–1 Valuation Date to offset the minimum contribution any compulsion to buy or sell and both and Valuation of Plan Assets requirements exceeds the minimum having reasonable knowledge of required contribution for a plan year Section 1.430(g)–1 provides rules relevant facts. Except as otherwise (determined without regard to the relating to a plan’s valuation date and provided by the Commissioner, any offset), if and only if the election is the valuation of a plan’s assets for a plan guidance on the valuation of insurance revoked by providing written year under section 430(g). The rules contracts under Subchapter D of notification of the revocation to the under the regulations relating to Chapter 1 of the Internal Revenue Code plan’s enrolled actuary and the plan valuation dates do not reflect significant applies for purposes of the regulations. administrator by the end of the plan changes from those under the proposed Such guidance has been issued in year (or, for plans with a valuation date regulations. The regulations provide Revenue Procedure 2005–25 (2005–1 CB other than the first day of the plan year, that the determination of the funding 962) and Revenue Procedure 2006–13 the deadline for contributions for the target, target normal cost, and value of (2006–1 CB 315). See § 601.601(d)(2) plan year as described in section plan assets for a plan year is made as of relating to objectives and standards for 430(j)(1)). The final regulations defer the the valuation date of the plan for that publishing regulations, revenue rulings deadline for making this revocation for plan year. and revenue procedures in the Internal the first plan year beginning in 2008 Except in the case of a small plan, the Revenue Bulletin. until the due date (including valuation date of a plan for any plan The regulations provide rules for the extensions) of the Schedule SB, ‘‘Single- year is the first day of the plan year. For treatment of contributions that are made this purpose, a small plan is defined as after the valuation date for a plan year 5 The regulations do not provide for a standing a plan that, on each day during the that are attributable to a prior plan year. election to be made with respect to quarterly preceding plan year, had 100 or fewer These rules are generally the same as contributions. The issue of standing elections with participants (including active and under the proposed regulations. Under respect to quarterly contributions will be considered in conjunction with future regulations inactive participants and all other these rules, only the present value of the regarding quarterly contributions. individuals entitled to future benefits). contributions (discounted using the

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effective interest rate for the prior plan and all other amounts paid from plan expected earnings that are applied in year) is included in the value of plan assets during the period beginning with determining average plan assets. These assets. The final regulations clarify that the prior determination date and ending issues are expected to be addressed in a contribution for a prior plan year is immediately before the valuation date, future proposed regulations. In the taken into account only if the and adjusted for expected earnings. The interim, Notice 2009–22 (2009–14 IRB contribution is made by the deadline for fair market value of assets as of a 741) provides guidance regarding these contributions for the immediately determination date includes any issues. See § 601.601(d)(2) relating to preceding plan year under section contribution for a plan year that ends objectives and standards for publishing 430(j). However, for the first plan year with or prior to the determination date regulations, revenue rulings and that begins on or after January 1, 2008, that is receivable as of the determination revenue procedures in the Internal any such prior plan year contribution is date (but only if the contribution is Revenue Bulletin. As provided under taken into account at the full value actually made within 81⁄2 months after that guidance, the final regulations without a present value discount, the end of the applicable plan year). For permit the use of an assumed earnings provided it is made by the deadline for this purpose, the present value of a rate of zero for purposes of determining contributions under section 412(c)(10), contribution receivable for the the actuarial value of assets for a plan as in effect before amendment by PPA applicable plan year is determined year beginning during 2008 using the ’06. using the effective interest rate under averaging rules (even if zero is not the The regulations also provide rules for section 430(h)(2)(A) for the applicable actuary’s best estimate of the anticipated the treatment of a contribution that is plan year. For purposes of determining annual rate of return on plan assets). made before the valuation date of the the value of plan assets for the first plan The regulations provide that any plan year to which it is attributable. year that begins in 2008, if the plan change in a plan’s valuation date or Such a contribution (and any interest on sponsor makes a contribution to the asset valuation method that is made for the contribution for the period between plan after the valuation date for that the first plan year beginning in 2008, the the contribution date and the valuation plan year but by the deadline for first plan year beginning in 2009, or the date, determined using the effective contributions under section 412(c)(10) first plan year beginning in 2010 is interest rate under section 430(h)(2)(A) as in effect before the effective date of automatically approved and does not for the plan year) must be subtracted PPA ’06 and the contribution is for the require the Commissioner’s specific from plan assets in determining the preceding plan year, then the prior approval. In addition, the value of plan assets as of the valuation contribution is taken into account as a regulations provide that a change in a date. If the result of this subtraction is plan asset without applying any present plan’s valuation date or asset valuation a number less than zero, the value of value discount. method for the first plan year to which plan assets as of the valuation date is The final regulations provide that, for section 430 applies to determine the equal to zero. purposes of determining the adjusted plan’s minimum required contribution Subject to the plan asset corridor fair market value of plan assets, assets (even if that plan year begins after rules, a plan is permitted to determine spun off from a plan as a result of a December 31, 2010) that satisfies the the value of plan assets on the valuation spin-off described in § 1.414(l)–1(b)(4) requirements of the regulations is date as the average of the fair market are treated as an amount paid from plan automatically approved and does not value of assets on the valuation date and assets. In addition, except as otherwise require the Commissioner’s specific the adjusted fair market value of assets provided by the Commissioner, for prior approval. determined for one or more earlier purposes of this determination, assets V. Section 1.430(h)(2)–1 Interest Rates determination dates. The regulations that are added to a plan as a result of Used To Determine Present Value require that the period of time between a plan-to-plan transfer are treated in the each determination date (treating the same manner as contributions. It is Section 1.430(h)(2)–1 provides rules valuation date as a determination date) expected that future proposed relating to the interest rates used in must be equal and that the period of regulations will provide additional determining the present value of the time cannot exceed 12 months. In rules, including rules relating to plan benefits that are included in the target addition, the earliest determination date mergers. normal cost and the funding target for with respect to a plan year cannot be The regulations provide that if the the plan for a plan year. These rules earlier than the last day of the 25th value of plan assets determined under follow the rules set forth in the month before the valuation date of the the averaging method would otherwise proposed regulations except for a few plan year (or a similar period in the case be less than 90 percent of the fair market changes that are noted in this preamble. of a valuation date that is not the first value of plan assets, then the value of The interest rates used under the day of a month). In a typical situation, plan assets is equal to 90 percent of the regulations are generally based on the the earlier determination dates will be fair market value of plan assets. If the 24-month moving averages of 3 separate the two immediately preceding value of plan assets determined under segment rates for the month that valuation dates. However, these rules the averaging method would otherwise includes the valuation date (which are also permit the use of more frequent be greater than 110 percent of the fair determined based on the monthly determination dates (for example, market value of plan assets, then the corporate bond yield curves for the monthly or quarterly determination value of plan assets is equal to 110 preceding 24 months). The first segment dates). percent of the fair market value of plan rate, which is based on the portion of The regulations provide that the assets. The rules for accounting for the corporate bond yield curve over the adjusted fair market value of plan assets contribution receipts are applied prior period from 0 to 5 years, applies for for a prior determination date is the fair to the application of this 90 to 110 purposes of discounting benefits that are market value of plan assets on that date, percent corridor. expected to be paid during the 5-year increased for contributions included in To reflect changes to the rules period beginning on the valuation date the plan’s asset balance on the valuation regarding determination of average plan for the plan year in the case of a plan date that were not included in the plan’s assets made by WRERA ’08, portions of with a beginning of year valuation date. asset balance on the earlier the regulations have been reserved to The second segment rate, which is determination date, reduced for benefits provide rules regarding adjustments for based on the portion of the corporate

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bond yield curve over the period The regulations reflect the special beginning during 2008 and 2009 (so, for between 5 and 20 years, applies for interest rate for determining a plan’s example, for a plan year beginning on purposes of discounting benefits that are funding target in the case of airlines that January 1, 2009, the plan sponsor could expected to be paid within 15 years after make the 10-year amortization election elect to use the monthly corporate bond that initial 5 year-period. The third described in section 402(a)(2) of PPA yield curve for September, October, segment rate, which is based on the ’06, in accordance with section 6615 of November 2008, or December 2008, or portion of the corporate bond yield the U.S. Troop Readiness, Veterans’ January 2009, based on data for that curve over the period between 20 years Care, Katrina Recovery, and Iraq month), but such an election is not and 60 years, applies to benefit Accountability Appropriations Act, permitted for plan years beginning on or payments that are expected to be paid 2007, Public Law 110–28 (121 Stat. after the regulations become effective. after the 20-year period. For example, if 112). This special interest rate does not The proposed regulations would have a series of monthly payments is apply for other purposes such as the required plan sponsors to obtain assumed to be made beginning on the determination of the plan’s target approval for an election to use valuation date, the second segment rate normal cost. alternative interest rates as described will apply beginning with the 61st such The regulations provide for elections above that is made for a plan year after payment and the third segment rate will that a plan sponsor can make to use the first plan year for which section 430 apply beginning with the 241st such alternative interest rates rather than the applies to the plan. Some commenters payment. Except in the case of a new segment rates for the month that argued that the statute permits these plan, a transition rule applies for plan includes the valuation date. These elections to be made without approval, years beginning in 2008 and 2009 under elections are made by providing written with approval required only for a later which these segment rates are blended notification of the election to the plan’s change or revocation of election. In with the long-term corporate bond rate enrolled actuary. These elections may response to the comments, the final that applies under pre-PPA ’06 law. be adopted for a plan year without regulations do not require approval for The monthly corporate bond yield obtaining the consent of the the initial adoption of these elections for curve is, with respect to any month, a Commissioner but, once adopted, they any year. For example, a plan sponsor yield curve that is prescribed by the will apply for that plan year and all that was using segment rates for the Commissioner for that month based on future plan years and may be changed plan year beginning in 2010 can elect to yields for that month on investment only with the consent of the switch to use the monthly corporate Commissioner. Under one such election, bond yield curve for the plan year grade corporate bonds with varying a plan sponsor that is using segment beginning in 2011 and subsequent years maturities that are in the top three rates may elect the use of an alternative without approval of the Commissioner quality levels available. Notice 2007–81 month as the applicable month, (and, in such a case, if the plan had been (2007–2 CB 899) provides guidance on provided that the alternative month is using a different month for the segment the monthly corporate bond yield curve one of the 4 months preceding that rates, then the change to use the yield and the related first, second, and third month that as the applicable month. In curve makes the applicable month segment rates, including a description of such a case, the segment rates for an election irrelevant). However, once an the methodology for determining the applicable month are based upon data election has been made, any change monthly corporate bond yield curve. through the end of the immediately requires the approval of the See § 601.601(d)(2) relating to objectives preceding month. Under another Commissioner. and standards for publishing election, for purposes of determining The final regulations provide that, in regulations, revenue rulings and the funding target, target normal cost, the case of a plan sponsor using the revenue procedures in the Internal shortfall amortization installments, monthly corporate bond yield curve, if Revenue Bulletin. waiver amortization installments, and with respect to a decrement the benefit The proposed regulations would have the present value of those installments, is only expected to be paid for one-half used the rules for applying the first the plan sponsor may elect to use of a year (because the decrement was segment rate as stated in this preamble interest rates under the monthly assumed to occur in the middle of the to all plans, regardless of the valuation corporate bond yield curve—which is a year), the interest rate for that year can date for the plan. Some commenters set of spot rates for the month preceding be determined as if the benefit were noted that section 430(h)(2)(B)(i) applies the valuation date rather than a 24- being paid for the entire year. the first segment rates to benefits month moving average for that month— The final regulations provide that the expected to be paid in the 5 years from in lieu of the segment rates. The target interest rate elections are made by the the beginning of the plan year rather normal cost and funding target plan sponsor, which is generally the than the valuation date. These determined using the monthly corporate employer or employers responsible for commenters argued that the regulations bond yield curve will also be used for making contributions to or under the should likewise base the period to purposes of sections 404 and 436. plan. In the case of plans that are which the first segment rate applies on Some commenters have maintained multiple employer plans to which the beginning of the plan year rather that the rules under which an applicable section 413(c)(4)(A) does not apply, the than the valuation date. The IRS and the month earlier than the month before the regulations provide that any reference to Treasury Department continue to valuation date can be used should be the plan sponsor means the plan believe that the position set forth in the permitted to be applied when the plan administrator within the meaning of proposed regulations remains the best sponsor elects to use the monthly section 414(g). method of valuing assets and liabilities corporate bond yield curve. The IRS and The regulations provide that, except as of the valuation date. Accordingly, the Treasury Department believe that, as otherwise provided, the effective the final regulations reserve the issue of while this is a reasonable interpretation interest rate determined under section guidance on the interest rates to be used of the statute, the better view is that this 430(h)(2)(A) for the plan year is the by plans with valuation dates other than option should not be available when the single interest rate that, if used to the first day of the plan year. A plan elects to use the monthly corporate determine the present value of the technical correction to the statute may bond yield curve. Accordingly, this benefits that are taken into account in address this in the future. interpretation can be used for plan years determining the plan’s funding target for

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the plan year, would result in an The proposed regulations would have imposed with respect to certain plans in amount equal to the plan’s funding required that the pre-PPA ’06 weighted at-risk status). target determined for the plan year average be determined as of the same In the case of a new plan that was under section 430(d) (without regard to month as the segment rates. In response neither the result of a merger nor calculations for plans in at-risk status to comments, the final regulations involved in a spin-off, the FTAP and the under section 430(i)). provide that this weighted average at-risk FTAP are equal to 100 percent for Some commenters asked how to interest rate can be determined for the years before the plan exists. As a result, determine the effective interest rate for same month that is used to determine such a plan will not be in at-risk status a plan year for which a plan’s funding the segment rates, or for the month that in its first year. In addition, if the target is equal to zero. The final contains the first day of the plan year funding target of the plan is equal to regulations provide that if, for the plan (that is, the month that was used under zero for a plan year, the FTAP and the year, the plan’s funding target is equal section 412(b)(5)(B)(ii)(II) as in effect at-risk FTAP are equal to 100 percent for to zero, then the effective interest rate before amendment by PPA ’06). that plan year. Accordingly, a plan that determined under section 430(h)(2)(A) The final regulations provide that any is established without benefits accruing for the plan year is the single interest change to any interest rate election that for periods prior to establishment will rate that, if used to determine the is made for the first plan year beginning not be in at-risk status in its second present value of the benefits that are in 2009 or 2010 is automatically year. The final regulations reserve a taken into account in determining the approved by the Commissioner and place for rules regarding a plan that is plan’s target normal cost for the plan does not require the Commissioner’s involved in a merger or a spin-off and year, would result in an amount equal specific prior approval. a newly established plan with a to the plan’s target normal cost predecessor plan that was in at-risk VI. Section 1.430(i)–1 Special Rules for determined for the plan year under status. Plans in At-Risk Status section 430(b) (without regard to In accordance with section 430(i)(1), the final regulations provide that the at- calculations for plans in at-risk status Section 1.430(i)–1 of the final risk funding target and the at-risk target under section 430(i)). regulations provides special rules normal cost of the plan for the plan year The final regulations provide that the related to determining the funding target are generally determined in the same and making other computations for interest rates used to determine the manner as for plans not in at-risk status, certain defined benefit plans that are in amount of shortfall amortization but using special actuarial assumptions. at-risk status for the plan year due to installments and waiver amortization In addition, the at-risk funding target their significantly underfunded status. installments and the present value of and the at-risk target normal cost are those installments are determined based The at-risk rules do not apply to small increased to take into account a loading on the dates those installments are plans. For this purpose, a small plan is factor if the plan has been in at-risk assumed to be paid, using the same defined as a plan sponsored by an status for at least 2 out of the preceding timing rules that apply in determining employer that had 500 or fewer 4 plan years. In any case, the at-risk target normal cost. Thus, for a plan that participants (including both active and funding target and the at-risk target uses the segment rates, the first segment inactive participants) in defined benefit normal cost of a plan for a plan year rate applies to installments assumed to plans (other than multiemployer plans) cannot be less than the plan’s funding be paid during the first five plan years, sponsored by the employer or any target and target normal cost determined and the second segment rate applies to member of the employer’s controlled without regard to the at-risk rules. This any installments assumed to be paid group on each day during the preceding minimum value is determined on a during the subsequent 15-year period. plan year. plan-wide (rather than a participant-by- For this purpose, the shortfall The regulations generally adopt the participant) basis. amortization installments for a plan year rules set forth in the proposed The actuarial assumptions used to are assumed to be paid on the valuation regulations, with a few modifications determine a plan’s at-risk funding target date for that plan year. that are noted in this preamble. In for a plan year are the actuarial Under the regulations, general, the regulations provide that a assumptions that are applied under notwithstanding the general rules for plan is in at-risk status for a plan year section 430, with certain modifications determination of segment rates, for plan if the FTAP for the preceding plan year as set forth in the final regulations. years beginning in 2008 or 2009, the is less than 80 percent (65, 70, and 75 Under the proposed regulations, if by first, second, or third segment rate for a percent, respectively, for plan years the end of the plan year that begins 10 plan with respect to any month is equal beginning in 2008, 2009, and 2010), and years after the end of the current plan to the sum of the product of that rate for the at-risk FTAP for the preceding plan year (that is, the end of the 11th plan that month, multiplied by the applicable year is less than 70 percent. For this year beginning with the current plan percentage and the product of the purpose, the FTAP is defined in the year) an employee would be eligible to weighted average interest rate same manner as under § 1.430(d)–1. The commence an immediate distribution determined under the rules of section at-risk FTAP of a plan for a plan year upon termination of employment, then 412(b)(5)(B)(ii)(II) (as that provision was is a fraction (expressed as a percentage) the employee would be assumed to in effect for plan years beginning in the numerator of which is the value of terminate and commence an immediate 2007), multiplied by a percentage equal plan assets for the plan year after distribution at the earliest retirement to 100 percent minus the applicable subtraction of the prefunding balance date under the plan, or, if later, at the percentage. This transition rule does not and the funding standard carryover end of the current plan year. For this apply to a plan if the first plan year of balance under section 430(f)(4)(B), and purpose, the proposed regulations the plan begins on or after January 1, the denominator of which is the at-risk defined the earliest retirement age under 2008. A plan sponsor may elect not to funding target of the plan for the plan the plan as the earliest age at which a apply the transition rule, but once an year (determined using the special participant could terminate employment election has been made any change to actuarial assumptions that apply to and receive an immediate distribution. that election requires the approval of the plans in at-risk status, but without The proposed regulations provided that, Commissioner. regard to the loading factor that is under the special at-risk actuarial

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assumptions, all employees who are needed to be in at-risk status (pursuant years of another defined benefit plan subject to the special early retirement to the transition rule described in maintained by the employer within the assumption are also assumed to elect section 430(i)(4)(B)), then the at-risk preceding five years if any participants the optional form of benefit available FTAP would necessarily be below the in the plan participated in that other under the plan at the assumed 70 percent needed for the plan to be in defined benefit plan. retirement age that would result in the at-risk status (because the at-risk 3. Terminated plans. highest present value of benefits. funding target cannot be less than the The proposed regulations did not In response to comments, the final funding target for a plan that is not in contain any special rules regarding regulations clarify that the special early at-risk status). However, plans for which terminated plans. Commenters asked retirement assumption applies to all the effective date of section 430 is whether, upon plan termination, the participants (employees, terminated delayed for purposes of determining the benefit restrictions under section 436(d) vested participants, and beneficiaries) minimum required contribution will operate to prevent the purchase of who have not commenced payment and have to determine the at-risk funding annuities to satisfy plan benefits or the is not limited to employees. In addition, target for the plan year that precedes the distribution of single sums. In response, the final regulations provide that the plan year for which section 430 is first these regulations contain special rules earliest retirement age is not earlier than effective with respect to the plan. for plan terminations. Under the final the age at which the participant’s regulations, in general, any section 436 benefit is fully vested. The regulations VII. Section 1.436–1 Limits on Benefits limitations in effect immediately before also provide that, under the special at- and Benefit Accruals Under Single the termination of a plan continue to risk actuarial assumptions, all Employer Defined Benefit Plans apply. However, the limitations under participants and beneficiaries (not just A. Overview and General Rules section 436(d) do not apply to the participants who are subject to the prohibited payments that are made to special early retirement assumption) 1. In general. carry out the termination of a plan in who are assumed to retire on a The final regulations set forth the rule accordance with applicable law. For particular date are assumed to elect the that a defined benefit pension plan that example, a plan sponsor’s purchase of optional form of benefit available under is subject to section 412 and that is not an irrevocable commitment from an the plan that would result in the highest a multiemployer plan is a qualified plan insurer to pay benefit liabilities with present value of benefits commencing at only if it satisfies the requirements of respect to participants in connection that date. section 436. This requirement is a with the standard termination of a plan, If a plan that is in at-risk status for the qualification requirement. A plan in accordance with 4041(b)(3) of ERISA plan year has not been in at-risk status satisfies the requirements of section 436 and 29 CFR 4041.28, does not violate for one or more of the preceding 4 plan only if the plan meets the requirements section 436(d). years, the plan’s funding target for the of these regulations. The final 4. Multiple employer plans. plan year is determined as a blend of the regulations generally adopt the rules set The regulations under section 436 funding target determined as if the plan forth in the proposed regulations, but apply to plans maintained by one were not in at-risk status and the with a number of modifications that are employer (including a controlled group funding target determined as if the plan discussed in this preamble. of employers) and to multiple employer had been in at-risk status for each of the 2. New plans. plans (within the meaning of section preceding 4 plan years. For this In accordance with section 436(g), the 413(c)). In the case of a multiple purpose, the funding target determined final regulations provide that the employer plan to which section as if the plan had been in at-risk status limitations described in sections 436(b), 413(c)(4)(A) applies, the rules under the for each of the preceding 4 plan years 436(c), and 436(e) do not apply to a plan regulations apply separately with is determined without applying the for the first five plan years of the plan. respect to each employer under the loading factor if the plan has not been Thus, the only benefit limitation under plan, as if each employer maintained a in at-risk status for two of the preceding section 436 that could apply under a separate plan. Thus, the benefit four plan years. The increase in the plan that is not a successor plan during limitations under section 436 can apply funding target to reflect the at-risk rules the first five years of its existence is the differently to employees of different is phased in over 5 years at 20 percent section 436(d) limitation applicable to employers under such a multiple per year. The final regulations provide accelerated benefit payments (such as employer plan. In the case of a multiple similar rules for determining the at-risk single-sum distributions). Except as employer plan to which section target normal cost of a plan that has otherwise provided by the 413(c)(4)(A) does not apply (that is, a been in at-risk status for fewer than 5 Commissioner in guidance of general plan described in section 413(c)(4)(B) consecutive plan years. applicability, plan years of the plan that has not made the election for For purposes of applying the rules include the following (in addition to section 413(c)(4)(A) to apply), the under section 430(i), the regulations set plan years during which the plan was regulations apply as if all participants in forth rules for making certain maintained by the employer or plan the plan were employed by a single calculations with respect to the first sponsor): (1) Plan years when the plan employer. Some commenters objected to plan year to which section 430 applies was maintained by a predecessor the separate application of the rules of to the plan. These rules are generally the employer within the meaning of section 436 for a multiple employer same as the rules that apply for that § 1.415(f)–1(c)(1); (2) plan years of plan to which section 413(c)(4)(A) plan year for purposes of section 436. another defined benefit plan maintained applies. These commenters argued that, There is no special rule for by a predecessor employer within the because it is impossible for an employer determining the at-risk funding target meaning of § 1.415(f)–1(c)(2) within the to make a contribution that inures only for the plan year preceding the plan year preceding five years if any participants to the benefit of its employees in the section 430 first applies to the plan. in the plan participated in that other event of plan termination, it is This is because, for a plan to which defined benefit plan (even if the plan inappropriate to apply the requirements section 430 applies beginning in 2008, maintained by the employer is not the of section 436 separately for each if the plan’s FTAP for the preceding plan that was maintained by the employer. No change has been made to plan year was less than the 65 percent predecessor employer); and (3) plan reflect this comment because the IRS

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and the Treasury Department believe benefit accruals for the period of the permitted to go into effect later in the that this rule is consistent with the limitation under preexisting plan terms, plan year as a result of additional applicable statutory requirement under the plan is generally treated as having contributions that satisfy the section 413(c)(4)(A) that applies that the adopted an amendment that has the requirements of section 436(c)(2) or a funding rules apply separately to each effect of increasing liabilities under the certification of the AFTAP for the plan employer. plan. The proposed regulations would year, then the plan amendment must 5. Treatment of plan as of close of have provided an exception to this rule automatically take effect as of the first prohibited or cessation period. if the period of limitation is 12 months day of the plan year (or, if later, the The final regulations use the term or less. The final regulations retain that original effective date of the section 436 measurement date to exception, but clarify that the exception amendment). However, if the plan identify the dates on which a section is available only if the plan’s AFTAP amendment cannot take effect during 436 limitation may apply or cease to would be at least 60 percent taking into the plan year, then it must be treated as apply (as discussed in section VII.A.8 of account the restored accruals.6 if it were never adopted, unless the plan this preamble). The regulations provide In response to questions raised by amendment provides otherwise. For that, if a limitation on prohibited commenters, the final regulations clarify example, a plan amendment that payments under section 436(d) (such as the treatment of unpredictable provides a benefit increase pursuant to single-sum distributions) applies to a contingent event benefits that are a collective bargaining agreement could plan as of a section 436 measurement limited under the rules of section provide that if the plan amendment date, but that limit subsequently ceases 436(b). The regulations provide that, in does not take effect pursuant to the rules to apply to the plan as of a later section general, if any unpredictable contingent of section 436(c), it will take effect at the 436 measurement date, then the event benefits are limited under section earliest time it is permitted to take effect limitation does not apply to benefits 436(b) with respect to an unpredictable pursuant to the rules of section 436(c). with annuity starting dates that are on contingent event, then that limitation 7. Deemed election to reduce or after that later section 436 applies to all such benefits that prefunding and funding standard measurement date. In addition, the final otherwise would have been paid to any carryover balances. regulations provide that, if a limitation plan participant with respect to that Pursuant to section 436(f)(3), the final on benefit accruals under section 436(e) unpredictable contingent event. regulations provide that, if a limitation applies to a plan, then, unless the plan However, if the limitations of section on prohibited payments under section provides otherwise, benefit accruals 436(b) with respect to an unpredictable 436(d)(1) or (d)(3) would otherwise under the plan will resume effective as contingent event cease to apply for a apply to a plan, the employer is treated of the section 436 measurement date as plan year as a result of a contribution as having made an election under of which benefit accruals are no longer that satisfies the requirements of section section 430(f) to reduce the prefunding restricted. If the accruals resume 436(b)(2) or a certification of the AFTAP balance or funding standard carryover effective in the middle of a plan year, for the plan year, then any balance by such amount as is necessary the plan must comply with the rules unpredictable contingent event benefits for the AFTAP to be at or above the relating to partial years of participation that were limited under the rules of applicable threshold (60 or 80 percent, and the prohibition on double proration section 436(b) for the plan year must as the case may be) 7 in order for the under Department of Labor regulation automatically become payable, benefit limitation not to apply to the 29 CFR 2530.204–2(c) and (d). retroactive to the period those benefits plan. In such a case, the plan sponsor With respect to a participant who was would have been payable under the is treated as having made that election barred from receiving an optional form terms of the plan (other than plan terms on the section 436 measurement date as of benefit that would have been payable implementing the requirements of of which the benefit limitation would but for the application of a restriction on section 436(b)). If the benefits do not otherwise apply. This deemed election prohibited payments pursuant to section become payable during the plan year in applies if the plan provides for 436(d), once the restriction ceases to accordance with the preceding sentence, prohibited payments that would be apply, the participant’s benefits will then the plan is treated as if it does not limited in a plan year, regardless of continue to be paid in the form provide for those benefits. However, all whether a plan participant is eligible or previously elected unless the plan offers or any portion of those benefits can be elects to receive such a distribution the participant a new election that restored pursuant to a plan amendment during the plan year (but does not apply modifies the prior election. The final that meets the requirements of section if the plan does not provide for regulations permit a plan to provide that 436(c) and other applicable qualification prohibited payments that are subject to the participant will be offered the requirements. the benefit limitation or if the plan is opportunity to have a new election 6. Treatment of plan amendments not subject to section 436(d) because the under which the form of benefit that do not go into effect. previously elected may be modified, The proposed regulations did not 7 Pursuant to section 436(j)(3), for any plan year, subject to applicable qualification contain rules regarding the treatment of if the FTAP is 100 percent or more (or at a lower requirements, and clarify that any such plan amendments that do not go into transition threshold for 2008 through 2010) new election will result in a new effect because of the restrictions under determined without subtracting the prefunding balance and funding standard carryover balance annuity starting date for purposes of section 436(c). To clarify the application from the value of plan assets, then the AFTAP is section 417. of these rules, the final regulations determined without regard to that subtraction. The Similarly, a plan is permitted to be provide that, if a plan amendment does deemed election under section 436(f)(3) is amended to provide that any benefit not go into effect as of the effective date irrelevant in the case of the 100% funding threshold of the amendment because of the that applies under section 436(d)(2) when an accruals that were limited under the employer is in bankruptcy because, either the plan rules of section 436(e) are credited limitations of section 436(c), but is is 100 percent or more funded without the under the plan once the limitation no subtraction (and therefore no subtraction need be longer applies, subject to applicable 6 The PBGC has informed the IRS and the made under section 436(j)(3)), or the plan is less qualification requirements (including Treasury Department that it expects similarly to than 100 percent funded without the subtraction so treat such an automatic restoration of missed that the value of plan assets must necessarily be the limitations of section 436(c)). If a benefit accruals as a plan amendment, unless it is insufficient for a deemed election to increase the plan provides for the restoration of covered by the 12-month exception. plan’s AFTAP to 100%.

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plan was frozen before September 1, this calculation. The final regulations contingent event benefit 8 must provide 2005). However, the deemed reduction adopt the definition in the proposed that the benefit will not be paid to a applies with respect to this limitation regulations, but also provide that such plan participant during a plan year if only if the prefunding and funding a plan is considered a collectively the AFTAP for the plan year is less than standard carryover balances to be bargained plan if at least 50 percent of 60 percent (or is 60 percent or more but reduced are large enough to avoid the the employees benefiting under the plan would be less than 60 percent if the application of the limitation. Thus, no (within the meaning of § 1.410(b)–3(a)) AFTAP were redetermined applying an reduction of prefunding and funding are members of collective bargaining actuarial assumption that the likelihood standard carryover balances is required units for which the benefit levels under of the occurrence of the unpredictable if the limitation would still apply for a the plan are specified under a collective contingent event during the plan year is year even if those balances were bargaining agreement. 100 percent). However, this prohibition reduced to zero. The final regulations 8. Section 436 measurement date. on payment of unpredictable contingent provide that, if a plan is presumed to event benefits no longer applies for a have an AFTAP of less than 60 percent The section 436 measurement date is plan year, effective as of the first day of because the plan did not receive a a defined term under the final the plan year, if the plan sponsor makes certification of the AFTAP before the regulations that is used to describe the the contribution specified in section first day of the 10th month of the plan date that stops or starts the application 436(b)(2), as described in section VII.F year under the section 436(h)(2) of the limitations of sections 436(d) and of this preamble. presumption rules, then the plan is 436(e) and is also used for calculations The regulations provide that an treated as if the plan’s funding standard with respect to applying the limitations unpredictable contingent event benefit carryover balance and prefunding of sections 436(b) and 436(c). The is any benefit or increase in benefits to balance are insufficient to increase the regulations provide that the date of the the extent the benefit or increase would plan’s AFTAP to the threshold enrolled actuary’s certification of the not be payable but for the occurrence of percentage. AFTAP for the plan year is a section 436 an unpredictable contingent event, and In addition, the regulations provide measurement date if it is made during that an unpredictable contingent event that, in the case of a plan maintained the plan year. The regulations further is a plant shutdown (whether full or pursuant to one or more collective provide that a section 436 measurement partial) or similar event, or an event bargaining agreements between an date also occurs where there is a change other than the attainment of any age, employee representative and one or in the plan’s presumed AFTAP under performance of any service, receipt or more employers in which a benefit the presumption rules of section 436(h). derivation of any compensation, or the limitation under section 436(b), 436(c), In addition, the regulations provide a occurrence of death or disability. For or 436(e) would otherwise apply to the series of rules in cases where the example, if a plan provides for an plan, the employer is treated as having enrolled actuary’s certification of the unreduced early retirement benefit upon made an election under section 430(f) to AFTAP for a plan year is made after the the occurrence of an event other than reduce the prefunding balance or end of the plan year, as described in the attainment of any age, performance funding standard carryover balance by section VII.G of this preamble. of any service, receipt or derivation of such amount as is necessary for the 9. Notice requirement under section any compensation, or the occurrence of AFTAP to be at or above the applicable 101(j) of ERISA. death or disability, then that unreduced threshold for the benefit limitation not Section 101(j) of ERISA requires the early retirement benefit is an to apply to the plan, taking into account plan administrator of a single employer unpredictable contingent event benefit the unpredictable contingent event plan to provide a written notice to to the extent of any portion of the benefits or plan amendment, as participants and beneficiaries within 30 benefit that would not be payable but applicable. In such a case, the plan days after certain specified dates, for the occurrence of the event, even if sponsor is treated as having made that including the date the plan has become the remainder of the benefit is payable election on the section 436 subject to a restriction described in the without regard to the occurrence of the measurement date as of which the ERISA provisions that are parallel to event. Similarly, if a plan includes a benefit limitation would otherwise Code sections 436(b) and 436(d); and, in benefit payable upon the presence apply. As in the case of the deemed the case of a plan that is subject to the (including the absence) of reduction in funding balances to avoid ERISA provisions that are parallel to circumstances specified in the plan the application of section 436(d), the Code section 436(e), the valuation date (other than the attainment of any age, deemed reduction applies only if the for the plan year for which the plan’s performance of any service, receipt or prefunding and funding standard derivation of any compensation, or the AFTAP is less than 60 percent (or, if carryover balances to be reduced are occurrence of death or disability), but earlier, the date the AFTAP is presumed large enough to avoid the application of not upon a severance from employment to be less than 60 percent). These the limitation under section 436(b), that does not include those regulations do not include any guidance 436(c), or 436(e), as applicable. circumstances, that benefit is an on section 101(j) of ERISA. The benefit The proposed regulations would have unpredictable contingent event benefit. provided that, in the case of a plan with restrictions under section 436 (and the Unpredictable contingent event respect to which a collective bargaining parallel provisions under section 206(g) benefits attributable to a plant shutdown agreement applies to some, but not all, of ERISA) apply without regard to or other unpredictable contingent event of the plan participants, the plan is whether the requirements of section that occurred within a period during considered a collectively bargained plan 101(j) of ERISA are satisfied. which no limitation under section if at least 25 percent of the participants B. Limitation on Plant Shutdown and 436(b) applied to the plan are not in the plan are members of collective Other Unpredictable Contingent Event bargaining units for which the benefit Benefits 8 See also Notice 2007–14, 2007–1 CB 501 (see levels under the plan are specified § 601.601(d)(2) of this chapter), requesting In accordance with section 436(b), the comments on the types of benefits that are under a collective bargaining agreement. permitted to be provided in a qualified defined A number of commentators asked which final regulations provide that a plan that benefit plan, including benefits payable in the event participants are taken into account in provides for any unpredictable of a plant shutdown or similar event.

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affected by the limitation as it applies in provide for cessation, suspension, or In accordance with section 436(c)(3), a subsequent period. For example, if a reduction of any benefits upon the limitation on amendments plant shutdown occurs in 2010 and the occurrence of any event. increasing liabilities does not apply to plan’s funded status is such that any amendment that provides for an C. Limitations on Plan Amendments benefits contingent upon that plant increase in benefits under a formula that Increasing Plan Liabilities shutdown are not subject to the is not based on a participant’s limitation described in section 436(b) In accordance with section 436(c), the compensation, but only if the rate of for that calendar plan year, section regulations provide that a plan satisfies increase in benefits does not exceed the 436(b) does not apply to restrict the limitation on plan amendments contemporaneous rate of increase in payment of those benefits even if increasing liability for benefits only if average wages of participants covered another plant shutdown occurs in 2012 the plan provides that no amendment to by the amendment. Like the proposed that results in the restriction of benefits the plan that has the effect of increasing regulations, the final regulations that are contingent upon that later plant liabilities of the plan by reason of provide that the determination of the shutdown under section 436(b) (where increases in benefits, establishment of rate of increase in average wages is the plan’s adjusted funding target new benefits, changing the rate of made by taking into consideration the attainment percentage for 2012 would benefit accrual, or changing the rate at net increase in average wages from the be less than 60 percent taking into which benefits become nonforfeitable is period of time beginning with the account the liability attributable to those permitted to take effect if the AFTAP for effective date of the most recent benefit shutdown benefits). Conversely, if a the plan year is less than 80 percent (or increase applicable to all of those plant shutdown occurs in 2010 and a is 80 percent or more but would be less participants who are covered by the plan’s funded status is such that its than 80 percent if the AFTAP were current amendment and ending on the shutdown benefits are subject to the redetermined taking into account the effective date of the current amendment. limitation under section 436(b) for that benefits attributable to the amendment). If the participants covered by an plan year and cannot be paid, those However, this prohibition on plan amendment include both currently shutdown benefits related to the 2010 amendments no longer applies for a employed participants and terminated plant shutdown are not permitted to be plan year if the employer makes the participants, all covered participants are paid in a later year even if the plan’s contribution specified in section included in determining the increase in AFTAP for the later year is at or above 436(c)(2), as described in section VII.F average wages of the participants 60 percent (subject to the rules of this preamble. Thus, an amendment covered by the amendment. For this permitting plan amendments to that provides for an increase in benefits purpose, terminated participants who reinstate previously restricted benefits, under a formula that is based solely on are not employees at any time during including unpredictable contingent service performed by participants after the period from the effective date of the event benefits, as described in section the amendment is adopted is always most recent benefit increase applicable to all the participants who are covered VII.A.5 of this preamble). permitted to take effect in a plan year by the current amendment and ending because the amount of contribution To clarify the operation of the rules on the effective date of the current described in section 436(c)(2) is $0. regarding unpredictable contingent amendment are treated as having no However, see § 1.430(d)–1(d)(2) for a event benefits, the final regulations increase or decrease in wages for the rule that requires such an amendment to contain rules of application that were period after severance from be taken into account in determining the not provided in the proposed employment. Alternatively, the funding target and the target normal cost regulations. The regulations clarify that employer can adopt two amendments— in certain situations. the limitations of section 436(b) apply one that increases benefits for currently on a participant-by-participant basis. The final regulations clarify the employed participants that is eligible for Thus, whether payment or application of section 436(c) to certain this exception based solely on the wages commencement of an unpredictable pre-existing plan provisions. Under the of those current employees, and another contingent event benefit under a plan is regulations, if a plan contains a that increases benefits for terminated restricted with respect to a participant is provision that provides for the participants. However, the amendment determined based on whether the automatic restoration of benefit accruals that applies only to terminated participant satisfies the plan’s eligibility that were not permitted to accrue participants (who received no increase requirements (other than the attainment because of the application of section in wages from the employer during the of any age, performance of any service, 436(e), the restoration of those accruals period over which the increase in receipt or derivation of any is generally treated as a plan average wages is determined) would not compensation, or the occurrence of amendment that is subject to section be eligible for this exception. death or disability) for such a benefit in 436(c). However, the automatic As under the proposed regulations, a plan year in which the limitations of restoration of benefit accruals that were the final regulations exempt a plan section 436(b) apply. In addition, in the not permitted to accrue because of the amendment (or any pre-existing plan case of a plan that provides for a benefit application of section 436(e) is not provision) that provides for a mandatory that depends upon the occurrence of treated as a plan amendment that is increase in the vesting of benefits under more than one unpredictable contingent subject to section 436(c) if the the Code or ERISA (such as vesting rate event with respect to a participant, the continuous period of the limitation is 12 increases pursuant to statute, plan unpredictable contingent event for months or less and the AFTAP for the termination amendments or partial purposes of section 436(b) occurs upon plan would not be less than 60 percent terminations under section 411(d)(3), the last of those unpredictable taking into account the restored benefit and vesting increases required by the contingent events. Cessation of a benefit accruals for the prior plan year. The rules for top-heavy plans under section under a plan upon the occurrence of a application of section 436(c) to other 416) from the requirements of section specified event does not trigger the pre-existing plan provisions that result 436(c) to the extent the increase in application of a limitation under section in benefit increases is expected to be vesting is necessary to enable the plan 436(b). Thus, section 436(b) does not addressed in future proposed to continue to satisfy the requirements prohibit provisions of a plan that regulations. for qualified plans. In addition, the final

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regulations provide that the limitations, the participant has to retain benefit to the extent then permitted Commissioner may, in guidance of the right to elect the annuity forms under section 436(d)(3). Any such general applicability, issue additional offered under the plan which do not optional forms must satisfy section rules under which other amendments to contain prohibited payments. Similar 436(d) and applicable qualification a plan are not treated as amendments to rules apply in any case in which a requirements, including satisfaction of which section 436(c) applies. beneficiary is entitled to a prohibited section 417(e) and section 415 (at each The final regulations contain a rule to payment (for example, where a qualified annuity starting date). clarify when an amendment is pre-retirement survivor annuity is 2. Bankruptcy. considered to take effect for purposes of offered in an alternative single-sum In accordance with section 436(d)(2), section 436(c). Under these regulations, payment). under the final regulations, a plan must in the case of an amendment that The proposed regulations would also provide that a participant or beneficiary increases benefits, the amendment takes have provided that, if a participant is not permitted to elect an optional effect under a plan on the first date on requests such a prohibited payment, the form of benefit that includes a which any individual who is or could plan must permit the participant to elect prohibited payment, and the plan will be a participant or beneficiary under the to defer payment to a later date to the not pay any prohibited payment, with plan would obtain a legal right to the extent permitted under applicable an annuity starting date that occurs increased benefit if the individual were qualification requirements. Questions during any period in which the plan on that date to satisfy the applicable have arisen regarding whether this sponsor is a debtor in a case under title requirements for entitlement to the deferral right must be provided to a 11, United States Code, or similar benefit (such as the attainment of any participant who has separated from Federal or State law, until the date on age, performance of any service, receipt service and has attained normal which the enrolled actuary of the plan or derivation of any compensation, or retirement age if the plan does not certifies that the plan’s AFTAP for the the occurrence of death, disability, or otherwise provide such a participant plan year is not less than 100 percent. severance from employment). Thus, if a with the right to defer commencement Participants and beneficiaries can still plan’s operations change to provide of benefits. The final regulations clarify elect those forms of distribution offered increased benefits so that participants that, if a participant requests a under the plan which do not contain a obtain a legal right to the benefit at the prohibited payment at a time when that prohibited payment, as well as the right time of the change (with the form of payment cannot be made, the to defer distribution, as described in corresponding plan amendment adopted participant retains the right to delay section VII.D.1 of this preamble. in that year or in a subsequent year that commencement of benefits only if the 3. Limited payment if percentage at is within the remedial amendment right to delay commencement is in least 60 percent but less than 80 period under section 401(b)), the accordance with the terms of the plan percent. amendment takes effect at the time of and applicable qualification In accordance with section 436(d)(3), the change and must satisfy the requirements (such as sections under the final regulations, a plan must requirements of section 436(c) for that 411(a)(11) and 401(a)(9)). Thus, where provide that, in any case in which the earlier year. By contrast, if an payment of an optional form of benefit plan’s AFTAP for a plan year is 60 amendment is adopted to provide is restricted pursuant to section 436(d), percent or more but is less than 80 increased benefits retroactively with the plan is not required to provide percent, a participant or beneficiary is respect to a prior year, but no participants with deferral rights that not permitted to elect the payment of an participant’s benefits are increased until would not be otherwise available. optional form of benefit that includes a the amendment is adopted, the Some commenters requested that the prohibited payment, and the plan will amendment takes effect at the time of regulations permit a plan under which not pay any prohibited payment, with adoption and must satisfy the prohibited payments are restricted to an annuity starting date that is on or requirements of section 436(c) for the handle an election for a prohibited after the applicable section 436 plan year the amendment is adopted. payment by paying the maximum measurement date, unless the present amount permitted under section 436(d) value, determined in accordance with D. Limitations on Prohibited Payments each year, with payments resuming section 417(e)(3), of the portion of the 1. Funding percentage less than 60 under the originally elected schedule as benefit that is being paid in a prohibited percent. soon as permitted under section 436(d) payment does not exceed the lesser of: In accordance with section 436(d)(1), (with appropriate catch-up payments). (A) 50 percent of the present value under the final regulations, a plan must The final regulations do not permit this (determined in accordance with section provide that, if the plan’s AFTAP for a approach because the IRS and the 417(e)(3)) of the benefit payable in the plan year is less than 60 percent, a Treasury Department believe that a plan optional form of benefit that includes participant or beneficiary is not should pay benefits in accordance with the prohibited payment; or (B) 100 permitted to elect an optional form of a participant’s actual election (with the percent of the PBGC maximum benefit benefit that includes a prohibited associated spousal consent, if guarantee amount. payment, and the plan will not pay any applicable). However, the final Commenters asked a number of prohibited payment, with an annuity regulations clarify that a plan can offer questions about this limitation, starting date that is on or after the special optional forms of benefit during including how to determine the portion applicable section 436 measurement the period in which section 436(d)(1) of the benefit that is being paid in a date. The proposed regulations would applies to the plan. For example, a plan prohibited payment. Under the final have provided that, if a participant may permit participants or beneficiaries regulations, this determination is made requests such a prohibited payment, the who commence benefits during this based on the applicable optional form of plan must permit the participant to elect period to elect, within a specified benefit. If the benefit is being paid in an another form of benefit available under period after the date on which the optional form for which any of the the plan and this rule is retained in limitation ceases to apply to the plan, to payments is greater than the amount these regulations. Thus, if a participant receive the remaining benefit in the payable under a straight life annuity to elects a single-sum payment which is form of a single-sum payment equal to the participant or beneficiary (plus any not available because of the section 436 the present value of the remaining social security supplements described

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in the last sentence of section 411(a)(9) plan (in the same manner described in portion, the optional form of benefit payable to the participant or section VII.D.1 of this preamble). elected by the participant, treating the beneficiary) with the same annuity Commenters had raised a number of unrestricted portion of the benefit as if starting date, then the portion of the questions concerning calculation of the it were the participant’s or beneficiary’s benefit that is being paid in a prohibited unrestricted portion of the benefit for entire benefit under the plan. The payment is the excess of each payment purposes of the rule requiring the participant can elect to receive the over the smallest payment during the participant’s benefit to be bifurcated remainder of his or her benefit in any participant’s lifetime under the optional into unrestricted and restricted portions. optional form of benefit available under form of benefit (treating a period during The final regulations clarify that the the plan at that annuity starting date the participant’s lifetime in which no benefit for the unrestricted portion of that does not include a prohibited payments are made as a payment of the benefit is calculated at the annuity payment. If a plan provides for an zero). Thus, for an optional form of starting date with respect to each optional form of benefit that applies to benefit in the form of a single sum or in optional form of benefit that does not only a portion of the participant’s satisfy the 50 percent/PBGC maximum the form of installments over a fixed benefit, that optional form of benefit benefit guarantee amount limitation. In period of years, the entire optional form must be available on a proportionate general, the unrestricted portion of the of benefit would be a prohibited basis with respect to the unrestricted benefit with respect to an optional form payment, whereas in the case of a social of benefit is 50 percent of the amount portion of the benefit. The rules of security leveling optional form of payable under that optional form of § 1.417(e)–1 are applied separately to benefit (under which higher payments benefit. Thus, if a participant elects a the separate optional forms for the are made before an assumed social single-sum payment of a participant’s unrestricted and restricted portions of security commencement date, with entire benefit which is not permitted the benefits. lower payments thereafter for life), only under section 436(d)(3), the bifurcation Under the regulations, a plan is the amount payable before the assumed rule requires the plan to offer the permitted to provide for separate social security commencement date that participant half that amount as a single- elections with respect to the exceeds the ultimate life annuity sum payment (with the remainder being unrestricted and restricted portions of amount would be a prohibited payment payable as a life annuity or any other the benefit, without regard to whether (so that a social security leveling form optional form available under the plan the participant or beneficiary elects an could go into effect under section at that annuity starting date that does optional form of benefit that includes a 436(d)(3) if the present value of the not include a prohibited payment). prohibited payment that is not payments before the assumed social However, for an optional form of permitted to be paid under the rules of security commencement date that benefit that is a prohibited payment on section 436(d)(3). Like the proposed exceed the ultimate life annuity amount account of a social security leveling regulations, the final regulations permit does not exceed the present value of 50 feature or a refund of employee after-tax a plan to offer optional forms of benefit percent of the total benefit or, if less, the contributions feature, the unrestricted that are solely available during a period PBGC maximum benefit guarantee portion of the benefit is that optional during which benefits are restricted amount). In addition, the PBGC form of benefit applied to only 50 pursuant to section 436(d)(3). For maximum benefit guarantee amount is percent of the total benefit. Thus, for a example, during that period, a plan may the present value (determined under social security leveling option, the offer an optional form of benefit (such guidance prescribed by the Pension unrestricted portion is not equal to half as a single sum) that provides for the the amount payable before the assumed Benefit Guaranty Corporation, using the current payment of the unrestricted social security commencement date, interest and mortality assumptions portion of the benefit, with a delayed plus half the amount payable thereafter, under section 417(e)) of the maximum commencement for the restricted but instead would be a result of benefit guarantee with respect to a portion of the benefit or for an participant (based on the participant’s applying the plan’s social security leveling option provision to half of the immediate commencement of the age or the beneficiary’s age at the restricted portion of the benefit in an annuity starting date) under section participant’s total benefit. This may often result in the unrestricted portion annuity form with a right to commute to 4022 of ERISA for the year in which the a single sum offered upon the enrolled annuity starting date occurs. being a series of payments ending at the assumed social security commencement actuary’s certification that the plan’s Like the proposed regulations, the date (which, in combination with a life AFTAP is at least 80 percent. As another final regulations require that, if an annuity for the restricted portion example, a plan that offers a subsidized optional form of benefit that is commencing at the same annuity early retirement benefit or a single-sum otherwise available under the terms of starting date plus the participant’s payment based on the normal retirement the plan is not available as of the anticipated social security benefit, benefit may offer an optional form of annuity starting date because of the would provide level income to the benefit that combines an unsubsidized application of the requirements of participant to the extent permitted single-sum payment for over 50 percent section 436(d)(3), the plan must permit under section 436(d)(3)). of the accrued benefit with a subsidized a participant or beneficiary to elect to In any event, the unrestricted portion early retirement life annuity for the bifurcate the benefit into unrestricted of the benefit must be reduced to the remainder of the accrued benefit, and restricted portions. The plan must extent necessary so that the present provided that the optional form satisfies also offer the participant or beneficiary value (determined in accordance with the section 436(d)(3) 50 percent/PBGC any other optional form of benefit section 417(e)) of the unrestricted maximum benefit guarantee limitation. otherwise available under the plan at portion of that optional form of benefit Any such optional forms must also that annuity starting date that would does not exceed the PBGC maximum satisfy the applicable qualification satisfy the 50 percent/PBGC maximum benefit guarantee amount. requirements, including satisfaction of benefit guarantee amount limitation, as If the participant or beneficiary elects section 417(e) and, in the case of well as any general right to defer to bifurcate the benefit, the plan must optional forms of benefit with different commencement of benefits under the provide, with respect to the unrestricted annuity starting dates, section 415 at the

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later annuity starting date for the permitted to be paid and for which no any period of consecutive plan years to restricted portion of the benefit. additional information is needed to which any of the limitations under The IRS and the Treasury Department make that determination (such as section 436(d) apply. Benefits provided anticipate that plan sponsors will use information regarding a social security to a participant and any beneficiary of one of several alternative approaches to leveling optional form of benefit), rather that participant are aggregated for providing benefit election packages to than wait for the participant or purposes of determining whether the participants in order to comply with the beneficiary to elect such optional form, distribution complies with the benefit restrictions of section 436(d). As the plan is permitted to provide for limitations under section 436(d)(3). The part of any of these alternatives, as separate elections with respect to the final regulations also reflect the rules of described in the preceding paragraph, restricted and unrestricted portions of section 436(d)(3)(B)(ii), which describe the plan may provide special optional that optional form of benefit. However, how this limited distribution is forms that are available only when the the alternative described in the allocated among the beneficiaries of a restrictions of section 436(d) apply. preceding sentence is permitted to be participant. The final regulations One approach would be to provide a applied only if the plan applies the rule include two special rules for benefit election package that does not to all the optional forms for which no beneficiaries. First, while generally the take into account the restrictions under additional information from the annuity starting date for the payments to section 436(d), regardless of whether a participant or beneficiary is needed to the participant is also the annuity benefit restriction under section 436(d) make that determination and the plan starting date for payments to the applies at the time the package is identifies the option that the bifurcation beneficiary, a new annuity starting date furnished. In periods during which a election replaces. Thus, if section occurs if the amount payable to the restriction applies, the plan must permit 436(d)(3) applies to a plan during a beneficiary can exceed the monthly the participant either to (1) choose period and the plan’s prohibited amount that would have been paid to another optional form of benefit that payments include a single-sum the participant had he or she not died does not have a restriction, (2) defer payment, installments for 10 years, and (such as where a plan offers to pay the commencement of the payments to a various life annuities with social death benefit in a single sum). Second, later annuity starting date, or (3) if the security leveling features that depend if a beneficiary is not an individual, the AFTAP is at least 60 percent but less on information from the participant prohibited payment amount is than 80 percent, elect to bifurcate the regarding assumed social security determined based on the monthly benefit—that is, to receive the commencement date and social security amount payable in installments over 20 unrestricted portion in the optional amount, then during this period the years (instead of the monthly amount form chosen and to make a separate plan can offer 50% of the single-sum paid under a straight life annuity). election with respect to the remaining payment and 50% of the 10-year 4. Exception for certain frozen plans. portion of the benefit (the restricted In accordance with section 436(d)(4), installments, without having to offer portion). Thus, if a participant elects a the limitations under section 436(d) do half of each of the potential life form of benefit that is not permitted not apply to a plan for any plan year if annuities with social security leveling pursuant to a restriction, then the the terms of the plan, as in effect for the features. Thus, the package presented to participant must be informed which period beginning on September 1, 2005, a participant would generally present benefit options are currently available in provide for no benefit accruals with optional forms of benefit that satisfy the order to enable the participant to make respect to any participants. However, if requirements of section 436(d) at the a new election among the available such a plan provides for any benefit annuity starting date (but if the forms if the participant so chooses. This accruals thereafter, this exception ceases participant were to elect a life annuity approach entails a two-step process. to apply for the plan as of the date those As an alternative to this approach, the with a social security leveling feature accruals start. plan may provide for a one-step process that is not permitted to be paid, then the 5. Prohibited payment. which eliminates the need to go back to plan would have to follow the two-step In accordance with section 436(d)(5), the participant if the participant elects approach). If this third approach is used the final regulations provide that the a form of benefit that is restricted. and the plan’s benefit restriction status term prohibited payment means any Under this one-step process, a with respect to the participant’s annuity payment for a month that is in excess participant who elects an optional form starting date changes after the package of the monthly amount paid under a of benefit that could be subject to is furnished, then updated information single life annuity (plus any social restrictions would also elect a backup would be provided to the participant security supplements described in the distribution form which would apply if that takes into account the plan’s new last sentence of section 411(a)(9)) to a restrictions are applicable as of the status. As part of the overall participant or beneficiary whose annuity starting date for the methodology, a plan may provide annuity starting date occurs during any distribution. As part of the backup special optional forms that are available period that a limitation on prohibited election, this one-step process would only when the restrictions of section payments is in effect, as well as any also provide the participant with the 436(d) apply. Thus, the package payment for the purchase of an opportunity to defer commencement presented to a participant would only irrevocable commitment from an insurer and, if the AFTAP is at least 60 percent present optional forms of benefit that to pay benefits. The final regulations but less than 80 percent, to bifurcate the satisfy the requirements of section also include in this definition any benefit. 436(d) at the annuity starting date. transfer of assets and liabilities to A third alternative approach, which A participant for whom a prohibited another plan maintained by the same also eliminates the need to go back to payment (or a series of prohibited employer (or by any member of the the participant, anticipates the payments under a single optional form employer’s controlled group) that is application of the section 436(d) of benefit) is made in accordance with made in order to avoid or terminate the restriction on prohibited payments. the 50 percent/PBGC maximum benefit application of section 436 benefit Under this approach, with respect to an guarantee amount limitation cannot limitations. In addition, the optional form of benefit that includes a receive any additional payment that Commissioner may provide for other prohibited payment that is not would be a prohibited payment during amounts to be identified as prohibited

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payments in revenue rulings and to the plan (which is generally the F. Rules Relating to Techniques To procedures, notices, and other guidance insurance premium). Where a Avoid Benefit Limitations published in the Internal Revenue prohibited payment is in the form of a The final regulations provide rules Bulletin. plan-to-plan transfer of assets and regarding techniques that the plan Commenters raised several concerns liabilities, the annuity starting date is sponsor may utilize to avoid or regarding the definition of the term the date of the transfer to the other terminate benefit limitations under annuity starting date as applied to qualified plan and the present value is section 436 that are largely unchanged various types of benefits restricted based on the present value of the from the rules in the proposed under section 436(d). The final liabilities transferred (determined in regulations. For example, under the regulations generally adopt the accordance with section 414(l)). final regulations, an employer definition of annuity starting date set However, any such transfer would have sponsoring a plan that would otherwise forth in § 1.401(a)–20, Q&A–10(b), to independently satisfy section 414(l), be subject to the limitations of section modified to cover retroactive annuity which generally would not be possible 436 can avoid the application of those starting dates, as well as transactions where only a portion of a participant’s limits by reducing the funding standard that are restricted under section 436(d) or beneficiary’s accrued benefit is being carryover balance and prefunding even though they do not constitute transferred. balance by an amount sufficient to avoid distributions to any participant. Thus, The regulations do not address the the final regulations provide that, for the limitations or, if the deadline for change made by section 101(c)(2)(C) of making contributions for the prior plan purposes of applying the limitations on WRERA ’08, under which the prohibited payments under section year has not passed, by making limitations of section 436 do not apply additional contributions for a prior plan 436(d), the term annuity starting date is to distributions permitted without defined as the first day of the first year that are not added to the consent of the participant under section prefunding balance. Either of these period for which an amount is payable 411(a)(11) (that is, distributions where as an annuity as described in section techniques will have the effect of the total present value of the benefit is increasing the adjusted plan assets that 417(f)(2)(A)(i) if the benefit is being paid not in excess of $5,000). That change is in the form of an annuity. In the case of form the numerator of the AFTAP expected to be addressed in future calculation, which will increase the a benefit not payable in the form of an proposed regulations. Those proposed annuity, the annuity starting date is the AFTAP. In addition, a plan sponsor regulations are also expected to address could make the specific contributions annuity starting date for the qualified issues regarding plan loans. joint and survivor annuity that is described in section 436(b)(2), 436(c)(2), payable under the plan at the same time E. Limitation on Benefit Accruals or 436(e)(2) or provide security to the as the benefit that is not payable as an plan as described in section 436(f)(1). In accordance with section 436(e), the annuity, and, in the case of an amount These latter two techniques for avoiding final regulations require a plan to payable under a retroactive annuity or terminating the application of the provide that, in any case in which the starting date, the annuity starting date is benefit limitations of section 436 are plan’s AFTAP for a plan year is less the benefit commencement date. The described in § 1.436–1(f). than 60 percent, benefit accruals under effect of the change in the definition of The regulations provide that the plan the plan will cease as of the applicable annuity starting date will be to provide sponsor is permitted to make additional section 436 measurement date. If a plan plan administrators with some contributions that are specifically additional time to adjust their must cease benefit accruals under this designated at the time of the administrative practices to take into limitation, then the plan is also not contribution as a contribution used to account a newly issued certification of permitted to be amended in a manner avoid the application of a limitation the plan’s AFTAP. The definition of that would increase the liabilities of the under section 436(b), 436(c), or 436(e). annuity starting date also includes the plan by reason of an increase in benefits To address questions raised with respect date of the purchase of an irrevocable or establishment of new benefits. This to the proposed regulations, the final commitment from an issuer to pay rule applies regardless of whether an regulations provide general rules that benefits under the plan and the date of amendment would otherwise be apply to all contributions pursuant to any transfer of assets and liabilities to permissible under section 436(c)(3) section 436(f) (referred to as section 436 another plan maintained by the same (involving certain amendments to contributions) and also separately state employer (or by any member of the increase benefits under a formula not the rules with respect to the amount of employer’s controlled group) that is based on a participant’s compensation). contributions needed to avoid each type made in order to avoid or terminate the This prohibition on additional benefit of benefit limitation. application of section 436 benefit accruals no longer applies for a plan Section 436 contributions must be limitations. year if the plan sponsor makes the separate from any minimum required The final regulations include rules to contribution specified in section contributions under section 430 and are clarify how the limitations apply with 436(e)(2), as described in section VII.F disregarded in determining the respect to any prohibited payment that of this preamble. maximum addition to the prefunding is in the form of a purchase of an The regulations do not reflect the balance under section 430(f)(6) and irrevocable commitment from an insurer provisions of section 203 of WRERA ’08 § 1.430(f)–1(b)(1)(i)(B). The designation or a transfer of assets and liabilities. In under which, for the first plan year of a contribution as a section 436 the case of a purchase of insurance, the beginning during the period beginning contribution must be made at the time annuity starting date is the date of the on October 1, 2008 and ending on the contribution is used to avoid or purchase of the irrevocable commitment September 30, 2009, the plan’s AFTAP terminate the applicable benefit from the insurer and the present value for purposes of the benefit limitation limitations and, except as specifically (for purposes of the section 436(d)(3) under section 436(e) is equal to the provided, cannot subsequently be limitation regarding the lesser of 50 larger of the AFTAP for the plan year recharacterized with respect to any plan percent of the present value of the and the AFTAP for the prior plan year. year as a contribution to satisfy a benefit and the PBGC maximum benefit That change is expected to be addressed minimum required contribution guarantee amount) is based on the cost in future proposed regulations. obligation, or otherwise. Thus, if a plan

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sponsor makes a section 436 AFTAP for the plan year determined limitation on accruals under section contribution for a plan year but does not without taking into account the liability 436(e), the amount of the contribution make the minimum required attributable to the unpredictable under section 436(e)(2) is equal to the contribution for the plan year, the plan contingent event benefits is 60 percent amount sufficient to result in an AFTAP will fail to satisfy the minimum funding or more, but would be less than 60 for the plan year of 60 percent if the requirements under section 430 for the percent taking the unpredictable contribution were included as part of plan year. The designation must be contingent event benefits into account, the assets of the plan. For this purpose, made in accordance with the rules and the amount of the contribution under the determination of the amount that procedures that otherwise apply to section 436(b)(2) is the amount that would be sufficient to result in an elections under the regulations (at would be sufficient to result in an AFTAP of 60 percent must take into § 1.430(f)–1(f)) with respect to funding AFTAP for the plan year of 60 percent account all liabilities for benefits balances. The deductibility of a section if the benefits attributable to the attributable to prior unpredictable 436 contribution is determined pursuant unpredictable contingent event were contingent event benefits that were to the rules of section 404 (including the included in the determination of the permitted to be paid, prior plan rules of section 404(a) and (o)). For this funding target and the contribution were amendments that were permitted to take purpose, the section 436 contribution is included as part of the assets of the effect, and restored benefit accruals (and considered to be made for the plan year plan. In this latter case, the any associated section 436 during which it is made. determination of the amount that would contributions). Any section 436 contribution made on be sufficient to result in an AFTAP of A plan sponsor is treated as making a date other than the valuation date for 60 percent must take into account all a section 436 contribution to bring the the plan year must be adjusted with liabilities for benefits attributable to funding level to the applicable interest at the plan’s effective interest prior unpredictable contingent event threshold only after the plan’s enrolled rate under section 430(h)(2)(A) for the benefits that were permitted to be paid, actuary certifies an AFTAP for the plan plan year. If the plan’s effective interest prior plan amendments that were year that takes into account the rate for the plan year has not been permitted to take effect, and restored increased liability for the unpredictable determined at the time of the accruals (and any associated section 436 contingent event benefits, the plan contribution, then this interest contributions). amendments, or accruals, and any adjustment must be made using the In the case of a contribution to avoid associated section 436 contributions. highest rate of the three segment rates as or terminate the application of the Another technique for a plan sponsor applicable for the plan year under limitation on benefits attributable to a to avoid the application of the benefit section 430(h)(2)(C). In such a case, if plan amendment under section 436(c), limitations of section 436 is for the plan the effective interest rate for the year in the event that the AFTAP for the plan sponsor to provide security. In such a under section 430(h)(2)(A) is year determined without taking into case, the AFTAP for the plan year is subsequently determined to be less than account the liability attributable to the determined by treating as an asset of the that highest rate, the excess is plan amendment is less than 80 percent, plan any security provided by a plan recharacterized as an employer the amount of the contribution under sponsor by the valuation date for the contribution taken into account under section 436(c)(2) is equal to the amount plan year in a form meeting certain section 430 for the current plan year. of the increase in the funding target of specified requirements. However, this Any section 436 contribution must be the plan for the plan year if the security is not taken into account as a paid before the unpredictable liabilities attributable to the amendment plan asset for any other purpose, contingent event benefits are permitted were included in the determination of including section 430. The only security to be paid, the plan amendment is the funding target. In the event that the permitted to be provided by a plan permitted to go into effect, or the benefit AFTAP for the plan year determined sponsor for this purpose is (i) a bond accruals are permitted to resume. In without taking into account the liability issued by a corporate surety company addition, any section 436 contribution attributable to the plan amendment is 80 that is an acceptable surety for purposes with respect to a plan year must be paid percent or more, but would be less than of section 412 of ERISA or (ii) cash, or during the plan year. Furthermore, no 80 percent taking the amendment into United States obligations that mature in prefunding balance or funding standard account, the amount of the contribution three years or less, held in escrow by a carryover balance under section 430(f) under section 436(c)(2) is the amount bank or insurance company. The may be used as a section 436 that would be sufficient to result in an regulations reflect section 436(f)(1)(C) contribution to avoid benefit AFTAP for the plan year of 80 percent and (D) in specifying when the security limitations. if the liabilities attributable to the plan is to be contributed to the plan and In the case of a contribution to avoid amendment were included in the when it may be released. If the security or terminate the application of the determination of the funding target and is turned over to the plan, then that limitation on benefits attributable to an the contribution were included as part amount is treated as an employer unpredictable contingent event under of the assets of the plan. In this latter contribution when it is turned over to section 436(b), in the event that the case, the determination of the amount the plan. The final regulations provide AFTAP for the plan year determined that would be sufficient to result in an that any such security turned over to the without taking into account the liability AFTAP of 80 percent must take into plan pursuant to the enforcement attributable to the unpredictable account all liabilities for benefits mechanism cannot be treated as a contingent event benefits is less than 60 attributable to prior unpredictable contribution to avoid or terminate the percent, the amount of the contribution contingent event benefits that were application of a section 436 benefit under section 436(b)(2) is equal to the permitted to be paid, prior plan limitation under section 436(b)(2), amount of the increase in the funding amendments that were permitted to take 436(c)(2), or 436(e)(2). In response to target of the plan for the plan year if the effect, and restored benefit accruals (and commenter concerns, the final benefits attributable to the any associated section 436 regulations permit security to be unpredictable contingent event were contributions). replaced, provided that the new security included in the determination of the In the case of a contribution to avoid is in at least the same amount and funding target. In the event that the or terminate the application of the satisfies certain other requirements.

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G. Presumed Underfunding for Purposes year, elections to use the prefunding The regulations also provide special of Benefit Limitations and funding standard carryover rules that apply when the presumed 1. General rules relating to operation balances to offset the minimum required AFTAP is deemed to be under 60 of presumptions. contribution for a year, and elections percent as a result of the application of Section 436(h) sets forth rules under (including deemed elections under section 436(h)(2). In such a case, the which the limitations of section 436 are section 436(f)(3)) to reduce the regulations provide that neither a applied during the portion of a plan prefunding and funding standard reduction of the funding standard year before the enrolled actuary has carryover balances for the current plan carryover balance or prefunding balance certified the plan’s AFTAP for the plan year). The presumed adjusted funding nor a section 436 contribution can be year. The regulations set forth rules for target is equal to the interim value of used to increase the presumed AFTAP the application of the section 436 adjusted plan assets for the plan year to 60 percent. Accordingly, no benefit limitations during the period the divided by the presumed AFTAP. prohibited payment can be made, no The final regulations provide that, if presumptions of section 436(h) apply to benefit accruals are permitted, and no the presumed AFTAP for the plan year plan amendment increasing benefits can a plan, and describe the interaction of changes during the year, the rules take effect during the period the plan is the application of those presumptions regarding the deemed election to reduce deemed to have an AFTAP of less than on plan operations with plan operations funding balances must be reapplied 60 percent. However, an unpredictable after the plan’s enrolled actuary has based on the new presumed AFTAP. contingent event benefit is permitted to issued a certification of the plan’s This will typically occur on the first day be paid if the plan sponsor makes the AFTAP for the plan year. The rules in of the 4th month of a plan year, but contribution described in section the final regulations have been revised could also happen at a different date if 436(b)(2)(B) (that is, a contribution from those in the proposed regulations the enrolled actuary certifies the AFTAP equal to the increase in the funding to reflect comments. for the prior plan year during the target attributable to the unpredictable Under the final regulations, a plan current plan year. In order to determine contingent event benefits). must provide that, for any period during the amount of any reduction in 2. Rules relating to unpredictable which a presumption under section prefunding balance and funding contingent event benefits and plan 436(h) applies to the plan, the standard carryover balance that would amendments. limitations applicable under section 436 apply in such a situation, a new Under the regulations, for purposes of are applied to the plan as if the AFTAP presumed adjusted funding target must applying the limitations applicable to for the year were the presumed AFTAP be established, which is then compared unpredictable contingent event benefits determined under the applicable rule to the updated interim value of adjusted and plan amendments during the under section 436(h), in accordance plan assets. For this purpose, the presumption period, the presumed with the rules of operation set forth in updated interim value of adjusted plan adjusted funding target must be adjusted the regulations. For example, a plan’s assets for the plan year is determined as to take into account the increase in the prefunding balance and funding the interim value of adjusted plan assets funding target attributable to the standard carryover balance must be as of the first day of the plan year unpredictable contingent event benefits reduced under section 436(f)(3) if the updated to take into account or the plan amendment, as well as the reduction would be sufficient to avoid contributions for the prior plan year and increase in the funding target the applicable limitation based on the section 430(f) elections with respect to attributable to any unpredictable presumed AFTAP. The final regulations the plan’s prefunding and funding contingent event benefits that are provide rules for determining the standard carryover balances made permitted to be paid as a result of any amount of the reduction in balances that before the date of the change in the unpredictable contingent event that are similar to those under the proposed presumed AFTAP, and the new occurred, or plan amendment that has regulations. presumed adjusted funding target is taken effect, in the prior plan year to the The final regulations use the equal to the updated interim value of extent not taken into account in the presumed AFTAP and the interim value adjusted plan assets divided by the new prior plan year adjusted funding target of adjusted plan assets as of a date to presumed AFTAP. The reapplication of attainment percentage, and any other calculate a presumed adjusted funding the rules regarding the deemed election unpredictable contingent event benefits target as of that date. The presumed under section 436(f)(3) may require an that are permitted to be paid as a result adjusted funding target is then additional reduction in funding of any unpredictable contingent event compared to the interim value of balances if the amount of the reduction that occurred, or plan amendment that adjusted plan assets in order to in funding balances that is necessary to has taken effect, in the current plan year determine the amount of any deemed reach the applicable threshold to avoid to the extent not previously taken into reduction in the funding standard the application of the limitation under account in the presumed adjusted carryover balance and prefunding section 436(d) or (e) is greater than the funding target for the plan year. The balance under section 436(f)(3) that is amount that was initially reduced. Prior final regulations use the term inclusive made as of the first day of the plan year reductions of funding balances continue presumed adjusted funding target for (and, in certain circumstances, that may to apply. this value. The inclusive presumed be made later in the plan year). Pursuant to section 436(d)(2), during adjusted funding target is used to The interim value of adjusted plan any period in which the plan sponsor of calculate an inclusive presumed AFTAP assets is equal to the value of adjusted a plan is a debtor in a case under title by comparing it to the interim value of plan assets as of the first day of the plan 11, United States Code, or any similar adjusted plan assets, updated to take year, determined without regard to Federal or State law, no prohibited into account contributions for the prior future contributions and future elections payment may be paid if the plan’s plan year, prior section 436 with respect to the plan’s prefunding enrolled actuary has not yet certified the contributions for the current plan year, and funding standard carryover plan’s AFTAP for the plan year to be at and section 430(f) elections with respect balances under section 430(f) (for least 100 percent. The presumption to the plan’s prefunding and funding example, elections to add to the rules of section 436(h) do not apply for standard carryover balances made prefunding balance for the prior plan purposes of section 436(d)(2). before the date of the unpredictable

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contingent event or the date the plan unpredictable contingent event benefits issued. However, the limitations on amendment would take effect. are permitted to be paid, or a plan unpredictable contingent event benefits During the presumption period, the amendment takes effect, because the under section 436(b) and plan rules relating to the deemed election of plan sponsor makes a contribution amendments increasing benefit a collectively bargained plan to reduce described in section 436(b)(2) or (c)(2), liabilities under section 436(c) must be the funding standard carryover balance then the presumed adjusted funding applied during that period by treating and the prefunding balance must be target must be adjusted to reflect the the preceding year’s certified AFTAP as applied based on the inclusive increase in the funding target if it were a presumed AFTAP and presumed adjusted funding target and attributable to the unpredictable applying the rules for the presumption the updated interim value of adjusted contingent event benefits or the plan period as described in this preamble. plan assets. Thus, if, based on the amendment and the present value of the Thus, an inclusive presumed adjusted comparison of the updated interim section 436 contribution is included in funding target must be determined that value of adjusted plan assets and the the updated interim value of adjusted takes into account prior events inclusive presumed adjusted funding plan assets. For example, if a plan (including the unpredictable contingent target, a plan amendment with respect amendment would have caused the ratio event or plan amendment, any other to a collectively bargained plan can only of the updated interim value of adjusted unpredictable contingent event benefits take effect if the funding standard plan assets to the inclusive presumed that were permitted to be paid as a carryover balance and prefunding AFTAP to be less than 80 percent, then, result of any unpredictable contingent balance are reduced, then those after the contribution described in event that occurred, and any other plan balances must be reduced. A plan section 436(c)(2)(B) is made, the amendment that took effect, earlier sponsor of a plan that is not a presumed AFTAP would be 80 percent. during the plan year to the extent not collectively bargained plan (and, thus, is The adjustment to the presumed taken into account in the certified not required to reduce the funding adjusted funding target is made on the AFTAP for the plan year, and any standard carryover balance and the date the contribution is made, and that earlier section 436 contributions made prefunding balance) is permitted to date is a section 436 measurement date. for the plan year to the extent those reduce those balances in order to Similar rules apply to a contribution contributions were not taken into increase the updated interim value of described in section 436(e)(2). Thus, if account in the certified AFTAP). adjusted plan assets that is compared to benefit accruals are permitted to resume If after application of those rules the the inclusive presumed adjusted in a plan year because the plan sponsor plan would be treated as having an funding target. makes the contribution described in AFTAP below the applicable threshold Under the final regulations, if the section 436(e)(2), then the presumed (taking into account the increase in the ratio of the updated interim value of AFTAP will be increased to 60 percent. funding target attributable to the adjusted plan assets to the inclusive In this case, the adjustment to the unpredictable contingent event benefits presumed adjusted funding target is less presumed adjusted funding target is or the increase in liability attributable to than the applicable threshold under made on the date the contribution is the plan amendment), the unpredictable section 436(b) or 436(c), then the plan made, and that date is a section 436 contingent event benefits are not is not permitted to provide any benefits measurement date. permitted to be paid, and the plan attributable to the unpredictable The regulations also provide that if a amendment is not permitted to take contingent event, nor is the plan plan’s funding standard carryover effect, unless the plan sponsor makes a amendment permitted to take effect, balance or prefunding balance is contribution that would allow payment unless the plan sponsor makes a reduced as a result of applying the of the unpredictable contingent event contribution that would allow payment presumption rules, then the presumed benefits or would permit the plan of unpredictable contingent event AFTAP for the plan year is increased to amendment to go into effect. In the case benefits or would permit a plan reflect the higher interim value of where the plan sponsor makes section amendment increasing benefit liabilities adjusted plan assets resulting from the 436 contributions to avoid the to take effect under section 436(b)(2) or reduction in the funding standard application of the applicable benefit 436(c)(2). However, if, after application carryover balance or prefunding limitations, to the extent those of any reduction in the funding standard balance. For example, if a reduction in contributions would not be needed to carryover balance or prefunding balance the prefunding balance is made in an permit the payment of the unpredictable (whether mandatory or optional), the amount necessary to increase the contingent event benefits or for a plan ratio of the interim value of adjusted presumed AFTAP to 60 percent, then amendment increasing benefits to go plan assets to the inclusive presumed the presumed AFTAP is changed to 60 into effect based on a subsequent adjusted funding target is greater than or percent. The date of the event that certification of the AFTAP for the equal to the applicable threshold under causes the reduction is a section 436 current plan year that takes into account section 436(b) or 436(c), then the plan measurement date. the increase in the funding target is not permitted to limit the payment of 4. Periods for which no presumptions attributable to those unpredictable unpredictable contingent event benefits, apply to the plan. contingent event benefits or the increase nor is the plan permitted to restrict a Under the regulations, if no in liability attributable to that plan plan amendment increasing benefit presumptions under section 436(h) amendment, the excess section 436 liabilities from becoming effective based apply to a plan during a period and the contributions are recharacterized as on an expectation that the limitations plan’s enrolled actuary has not yet employer contributions and taken into under section 436(b) or 436(c) will issued the certification of the plan’s account under section 430 for the apply following the enrolled actuary’s actual AFTAP for the plan year, the plan current plan year. certification of the AFTAP for the plan is not permitted to limit the payment of 5. Periods following certification of year. prohibited payments under section AFTAP. 3. Updated determination of 436(d) or the accrual of benefits under Under the final regulations, the rules presumed AFTAP. section 436(e) based on an expectation of operation that apply during a period If, in accordance with the rules of that those sections will apply to the for which a section 436(h) presumption operation under the final regulations, plan once an actuarial certification is is in effect no longer apply for a plan

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year on and after the date the enrolled that is necessary to reach the applicable amendment (and including any earlier actuary for the plan issues a certification threshold to avoid the application of the section 436 contributions for the plan of the AFTAP of the plan for the current benefit limitation is less than the year as plan assets). As applied with plan year, provided that the certification amount that was reduced, then the prior respect to the limitation on plan is issued before the first day of the 10th reduction continues to apply. Similarly, amendments, this rule ensures that the month of the plan year. For example, if the amount of the reduction in limitation applies in a similar fashion the plan must provide that section funding balances that is necessary to regardless of whether a benefit increase 436(d) applies for distributions with reach the applicable threshold to avoid is effectuated through a series of annuity starting dates on and after the the application of the corresponding amendments or through a single date of that certification using the benefit limitation exceeds the remaining amendment. In the absence of such a certified AFTAP of the plan for the plan amount of the funding balances, then rule, the limitation on plan amendments year. Similarly, the plan must provide the prior reduction continues to apply could be avoided through a series of that any prohibition on accruals under and no further reduction is made. amendments each of which provides section 436(e) as a result of the enrolled The enrolled actuary’s certification of only a small portion of the aggregate actuary’s certification that the AFTAP of the AFTAP for the plan for the plan year increase. the plan for the plan year is less than does not affect unpredictable contingent H. Determination of AFTAP and 60 percent is effective as of the date of event benefits that were permitted to be Presumed AFTAP the certification and that any paid for events that occurred during the prohibition on accruals ceases to be prior periods for which a presumption 1. Determination of presumed AFTAP effective on the date the enrolled under section 436(h) applied. In based on prior plan year’s certified actuary issues a certification that the addition, the enrolled actuary’s AFTAP. AFTAP of the plan for the plan year is certification of the AFTAP for the plan The final regulations provide rules for at least 60 percent. In addition, in the for the plan year does not affect a plan the determination of the presumed case of a plan that has been issued a amendment that increases the liability AFTAP under section 436(h)(1) that are certification of the plan’s AFTAP for a for benefits where the amendment was similar to the rules under the proposed plan year by the plan’s enrolled actuary, permitted to first take effect during the regulations. Thus, if a limitation under the plan sponsor must comply with the prior periods for which a presumption section 436 applied in the prior plan requirements of sections 436(b) and (c) under section 436(h) applies. Similarly, year based on a certified AFTAP during for an unpredictable contingent event the enrolled actuary’s certification of the that plan year, the presumed AFTAP as that occurs or a plan amendment that AFTAP for the plan for the plan year of the first day of the current plan year would take effect on or after the date of does not affect prohibited payment is equal to the AFTAP for the prior plan the enrolled actuary’s certification. distributions with annuity starting dates year. before the certification and does not Thus, the plan administrator must The final regulations modify the rule require a cessation of accruals prior to determine if the AFTAP is at or above in the proposed regulations that would the applicable threshold, taking into the date of that certification. However, under the final regulations, have permitted a certified AFTAP that account the increase in the funding if a plan does not pay benefits is made on or after the first day of the target that would be attributable to the attributable to an unpredictable 10th month of the prior plan year to be unpredictable contingent event or plan contingent event or plan amendment used as the basis for the presumed amendment, any other unpredictable because of the application of a AFTAP in the current plan year (in lieu contingent event benefits that were presumption under section 436(h) for a of using the deemed ‘‘under 60 percent’’ permitted to be paid as a result of any plan year, the plan must provide for AFTAP that applied for the prior plan unpredictable contingent event that benefits that were not previously paid year in such a case). Under the final occurred (and any other plan (or accrued) if such benefits would be regulations, such a late prior plan year amendment that went into effect) earlier permitted under the rules of section 436 certification is permitted to be so used during the plan year to the extent not based on the certified actual AFTAP for only if the certification took into taken into account in the certified that plan year, taking into account the account any unpredictable contingent AFTAP for the plan year, and any increase in the funding target that event benefits that are permitted to be earlier section 436 contributions made would be attributable to the paid based on unpredictable contingent for the plan year to the extent those unpredictable contingent event benefits events that occurred and plan contributions were not taken into or increase in liability due to the plan amendments that went into effect prior account in the certified AFTAP. amendment. to that late certification (along with any After the AFTAP for a plan year is The final regulations clarify that, for associated section 436 contributions). certified by the plan’s enrolled actuary, any plan year in which a plan is In addition, the regulations provide the deemed election to reduce funding providing benefits with respect to rules for the application of the balances must be reapplied based on the multiple unpredictable contingent presumptions if the plan actuary did not actual funding target for the year events occurring within the plan year or certify the AFTAP in the prior plan (provided the certification is issued plan amendments taking effect within year, but that prior plan year ended before the first day of the 10th month of the plan year, the section 436(b) before the first day of the 10th month of the plan year). This reapplication of the restriction on unpredictable contingent the plan year (so that section 436(h)(2) deemed election rules may require an event benefits and the section 436(c) did not apply in that prior plan year). additional reduction in funding restriction on plan amendments are In such a case, the presumed AFTAP balances if the amount of the reduction applied with respect to each that applied as of the end of the prior in funding balances that is necessary to unpredictable contingent event or plan year is treated as a certified AFTAP reach the applicable threshold to avoid amendment by treating the increase in for that plan year which is used for the application of the limitations under the funding target attributable to that purposes of the presumptions in the section 436(d) or (e) is greater than the event or amendment as if it included the current year. amount that was reduced. If the amount increase in the funding target 2. Change in presumed AFTAP on of the reduction in funding balances attributable to any earlier event or first day of the 4th month.

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The final regulations provide rules for for which the actuary has not issued a As an alternative to certifying a the application of section 436(h)(3) that certification before the first day of the specific number for the plan’s AFTAP, are similar to the proposed regulations. 10th month of the plan year is the proposed regulations would have Some comments suggested that section conclusively presumed to have an provided that the enrolled actuary is 436(h)(3) applies on a limitation by AFTAP of less than 60 percent permitted to certify during the first 9 limitation basis (with the result that a beginning on that date. These rules are months of a plan year that the plan’s plan could have different presumed unchanged from the proposed AFTAP for that year is within a AFTAPs among the various limitations). regulations. percentage ‘‘range’’ that is either (i) 60 However, the IRS and the Treasury 4. Rules regarding certifications and percent or higher, but less than 80 Department believe that applying a range certifications. percent, (ii) 80 percent or higher, or (iii) single presumed AFTAP for all The proposed regulations would have 100 percent or higher. The final purposes reflects the statutory language provided that the enrolled actuary’s regulations adopt this alternative and of section 436(h)(3) and provides a certification of the AFTAP for a plan provide that such a ‘‘range’’ certification consistent set of rules for applying the year must be made in writing, must be ends the application of the limitations during the period following provided to the plan administrator, and presumptions, but only if the enrolled the first day of the 4th month of the plan must certify the plan’s AFTAP for the actuary follows up with a certification year. This interpretation is also essential plan year. The final regulations specify of the specific AFTAP and that the for purposes of the rule under which that the certification must also set forth certified specific AFTAP is within the benefits with respect to unpredictable the value of plan assets, the prefunding range of the earlier certification. In contingent events that previously balance, the funding standard carryover addition, the final regulations permit a occurred during the plan year and plan balance, the value of the funding target range certification of under 60 percent. amendments that previously took effect used in the determination, the aggregate The proposed regulations would have during the plan year are taken into amount of annuity purchases included provided that the specific AFTAP must account on a combined basis for in the adjusted value of plan assets and be certified before the first day of the purposes of applying the limitations the adjusted funding target, the 10th month of that year. In response to with respect to subsequent events or unpredictable contingent event benefits concerns raised by commenters, the amendments, such as a subsequent permitted to be paid for unpredictable final regulations provide that, if the unpredictable contingent event. contingent events that occurred during plan’s enrolled actuary has issued a Under the final regulations, if the the current plan year that were taken timely range certification for a plan AFTAP for the prior plan year was at into account for the current plan year year, then the specific AFTAP is least 60 percent but less than 70 percent (including with any associated section permitted to be certified at any time or was at least 80 percent but less than 436 contribution), the plan amendments prior to the end of the plan year. 90 percent, and the actuary has not that went into effect in the current plan However, if the plan’s enrolled actuary certified the AFTAP for the current plan year that were taken into account for the has issued a range certification for the year before the first day of the 4th current plan year (including with any plan year but does not issue a month of the current plan year, then the associated section 436 contribution), certification of the specific AFTAP for presumed AFTAP for the current plan and any other relevant factors. The the plan by the last day of that plan year is 10 percentage points lower than actuarial assumptions and funding year, the AFTAP for the plan is the AFTAP for the prior plan year. As methods used in the calculation for the retroactively deemed to be less than 60 under the proposed regulations, this 10 certification must be the actuarial percent as of the first day of the 10th percentage point reduction will also assumptions and funding methods used month of the plan year. apply as of the date the actuary certifies for the plan for purposes of determining If this range certification alternative is the AFTAP for the prior plan year, even the minimum required contributions followed, then the plan is treated as if that certification is on or after the first under section 430 for the plan year. having a certified AFTAP at the smallest day of the 4th month of the current plan Thus, if the actuary who determines the value within the applicable range. For year. In either case, the date of the 10 minimum required contributions for the example, if the enrolled actuary percentage point reduction is a section plan year is not the same actuary who certified that the AFTAP was more than 436 measurement date. certified the AFTAP for the plan year, 60 percent but less than 80 percent, then The final regulations also provide that then the second actuary must either the plan is treated as having an AFTAP the 10 percentage point reduction apply the actuarial assumptions and of 60 percent for purposes of applying applies in the first year that section 436 methods used by the first actuary or the limitations of section 436(b) until applies to the plan if the AFTAP for the must issue a revised certification for the the date of the specific AFTAP prior plan year was at least 70 percent plan year. See section VII.H.5 of this certification. In such a case, if there is but less than 80 percent. This rule preamble for a description of the an unpredictable contingent event or a reflects an interpretation of section consequences of a revised certification. plan amendment is adopted that 436(h)(3)(A) (providing for a 10 Some commenters requested that an increases liability for benefits, percentage point reduction in the enrolled actuary be permitted to certify unpredictable contingent event benefits AFTAP if a limitation under section 436 the AFTAP for a plan year based on a cannot be paid and the plan amendment would have applied in the prior plan ‘‘roll forward’’ of prior year actuarial cannot take effect unless the plan year) under which the determination of results with appropriate adjustments for sponsor makes a contribution described whether a limitation under section 436 subsequent changes. The final in section 436(b)(2) or 436(c)(2). If the would have applied in the prior plan regulations do not provide for such an plan sponsor makes a contribution year is made by assuming that section alternative to estimate the AFTAP under section 436(b)(2) or section 436 was effective in that prior plan year. because the AFTAP must be based on 436(c)(2), the final regulations provide 3. Change in presumed AFTAP on the funding target for the current plan that the contribution is recharacterized first day of 10th month for plans with year and section 436 does not provide as a regular employer contribution that no current year certification. any rules to address discrepancies is taken into account under section 430 The final regulations reflect the rules between an estimated AFTAP and an for the current plan year to the extent it of section 436(h)(2), under which a plan actual AFTAP for a plan year. is determined that the contribution was

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not needed to avoid the application of the difference between the AFTAP for a AFTAP under section 436(h) continue the benefit limit, based on the plan year and the later revised to apply from and after the date of the subsequent calculation of the specific determination of that percentage is the prior certification until the date of the AFTAP. result of certain specified actions, then subsequent certification. The final regulations specify that the the change in the AFTAP is deemed to The final regulations provide that, in enrolled actuary is not permitted to be an immaterial change. The proposed the case of an immaterial change, the certify the AFTAP based on a value of regulations would have provided that revised percentage applies assets that includes contributions the specified actions are additional prospectively. For this purpose, in the receivable for the prior plan year that contributions for the preceding year or case of a change that would be a have not actually been made as of the a plan sponsor’s election to reduce the material change but for the rule deeming date of the certification. However, this prefunding or funding standard it to be an immaterial change, the rule does not apply to certifications that carryover balance after the date of the revised percentage must be applied are made for plan years beginning before certification. The final regulations add beginning with the date of the event that January 1, 2009. Thus, for a certification to this list, including adding a plan gave rise to the need for the updated with respect to 2008, the enrolled sponsor’s election to apply the certification. As under the proposed actuary is permitted to take in account prefunding balance or funding standard regulations, an immaterial change does contributions for 2007 that are carryover balance to offset the prior plan not change the inapplicability of the reasonably expected but have not yet year’s minimum required contribution, presumptions under section 436(h) for been made by the plan sponsor at the a change in funding method or actuarial the plan year prior to the date of the time of the certification. However, if the assumptions (where such change subsequent certification. plan sponsor does not make those required actual approval of the I. Determination of Adjusted Funding contributions, the enrolled actuary’s Commissioner, rather than deemed Target Attainment Percentage certification will be incorrect. approval), and an unpredictable 5. Change in certified AFTAP. contingent event or plan amendment for For purposes of section 436, the If the enrolled actuary for the plan which a section 436 contribution was funding target means the funding target provides a certification of the AFTAP made. under section 430(d) or section 430(i), for the plan year (including a range The final regulations provide rules as applicable to the plan for a plan year, certification) and that certified requiring a recertification of the AFTAP and the FTAP is determined under the percentage is superseded by a in certain situations. For example, if the same rules that apply under section subsequent determination of the AFTAP plan would have a material change in 430(d). for that plan year, that later percentage the AFTAP as a result of one of the The AFTAP for any plan year is the generally must be applied for the period changes described in the prior fraction (expressed as a percentage), the beginning with the date of the first paragraph, the change is deemed numerator of which is the adjusted plan certification. The subsequent immaterial only if the actuary recertifies assets and the denominator of which is determination could be the correction of the AFTAP for the plan year as soon as the adjusted funding target. The a prior incorrect certification (including practicable thereafter, taking into adjusted plan assets equals the value of a certification for a plan year beginning account the relevant event. Similarly, if plan assets, decreased by the plan’s in 2008 which assumed an employer the plan sponsor is making a section 436 funding standard carryover balance and contribution that was not made) or it contribution in the amount needed to prefunding balance and increased by the could be an update of a prior correct bring the AFTAP up to a relevant aggregate amount of purchases of certification to take into account threshold (60 or 80 percent), then the annuities for participants and subsequent events, such as plan actuary must recertify the AFTAP as 60 beneficiaries (other than participants amendments, additional contributions, or 80 percent. The regulations also who, at the time of the purchase, were or elections under section 430(f). The provide that the plan administrator is highly compensated employees (as implications of such a change depend permitted to request an updated defined in section 414(q), which on whether the change is a material certification of AFTAP in other definition includes highly compensated change or an immaterial change. situations, such as where the employer former employees described in For this purpose, the regulations makes a section 436 contribution in the § 1.414(q)–1T, Q&A–4)) which were define a change of AFTAP as a material amount of the increase in the funding made by the plan during the preceding change if plan operations with respect target attributable to the unpredictable 2 plan years, to the extent not included to benefits that are addressed by section contingent event benefits or the plan in plan assets under section 430. The 436, taking into account any actual amendment. final regulations provide that the contributions and elections under The regulations provide that a adjusted funding target equals the section 430(f) made by the plan sponsor material change will result in the plan funding target for the plan year based on the prior certified percentage, not satisfying the qualification rules. If (determined without regard to the at- would have been different based on the the plan was operated in accordance risk rules under section 430(i)), subsequent determination of the plan’s with the prior certification of the increased by the same annuity AFTAP for the plan year. A change in AFTAP for the plan year, the plan will purchases that were added to the assets a plan’s AFTAP for a plan year can be not have satisfied the requirements of in determining adjusted plan assets. a material change even if the only section 401(a)(29) and section 436. In If the FTAP for a plan year, impact of the change occurs in the the case of a material change where the determined without regard to the following plan year under the rules for plan was operated in accordance with subtraction of the funding standard determining the presumed AFTAP in the subsequent certification of the carryover balance and the prefunding that following year. AFTAP during the period of time the balance from the value of plan assets in The regulations specify that a change prior certification applied, then the plan accordance with section 436(f), would in an AFTAP that is not a material will not have been operated in be 100 percent or more, then, for change as described in the preceding accordance with its terms. Furthermore, purposes of section 436, the value of net paragraph is an immaterial change. In the regulations provide that the rules plan assets used in the determination of addition, the regulations provide that if requiring application of a presumed the FTAP (and hence the AFTAP) is

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determined without regard to any In any case in which the plan’s a certification of the plan’s AFTAP by subtraction of funding balances under enrolled actuary has not issued a the plan’s enrolled actuary. In section 430(f)(4). The final regulations certification of the AFTAP of the plan particular, commenters asked whether reflect the transition rule of section for the 2007 plan year using this rule, there was any legal obligation to provide 436(j)(3)(B) under which a lower the AFTAP of the plan for the first plan a certification, whether an actuary could percentage is substituted for 100 percent year beginning in 2008 is presumed to intentionally delay providing the for purposes of the rule described in the be less than 60 percent until the AFTAP certification, and whether the plan preceding sentence. However, this of the plan for the 2007 plan year has administrator could direct the transition is only available if the plan’s been certified or the AFTAP of the plan certification to be delayed (or delay FTAP for each prior year is above the for the first plan year beginning in 2008 requesting a certification where the transition percentage. This latter has been certified. This rule applies for plan’s actuary would not provide a requirement was unchanged by WRERA. purposes of sections 436(b) and 436(c) certification until so requested by the The final regulations also provide at the beginning of the first plan year plan administrator). These final rules for determining the AFTAP for the beginning in 2008 and applies for regulations do not include any special prior plan year in the case of the first purposes of sections 436(d) and 436(e) rules relating to these comments, but plan year beginning in 2008. These rules as of the first day of the 4th month of these comments may be considered in are the same as under the proposed the first plan year beginning in 2008. connection with future proposed regulations, except that the proposed The special rules permitting range regulations. In addition, the Treasury regulations would have allowed the certifications for plan years beginning Department and the IRS will be special rules to apply to the first after 2007 do not apply to the 2007 plan coordinating with the Department of effective plan year (which could be later year. Labor to consider the circumstances in than 2008 in the case of a plan The final regulations differ from the which the power to delay issuance of a described in sections 104 through 106 of proposed regulations in the transition certification may result in fiduciary PPA ’06). rules that apply for the determination of responsibilities in the administration of Under the rules for determining the a plan’s AFTAP for the pre-effective the plan, rather than being merely AFTAP for the plan year preceding the plan year in the case of a plan described ministerial. Section 1.411(d)–4, Q&A–4(a) first plan year beginning in 2008, the in sections 104 through 106 of PPA ’06. provides generally that a plan that FTAP for the preceding plan year is In such a case, the AFTAP is determined for that plan year in the permits the employer, either directly or determined by substituting the current indirectly, through the exercise of liability for the funding target. The same manner as for a plan to which section 430 applies to determine the discretion, to deny a participant a transition rules for determining the section 411(d)(6) protected benefit value of plan assets are the same under plan’s minimum required contribution, except that the value of plan assets that provided under the plan for which the section 436 as apply under section participant is otherwise eligible violates 430(d). Thus, the value of plan assets is forms the FTAP numerator is determined without subtraction of the the requirements of section 411(d)(6). In determined under section 412(c)(2) as in addition, pursuant to that regulation, a effect for the 2007 plan year (except that funding standard carryover balance or the credit balance under the funding plan that permits employer discretion to the value of plan assets prior to deny the availability of a section subtraction of the plan’s funding standard account.9 The regulations do not include any 411(d)(6) protected benefit violates the standard account credit balance definitely determinable requirement of described below can neither be less than special rules authorized under section 436(k) (relating to the determination of section 401(a). Section 1.411(d)–4, 90 percent of the fair market value of Q&A–4(b) provides an exception to this plan assets nor greater than 110 percent the AFTAP for a plan that uses a valuation date other than the first day of general rule for limited discretion with of the fair market value of plan assets on respect to the ministerial or mechanical the valuation date for that plan year). If the plan year). Those rules, based on the rules described in Notice 2008–21, will administration of the plan. Section a plan has a funding standard account 1.411(d)–4, Q&A–6(b) provides that a credit balance as of the valuation date be included in future proposed regulations. See § 601.601(d)(2) relating plan may not limit the availability of for the 2007 plan year, that balance section 411(d)(6) protected benefits must be subtracted from the asset value to objectives and standards for publishing regulations, revenue rulings permitted under the plan based on described in this preamble as of that objective conditions that are within the date (unless the value of plan assets is and revenue procedures in the Internal Revenue Bulletin. employer’s discretion. As an example of greater than or equal to 90 percent of the such a provision, the regulation states plan’s current liability determined J. Timeliness of Certification of a Plan’s that the availability of section 411(d)(6) under section 412(l)(7) (as in effect prior AFTAP protected benefits in a plan may not be to PPA ’06) on the valuation date for the A number of comments were received conditioned on a determination with 2007 plan year). However, if the raising issues concerning potential respect to the level of the plan’s funded employer makes an election to reduce delays in the completion and delivery of status because the amount of the plan’s some or all of the funding standard funding is within the employer’s carryover balance as of the first day of 9 Section 436(m) provides for special rules to discretion. the first plan year beginning in 2008 in apply in determining a plan’s AFTAP for the Future proposed regulations are accordance with section 430(f)(5), then preceding plan year only for plan years beginning expected to address the interaction of the present value (determined as of the during 2008. Accordingly, the regulations limit the the rules of section 436 and the rules of use of the special rule under which the plan’s FTAP valuation date for the prior plan year is determined based on the plan’s current liability § 1.411(d)–4 that relate to employer using the valuation interest rate for that to the determination of the plan’s FTAP for the discretion. These future proposed prior year) of the amount so reduced is 2007 plan year, even for a plan described in regulations are expected to conform the not treated as part of the funding sections 104 through 106 of PPA ’06 for which rules of § 1.411(d)–4, Q&A–6(b), section 430 does not apply for purposes of standard account credit balance when determining a plan’s minimum required regarding employer discretion in plan that balance is subtracted from the value contribution until a plan year after the 2008 plan funding to the requirements of section of net plan assets. year. 436. These future proposed regulations

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are also expected to address the extent after January 1, 2010. For plan years burden imposed by the collection of to which § 1.411(d)–4, Q&A–4(b) (under beginning before January 1, 2010, plans information contained in these which a plan may permit limited are permitted to rely on the provisions regulations is 1.5 hours per respondent. discretion with respect to ministerial set forth in these final regulations for Moreover, most of this burden is acts) applies with respect to the purposes of satisfying the requirements attributable to the requirement for a certification of the plan’s AFTAP. of section 436. Alternatively, for plan qualified defined benefit plan’s enrolled years beginning before January 1, 2010, Effective/Applicability Date actuary to provide a timely certification plans are permitted to rely on the of the plan’s AFTAP for each plan year The final regulations under section proposed regulations under section 436 to avoid certain benefit restrictions, 430 apply to plan years beginning on or (REG–113891–07, 72 FR 50544) for which is imposed by section 436(h) of after January 1, 2010, regardless of purposes of satisfying the requirements the Code. In addition, these regulations whether section 430 applies to of section 436. provide for several written elections to determine the minimum required be made by the plan sponsor upon contribution for the plan year. For plan Section 1107 of PPA ’06 and Code Section 411(d)(6) occasion; these written elections will years beginning before January 1, 2010, require minimal time to prepare. plans are permitted to rely on these final Under section 1107 of PPA ’06, a plan Accordingly, a regulatory flexibility regulations for purposes of satisfying the sponsor is permitted to delay adopting analysis is not required. Pursuant to requirements of section 430. This a plan amendment pursuant to the section 7805(f) of the Code, the notice reliance applies section by section enactment of section 436 (or pursuant to of proposed rulemaking preceding these under the final regulations. these regulations) until the last day of regulations was submitted to the Chief Alternatively, for plan years beginning the first plan year beginning on or after Counsel for Advocacy of the Small before January 1, 2010, plans are January 1, 2009. If section 1107 of PPA Business Administration for comment permitted to rely on the proposed ’06 applies to an amendment of a plan, on its impact on small business. regulations under section 430(d), (f), (g), section 1107 provides that the plan does (h)(2), and (i) (REG–139236–07, 72 FR not fail to meet the requirements of Drafting Information 74215; REG–113891–07, 72 FR 50544) section 411(d)(6) by reason of such The principal authors of these for purposes of applying the rules of amendment, except as otherwise regulations are Michael P. Brewer, section 430. provided by the Secretary of the Lauson C. Green, and Linda S.F. 11 Section 436 generally applies to plan Treasury. For example, section Marshall, Office of Division Counsel/ years beginning on or after January 1, 411(d)(6) relief would be available for Associate Chief Counsel (Tax Exempt 2008. The applicability of section 436 plan amendments that would prohibit and Government Entities). However, for purposes of determining the single sum or other optional forms of other personnel from the IRS and the minimum required contribution is benefit that include prohibited Treasury Department participated in the delayed for certain plans in accordance payments if the plan’s AFTAP was less development of these regulations. with sections 104 through 106 of PPA than 60 percent, in accordance with ’06. In the case of a collectively section 436(d) and § 1.436–1(d) of these List of Subjects bargained plan that is maintained regulations. The IRS and the Treasury 26 CFR Part 1 pursuant to one or more collective Department are reviewing whether bargaining agreements between sample plan amendments should be Income taxes, Reporting and employee representatives and one or issued with respect to section 436 and recordkeeping requirements. more employers ratified before January the § 1.436–1 regulations. 26 CFR Part 602 1, 2008, section 436 does not apply to Special Analyses plan years beginning before the earlier Reporting and recordkeeping of January 1, 2010, or the later of the It has been determined that this requirements. date on which the last such collective Treasury Decision is not a significant Adoption of Amendments to the bargaining agreement relating to the regulatory action as defined in Regulations plan terminates 10 (determined without Executive Order 12866. Therefore, a regard to any extension thereof agreed to regulatory assessment is not required. It ■ Accordingly, 26 CFR parts 1 and 602 after August 17, 2006), or the first day has also been determined that section are amended as follows: of the first plan year to which section 553(b) of the Administrative Procedure PART 1—INCOME TAXES 436 would otherwise apply. In the case Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby of a plan with respect to which a ■ Paragraph 1. The authority citation certified that the collection of collective bargaining agreement applies for part 1 continues to read in part as information imposed by these to some, but not all, of the plan follows: regulations will not have a significant participants, the plan is considered a Authority: 26 U.S.C. 7805 * * * collectively bargained plan if it is economic impact on a substantial considered a collectively bargained plan number of small entities. The estimated ■ Par. 2. Section 1.430(d)–1 is added to under the rules that apply for purposes read as follows: 11 Except to the extent permitted under section of section 436(f)(3)(C) described in 411(d)(6) and § 1.411(d)–3 or 1.411(d)–4, or under section VII.A.7 of this preamble. § 1.430(d)–1 Determination of target a statutory provision such as section 1107 of PPA normal cost and funding target. The final regulations under section ’06, section 411(d)(6) prohibits a plan amendment 436 apply to plan years beginning on or that decreases a participant’s accrued benefits or (a) In general—(1) Overview. This that has the effect of eliminating or reducing an section sets forth rules for determining early retirement benefit or retirement-type subsidy, 10 As provided in section 113(b)(2) of PPA ’06, or eliminating an optional form of benefit, with a plan’s target normal cost and funding any plan amendment made pursuant to a collective respect to benefits attributable to service before the target under sections 430(b) and 430(d), bargaining agreement relating to the plan which amendment. However, an amendment that including guidance relating to the rules amends the plan solely to conform to any eliminates or decreases benefits that have not yet regarding actuarial assumptions under requirement added by section 436 is not treated as accrued does not violate section 411(d)(6), provided a termination of the collective bargaining that the amendment is adopted and effective before sections 430(h)(1), 430(h)(4), and agreement. the benefits accrue. 430(h)(5). Section 430 and this section

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apply to single employer defined benefit and (e)(2) for the determination of the prefunding balance and the funding plans (including multiple employer target normal cost for a plan that is in standard carryover balance under plans as defined in section 413(c)) that at-risk status. section 430(f)(4)(B) and § 1.430(f)–1(c); are subject to section 412, but do not (ii) Benefits allocated to a plan year. and apply to multiemployer plans (as The benefits that accrue, are earned, or (B) The denominator of which is the defined in section 414(f)). For further are otherwise allocated to service for the funding target of the plan for the plan guidance on actuarial assumptions, see plan year are based on the actual year (determined without regard to the § 1.430(h)(2)–1 (relating to interest rates) benefits accrued, earned, or otherwise at-risk rules of section 430(i) and and §§ 1.430(h)(3)–1 and 1.430(h)(3)–2 allocated to service for the plan year § 1.430(i)–1). (relating to mortality tables). See also through the valuation date and benefits (ii) Determination of funding target § 1.430(i)–1 for the determination of the expected to accrue, be earned, or be attainment percentage for plans with funding target and the target normal cost otherwise allocated to service for the delayed effective dates. If section 430 for a plan that is in at-risk status. plan year for the period from the does not apply for purposes of (2) Organization of regulation. valuation date through the end of the determining the plan’s minimum Paragraph (b) of this section sets forth plan year. The benefits that are allocated required contribution for a plan year certain definitions that apply for to the plan year under the rules of that begins on or after January 1, 2008 purposes of section 430. Paragraph (c) of paragraph (c) of this section include any (as is the case for a plan described in this section provides rules regarding increase in benefits during the plan year section 104, 105, or 106 of the Pension which benefits are taken into account in that is attributable to increases in Protection Act of 2006 (PPA ’06), Public determining a plan’s target normal cost compensation for the current plan year Law 109–280 (120 Stat. 780)), then the and funding target. Paragraph (d) of this even if that increase in benefits is with funding target attainment percentage is section sets forth the rules regarding the respect to benefits attributable to service determined for that plan year in plan provisions that are taken into performed in a preceding plan year. In accordance with the rules of paragraph account in making these determinations, addition, the benefits that are allocated (b)(3)(i) of this section in the same and paragraph (e) of this section to the plan year under the rules of manner as for a plan to which section provides rules on the plan population paragraph (c) of this section include any 430 applies to determine the plan’s that is taken into account for this increase in benefits during the plan year minimum required contribution, except purpose. Paragraph (f) of this section that arises on account of mandatory that the value of plan assets that forms provides rules relating to the actuarial employee contributions (within the the numerator under paragraph assumptions and the plan’s funding meaning of § 1.411(c)–1(c)(4)) that are (b)(3)(i)(A) of this section is determined method that are used to determine made during the plan year. without subtraction of the funding present values. Paragraph (g) of this (iii) Special adjustments—(A) In standard carryover balance or the credit section contains effective/applicability general. The target normal cost of the balance under the funding standard dates and transition rules. plan for the plan year (determined account. (3) Special rules for multiple under paragraph (b)(1)(i) of this section) (iii) Special rule for plans with zero employer plans. In the case of a multiple is adjusted (not below zero) by adding funding target. If the funding target of employer plan to which section the amount of plan-related expenses the plan is equal to zero for a plan year, 413(c)(4)(A) applies, the rules of section expected to be paid from plan assets then the funding target attainment 430 and this section are applied during the plan year and subtracting the percentage under this paragraph (b)(3) is separately for each employer under the amount of mandatory employee equal to 100 percent for the plan year. plan, as if each employer maintained a contributions (within the meaning of (4) Present value. The present value of separate plan. Thus, the plan’s funding § 1.411(c)–1(c)(4)) that are expected to a benefit (including a portion of a target and target normal cost are be made during the plan year. benefit) with respect to a participant computed separately for each employer (B) Plan-related expenses. [Reserved] that is taken into account under the under such a multiple employer plan. In (2) Funding target. For a plan that is rules of paragraph (c) of this section is the case of a multiple employer plan to not in at-risk status under section 430(i) determined as of the valuation date by which section 413(c)(4)(A) does not for a plan year, the funding target of the multiplying the amount of that benefit apply (that is, a plan described in plan for the plan year is the present by the probability that the benefit will section 413(c)(4)(B) that has not made value (determined as of the valuation be paid at a future date and then the election for section 413(c)(4)(A) to date) of all benefits under the plan that discounting the resulting product using apply), the rules of section 430 and this have been accrued, earned, or otherwise the appropriate interest rate under section are applied as if all participants allocated to years of service prior to the § 1.430(h)(2)–1. The probability that the in the plan were employed by a single first day of the plan year under the benefit will be paid with respect to the employer. applicable rules of this section, participant at such future date is (b) Definitions—(1) Target normal including paragraph (c)(1)(ii)(B), (C), or determined using the actuarial cost—(i) In general. For a plan that is (D) of this section. See § 1.430(i)–1(c) assumptions that satisfy the standards of not in at-risk status under section 430(i) and (e)(1) for the determination of the paragraph (f) of this section as to the for a plan year, subject to the funding target for a plan that is in at-risk probability of future service, adjustments described in paragraph status. advancement in age, and other events (b)(1)(iii) of this section, the target (3) Funding target attainment (such as death, disability, termination of normal cost of the plan for the plan year percentage—(i) In general. Except as employment, and selection of optional is the present value (determined as of otherwise provided in this paragraph form of benefit) that affect whether the the valuation date) of all benefits under (b)(3), the funding target attainment participant or beneficiary will be the plan that accrue during, are earned percentage of a plan for a plan year is eligible for the benefit and whether the during, or are otherwise allocated to a fraction (expressed as a percentage)— benefit will be paid at that future date. service for the plan year under the (A) The numerator of which is the (c) Benefits taken into account—(1) In applicable rules of this section, value of plan assets for the plan year general—(i) Benefits earned or accrued. including paragraph (c)(1)(ii)(B), (C), or (determined under the rules of The benefits taken into account in (D) of this section. See § 1.430(i)–1(d) § 1.430(g)–1) after subtraction of the determining the target normal cost and

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the funding target under paragraph (b) percent of the increase in the accrued service at the particular age. In such a of this section are all benefits earned or benefit during the plan year. case, if the participant earns or is accrued under the plan that have not yet (C) Benefits that are based on service. expected to earn a full year of service been paid as of the valuation date, If the allocation of the benefit for during the plan year, the target normal including retirement-type and ancillary purposes of determining the funding cost is determined based on the benefits (within the meaning of target and the target normal cost is made projected Social Security benefit § 1.411(d)–3(g)). The benefits taken into under this paragraph (c)(1)(ii)(C), then payable at the particular age multiplied account are based on the participant’s or the portion of a participant’s benefit that by a fraction, the numerator of which is beneficiary’s status (such as active is taken into account in determining the one and the denominator of which is the employee, vested or partially vested funding target for a plan year is participant’s projected years of service terminated employee, or disabled determined by applying the function to at the particular age. participant) as of the valuation date, and the participant’s years of service as of (iii) Application of section 436 those benefits are allocated to the the first day of the plan year, and the limitations to funding target and target funding target or the target normal cost portion of the benefit that is taken into normal cost determination—(A) Effect under paragraph (c)(1)(ii) of this section. account in determining the target of limitation on unpredictable (ii) Allocation of benefits—(A) In normal cost for the plan year is contingent event benefits. The general. To the extent that the amount determined by applying that function to determination of the funding target and of a participant’s benefit that is expected the increase in the participant’s years of the target normal cost of a plan for a to be paid is a function of the accrued service during the plan year. For plan year must take into account any benefit, the allocation of the benefit for example, if a plan provides a post- limitation on unpredictable contingent purposes of determining the funding retirement death benefit of $500 per event benefits under section 436(b) with target and the target normal cost is made year of service, then the funding target respect to unpredictable contingent using the rules of paragraph (c)(1)(ii)(B) is determined based on a death benefit events which occurred before the of this section. To the extent that the of $500 multiplied by a participant’s valuation date, but must not take into amount of a participant’s benefit that is years of service at the beginning of the account anticipated funding-based expected to be paid is not a function of year, and if the participant earns or is limitations on unpredictable contingent the accrued benefit, but is a function of expected to earn a full year of service event benefits under section 436(b) with the participant’s years of service (or is during the plan year, the target normal respect to unpredictable contingent the excess of a function of the cost is based on the additional $500 in events which are expected to occur on participant’s years of service over a death benefits attributable to that or after the valuation date. function of the participant’s accrued additional year of service. (B) Effect of limitation on benefit), the allocation of the benefit for (D) Other benefits. If the allocation of applicability of plan amendments. See purposes of determining the funding the benefit for purposes of determining paragraph (d) of this section for rules target and the target normal cost is made the funding target and the target normal regarding the treatment of plan using the rules of paragraph (c)(1)(ii)(C) cost is made under this paragraph amendments that take effect during the of this section. To the extent that the (c)(1)(ii)(D), then the portion of a plan year taking into account the amount of a participant’s benefit that is participant’s benefit that is taken into restrictions under section 436(c). expected to be paid is not allocated account in determining the funding (C) Effect of limitation on prohibited under the rules of paragraph (c)(1)(ii)(B) target for a plan year is equal to the total payments. The determination of the or (C) of this section, the allocation of benefit multiplied by the ratio of the funding target and the target normal cost the benefit for purposes of determining participant’s years of service as of the of a plan for a plan year must take into the funding target and the target normal first day of the plan year to the years of account any limitation on prohibited cost is made using the rules of service the participant will have at the payments under section 436(d) with paragraph (c)(1)(ii)(D) of this section. time of the event that causes the benefit respect to any annuity starting date that (B) Benefits that are based on accrued to be payable (whether the benefit is was before the valuation date, but must benefits. If the allocation of the benefit expected to be paid at the time of that not take into account any limitation on for purposes of determining the funding decrement or at a future time), and the prohibited payments under section target and the target normal cost is made portion of the benefit that is taken into 436(d) for any annuity starting date on under this paragraph (c)(1)(ii)(B), then account in determining the target or after the valuation date (however, the the portion of a participant’s benefit that normal cost for the plan year is the determination must take into account is taken into account in the funding increase in the proportionate benefit benefit distributions under plan target for a plan year is determined by attributable to the increase in the provisions that allow new annuity applying the function to the accrued participant’s years of service during the starting dates with respect to benefit as of the first day of the plan plan year. For example, if a plan distributions that were limited under year, and the portion of the benefit that provides a Social Security supplement section 436(d)). is taken into account in determining the for a participant who retires after 30 (D) Effect of limitation on benefit target normal cost for the plan year is years of service that is equal to a accruals. Except as otherwise provided determined by applying that function to participant’s Social Security benefit, the in this paragraph (c)(1)(iii)(D), the the increase in the accrued benefit funding target with respect to the determination of the funding target of a during the plan year. For example, a benefit payable beginning at a particular plan for a plan year must take into benefit that is assumed to be payable at age (which reflects the probability of account any limitation on benefit a particular early retirement age in the retirement at that age) is determined accruals under section 436(e) applicable amount of 90 percent of the accrued based on the projected Social Security before the valuation date. However, if benefit is taken into account in the benefit payable at the particular age the plan terms provide for the automatic funding target in the amount of 90 multiplied by a fraction, the numerator restoration of benefit accruals as percent of the accrued benefit as of the of which is the participant’s years of permitted under § 1.436–1(a)(4)(ii)(B), beginning of the plan year, and that service as of the first day of the plan and the restoration of benefits as of the benefit is taken into account in the year and the denominator of which is valuation date will not be treated as target normal cost in the amount of 90 the participant’s projected years of resulting from a plan amendment under

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the rules of § 1.436–1(c)(3) (because the target and target normal cost the liability plan’s funding target and target normal period of limitation as of the valuation for benefits that are funded through cost and the contracts cannot be date does not exceed 12 months and the insurance contracts held by the plan, excluded from plan assets. adjusted funding target attainment and to include the corresponding (d) Plan provisions taken into percentage for the plan would not be insurance contracts in plan assets. account—(1) General rule—(i) Plan less than 60 percent taking into account Paragraph (c)(2)(ii) of this section sets provisions adopted by valuation date. the restored benefit accruals), then the forth an alternative to this general Except as otherwise provided in this determination of the funding target of a approach. A plan’s treatment of benefits paragraph (d), a plan’s funding target plan for a plan year must not take into funded through insurance contracts and target normal cost for a plan year account the limitation on benefit pursuant to this paragraph (c)(2) is part are determined based on plan accruals under section 436(e) for that of the plan’s funding method. provisions that are adopted no later than period. The determination of the target Accordingly, that treatment can be the valuation date for the plan year and normal cost of a plan for a plan year changed only with the consent of the that take effect on or before the last day must not take into account any Commissioner. of the plan year. For example, in the limitation on benefit accruals under (ii) Separate funding of insured case of a plan amendment adopted on section 436(e). Thus, if an employer benefits. As an alternative to the or before the valuation date for the plan wishes to take a plan freeze into account treatment described in paragraph year that has an effective date occurring in determining the target normal cost, (c)(2)(i) of this section, in the case of in the current plan year, the plan amendment is taken into account in the plan must be specifically amended benefits that are funded through determining the funding target and the to cease accruals. insurance contracts, the liability for (iv) Effect of other limitations of target normal cost for the current plan benefits provided under such contracts benefits—(A) Liquidity shortfalls. The year if it is permitted to take effect is permitted to be excluded from the determination of the funding target and under the rules of section 436(c) for the plan’s funding target and target normal the target normal cost of a plan for a current plan year, but the amendment is cost, provided that the corresponding plan year must take into account any not taken into account for the current insurance contracts are excluded from restrictions on payments under section plan year if it does not take effect until plan assets. This treatment is only 401(a)(32) on account of a liquidity a future plan year. available with respect to insurance shortfall (as defined in section 430(j)(4)) (ii) Plan provisions adopted after purchased from an insurance company for periods preceding the valuation date. valuation date. If a plan administrator The determination of the funding target licensed under the laws of a State and makes the election described in section and the target normal cost must not take only to the extent that a participant’s or 412(d)(2) with respect to a plan into account any restrictions on beneficiary’s right to receive those amendment, then the plan amendment payments under section 401(a)(32) on benefits is an irrevocable contractual is treated as having been adopted on the account of a liquidity shortfall or right under the insurance contracts, first day of the plan year for purposes possible liquidity shortfall for any based on premiums paid to the of this paragraph (d). Section 412(d)(2) period on or after the valuation date. insurance company prior to the applies to any plan amendment adopted (B) High 25 limitation. The valuation date. For example, in the case no later than 21⁄2 months after the close determination of the funding target and of a retired participant receiving of the plan year, including an the target normal cost of a plan for a benefits from an annuity contract in pay amendment adopted during the plan plan year must take into account any status under which no premiums are year. Thus, if an amendment is adopted restrictions on payments under required on or after the valuation date, after the valuation date for a plan year § 1.401(a)(4)–5(b) to highly compensated the liability for benefits provided by the (and no later than 21⁄2 months after the employees to the extent that benefits contract is permitted to be excluded close of the plan year), but takes effect were not paid or will not be paid from the plan’s funding target provided by the last day of the plan year, the because of a limitation that applied that the value of the contract is also amendment is taken into account in prior to the valuation date. If a benefit excluded from the value of plan assets. determining the plan’s funding target that was otherwise restricted was paid Similarly, in the case of an active or and target normal cost for the plan year prior to the valuation date but with deferred vested participant whose if the plan administrator makes the suitable security (such as an escrow benefits are funded by a life insurance election described in section 412(d)(2) account) provided to the plan in the or annuity contract under which further with respect to such amendment. event of a plan termination, the benefit premiums are required on or after the (iii) Determination of when an is treated as distributed for purposes of valuation date, the liability for benefits, amendment takes effect. For purposes of section 430 and this section. if any, that would be paid from the this paragraph (d)(1), the determination Accordingly, the funding target does not contract if no further premiums were to of whether an amendment that increases include any liability for the benefit and be paid (for example, if the contract benefits takes effect and when it takes the plan assets do not include the were to go on reduced paid-up status) is effect is determined in accordance with security. The determination of the permitted to be excluded from the the rules of section 436(c) and § 1.436– funding target and the target normal cost plan’s funding target and target normal 1(c)(5). For purposes of this paragraph of a plan for a plan year must not take cost, provided that the value of the (d)(1), in the case of an amendment that into account any restrictions on contract is excluded from the value of decreases benefits, the amendment takes payments under § 1.401(a)(4)–5(b) to plan assets. By contrast, if the plan effect under a plan on the first date on highly compensated employees that are trustee can surrender a contract to the which the benefits of any individual anticipated with respect to annuity insurer for its cash value, then the who is or could be a participant or starting dates on or after the valuation participant’s or beneficiary’s right to beneficiary under the plan would be date on account of the funded status of receive those benefits is not an less than those benefits would be under the plan. irrevocable contractual right and, the pre-amendment plan provisions if (2) Benefits provided by insurance— therefore, the liability for benefits the individual were on that date to (i) General rule. A plan generally is provided under the contract must be satisfy the applicable conditions for the required to reflect in the plan’s funding taken into account in determining the benefits. In either case, the

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determination of when an amendment (ii) Participants who are retired under used in making a certification of the takes effect is unaffected by an election the plan or who are otherwise no longer adjusted funding target attainment under section 412(d)(2). employed in the service of the percentage for a plan year must be the (2) Special rule for certain employer; and same as those disclosed on the actuarial amendments increasing liabilities. In (iii) All other individuals currently report under section 6059 (Schedule SB, the case of a plan amendment that is not entitled to benefits under the plan. ‘‘Single-Employer Defined Benefit Plan required to be taken into account under (2) Assumption regarding rehiring of Actuarial Information’’ of Form 5500, the rules of paragraph (d)(1) of this former employees—(i) Special exclusion ‘‘Annual Return/Report of Employee section because it is adopted after the for ‘‘rule of parity’’ cases. Certain Benefit Plan’’). valuation date for the plan year, the individuals may be excluded from the (ii) Changes in actuarial assumptions plan amendment must be taken into class of individuals described in and funding method. Actuarial account in determining a plan’s funding paragraph (e)(1)(ii) of this section. The assumptions established for a plan year target and target normal cost for the plan excludable individuals are those former cannot subsequently be changed for that year if the plan amendment— employees who, prior to the valuation plan year unless the Commissioner (i) Takes effect by the last day of the date for the plan year, have terminated determines that the assumptions that plan year; service with the employer without were used are unreasonable. Similarly, (ii) Increases the liabilities of the plan vested benefits and whose service might a funding method established for a plan by reason of increases in benefits, be taken into account in future years year cannot subsequently be changed for establishment of new benefits, changing because the ‘‘rule of parity’’ of section that plan year unless the Commissioner the rate of benefit accrual, or changing 411(a)(6)(D) does not permit that service determines that the use of that funding the rate at which benefits become to be disregarded. However, if the plan’s method for that plan year is nonforfeitable; and experience as to separated employees impermissible. returning to service has been such that (iii) Procedures for establishing (iii) Would not be permitted to take the exclusion described in this actuarial assumptions and funding effect under the rules of section 436(c) paragraph (e)(2) would be unreasonable, method. For purposes of this paragraph if those rules were applied— then no such exclusion is permitted. (f)(1), in the case of a plan for which an (A) By treating the increase in the (ii) Application to partially vested actuarial report under section 6059 target normal cost for the plan year participants. Whether former employees (Schedule SB of Form 5500) is required attributable to the amendment (and all who are terminated with partially to be filed for a plan year, actuarial other amendments that must be taken vested benefits are assumed to return to assumptions and the funding method into account solely because of the service is determined under the same are established by the filing of the application of the rules in this rules that apply to former employees actuarial report if it is filed no later than paragraph (d)(2)) as if the increase were without vested benefits under paragraph the due date (with extensions) for the an increase in the funding target for the (e)(2)(i) of this section. report. In the case of a plan for which plan year; and (3) Anticipated future participants. In an actuarial report for a plan year is not (B) By taking into account all making any determination of the required to be filed, actuarial unpredictable contingent event benefits funding target or target normal cost assumptions and the funding method permitted to be paid for unpredictable under paragraph (b) of this section, the are established by the delivery of the contingent events that occurred during actuarial assumptions and funding completed report to the employer if it is the current plan year and all plan method used for the plan must not delivered no later than what would be amendments that took effect in the anticipate the affiliation with the plan of the due date (with extensions) for filing current plan year (including all future participants not employed in the the actuarial report were such a filing amendments to which this paragraph service of the employer on the plan’s required. If the actuarial report is not (d)(2) applies for the plan year). valuation date. However, any such filed or delivered by the applicable date (3) Allocation of benefits attributable determination may anticipate the described in the two preceding to plan amendments. If a plan affiliation with the plan of current sentences, then the same actuarial amendment is taken into account for a employees who have not yet satisfied assumptions (such as the same interest plan year under the rules of this the participation (age and service) rate and mortality table elections) and paragraph (d), then the allocation of requirements of the plan as of the funding method as were used for the benefits that is used to determine the valuation date. preceding plan year apply for all funding target and the target normal cost (f) Actuarial assumptions and funding computations under sections 430 and for that plan year is based on the plan method used in determination of 436 for the current plan year, unless the as amended. Thus, if an amendment present value—(1) Selection of actuarial Commissioner permits or requires other that is taken into account for a plan year assumptions and funding method—(i) actuarial assumptions or another increases a participant’s accrued benefit General rules. The determination of any funding method permitted under for service prior to the beginning of the present value or other computation section 430 to be used for the current plan year, then the present value of that under section 430 and this section must plan year. increase is included in the funding be made on the basis of actuarial (iv) Scope of funding method. A target for the plan year. assumptions and a funding method. plan’s funding method includes not (e) Plan population taken into Except as otherwise specifically only the overall funding method used account—(1) In general. In making any provided (for example, in § 1.430(h)(2)– by the plan but also each specific determination of the funding target or 1(b)(6) or section 4006(a)(3)(E)(iv) of the method of computation used in target normal cost under paragraph (b) Employee Retirement Income Security applying the overall method. However, of this section, the plan population is Act of 1974, as amended (ERISA)), the the choice of which actuarial determined as of the valuation date. The same actuarial assumptions and funding assumptions are appropriate to the plan population must include three method must be used for all overall method or to the specific method classes of individuals— computations under sections 430 and of computation is not a part of the (i) Participants currently employed in 436. For example, the actuarial funding method. The assumed earnings the service of the employer; assumptions and the funding method rate used for purposes of determining

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the actuarial value of assets under (iii) Single-sum and similar segment rates under section 430(h)(2)(G) section 430(g)(3)(B) is treated as an distributions—(A) Distributions using and the adjustments to the segment rates actuarial assumption, rather than as part section 417(e) assumptions. In the case under section 417(e)(3)(D)(iii). of the funding method. of a distribution that is subject to (D) Distributions subject to section (2) Interest and mortality rates. section 417(e)(3) and that is determined 417(e)(3) using other assumptions. In Section 430(h)(2) and § 1.430(h)(2)–1 set using the applicable interest rates and the case of a distribution that is subject forth the interest rates, and section applicable mortality table under section to section 417(e)(3) but that is 430(h)(3) and §§ 1.430(h)(3)–1 and 417(e)(3), for purposes of applying determined on a basis other than using 1.430(h)(3)–2 set forth the mortality paragraph (f)(4)(ii) of this section, the the applicable interest rates and the tables, that must be used for purposes of computation of the present value of that applicable mortality table under section determining any present value under distribution is treated as having taken 417(e)(3), for purposes of applying this section. However, notwithstanding into account any difference in present paragraph (f)(4)(ii)(B) of this section, the the requirement to use the mortality value that results from the use of computation of present value must take tables, in the case of a plan which has actuarial assumptions that are different into account the extent to which the fewer than 100 participants and from those prescribed by section 430(h) present value of the distribution is beneficiaries who are not in pay status, (as required under paragraph (f)(4)(ii)(B) different from the present value the actuarial assumptions may assume of this section) if and only if the present determined using the rules of paragraph no pre-retirement mortality, but only if value of the distribution is determined (f)(4)(iii)(B) of this section, based on that assumption would be a reasonable in accordance with this paragraph actuarial assumptions that satisfy the assumption. (f)(4)(iii). requirements of paragraph (f)(3) of this (3) Other assumptions. In the case of (B) Substitution of annuity form. section. If the plan provides that the actuarial assumptions other than those Except as otherwise provided in this amount of the benefit is based on a specified in sections 430(h)(2), paragraph (f)(4)(iii), the present value of comparison of the section 417(e)(3) 430(h)(3), and 430(i), each of those a distribution is determined in benefit (that is, the benefit determined actuarial assumptions must be accordance with this paragraph (f)(4)(iii) using the applicable interest rates and reasonable (taking into account the if that present value is determined as the applicable mortality table under experience of the plan and reasonable the present value, using special section 417(e)(3)) with another benefit expectations). In addition, the actuarial actuarial assumptions, of the annuity determined using some other basis, then assumptions (other than those specified (either the deferred or immediate paragraph (f)(4)(ii)(B) of this section is in sections 430(h)(2), 430(h)(3), and annuity) which is used under the plan applied as of the valuation date by 430(i)) must, in combination, offer the to determine the amount of the comparing the present value of the plan’s enrolled actuary’s best estimate of distribution. Under these special section 417(e)(3) benefit determined anticipated experience under the plan assumptions, for the period beginning under the rules of paragraph (f)(4)(iii)(B) based on information determined as of with the expected annuity starting date of this section with the present value of the valuation date. See paragraph for the distribution, the current the other benefit. The rule of this (f)(4)(iii) of this section for special rules applicable mortality table under section paragraph (f)(4)(iii)(D) applies, for for determining the present value of a 417(e)(3) that would apply to a example, where a distribution that is single-sum and similar distributions. distribution with an annuity starting subject to section 417(e)(3) is (4) Probability of benefit payments in date occurring on the valuation date is determined as the greater of the benefit single sum or other optional forms—(i) substituted for the mortality table under determined using the applicable interest In general. This paragraph (f)(4) section 430(h)(3) that would otherwise rates and the applicable mortality table provides rules relating to the probability be used. In addition, under these special under section 417(e)(3) and the benefit that benefit payments will be paid as assumptions, the valuation interest rates determined using some other basis, or single sums or other optional forms under section 430(h)(2) are used for where the amount of a distribution that under a plan and the impact of that purposes of discounting the projected is subject to section 417(e)(3) is probability on the determination of the annuity payments from their expected determined using an interest rate other present value of those benefit payments payment dates to the valuation date (as than the applicable interest rates as under section 430. opposed to the interest rates under required under section 415(b)(2)(E)(ii) (ii) General rules of application. Any section 417(e)(3) which the plan uses to (see § 1.417(e)–1(d)(1)). determination of present value or any determine the amount of the benefit). (5) Distributions from applicable other computation under this section (C) Optional application of defined benefit plans under section must take into account— generational mortality and phase-in of 411(a)(13)(C)—(i) In general. In the case (A) The probability that future benefit interest rates. In determining the of an applicable defined benefit plan payments under the plan will be made present value of a distribution under described in section 411(a)(13)(C), if the in the form of any optional form of this paragraph (f)(4)(iii), if a plan uses amount of a future distribution is based benefit provided under the plan the generational mortality tables under on an interest adjustment applied to the (including single-sum distributions), § 1.430(h)(3)–1(a)(4) or § 1.430(h)(3)–2, current accumulated benefit, then the determined on the basis of the plan’s the plan is permitted to use a 50–50 amount of that distribution is experience and other related male-female blend of the annuitant determined by projecting the future assumptions, in accordance with mortality rates under the § 1.430(h)(3)– interest credits or equivalent amount paragraph (f)(3) of this section; and 1(a)(4) generational mortality tables in under the plan’s interest crediting rules (B) Any difference in the present lieu of the applicable mortality table using actuarial assumptions that satisfy value of future benefit payments that under section 417(e)(3) that would the requirements of paragraph (f)(3) of results from the use of actuarial apply to a distribution with an annuity this section. Thus, if a plan provides for assumptions in determining the amount starting date occurring on the valuation a single-sum distribution equal to the of benefit payments in any such date. Similarly, a plan is permitted to balance of a participant’s hypothetical optional form of benefit that are make adjustments to the interest rates in account under a cash balance plan, then different from those prescribed by order to reflect differences between the the amount of that future distribution is section 430(h). phase-in of the section 430(h)(2) equal to the projected account balance

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at the expected date of payment requirements of paragraph (f)(3) of this decrease in the plan’s funding shortfall determined using actuarial assumptions section. (within the meaning of section that satisfy the requirements of (6) Unpredictable contingent event 430(c)(4)) for the current plan year paragraph (f)(3) of this section. benefits. Any determination of present (disregarding the effect on the plan’s (ii) Annuity distributions—(A) value or any other computation under funding shortfall resulting from changes General rule. In the case of an this section must take into account, in interest and mortality assumptions applicable defined benefit plan based on information as of the valuation under sections 430(h)(2) and (h)(3)) that described in section 411(a)(13)(C), if the date, the probability that future benefits either exceeds $50,000,000, or exceeds amount of an annuity distribution is (or increased benefits) will become $5,000,000 and is 5 percent or more of based on either the balance of a payable under the plan due to the the funding target of the plan before hypothetical account maintained for a occurrence of an unpredictable such change. participant or the accumulated contingent event (as described in (ii) Affected plans. A plan is percentage of a participant’s final § 1.436–1(j)(9)). For this purpose, this described in this paragraph (f)(8)(ii) for average compensation, then the amount probability with respect to an a plan year if— of that annuity distribution is calculated unpredictable contingent event may be (A) The plan is a defined benefit plan by converting the projected account assumed to be zero if there is not more (other than a multiemployer plan) to balance (or accumulated percentage of than a de minimis likelihood that the which Title IV of ERISA applies; and final average compensation), in unpredictable contingent event will (B) The aggregate unfunded vested accordance with paragraph (f)(5)(i) of occur. benefits used to determine variable-rate this section, to an annuity by applying (7) Reasonable techniques premiums for the plan year (as the plan’s annuity conversion permitted—(i) Determination of benefits determined under section provisions using the rules of this to be paid during the plan year. Any 4006(a)(3)(E)(iii) of ERISA) of the plan paragraph (f)(5)(ii). reasonable technique can be used to and all other plans maintained by the (B) Use of current annuity factors. determine the present value of the contributing sponsors (as defined in Except as otherwise provided in benefits expected to be paid during a section 4001(a)(13) of ERISA) and paragraph (f)(5)(ii)(C) of this section, if plan year, based on the interest rates members of such sponsors’ controlled the plan bases the conversion of the and mortality assumptions applicable groups (as defined in section 4001(a)(14) projected account balance (or for the plan year. For example, the of ERISA) which are covered by Title IV accumulated percentage of final average present value of a monthly retirement of ERISA (disregarding multiemployer compensation) to an annuity using the annuity payable at the beginning of each plans and disregarding plans with no applicable interest rates and applicable month can be determined— unfunded vested benefits) exceed mortality table under section 417(e)(3), (A) Using the standard actuarial $50,000,000. then the amount of the annuity approximation that reflects 13/24ths of (iii) Automatic approval to resume distribution is determined by dividing the discounted expected payments for use of previously used assumptions the projected account balance (or the year as of the beginning of the year upon exiting at-risk status during phase- accumulated percentage of final average and 11/24ths of the discounted expected in. A plan that is not in at-risk status for compensation) by an annuity factor payments for the year as of the end of the current plan year and that was in at- corresponding to the assumed form of the year; risk status for the prior plan year (but payment using, for the period beginning (B) By assuming a uniform not for a period of 5 or more consecutive with the annuity starting date, the distribution of death during the year; or plan years) is granted automatic (C) By assuming that the payment is current applicable mortality table under approval to use the actuarial section 417(e)(3) that would apply to a made in the middle of the year. (ii) Determination of target normal assumptions that were applied before distribution with an annuity starting the plan entered at-risk status and that date occurring on the valuation date (in cost. In the case of a participant for whom there is a less than 100 percent were used in combination with the lieu of the mortality table under section required at-risk assumptions during the 430(h)(3) that would otherwise be used) probability that the participant will terminate employment during the plan period the plan was in at-risk status. and the valuation interest rates under (9) Examples. The following examples year, for purposes of determining the section 430(h)(2) (as opposed to the illustrate the rules of this section. benefits expected to accrue, be earned, interest rates under section 417(e)(3) Unless otherwise indicated, these or otherwise allocated to service during which the plan uses to determine the examples are based on the following the plan year which are used to amount of the annuity). assumptions: The normal retirement age (C) Optional application of determine the target normal cost, it is is 65, the minimum required generational mortality and phase-in of permissible to assume the participant contribution for the plan is determined segment rates. In determining the will not terminate during the plan year, under the rules of section 430 starting amount of an annuity distribution under unless using this method of calculation in 2008, the plan year is the calendar paragraph (f)(5)(ii)(B) of this section, a would be unreasonable. year, the valuation date is January 1, no plan is permitted to apply the options (8) Approval of significant changes in plan-related expenses are paid or described in paragraph (f)(4)(iii)(C) of actuarial assumptions for large plans— expected to be paid from plan assets, this section. (i) In general. Except as otherwise (D) Distributions using assumptions provided in paragraph (f)(8)(iii) of this and the plan does not provide for other than assumptions under section section, any actuarial assumptions used mandatory employee contributions. The 417(e)(3). In applying this paragraph to determine the funding target of a plan examples are as follows: (f)(5)(ii), in the case of a plan that for a plan year during which the plan is Example 1. (i) Plan P provides an accrued determines an annuity using a basis described in paragraph (f)(8)(ii) of this benefit equal to 1.0% of a participant’s highest 3-year average compensation for each other than the applicable interest rates section cannot be changed from the year of service. Plan P provides that an early and applicable mortality table under actuarial assumptions that were used for retirement benefit can be received at age 60 section 417(e)(3), the amount of the the preceding plan year without the equal to the participant’s accrued benefit annuity distribution must be based on approval of the Commissioner if the reduced by 0.5% per month for early actuarial assumptions that satisfy the changes in assumptions result in a commencement. On January 1, 2010,

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Participant A is age 60 and has 12 years of portion of the annual temporary supplement (iv) The excess of the death benefit over past service. Participant A’s compensation for Participant B with respect to the early Participant A’s accrued benefit is $4,040 (that for the years 2007 through 2009 was $47,000, retirement decrement occurring at age 60 that is, $10,000 ¥ $5,960). Because this part of $50,000, and $52,000, respectively. is taken into account in determining the the death benefit is not a function of the Participant A’s rate of compensation at funding target for the 2010 plan year is participant’s accrued benefit nor is it a December 31, 2009, is $54,000 and A’s rate $4,800 [($500 × 12 months) × 20 years of past function of service, the determination of the of compensation for 2010 is assumed not to service ÷ 25 years of service at assumed early corresponding portion of the death benefit increase at any point during 2010. retirement age]. The portion of the annual taken into account in determining the target Decrements are applied at the beginning of temporary supplement for Participant B with normal cost and funding target for 2010 is the plan year. respect to the early retirement decrement made under paragraph (c)(1)(ii)(D) of this (ii) Participant A’s annual accrued benefit occurring at age 61 that is taken into account section. For example, for Participant A, the as of January 1, 2010, is $5,960 [0.01 × 12 × in determining the funding target for the portion of this benefit with respect to the ($47,000 + $50,000 + $52,000) ÷ 3]. 2010 plan year is $4,615 [($500 × 12 months) death decrement occurring at age 64 that is Participant A’s expected benefit accrual for × 20 years of past service ÷ 26 years of service taken into account for purposes of 2010 is $800 [0.01 × 13 × ($50,000 + $52,000 at assumed early retirement age]. In each determining the funding target for the 2010 + $54,000) ÷ 3 ¥ $5,960], to the extent that case, the allocable portion of the benefit is plan year is $3,030 ($4,040 × 12 years of past Participant A is expected to continue in assumed to be payable until age 62 (or the service ÷ 16 years of service at assumed age employment for the full 2010 plan year. participant’s death, if earlier). of death). (iii) Because the early retirement benefit is (iii) For Participant B, the portion of the (v) The total single-sum death benefit for a function of the participant’s accrued annual temporary supplement with respect to Participant A with respect to the death benefit, the allocation of the benefit for the early retirement decrement occurring at decrement at age 64 that is taken into account purposes of determining the target normal age 60 that is taken into account in in determining the funding target for the cost and funding target is made under determining the target normal cost for the 2010 plan year is $8,990 ($5,960 + $3,030). paragraph (c)(1)(ii)(B) of this section. 2010 plan year is $240 [($500 × 12 months) (vi) Similarly, the portion of the single-sum Accordingly, for Participant A, the early × 1 year of service expected to be earned death benefit for Participant A that is taken retirement benefit that is taken into account during the plan year ÷ 25 years of service at into account in determining the target normal with respect to the decrement at age 60 when assumed early retirement age]. The portion of cost for the 2010 plan year is equal to the determining the 2010 funding target is $4,172 the annual temporary supplement with sum of the expected increase in the accrued [$5,960 accrued benefit × (1 ¥ 0.005 × 60 respect to the early retirement decrement benefit during 2010, and the expected change months)]. The expected accrual of the early occurring at age 61 that is taken into account in the allocable portion of the excess death retirement benefit during 2010 that is taken in determining the target normal cost for the benefit attributable to service during 2010 as into account for Participant A with respect to 2010 plan year is $230.77 [($500 × 12 determined in accordance with paragraph the decrement at age 60 when determining months) × 1 year of service expected to be (c)(1)(ii)(D) of this section. As described in the 2010 target normal cost is zero, because earned during the plan year ÷ 26 years of Example 1, the expected increase in in this example the age-60 decrement would service at assumed early retirement age]. The Participant A’s accrued benefit during 2010 be applied as of January 1, 2010, before present value of these amounts reflects a is $800, to the extent that Participant A is Participant A would earn any additional payment period beginning with the expected to continue in employment for the benefits. (But see paragraph (f)(7)(ii) of this decrement at age 60 or 61, as applicable, full 2010 plan year. section for an alternative approach for until age 62 (or assumed death, if earlier). (vii) At the end of 2010, Participant A’s determining the expected accrual with (iv) For Participant C, the portion of the accrued benefit is expected to be $6,760 respect to the decrement at age 60.) annual temporary supplement with respect to ($5,960 + $800). The excess portion of the (iv) The early retirement benefit for the early retirement decrement occurring at single-sum death benefit to be allocated in Participant A with respect to the decrement age 61 (when the participant is first eligible accordance with paragraph (c)(1)(ii)(D) of this at age 61 that is taken into account in for the benefit) that is taken into account in section is $3,240 ($10,000 ¥ $6,760), and the determining the funding target for the 2010 determining the funding target for the 2010 allocable portion of the excess benefit for plan year is $4,529.60 [$5,960 accrued plan year is $5,600 [($500 × 12 months) × 14 Participant A as of December 31, 2010, with benefit × (1 ¥ 0.005 × 48 months)]. The years of past service ÷ 15 years of service at respect to the death decrement at age 64, is portion of the early retirement benefit that is assumed early retirement age]. The present $2,632.50 ($3,240 × 13 years of service as of taken into account for Participant A with value of this amount reflects a payment December 31, 2010 ÷ 16 years of service at respect to the decrement at age 61 that is period beginning with the decrement at age assumed age of death). The change in the taken into account in determining the target 61 until age 62 (or death if earlier). allocable portion of Participant A’s excess normal cost for the 2010 plan year is $608 Example 3. (i) The facts are the same as death benefit due to an additional year of [$800 expected annual accrual × (1 ¥ 0.005 in Example 1. The plan also provides a service, with respect to the death decrement × 48 months)]. single-sum death benefit (in addition to the at age 64, is a decrease of $397.50. Therefore, Example 2. (i) The facts are the same as qualified pre-retirement spouse’s benefit) the target normal cost for the 2010 plan year in Example 1. In addition, the plan offers a equal to the greater of the participant’s attributable to Participant A, with respect to $500 temporary monthly supplement to annual accrued benefit at the time of death, the death decrement at age 64, will reflect a participants who complete 15 years of service or $10,000. The benefit is limited as single-sum death benefit of $402.50 ($800 and retire from active employment after necessary to ensure that the plan meets the expected increase in Participant A’s accrued attaining age 60. The temporary supplement incidental death benefit requirements of benefit minus a $397.50 expected decrease in is payable until the participant turns age 62. section 401(a). the allocable portion of the death benefit in In addition, the supplement is limited so that (ii) The determination of the portion of the excess of the accrued benefit). it does not exceed the participant’s Social death benefit that is taken into account in Example 4. (i) The facts are the same as Security benefit payable at age 62. On determining the target normal cost and in Example 3, except that the plan provides January 1, 2010, Participant B is age 55 and funding target is made under paragraph a single-sum death benefit equal to the has 20 years of past service, and Participant (c)(1)(ii)(B) of this section to the extent that greater of the present value of the qualified C is age 60 and has 14 years of past service. it is a function of the participant’s accrued pre-retirement survivor annuity or 100 times For Participants B and C, the projected Social benefit and under paragraph (c)(1)(ii)(D) of the amount of the participant’s monthly Security benefit is greater than $500 per this section to the extent that it relates to the retirement benefit with service projected to month. part of the death benefit that is not a function normal retirement age. The valuation is based (ii) Because the temporary supplement is of the participant’s accrued benefit. on the assumption that all surviving spouses not a function of the participant’s accrued (iii) The portion of the single-sum death choose to receive their benefit in the form of benefit or service, the allocation of the benefit corresponding to the accrued benefit, a single sum. For Participant A, the value of benefit for purposes of determining the target or $5,960, is taken into account when the qualified pre-retirement survivor annuity normal cost and funding target is made under determining the 2010 funding target for is less than 100 times Participant A’s paragraph (c)(1)(ii)(D) of this section. The Participant A. projected monthly retirement benefit.

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(ii) The allocation of the death benefit that month. The corresponding death benefit is (v) The portion of Participant A’s disability is a function of Participant A’s accrued $73,667. The excess portion of the single-sum benefit with respect to the disability benefit is based on service and compensation death benefit to be allocated in accordance decrement occurring at age 64 that is taken to the first day of the plan year for purposes with paragraph (c)(1)(ii)(D) of this section is into account when determining the 2010 of determining the funding target, and the $17,334 ($73,667 ¥ $56,333), and the funding target is $8,375 [$5,960 + $3,220 × allocation of the death benefit that is a allocable portion of the excess benefit for (12 years of past service ÷ 16 years of service function of the increase in Participant A’s Participant A as of December 31, 2010, with at assumed date of disability)]. accrued benefit during the plan year for respect to the death decrement at age 64, is (vi) If in fact Participant A becomes purposes of determining the target normal $14,084 ($17,334 × 13 years of service as of disabled at age 63, the funding target will cost is made in accordance with paragraph December 31, 2010 ÷ 16 years of service at reflect the full disability benefit to which (c)(1)(ii)(B) of this section. As described in assumed age of death). Participant A will be entitled at normal Example 1, Participant A’s accrued benefit (viii) The change in the allocable portion retirement age, based on service projected to based on service and compensation as of of Participant A’s excess death benefit during normal retirement age (17 years) and final January 1, 2010, is $5,960, or $496.67 per 2010, with respect to the death decrement at average compensation reflecting month. Accordingly, the portion of the age 64, is a decrease of $1,437 ($14,084 ¥ compensation projected to normal retirement single-sum death benefit corresponding to $15,521). Therefore, the target normal cost for age at the rate Participant A was earning at the accrued benefit, or $49,667 (100 times the 2010 plan year attributable to Participant the time of disablement. $496.67), is taken into account when A, with respect to the death decrement at age Example 6. (i) The facts are the same as determining the 2010 funding target for 64, will reflect a single-sum death benefit of in Example 5, except that the disability Participant A. $5,229 ($6,666 expected increase in benefit is based on the accrued benefit (iii) In addition, the funding target and the Participant A’s death benefit based on the calculated using service and compensation target normal cost reflect a portion of expected increase in the accrued benefit, earned to the date of disability. Participant A’s death benefit in excess of the minus an expected decrease of $1,437 in the (ii) Because the disability benefit is a amount based on Participant A’s accrued amount of the death benefit in excess of the function of the participant’s accrued benefit, benefit. Based on Participant A’s average amount attributable to the accrued benefit). the portion of Participant A’s disability compensation as of the first day of the plan Example 5. (i) The facts are the same as benefit that is taken into account when year, Participant A’s accrued benefit with in Example 1. In addition, the plan provides determining the funding target for the 2010 service projected to normal retirement is a disability benefit to participants who plan year is Participant A’s annual accrued $8,443 [.01 × 17 years of service at age 65 × become disabled after completing 15 years of benefit as of January 1, 2010, or $5,960, as ($47,000 + $50,000 + $52,000) ÷ 3], or service. The disability benefit is payable at determined in Example 1. This amount is $703.61 per month. The corresponding death normal retirement age or an earlier date if taken into account for both the disability elected by a participant. For purposes of benefit is $70,361. decrement occurring at age 63 and the calculating the disability benefit, service (iv) The excess of the death benefit over disability decrement occurring at age 64. continues to accrue until normal retirement Participant A’s accrued benefit as of January (iii) Similarly, the benefit accrual for age (unless recovery or commencement of 1, 2010, is $20,694 (that is, $70,361 ¥ Participant A with respect to the disability retirement benefits occurs earlier). Further, $49,667). Because this part of the death decrements occurring at age 63 and age 64 compensation is deemed to continue at the benefit is not a function of Participant A’s same rate as when the disability began. that is taken into account when determining accrued benefit or service, the portion that is (ii) Participant A will be eligible for the the target normal cost for the 2010 plan year taken into account in determining the disability benefit at age 63 after completion is equal to Participant A’s expected benefit funding target is determined under paragraph of 15 years of service. Participant A’s annual accrual for 2010 determined in Example 1, or (c)(1)(ii)(D) of this section. For Participant A, disability benefit at normal retirement age is $800. the portion of this benefit with respect to the $9,180 (that is, 1% of highest 3-year average Example 7. (i) Retiree D, a participant in death decrement occurring at age 64 that is compensation of $54,000 multiplied by 17 Plan P, is a male age 72 and is receiving a taken into account when determining the years of deemed service at normal retirement $100 monthly straight life annuity. The 2009 funding target for the 2010 plan year is age). actuarial valuation is performed using the $15,521 ($20,694 × 12 years of past service segment rates applicable for September 2008 ÷ (iii) The portion of the disability benefit 16 years of service at assumed age of based on the participant’s accrued benefit as (determined without regard to the transition death). The total single-sum death benefit for of the valuation date that is taken into rule of section 430(h)(2)(G)), and the 2009 Participant A with respect to the death account in determining the target normal cost annuitant and nonannuitant (male and decrement at age 64 reflected in the funding and funding target is determined in female) mortality tables (published in Notice target for the 2010 plan year is $65,188 accordance with paragraph (c)(1)(ii)(B) of this 2008–85). See § 601.601(d)(2) relating to ($49,667 + $15,521). section. Accordingly, the portion of the objectives and standards for publishing (v) Similarly, the portion of the single-sum disability benefit corresponding to regulations, revenue rulings and revenue death benefit for Participant A that is taken Participant A’s accrued benefit as of January procedures in the Internal Revenue Bulletin. into account when determining the target 1, 2010, or $5,960, is taken into account (ii) The present value of Retiree D’s straight normal cost for 2010 is equal to the sum of when determining the 2010 funding target. life annuity on the valuation date is the death benefit based on the expected (iv) The excess of Participant A’s disability $10,535.79. This is equal to the sum of: increase in the accrued benefit during 2010 benefit over the accrued benefit as of January $5,029.99, which is the present value of and the expected change in the allocable 1, 2010, is $3,220 ($9,180 ¥ $5,960). Because payments expected to be made during the portion of the excess death benefit this portion of the disability benefit is not first 5 years, using the first segment interest attributable to service during 2010 as based on Participant A’s accrued benefit or rate of 5.07%; $5,322.26, which is the present determined in accordance with paragraph service, the portion that is taken into account value of payments expected to be made (c)(1)(ii)(D) of this section. in determining the funding target is during the next 15 years, using the second (vi) At the end of 2010, Participant A’s determined under paragraph (c)(1)(ii)(D) of segment interest rate of 6.09%; and $183.54, accrued benefit is expected to be $6,760 this section. The portion of Participant A’s which is the present value of payments ($5,960 + $800), or $563.33 per month, and excess disability benefit with respect to the expected to be made after 20 years, using the the associated death benefit is $56,333. The disability decrement occurring at age 63 that third segment interest rate of 6.56%. expected increase in the amount of the death is taken into account when determining the Example 8. (i) The facts are the same as in benefit attributable to the increase in 2010 funding target is $2,576 [$3,220 × (12 Example 7. Plan P does not provide for early Participant A’s accrued benefit is therefore years of past service ÷ 15 years of service at retirement benefits or single-sum $6,666 ($56,333 ¥ $49,667). assumed date of disability)]. The total distributions. The actuary assumes that no (vii) Participant A’s projected accrued disability benefit for Participant A, with participants terminate employment prior to benefit at normal retirement based on average respect to the disability decrement occurring age 50 (other than by death), there is a 5% compensation as of the end of 2010 is $8,840 at age 63, that is taken into account in probability of withdrawal at age 50, and that [.01 × 17 years of service at age 65 × ($50,000 determining the funding target for the 2010 those participants who withdraw receive a + $52,000 + $54,000) ÷ 3], or $736.67 per plan year is $8,536 ($5,960 + $2,576). deferred annuity starting at age 65.

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Participant E is a male age 46 on January 1, expected to be made between age 65 and 66 nonannuitant mortality rates after the 2009, and has an annual accrued benefit of (during the 20th year after the valuation annuity starting date. This portion of the $23,000 beginning at age 65. date), using the second segment interest rate 2009 funding target is equal to the sum of (ii) Before taking into account the 5% of 6.09%; and $63,123.30, which is the $6,815.85, which is the present value of probability of withdrawal, the funding target present value of annuity payments expected annuity payments expected to be made associated with Participant E’s assumed age to be made after the 20th year following the between age 65 and 66 (during the 20th year 50 withdrawal benefit in the 2009 actuarial valuation date, using the third segment after the valuation date), using the second valuation is $68,396.75. This is equal to the interest rate of 6.56%. These present value segment interest rate of 6.09%, and sum of: $6,925.29, which is the present value amounts reflect the 2009 male nonannuitant $62,092.54, which is the present value of of payments expected to be made during the mortality rates prior to the assumed annuity payments expected to be made after year the participant turns age 65 (the 20th commencement of benefits at age 65 and the the 20th year following the valuation date, year after the valuation date), using the 100% probability of retiring at age 65. using the third segment interest rate of second segment interest rate of 6.09%; and (iii) Taking the 5% probability of 6.56%. These present value amounts reflect $61,471.46, which is the present value of withdrawal and the 70% probability of the 2009 male nonannuitant mortality rates payments expected to be made after the 20th electing a single-sum payment into account, prior to the assumed single-sum distribution year, using the third segment interest rate of the portion of the 2009 funding target age of 50. 6.56%. attributable to Participant E’s assumed single- (iii) Applying the 5% probability of (iii) Taking the 5% probability of sum payment based on withdrawal at age 50 withdrawal into account, the funding target is $2,451.83 ($70,052.30 × 5% × 70%). After withdrawal at age 50 and the 70% probability for the 2009 plan year associated with taking into account the 5% probability of of electing a single-sum payment, the portion Participant E’s assumed age 50 withdrawal withdrawal and the 30% probability of of the funding target for the 2009 plan year benefit is $3,419.84 ($68,396.75 × 5%). electing a straight life annuity, the portion of that is attributable to Participant E’s assumed Example 9. (i) The facts are the same as in the 2009 funding target that is attributable to single-sum payment (based on withdrawal at × × Example 8, except the plan offers a single- Participant E’s assumed straight life annuity age 50) is $2,411.79 ($68,908.39 5% sum distribution payable at normal (based on assumed withdrawal at age 50), 70%). retirement age (age 65) determined based on deferred to age 65, is equal to 30% of the Example 11. (i) The facts are the same as the applicable interest rates and the result obtained in Example 8. in Example 8, except that the plan sponsor applicable mortality table under section Example 10. (i) The facts are the same as elects under section 430(h)(2)(D)(ii) to use 417(e)(3). The actuary assumes that 70% of in Example 9, except the plan offers an the monthly corporate bond yield curve the participants will elect a single sum upon immediate single sum upon withdrawal at instead of segment rates. The enrolled retirement and the remaining 30% will elect age 50 determined based on the applicable actuary assumes payments are made monthly a straight life annuity. interest rates and the applicable mortality throughout the year and uses the interest rate (ii) Before taking into account the 5% table under section 417(e)(3). The actuary from the middle of the monthly corporate probability of withdrawal or the 70% assumes that 70% of the participants will bond yield curve because this mid-year yield probability of electing a single-sum payment, elect to receive a single-sum distribution rate most closely matches the average timing the portion of the 2009 funding target that is upon withdrawal. of benefits paid. In accordance with attributable to Participant E’s assumed single- (ii) Before taking into account the 5% § 1.430(h)(2)–1(e)(4), the applicable monthly sum payment, deferred to age 65, is probability of withdrawal and the 70% corporate bond yield curve is the yield curve $70,052.30. This is calculated in the same probability of electing a single-sum payment, derived from December 2008 rates. manner as the present value of annuity the portion of the funding target for the 2009 (ii) Before taking into account the 5% payments, except that, for the period after the plan year that is attributable to Participant probability of withdrawal, the funding target annuity starting date, the 2009 applicable E’s assumed single-sum payment based on associated with Participant E’s assumed age mortality rates are substituted for the 2009 withdrawal at age 50 is $68,908.39. This is 50 withdrawal benefit in the 2009 actuarial male annuitant mortality rates. This portion calculated in the same manner as the present valuation is $67,394.12. This reflects the sum of the funding target for the 2009 plan year value of annuity payments, except that the of each year’s expected payments, discounted is equal to the sum of: $6,929.00, which is 2009 applicable mortality rates are at the yield rates described in paragraph (i) the present value of annuity payments substituted for the 2009 male annuitant and of this Example 11, as shown below:

Age Maturity Yield rate Present value

65 ...... 19.5 ...... 6.97% ...... $5,897.88 66 ...... 20.5 ...... 6.90% ...... 5,524.69 67 ...... 21.5 ...... 6.84% ...... 5,164.63 68 and over ...... Varies ...... Varies ...... 50,806.92

Total ...... 67,394.12

(iii) Applying the 5% probability of probability of electing a single-sum payment, probability of electing a single-sum payment, withdrawal, the portion of the funding target the present value of Participant E’s single- the present value as of January 1, 2009, of for the 2009 plan year attributable to sum distribution as of January 1, 2009, using Participant E’s age-50 single-sum distribution Participant E’s assumed withdrawal at age 50 an interest rate of 6.25%, based on using the applicable interest rates and is $3,369.71 ($67,394.12 × 5%). withdrawal at age 50, is $77,391.88. This applicable mortality table under section Example 12. (i) The facts are the same as amount is determined by calculating the 417(e)(3) is $68,908.39, as developed in in Example 10, except that the plan projected single-sum distribution at age 50 Example 10. Corresponding to plan determines the amount of the immediate using the applicable mortality rate under provisions, the present value reflected in the single-sum distribution upon withdrawal at section 417(e)(3) and an interest rate of funding target is the larger of this amount or age 50 based on the applicable interest rates 6.25%, or $94,789.10, and discounting the the present value of the amount based on a under section 417(e)(3) or an interest rate of result to the January 1, 2009, valuation date 6.25% interest rate, or $77,391.88. 6.25%, whichever produces the higher using the first segment rate of 5.07% (because (iv) Applying the 5% probability of amount. The applicable mortality table under the single-sum distribution is assumed to be withdrawal at age 50 and the 70% probability section 417(e)(3) is used for both paid 4 years after the valuation date) and the of electing a single-sum payment, the portion calculations. male non-annuitant mortality rates for 2009. of the funding target for the 2009 plan year (ii) Before taking into account the 5% (iii) Before taking into account the 5% that is attributable to Participant E’s assumed probability of withdrawal and the 70% probability of withdrawal and the 70% single-sum payment (based on withdrawal at

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age 50) is $2,708.72 ($77,391.88 × 5% × annuity, the funding target associated with $25,000 that results from the plan 70%). the future annuity payout for Participant F is amendment. Example 13. (i) Plan Q is a cash balance $149,120.41. This is equal to the sum of plan that permits an immediate payment of $14,242.79, which is the present value of the (g) Effective/applicability dates and a single sum equal to the participant’s annuity payment expected to made during transition rules—(1) Statutory effective hypothetical account balance upon the year the participant turns age 65 (the 5th date/applicability date—(i) In general. termination of employment. Plan Q’s terms year after the valuation date), using the first Section 430 generally applies to plan provide that the hypothetical account is segment interest rate of 5.07%; $116,321.72, years beginning on or after January 1, credited with interest at a market-related rate, which is the present value of payments 2008. The applicability of section 430 based on a specified index. The January 1, expected to be made during the 6th through for purposes of determining the 2009, actuarial valuation is performed using the 20th years following the valuation date, minimum required contribution is the 24-month average segment rates using the second segment interest rate of applicable for September 2008 (determined 6.09%; and $18,555.90, which is the present delayed for certain plans in accordance without regard to the transition rule of value of payments expected to be made after with sections 104 through 106 of PPA section 430(h)(2)(G)). Participant F is a male the 20th year following the valuation date, ’06. age 61 on January 1, 2009, and has a using the third segment interest rate of (ii) Applicability of special hypothetical account balance equal to 6.56%. adjustments. The special adjustments of $150,000 on that date. In the 2009 actuarial (iv) Applying the 10% probability of paragraph (b)(1)(iii) of this section valuation, the enrolled actuary assumes that electing a lifetime annuity, the portion of the (relating to adjustments to the target the hypothetical account balances will 2009 funding target attributable to Participant normal cost for plan-related expenses increase with annual interest credits of 7% F’s assumed lifetime annuity payable at age until the participant commences receiving 65 is $14,912.04. The portion of the 2009 and mandatory employee contributions) his or her benefit, corresponding to the funding target attributable to Participant F’s apply to plan years beginning after actuary’s best estimate of future interest rates assumed single-sum payment is 90% of the December 31, 2008. In addition, a plan credited under the terms of the plan. The result obtained in Example 13. sponsor may elect to make the special actuary also assumes that all participants will Example 15. (i) Plan H provides a monthly adjustments of paragraph (b)(1)(iii) of retire on the first day of the plan year in benefit of $50 times service for all this section for a plan year beginning in which they attain age 65 (that is, no participants. Plan H has a funding target of 2008. This election must take into participant will terminate employment prior $1,000,000 and an actuarial value of assets of account both adjustments described in to age 65 other than by death), and that 100% $810,000 as of January 1, 2010. No annuity paragraph (b)(1)(iii) of this section. This of participants will elect a single sum upon contracts have been purchased, and Plan H retirement. has no funding standard carryover balance or election is subject to the same rules that (ii) Participant F’s hypothetical account prefunding balance as of January 1, 2010. The apply to an election to add an amount balance projected to January 1, 2013 (the plan enrolled actuary certifies that the January 1, to the plan’s prefunding balance year in which F attains age 65) is $196,619.40 2010, AFTAP is 81%. Effective July 1, 2010, pursuant to § 1.430(f)–1(f), and it must based on the assumed annual interest Plan H is amended on June 14, 2010, to be made in the same manner as the crediting rate of 7%. The funding target for increase the plan’s monthly benefit to $55 for election made under § 1.430(f)–1(f). the 2009 plan year attributable to Participant years of service earned on or after July 1, Thus, the election can be made no later F’s benefit at age 65 is $158,525.81, which is 2010. The present value of the increase in than the last day for making the calculated by discounting the projected plan benefits during 2010 (reflecting benefit minimum required contribution for the hypothetical account balance of $196,619.40 accruals attributable to the six months using the first segment rate of 5.07% and the between July 1, 2010, and December 31, plan year to which the election relates. male non-annuitant mortality rates. 2010) is $25,000. (2) Effective date/applicability date of Example 14. (i) The facts are the same as (ii) The amendment increases benefits for regulations. This section applies to plan in Example 13, except that the actuary future service only, and so the funding target years beginning on or after January 1, assumes that 10% of the participants will is unaffected. Since section 436(c) only 2010, regardless of whether section 430 choose to collect their benefits in the form of restricts plan amendments that increase plan applies to determine the minimum a straight life annuity. The plan provides that liabilities, the plan amendment can take required contribution for the plan year. the participant’s account balance at effect. For plan years beginning before January retirement is converted to an annuity using (iii) If the $25,000 present value of the 1, 2010, plans are permitted to rely on the applicable interest rates and applicable increase in plan benefits during 2010 were mortality table under section 417(e)(3). included in Plan H’s funding target of the provisions set forth in this section (ii) Participant F’s hypothetical account $1,000,000, the total would be $1,025,000, for purposes of satisfying the balance projected to January 1, 2013 (the plan and the AFTAP would be 79.02% (that is, requirements of section 430. year in which F attains age 65) is $810,000/$1,025,000). Since this is less than (3) Approval for changes in funding $196,619.40, as outlined in Example 13. This 80%, the amendment would not have been method—(i) 2008 plan year. Any amount is converted to an annuity payable permitted to take effect if the 2010 increase changes in a plan’s funding method that commencing at age 65 by dividing the were included in the funding target instead are made for the first plan year projected account balance by an annuity of target normal cost. beginning in 2008 that are not factor based on the applicable mortality table (iv) Because the amendment was adopted inconsistent with the requirements of for 2009 under section 417(e)(3) after the January 1, 2010, valuation date, the (corresponding to the valuation date) and the plan sponsor would generally have the section 430 are treated as having been interest rates used for the valuation. The option of deciding whether to reflect this approved by the Commissioner and do resulting annuity factor is 10.8321, reflecting amendment in the January 1, 2010, valuation not require the Commissioner’s specific one year of interest at the first segment rate or defer recognition of the amendment to the prior approval. (5.07%) corresponding to the first year of the January 1, 2011, valuation. However, under (ii) Application of this section—(A) expected annuity payments (the fifth year paragraph (d)(2) of this section, because the First plan year for which regulations are after the valuation date), 15 years of interest plan amendment would not have been effective. Except as otherwise provided at the second segment rate (6.09%) and all permitted to take effect under the provisions in paragraph (g)(3)(ii)(B) of this section, remaining years at the third segment rate of section 436 if the increase in the target any change in a plan’s funding method (6.56%). The projected future annuity is normal cost for the plan year had been taken therefore $196,619.40 divided by 10.8321, or into account in the funding target, the for the first plan year that begins on or $18,151.55 per year. actuary must take into account the after January 1, 2010, is treated as (iii) Before taking into account the 10% amendment in the January 1, 2010, valuation having been approved by the probability that the participant will elect to for purposes of section 430. Thus, the target Commissioner and does not require the take the distribution in the form of a lifetime normal cost for the plan year includes the Commissioner’s specific prior approval.

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(B) Optional earlier application of current liability determined pursuant to the 2007 plan year using the valuation regulations. For the first plan year that section 412(l)(7) (as in effect prior to interest rate for that 2007 plan year) of a plan applies all the provisions of this amendment by PPA ’06) as of the the amount so reduced is not treated as section, §§ 1.430(f)–1, 1.430(g)–1, valuation date for the 2007 plan year. part of the funding standard account 1.430(i)–1, and 1.436–1, any change in (ii) Determination of value of plan credit balance when that balance is a plan’s funding method for that plan assets—(A) In general. The value of plan subtracted from the value of plan assets year is treated as having been approved assets for the 2007 plan year under this pursuant to paragraph (g)(5)(iii)(A) of by the Commissioner and does not paragraph (g)(5)(ii)(A) is determined as this section. require the Commissioner’s specific the value of plan assets as described in ■ Par. 3. Section 1.430(f)–1 is added to prior approval. For example, if the paragraph (g)(5)(ii)(B) of this section, read as follows: change in funding method includes a reduced by the plan’s funding standard change in the valuation software, the account credit balance for the 2007 plan § 1.430(f)–1 Effect of prefunding balance change in the valuation software is year as described in paragraph and funding standard carryover balance. treated as having been approved by the (g)(5)(iii)(A) of this section except to the (a) In general—(1) Overview. This Commissioner and does not require the extent provided in paragraph section provides rules relating to the Commissioner’s specific prior approval. (g)(5)(iii)(B) of this section. application of prefunding and funding If that plan year begins before January (B) Value of plan assets. The value of standard carryover balances under 1, 2010, the automatic approval for a plan assets for the 2007 plan year under section 430(f). Section 430 and this change in funding method under this paragraph (g)(5)(ii)(B) is determined section apply to single employer paragraph (g)(3)(ii)(A) of this section under section 412(c)(2) as in effect for defined benefit plans (including does not apply to the plan. the 2007 plan year, except that the value multiple employer plans) that are (C) Special rule for changes in of plan assets prior to subtracting the subject to section 412, but do not apply allocation. Any change in a plan’s plan’s funding standard account credit to multiemployer plans (as defined in funding method for a plan year earlier balance described in paragraph section 414(f)). Paragraph (b) of this than the first plan year beginning on or (g)(5)(iii)(A) of this section must be section sets forth rules regarding a after January 1, 2010, that is necessary adjusted so that it is neither less than 90 plan’s prefunding balance and a plan to apply the rules of paragraph (c)(1)(ii) percent of the fair market value of plan sponsor’s election to maintain a funding of this section is treated as having been assets nor greater than 110 percent of standard carryover balance. Paragraph approved by the Commissioner and the fair market value of plan assets on (c) of this section provides rules under does not require the Commissioner’s the valuation date for that plan year. If which those balances must be specific prior approval. the value of plan assets prior to subtracted from plan assets. Paragraph (iii) First plan year for which section adjustment under this paragraph (d) of this section describes a plan 430 applies to determine minimum (g)(5)(ii)(B) is less than 90 percent of the sponsor’s election to use those balances funding. For a plan for which the fair market value of plan assets on the to offset the minimum required minimum required contribution is not valuation date, then the value of plan contribution. Paragraph (e) of this determined under section 430 for the assets under this paragraph (g)(5)(ii)(B) section describes a plan sponsor’s first plan year that begins on or after is equal to 90 percent of the fair market election to reduce those balances (which January 1, 2008, pursuant to sections value of plan assets. If the value of plan will affect the determination of the 104 through 106 of PPA ’06, any change assets determined under this paragraph value of plan assets for purposes of in a plan’s funding method for the first (g)(5)(ii)(B) is greater than 110 percent of sections 430 and 436). Paragraph (f) of plan year to which section 430 applies the fair market value of plan assets on this section sets forth rules regarding to determine the plan’s minimum the valuation date, then the value of elections under this section. Paragraph required contribution is treated as plan assets under this paragraph (g) of this section contains examples. having been approved by the (g)(5)(ii)(B) is equal to 110 percent of the Paragraph (h) of this section contains Commissioner and does not require the fair market value of plan assets. effective/applicability dates and Commissioner’s specific prior approval. (iii) Subtraction of credit balance— transition rules. (4) Approval for changes in actuarial (A) In general. If a plan has a funding (2) Special rules for multiple assumptions. The Commissioner’s standard account credit balance as of employer plans. In the case of a multiple specific prior approval is not required the valuation date for the 2007 plan employer plan to which section with respect to any actuarial year, then, except as described in 413(c)(4)(A) applies, the rules of this assumptions that are adopted for the paragraph (g)(5)(iii)(B) of this section, section are applied separately for each first plan year for which section 430 that balance is subtracted from the value employer under the plan, as if each applies to determine the minimum of plan assets described in paragraph employer maintained a separate plan. required contribution for the plan and (g)(5)(ii)(B) of this section as of that Thus, each employer under such a that are not inconsistent with the valuation date to determine the value of multiple employer plan may have a requirements of section 430. plan assets for the 2007 plan year. separate funding standard carryover (5) Transition rule for determining However, the value of plan assets is not balance and a prefunding balance for funding target attainment percentage for reduced below zero. the plan. In the case of a multiple the 2007 plan year—(i) In general. For (B) Effect of funding standard employer plan to which section purposes of the first plan year beginning carryover balance reduction for the 2008 413(c)(4)(A) does not apply (that is, a on or after January 1, 2008, the funding plan year. Notwithstanding the rules of plan described in section 413(c)(4)(B) target attainment percentage for the paragraph (g)(5)(iii)(A) of this section, that has not made the election for plan’s prior plan year (the 2007 plan for the first plan year beginning in 2008, section 413(c)(4)(A) to apply), the rules year) is determined as the fraction if the employer has made an election to of this section are applied as if all (expressed as a percentage), the reduce some or all of the funding participants in the plan were employed numerator of which is the value of plan standard carryover balance as of the first by a single employer. assets determined under paragraph day of that year in accordance with (b) Maintenance of balances—(1) (g)(5)(ii) of this section, and the § 1.430(f)–1(e), then the present value Prefunding balance—(i) In general. A denominator of which is the plan’s (determined as of the valuation date for plan sponsor is permitted to elect to

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maintain a prefunding balance for a (iv) Adjustments for interest—(A) adjusted to reflect the actual rate of plan. A prefunding balance maintained Adjustment of excess contribution. The return on plan assets for the preceding for a plan consists of a beginning present value of the excess contribution plan year. For this purpose, the actual balance of zero, increased by the for the preceding year (as determined rate of return on plan assets for the amount of excess contributions to the under paragraph (b)(1)(ii)(B) of this preceding plan year is determined on extent the employer elects to do so as section) is increased for interest the basis of fair market value and must described in paragraph (b)(1)(ii) of this accruing for the period between the take into account the amount and timing section, and decreased to the extent valuation date for the preceding plan of all contributions, distributions, and provided in paragraph (b)(1)(iii) of this year and the first day of the current plan other plan payments made during that section. The plan sponsor’s initial year. For this purpose, interest is period. election to add to the prefunding determined by using the plan’s effective (ii) Ordering rules for adjustments. In balance under paragraph (b)(1)(ii) of this interest rate under section 430(h)(2)(A) general, the adjustment for actual rate of section constitutes an election to for the preceding plan year, except to return on plan assets is applied to the maintain a prefunding balance. The the extent provided in paragraph balance after any reduction of prefunding balance is adjusted further (b)(3)(iii) of this section. prefunding and funding standard for investment return and interest as (B) Determination of present value. carryover balances for that preceding provided in paragraphs (b)(3) and (b)(4) The present value of the contributions plan year under paragraph (e) of this of this section. described in paragraph (b)(1)(ii)(B)(1) of section and after subtracting amounts (ii) Increases—(A) In general. If the this section is determined as of the used to offset the minimum required plan sponsor of a plan elects to add to valuation date for the preceding plan contribution for the preceding plan year the plan’s prefunding balance, as of the year, using the plan’s effective interest pursuant to paragraph (d) of this first day of a plan year following the rate under section 430(h)(2)(A) for the section. However, see paragraph first effective plan year for the plan, the preceding plan year. (d)(1)(ii)(D) of this section for a special prefunding balance is increased by the (2) Funding standard carryover ordering rule when adjusting for amount so elected by the plan sponsor balance—(i) In general. A funding investment experience. standard carryover balance is for the plan year. The amount added to (iii) Special rule for excess automatically established for a plan that the prefunding balance cannot exceed contributions attributable to use of had a positive balance in the funding the present value of the excess funding balances. Notwithstanding standard account under section 412(b) contributions for the preceding plan paragraph (b)(1)(iv)(A) of this section, to (as in effect prior to amendment by the year determined under paragraph the extent that a contribution is Pension Protection Act of 2006 (PPA (b)(1)(ii)(B) of this section, increased for included in the present value of excess ’06), Public Law 109–280 (120 Stat. interest in accordance with paragraph 780)) as of the end of the pre-effective contributions solely because the (b)(1)(iv)(A) of this section. plan year for the plan. The funding minimum required contribution has (B) Present value of excess standard carryover balance as of the been offset under paragraph (d) of this contribution. The present value of the beginning of the first effective plan year section, the contribution is adjusted for excess contribution for the preceding for the plan is the positive balance in investment experience under the rules plan year is the excess, if any, of— the funding standard account under of this paragraph (b)(3). (1) The present value (determined section 412(b) (as in effect prior to (4) Valuation date other than the first under the rules of paragraph (b)(1)(iv)(B) amendment by PPA ’06) as of the end day of the plan year—(i) In general. If of this section) of the employer of the pre-effective plan year for the a plan’s valuation date is not the first contributions (other than contributions plan. After that date, the funding day of the plan year, then, solely for to avoid or terminate benefit limitations standard carryover balance is decreased purposes of applying paragraphs (c), (d), described in § 1.436–1(f)(2)) to the plan to the extent provided in paragraph and (e) of this section, the plan’s for such preceding plan year; over (b)(2)(ii) of this section and adjusted prefunding and funding standard (2) The minimum required further for investment return and carryover balances (if any) determined contribution for such preceding plan interest as provided in paragraphs (b)(3) under this paragraph (b) are increased year. and (b)(4) of this section. from the first day of the plan year to the (C) Treatment of unpaid minimum (ii) Decreases. As of the first day of valuation date using the plan’s effective required contributions. For purposes of each plan year, the funding standard interest rate under section 430(h)(2)(A) this paragraph (b)(1)(ii), a contribution carryover balance of a plan is decreased for the plan year. made during a plan year to correct an (but not below zero) by the sum of— (ii) Special rule for adjustments for unpaid minimum required contribution (A) Any amount of the funding investment experience. In the case of a (within the meaning of section standard carryover balance that was plan with a valuation date that is not the 4971(c)(4)) for a prior plan year is not used under paragraph (d) of this section first day of the plan year, for purposes treated as a contribution for the current to offset the minimum required of applying the subtraction under plan year. contribution of the plan for the paragraph (b)(3)(ii) of this section for (iii) Decreases. As of the first day of preceding plan year; and amounts used to offset the minimum each plan year, the prefunding balance (B) Any reduction in the funding required contribution for the preceding of a plan is decreased (but not below standard carryover balance under plan year and the decreases under zero) by the sum of— paragraph (e) of this section for the plan paragraphs (b)(1)(iii) and (b)(2)(ii) of this (A) Any amount of the prefunding year. section, the amount of the prefunding balance that was used under paragraph (3) Adjustments for investment balance or funding standard carryover (d) of this section to offset the minimum experience—(i) In general. A plan’s balance that is used to offset the required contribution of the plan for the prefunding balance under paragraph minimum required contribution under preceding plan year; and (b)(1) of this section and a plan’s paragraph (d) of this section or reduced (B) Any reduction in the prefunding funding standard carryover balance under paragraph (e) of this section is balance under paragraph (e) of this under paragraph (b)(2) of this section as discounted from the valuation date to section for the plan year. of the first day of a plan year must be the first day of the plan year using the

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effective interest rate under section the minimum required contribution for the due date of the required installment. 430(h)(2)(A) for the plan year. the plan year under paragraph (d) of this If the election to use all or a portion of (5) Special rule for quarterly section. the prefunding balance or the funding contributions—(i) Quarterly (3) Special rule for certain binding standard carryover balance to satisfy the contributions due on or after the agreements with PBGC. If there is in required installments under section valuation date. For purposes of effect for a plan year a binding written 430(j)(3) is made after the due date for applying a prefunding balance or agreement with the Pension Benefit the required installment, then the funding standard carryover balance to Guaranty Corporation (PBGC) which amount used to offset the minimum required installments described in provides that all or a portion of the required contribution for the plan year section 430(j)(3) that are due on or after prefunding balance or funding standard is the portion of the balance so used, the valuation date for the plan year for carryover balance (or both balances) is discounted from the date of the election which they are due, the respective not available to offset the minimum to the due date of the required balances are increased from the required contribution for a plan year, installment at the effective interest rate beginning of the year to the date of the that specified amount is not subtracted plus 5 percentage points, and then election (using the plan’s effective from the value of plan assets for further discounted from the installment interest rate for the plan year) to purposes of determining the funding due date to the valuation date at the determine the amount available to offset shortfall under section 430(c)(4). For effective interest rate. For example, if a the required quarterly installment. The example, if a plan has no prefunding quarterly installment of $20,250 is due amounts used to offset required balance and a $20 million funding on April 15 for a calendar year plan quarterly installments are then standard carryover balance, a PBGC with a valuation date on January 1 and discounted from that date to the first agreement provides that $5 million of a an effective interest rate of 6 percent, day of the plan year for purposes of the plan’s funding standard carryover and the installment is satisfied by an subtraction under paragraph (b)(3)(ii) of balance is unavailable to offset the election to apply the funding standard this section and the decreases under minimum required contribution for a carryover balance that is made on July paragraphs (b)(1)(iii) and (b)(2)(ii) of this plan year, and the plan’s assets are $100 1 (21⁄2; months after the April 15 due section, using the effective interest rate million, then the value of plan assets for date), then the amount used to offset the for the plan year. However, see purposes of determining the funding minimum required contribution under paragraph (d)(1)(i)(B) of this section for shortfall under section 430(c)(4) is this paragraph (d)(1)(i) is $19,481 (that a special rule regarding late quarterly reduced by $15 million ($20 million less is, $20,250 ÷ 1.11(2.5⁄12) ÷ 1.06(3.5⁄12). installments when determining the $5 million) to $85 million. For purposes However, the amount by which the amount that is used to offset the of this paragraph (c)(3), an agreement funding standard carryover balance is minimum required contribution for the with the PBGC is taken into account reduced under paragraph (b)(2)(ii) of plan year. with respect to a plan year only if the this section is $19,669 (that is, $20,250 (ii) Quarterly contributions due before agreement was executed prior to the ÷ 1.06(6⁄12). the valuation date. [Reserved.] valuation date for the plan year. (2) Quarterly contributions due before (c) Effect of balances on the value of (d) Election to apply balances against the valuation date. [Reserved.] plan assets—(1) In general. In the case minimum required contribution—(1) In (ii) Maximum amount of available of any plan with a prefunding balance general—(i) Amount of offset to balances and coordination of or a funding standard carryover balance, minimum required contribution—(A) elections—(A) General requirement to the amount of those balances is Effect of use of balances. Subject to the follow chronology. In general, the subtracted from the value of plan assets limitations provided in this paragraph amount of prefunding and funding for purposes of sections 430 and 436, (d), in the case of any plan year with standard carryover balances that may be except as otherwise provided in respect to which the plan sponsor elects used to offset the minimum required paragraphs (c)(2), (c)(3), and (d)(3) of to use all or a portion of the prefunding contribution for a plan year must take this section and § 1.436–1(j)(1)(ii)(B). balance or the funding standard into account any decrease in those (2) Subtraction of balances in carryover balance to offset the minimum balances which results from a prior determining new shortfall amortization required contribution for the plan year, election either to use the prefunding base—(i) Prefunding balance. For the minimum required contribution for balance or funding standard carryover purposes of determining whether a plan the plan year (determined after taking balance under section 430(f)(3) and this is exempt from the requirement to into account any waiver under section paragraph (d) or to reduce those establish a new shortfall amortization 412(c)) is offset as of the valuation date balances under section 430(f)(5) and base under section 430(c)(5), the amount for the plan year by the amount so used. paragraph (e) of this section (including of the prefunding balance is subtracted (B) Special rule for late quarterly deemed elections under section from the value of plan assets only if an contributions—(1) Quarterly 436(f)(3) and § 1.436–1(a)(5)). For election under paragraph (d) of this contributions due on or after the example, for a calendar plan year with section to use the prefunding balance to valuation date. Notwithstanding a January 1 valuation date, a deemed offset the minimum required paragraph (d)(1)(i)(A) of this section, if election under section 436(f)(3) and contribution is made for the plan year. the plan sponsor elects to use all or a § 1.436–1(a)(5) on April 1, 2010 (the first (ii) Funding standard carryover portion of the prefunding balance or the day of the 4th month of the plan year) balance. For purposes of determining funding standard carryover balance to will reduce the available prefunding whether a plan is exempt from the satisfy a required installment under balance or funding standard carryover requirement to establish a new shortfall section 430(j)(3) that is due on or after balance that can be used with respect to amortization base under section the valuation date, the amount used to an election made after April 1, 2010. 430(c)(5), the funding standard offset the minimum required (B) Exception to chronological rule. carryover balance is not subtracted from contribution for the plan year is the Notwithstanding the general rule of the value of plan assets regardless of portion of the balance so used, paragraph (d)(1)(ii)(A) of this section, all whether any portion of either the discounted in accordance with the rules elections under section 430(f)(5) and funding standard carryover balance or of paragraph (b)(5) of this section, paragraph (e) of this section to reduce the prefunding balance is used to offset unless the date of the election is after the prefunding balance or funding

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standard carryover balance for the carryover balances available for that date for the preceding plan year, current plan year (including deemed subsequent election. Under this special reduced by the amount of any elections under section 436(f)(3) and rule, in lieu of decreasing the funding prefunding balance (but not the amount § 1.436–1(a)(5)) are deemed to occur on standard carryover balance or of any funding standard carryover the valuation date for the plan year and prefunding balance as of the valuation balance); and before any election under section date for the current year to take into (B) The denominator of which is the 430(f)(3) and this paragraph (d) to offset account the current year election, the funding target of the plan for the the minimum required contribution for funding standard carryover balance or preceding plan year (determined the current plan year. Accordingly, if an prefunding balance as of the valuation without regard to the at-risk rules of election to use the prefunding balance date for the prior plan year is decreased section 430(i)(1)). or funding standard carryover balance to by the amount of the prior year (ii) Special rule for second year of a offset the minimum required equivalent of the current year election. new plan with no past service. In the contribution for the plan year (including The prior year equivalent of the current case of a new plan that was neither the an election to satisfy the quarterly year election is determined by dividing result of a merger nor involved in a contribution requirement) has been the amount of the current year election spinoff, if the prior plan year was the made prior to the election to reduce the (as of the first day of the current plan first year of the plan and the funding prefunding balance or funding standard year) by a number equal to 1 plus the target for the prior plan year was zero, carryover balance, then the amount rate of investment return for the prior then the plan’s prior plan year funding available for use to offset the otherwise plan year determined under paragraph ratio is deemed to be 80 percent for applicable minimum required (b)(3) of this section. If this paragraph purposes of this paragraph (d)(3). contribution for the plan year under this (d)(1)(ii)(D) applies for a plan year, then (iii) Special rule for plans that are the paragraph (d) will be retroactively the funding standard carryover balance result of a merger. [Reserved] reduced. However, an election to reduce and prefunding balance are nonetheless (iv) Special rules for plans that are a prefunding balance or funding adjusted in accordance with the rules of involved in a spinoff. [Reserved] standard carryover balance for a plan paragraph (b) of this section, after the (e) Election to reduce balances—(1) In year does not affect a prior election to application of the rules of this general. A plan sponsor may make an use a prefunding balance or funding paragraph (d)(1)(ii)(D). Thus, the election for a plan year to reduce any standard carryover balance to offset a amount used to offset the minimum portion of a plan’s prefunding and minimum required contribution for a required contribution for the earlier funding standard carryover balances prior plan year. plan year is subtracted from the under this paragraph (e). If such an (C) Investment experience. In addition prefunding balance or funding standard election is made, the amount of those to reflecting any decrease in the carryover balance as of the valuation balances that must be subtracted from prefunding balance or the funding date for that year prior to the adjustment the value of plan assets pursuant to standard carryover balance which for investment return under paragraph paragraph (c)(1) of this section will be results from a prior election for the (b)(3) of this section for that plan year, smaller and, accordingly, the value of previous year either to use the and the amount by which the plan assets taken into account for prefunding balance or funding standard prefunding balance or funding standard purposes of sections 430 and 436 will be carryover balance under section carryover balance is decreased for the larger. Thus, this election to reduce a 430(f)(3) and this paragraph (d) to offset second year is based on the elections the minimum required contribution for made for the second year. plan’s prefunding and funding standard such prior plan year or to reduce those (2) Requirement to use funding carryover balances is taken into account balances under section 430(f)(5) and standard carryover balance before in the determination of the value of plan paragraph (e) of this section (including prefunding balance. To the extent that assets for the plan year and applies for deemed elections under section a plan has a funding standard carryover all purposes under sections 430 and 436(f)(3) and § 1.436–1(a)(5)), the prior balance greater than zero, no amount of 436, including for purposes of plan year’s prefunding and funding the plan’s prefunding balance may be determining the plan’s prior plan year standard carryover balances must be used to offset the minimum required funding ratio under paragraph (d)(3) of adjusted under the rules of paragraph contribution. Thus, a plan’s funding this section for the following plan year. (b)(3) of this section for investment standard carryover balance must be See also section 436(f)(3) and § 1.436– experience for that prior plan year exhausted before the plan’s prefunding 1(a)(5) for a rule under which the plan before determining the amount of those balance may be applied under sponsor is deemed to make the election balances available for such an election paragraph (d)(1) of this section to offset described in this paragraph (e). The for the current plan year. the minimum required contribution. rules of paragraph (d)(1)(ii) of this (D) Special rule for current year (3) Limitation for underfunded section also apply for purposes of elections that are made before prior year plans—(i) In general. An election to use determining the maximum amount of elections. This paragraph (d)(1)(ii)(D) the prefunding balance or funding prefunding balance or funding standard sets forth a special rule that applies if, standard carryover balance to offset the carryover balance that is available for an for the current plan year, a plan sponsor minimum required contribution under election under this paragraph (e). makes an election under this paragraph this paragraph (d) is not available for a (2) Requirement to reduce funding (d) or paragraph (e) of this section plan year if the plan’s prior plan year standard carryover balance before (including a deemed election under funding ratio is less than 80 percent. For prefunding balance. To the extent that section 436(f)(3) and § 1.436–1(a)(5)), purposes of this paragraph (d)(3), except a plan has a funding standard carryover and then subsequently makes an as otherwise provided in this paragraph balance greater than zero, no election election under this paragraph (d) to (d)(3) or paragraph (h)(3) of this section, under paragraph (e)(1) of this section is offset the minimum required the plan’s prior plan year funding ratio permitted to be made that reduces the contribution for the prior plan year. is the fraction (expressed as a plan’s prefunding balance. Thus, a plan This special rule applies solely for percentage)— must exhaust its funding standard purposes of determining the amount of (A) The numerator of which is the carryover balance before it is permitted prefunding and funding standard value of plan assets on the valuation to make an election under paragraph

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(e)(1) of this section with respect to its balance as of the first day of the plan contribution requirements (including an prefunding balance. year that begins on January 1, 2010 (in election used to satisfy the quarterly (f) Elections—(1) Method of making an amount not in excess of the present contribution requirements) exceeds the elections—(i) In general. Any election value of the excess contribution as of minimum required contribution for a under this section by the plan sponsor the valuation date in 2009, adjusted for plan year (determined without regard to must be made by providing written interest under the rules of paragraph the election under paragraph (d) of this notification of the election to the plan’s (b)(1)(ii) of this section), must be made section) if and only if the election is enrolled actuary and the plan no later than September 15, 2010, even revoked by providing written administrator. The written notification though the election is reported on the notification of the revocation to the must set forth the relevant details of the 2010 Schedule SB of Form 5500, which plan’s enrolled actuary and the plan election, including the specific dollar is not due until 2011. Except for the administrator by the deadline set forth amount involved in the election (except standing elections covered by paragraph in paragraph (f)(3)(iii) of this section. If as provided in paragraph (f)(1)(ii) of this (f)(1)(ii) of this section, an election no such revocation is made, then, under section). Thus, except as provided in under this section may not be made paragraph (b) of this section, the paragraph (f)(1)(ii) of this section, a prior to the first day of the plan year to funding standard carryover balance or conditional or formula-based election which the election relates. prefunding balance is decreased by the generally does not satisfy the (ii) Special rule for standing election entire amount that the plan sponsor requirements of this paragraph (f). revoked by a change in enrolled actuary. elected to use to offset the minimum (ii) Standing elections to increase or If there is a change in enrolled actuary required contribution for a plan year use balances. A plan sponsor may for the plan year which would result in (including an election to satisfy the provide a standing election in writing to a revocation of the standing election quarterly contribution requirements for the plan’s enrolled actuary to use the under the rule of paragraph (f)(1)(ii)(B) a plan year). funding standard carryover balance and of this section, then the plan sponsor (iii) Deadline for revoking election. the prefunding balance to offset the may reinstate the revoked standing The deadline for revoking the election minimum required contribution for the election by providing a replacement to described in paragraph (f)(3)(ii) of this plan year to the extent needed to avoid the new enrolled actuary by the due section is generally the end of the plan an unpaid minimum required date of the Schedule SB of Form 5500. year. However, for plans with a contribution under section 4971(c)(4) (iii) Election to reduce balances. Any valuation date other than the first day of taking into account any contributions election under paragraph (e) of this the plan year, the deadline for the that are or are not made. In addition, a section to reduce the prefunding revocation is the deadline for plan sponsor may provide a standing balance or funding standard carryover contributions for the plan year as election in writing to the plan’s enrolled balance for a plan year (for example, in described in section 430(j)(1). In actuary to add the maximum amount order to avoid or terminate a benefit addition, for the first plan year possible each year to the prefunding restriction under section 436) must be beginning in 2008, the deadline for the balance. Any election made pursuant to made by the end of the plan year to revocation for all plans is deferred to the a standing election under this paragraph which the election relates. due date (including extensions) of the (f)(1)(ii) is deemed to occur on the last (iv) Earlier elections. This paragraph Schedule SB, ‘‘Single-Employer Defined day available to make the election for (f)(2) sets forth the latest date that an Benefit Plan Actuarial Information’’ of the plan year as provided under election can be made. A plan sponsor is Form 5500, ‘‘Annual Return/Report of paragraph (f)(2)(i) of this section. Any permitted to make an earlier election, Employee Benefit Plan’’. standing election under this paragraph and in certain circumstances may need (4) Plan sponsor—(i) In general. For (f)(1)(ii) remains in effect for the plan to make such an election in order to purposes of the elections described in with respect to the enrolled actuary timely satisfy a quarterly contribution this section, except as otherwise named in the election, unless— requirement under section 430(j)(3). (A) The standing election is revoked (3) Irrevocability of elections—(i) In provided in paragraph (f)(4)(ii) of this under the rules of paragraph (f)(3) of general. Except as otherwise provided section, any reference to the plan this section; or in this paragraph (f)(3), a plan sponsor’s sponsor means the employer or (B) The enrolled actuary who signs election under this section with respect employers responsible for making the actuarial report under section 6059 to the plan’s prefunding balance or contributions to or under the plan. (Schedule SB, ‘‘Single-Employer funding standard carryover balance is (ii) Certain multiple employer plans. Defined Benefit Plan Actuarial irrevocable (and must be For purposes of the elections described Information’’ of Form 5500, ‘‘Annual unconditional). A standing election by in this section, in the case of plans that Return/Report of Employee Benefit the plan sponsor may be revoked by are multiple employer plans to which Plan’’) for the plan for the plan year is providing written notification of the section 413(c)(4)(A) does not apply, any not the enrolled actuary named in the revocation to the plan’s enrolled actuary reference to the plan sponsor means the standing election. and the plan administrator on or before plan administrator within the meaning (2) Timing of elections—(i) General the date the corresponding election is of section 414(g). rule. Except as otherwise provided in deemed to occur pursuant to paragraph (g) Examples. The following examples paragraph (f)(2)(ii) or (iii) of this section, (f)(1)(ii) of this section. illustrate the rules of this section: any election under this section with (ii) Exception for certain elections. An Example 1. (i) Plan P is a defined benefit respect to a plan year must be made no election to use the prefunding balance plan with a plan year that is the calendar later than the last date for making the or funding standard carryover balance to year and a valuation date of January 1. The minimum required contribution for the offset the minimum required funding standard carryover balance of Plan P plan year as described in section contribution for a plan year (including is $25,000 and the prefunding balance is zero as of the beginning of the 2010 plan year. The 430(j)(1). For this purpose, an election an election to satisfy the quarterly sponsor of Plan P, Sponsor S, does not elect to add to the prefunding balance relates contribution requirements for a plan to use any portion of the balance to offset the to the plan year for which excess year) is permitted to be revoked to the minimum required contribution for 2010 contributions were made. For example, extent the amount the plan sponsor pursuant to paragraph (d)(1) of this section, an election to add to the prefunding elected to use to offset the minimum or to reduce any portion of the funding

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standard carryover balance prior to the Sponsor S elects to use $15,000 of the standard carryover balance to offset the determination of the value of plan assets for funding standard carryover balance to offset minimum required contribution as provided 2010, pursuant to paragraph (e)(1) of this P’s minimum required contribution for 2010, in paragraph (d)(1) of this section. The section. The actual rate of return on Plan P’s pursuant to paragraph (d)(1) of this section. remaining $40,824 ($140,824 minus assets for 2010 is 2%. Plan P’s effective This is permitted because Plan P’s prior-year $100,000) results from cash contributions interest rate for 2010 is 6%. The minimum funding ratio determined under paragraph made in excess of the minimum required required contribution for Plan P under (d)(3) of this section is 110%, and is therefore contribution before offset by the funding section 430 for 2010 is $100,000, and no not less than 80%. standard carryover balance. quarterly installments are required for Plan P (ii) Because the contribution was made on (iv) The portion of the excess contribution for the 2010 plan year. As of January 1, 2010, a date other than the valuation date for the resulting solely because the minimum the value of plan assets is $1,100,000 and the 2010 plan year, the contribution must be required contribution was offset by a portion funding target is $1,000,000. Therefore, the adjusted to reflect interest that would of the funding standard carryover balance is prior plan year funding ratio for Plan P for otherwise have accrued between the adjusted for investment experience during 2010, as determined under paragraph (d)(3) valuation date and the date of the 2009, pursuant to paragraph (b)(3)(iii) of this of this section, is 110%. contribution, at the effective interest rate for section. Accordingly, this portion of the (ii) Sponsor S makes a contribution to Plan the 2010 plan year. The amount of the present value of the excess contribution P of $150,000 on December 1, 2010, for the contribution after adjustment is $85,000, adjusted for interest as of January 1, 2011, is 2010 plan year and makes no other determined as $90,539 discounted for 13 $15,300 ($15,000 adjusted for investment contributions for the 2010 plan year. Because months of compound interest at an effective experience during 2010 at a rate of 2%). this contribution was made on a date other interest rate of 6%. The adjusted contribution (v) The excess contribution resulting from than the valuation date for the 2010 plan of $85,000 plus the $15,000 of the funding cash contributions in excess of the minimum year, the contribution must be adjusted to standard carryover balance used to offset the required contribution before offset by the reflect interest that would otherwise have minimum required contribution equals the funding standard carryover balance is accrued between the valuation date and the minimum required contribution for the 2010 adjusted for interest at the effective interest date of the contribution, at the effective plan year of $100,000. Therefore, no excess rate for 2010, pursuant to paragraph interest rate for the 2010 plan year. The contributions are available to increase the (b)(1)(iv)(A) of this section. Accordingly, this amount of the contribution after adjustment prefunding balance, and the prefunding portion of the present value of the excess is $142,198, determined as $150,000 balance as of January 1, 2011, remains zero. contribution adjusted for interest as of discounted for 11 months of compound (iii) The funding standard carryover January 1, 2011, is $43,273 ($40,824 interest at an effective annual interest rate of balance as of January 1, 2011, is adjusted for increased by the effective interest rate of 6%). The increase in Plan P’s prefunding balance 6%. investment experience during the 2010 plan as of January 1, 2011, cannot exceed the total (iii) The excess of employer contributions year, in accordance with paragraph (b)(3) of present value of the excess contribution for 2010 over the minimum required this section. The amount of the adjustment is adjusted for interest of $58, 573 ($15,300 plus contribution for 2010, as of the valuation $200, determined as the actual rate of return $43,273). date, is $42,198 ($142,198 less $100,000). on plan assets for 2010 as applied to the 2010 (vi) The funding standard carryover funding standard carryover balance after Accordingly, the increase in Plan P’s balance as of January 1, 2011, is $10,200, prefunding balance as of January 1, 2011, reduction for the amount of that balance used determined as the 2010 funding standard cannot exceed $44,730 (which is the present under paragraph (d)(1) of this section (that is, carryover balance less the $15,000 used to value of the excess contribution of $42,198 $25,000 less $15,000, multiplied by the offset the 2010 minimum required adjusted for 12 months of interest at an actual rate of return of 2%). contribution, adjusted for investment effective interest rate of 6%). (iv) The funding standard carryover experience during the 2010 plan year as (iv) Plan P’s funding standard carryover balance, as of January 1, 2011, is $10,200, developed in Example 3 ($25,000 less balance as of January 1, 2011, is $25,500 determined as the 2010 funding standard $15,000 plus $200). (which is the funding standard carryover carryover balance less the amount used to (vii) Sponsor S elects to increase the balance as of January 1, 2010, adjusted for offset the 2010 minimum required prefunding balance by the maximum amount investment experience during 2010 at a rate contribution, adjusted for investment of the present value of the excess of 2%). experience during the 2010 year ($25,000 less contribution adjusted for interest of $58,573, Example 2. (i) The facts are the same as in $15,000 plus $200). resulting in a total of the funding standard Example 1, except that the contribution of Example 4. (i) The facts are the same as carryover balance and the prefunding balance $150,000 is made on February 1, 2011, for the in Example 3, except that Sponsor S as of January 1, 2011, of $68,773, the same 2010 plan year. contributes $150,000 (instead of $90,539) to amount as that developed in Example 2. (ii) The amount of the contribution after Plan P on February 1, 2011, for the 2010 plan Example 5. (i) Plan Q is a defined benefit adjustment is $140,824, which is determined year. plan with a plan year that is the calendar as $150,000 discounted for 13 months of (ii) Because the contribution was made on year and a valuation date of July 1. The interest at an effective interest rate of 6%. a date other than the valuation date for the funding standard carryover balance of Plan Q Accordingly, the increase in Plan P’s 2010 plan year, the contribution must be is $50,000 as of January 1, 2010, the prefunding balance as of January 1, 2011, adjusted to reflect interest that would beginning of the 2010 plan year. The cannot exceed $43,273 (which is the present otherwise have accrued between the prefunding balance of Plan Q as of the value of the excess contribution of $40,824 valuation date and the date of the beginning of the 2010 plan year is $0. The adjusted for 12 months of interest at an contribution, at the effective interest rate for actual rate of return on Plan Q’s assets for effective interest rate of 6%). the 2010 plan year. The amount of the 2010 is 10%. Plan Q’s effective interest rate (iii) Plan P’s funding standard carryover contribution after adjustment is $140,824, for 2010 is 6.25%. The funding ratio for Plan balance as of January 1, 2011, is $25,500, as determined as $150,000 discounted for 13 Q for 2009 (the prior plan year funding ratio developed in Example 1 of this section. If months of interest at an effective interest rate with respect to 2010, as determined under Sponsor S elects to increase the prefunding of 6%. paragraph (d)(3) of this section) is 85%, balance as of January 1, 2011, by the present (iii) Because Sponsor S elected to use which is not less than 80%. The minimum value of the excess contribution adjusted for $15,000 of the funding standard carryover required contribution for Plan Q for 2010 is interest, or $43,273, the total of the funding balance to offset the minimum required $200,000. Sponsor T makes a contribution to standard carryover balance and prefunding contribution for 2010 of $100,000, the cash Plan Q of $190,000 on July 1, 2010, for the balance as of January 1, 2011, is $68,773. contribution requirement for 2010, adjusted 2010 plan year, and makes no other Example 3. (i) The facts are the same as with interest to January 1, 2010, is $85,000. contributions for the 2010 plan year. Sponsor in Example 1, except that Sponsor S The adjusted contribution of $140,824 T elects to use $10,000 of the funding contributes $90,539 to Plan P on February 1, exceeds this amount by $55,824. Of this standard carryover balance to offset Plan Q’s 2011, for the 2010 plan year and makes no amount, $15,000 exceeds the minimum minimum required contribution in 2010. other contributions to Plan P for the 2010 required contribution only because of (ii) Pursuant to paragraph (b)(4) of this plan year. In addition, on February 1, 2011, Sponsor S’s election to use the funding section, the funding standard carryover

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balance is increased to $51,539 as of July 1, for 2011 is 6.5%, and the rate of return on to offset the minimum required contribution 2010 (that is, an increase to reflect 6 months investments during 2011 is 7%. All required for 2012. of interest at an effective interest rate of quarterly installments for the 2011 plan year (iv) The portion of the quarterly 6.25%) for the purpose of adjusting plan were made by the applicable due dates. On installment due April 15, 2012 that was not assets under paragraph (c) of this section, and February 1, 2012, Sponsor S elects to use covered by the remaining $5,087 prefunding for applying any election to use or reduce $50,000 of Plan P’s prefunding and funding balance is considered unpaid retroactive to Plan Q’s funding standard carryover balance standard carryover balances to offset the April 15, 2012. under paragraph (d) or (e) of this section. minimum required contribution for the 2011 Example 9. (i) The facts are the same as However, Sponsor T does not elect in 2010 plan year. On April 15, 2012, Sponsor S in Example 8, except that Sponsor S does not to reduce any portion of the funding standard elects to use Plan P’s prefunding and funding make the election to offset the 2011 carryover balance pursuant to paragraph (e) standard carryover balances to offset the 2012 minimum required contribution until August of this section. The funding standard minimum required contribution by $20,000, 1, 2012, and the deemed election as of July carryover balance ($51,539) is subtracted in accordance with paragraph (d) of this 1, 2012, reduces Plan P’s prefunding and from the value of plan assets, as of July 1, section, in order to offset the required funding standard carryover balances as of 2010, prior to the determination of the quarterly installment then due. January 1, 2012, by $68,500. Sponsor S does minimum funding contribution, and $51,539 (ii) When adjusting Plan P’s prefunding not elect to use Plan P’s prefunding and is the maximum amount that may applied and funding standard carryover balances to funding standard carryover balances to offset against the minimum required contribution. reflect Sponsor S’s election to use them to the 2012 minimum contribution. (iii) The value of the funding standard offset the 2011 minimum required (ii) In accordance with paragraph carryover balance as of January 1, 2011, is contribution, the remaining $10,200 in the (d)(1)(ii)(A) of this section, the July 1, 2012, determined by first discounting the amount funding standard carryover balance as of deemed election to reduce Plan P’s used to offset the minimum required January 1, 2011, must be used before any prefunding and funding standard carryover contribution for 2010 from July 1, 2010, to portion of the prefunding balance. The balances must be taken into account before January 1, 2010, using the effective interest prefunding balance is reduced by the determining the amount available to offset rate of 6.25%, and subtracting the discounted remaining $39,800 ($50,000 total election the 2011 minimum required contribution amount from the January 1, 2010, funding minus $10,200 from the funding standard because the election to offset the 2011 standard carryover balance. The resulting carryover balance). minimum required contribution was made amount is adjusted for investment experience (iii) The amount available for Sponsor S’s after the date of the deemed election, July 1, to January 1, 2011, using a rate equal to the election to use Plan P’s prefunding and 2012. actual rate of return on plan assets of 10% funding standard carryover balances to offset (iii) Pursuant to paragraph (d)(1)(ii)(C) of during 2010. Thus, the $10,000 used to offset the 2012 minimum required contribution is this section, the January 1, 2011, prefunding Plan Q’s minimum required contribution as determined by reducing the January 1, 2011, and funding standard carryover balances are of July 1, 2010, is discounted for 6 months prefunding and funding standard carryover adjusted to January 1, 2012, using Plan P’s of interest, at an effective interest rate of balances to reflect the election to use the rate of investment return for 2011 of 7%. 6.25%, to obtain an amount of $9,701 as of prefunding and funding standard carryover This results in an available funding standard January 1, 2010. The remaining funding balances to offset the 2011 minimum carryover balance of $10,914 ($10,200 × 1.07) standard carryover balance as of January 1, required contribution, and by adjusting the and an available prefunding balance of 2010, solely for purposes of determining the resulting amount to January 1, 2012, using $62,673 (58,573 × 1.07) as of adjustment for investment experience during the rate of investment return for Plan P January 1, 2012. 2010, is $40,299 ($50,000—$9,701), and the during 2011. Accordingly, the available (iv) Paragraph (d)(2) of this section requires adjustment for investment experience is amount in Plan P’s funding standard that the funding standard carryover balance $4,030 ($40,299 × 10%). The value of the carryover balance as of January 1, 2012, is must be used before reducing Plan P’s funding standard carryover balance as of zero. The available amount in Plan P’s prefunding balance. Accordingly, the funding January 1, 2011, is $44,329 (that is, $50,000 prefunding balance as of January 1, 2012, is standard carryover balance is eliminated, and ¥ $9,701 + $4,030). $20,087 ($58,573 minus $39,800, increased the prefunding balance is reduced by the Example 6. (i) The facts are the same as by 7%). Therefore, Sponsor S has $20,087 remaining $57,586 ($68,500 ¥ $10,914), in Example 5, except that Sponsor T available to offset the minimum required resulting in an available prefunding balance contributes $200,000 on July 1, 2010, for the contribution for the 2012 plan year. of $5,087 ($62,673 ¥ $57,586) as of January 2010 plan year. Example 8. (i) The facts are the same as in 1, 2012. (ii) The cash contribution required for Example 7, except that based on the enrolled (v) In accordance with paragraph 2010, after offsetting the minimum required actuary’s certification of the AFTAP on July (d)(1)(ii)(D) of this section, the remaining contribution by $10,000 of the funding 1, 2012, Sponsor S is deemed to elect to balance is adjusted to January 1, 2011, to standard carryover balance in accordance reduce the January 1, 2012, prefunding determine the amount available to offset the with T’s election, is $190,000. The difference, balance by $15,000 under section 436(f)(3). 2011 minimum required contribution. This or $10,000, must be adjusted to January 1, (ii) In accordance with paragraph adjustment is done by dividing the remaining 2011, to determine the maximum amount (d)(1)(ii)(B) of this section, the deemed balance by 1 plus the rate of investment that can be added to the prefunding balance election to reduce the prefunding balance is return for 2011. Accordingly, the amount as of that date. deemed to occur on the first day of the plan available to offset the 2011 minimum (iii) The excess contribution is first year, and before the date of any election to required contribution is $4,754 ($5,087 ÷ adjusted to January 1, 2010, by discounting offset the minimum required contribution for 1.07). for 6 months of interest using the effective the 2012 plan year. The deemed election (vi) If the plan sponsor elects to use the interest rate for 2010 of 6.25%. This results does not affect Sponsor S’s election to offset $4,754 available balance to offset the 2011 in an excess contribution of $9,701 ($10,000 the 2011 minimum contribution because that minimum required contribution, the funding ÷ 1.0625 0.5). Because this amount is an election was made on February 1, 2012, standard carryover balance as of January 1, excess contribution solely because of before the date of the deemed election, 2012 (prior to the deemed reduction under Sponsor T’s election to offset the minimum July 1, 2012. section 436(f)(3)) is $5,827 ($10,200 less required contribution for 2010 by a portion (iii) As shown in Example 7, the available $4,754, plus $381 for investment experience of the funding standard carryover balance, prefunding balance as of January 1, 2012, at a rate of 7%). The prefunding balance as the amount is then adjusted for investment after reflecting the February 1, 2012, election of January 1, 2012 (prior to the deemed experience during 2010 at a rate of 10%, in to offset the 2011 minimum required reduction under section 436(f)(3)) is $62,673 accordance with paragraph (b)(3)(iii) of this contribution but before reflecting the (that is, $58,573 × 1.07). The deemed election section, for a present value of the excess April 15, 2012, election to offset the 2012 to reduce Plan P’s balance is first applied to contribution adjusted for interest of $10,671 minimum required contribution, is $20,087. eliminate the funding standard carryover ($9,701 × 1.10) as of January 1, 2011. Adjusting this amount to reflect the deemed balance, and the remaining $62,673 ($68,500 Example 7. (i) The facts are the same as election to reduce the prefunding balance by less $5,827) reduces the January 1, 2012, in Example 4. Plan P’s effective interest rate $15,000 leaves a balance of $5,087 available prefunding balance to zero.

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Example 10. (i) Plan V is a defined benefit prefunding balance is applied before the year beginning on or after January 1, plan with a plan year that is the calendar election to use the prefunding balance to 2008, the funding target of the plan for year and a valuation date of December 31. offset the balance of the minimum required the preceding plan year is equal to the The valuation is based on the fair market contribution for 2010. To determine the plan’s current liability under section value of plan assets, which amounts to amount of the prefunding balance available $1,000,000 as of December 31, 2010, before to cover the remaining minimum required 412(l)(7) (as in effect prior to any adjustments. As of January 1, 2010, Plan contribution for 2010, the deemed reduction amendment by PPA ’06) on the V’s funding standard carryover balance is $0 is adjusted for investment experience to valuation date for the 2007 plan year. and its prefunding balance is $125,000. Plan January 1, 2010, using the actual rate of (iii) Special rules for new plans, V’s effective interest rate for 2010 is 5.5%. return of 10% for 2010. Accordingly, the mergers, and spinoffs. In the case of a The enrolled actuary’s certification of AFTAP adjusted deemed reduction is $68,182 plan described in paragraph (d)(3)(ii), for 2010 on March 31, 2010, results in a ($75,000 ÷ 1.10) and the available prefunding (d)(3)(iii), or (d)(3)(iv) of this section, deemed reduction of $15,000 in the plan’s balance as of January 1, 2010, is $41,818 the plan’s prior plan year funding ratio prefunding balance as of January 1, 2010. ($125,000 ¥ $15,000 adjusted deemed Plan V’s sponsor elected to use the ¥ with respect to the first plan year reduction for 2010 $68,182 adjusted beginning on or after January 1, 2008 is prefunding balance to offset any portion of deemed reduction for 2011). the minimum required contribution for 2010 (iii) This amount is then adjusted to determined using rules similar to the not covered by cash contributions. December 31, 2010, using the effective rules of paragraphs (d)(3)(ii), (d)(3)(iii), (ii) In accordance with paragraph (b)(4)(i) interest rate of 5.5%. The amount of the and (d)(3)(iv) of this section. of this section, the amount of the prefunding prefunding balance available to offset the (4) First effective plan year. For balance subtracted from plan assets is 2009 minimum required contribution as of purposes of this section, the term first increased from the first day of the plan year December 31, 2010, is $44,118 ($41,818 × effective plan year means the first plan to the valuation date using the effective 1.055). This amount is larger than the year beginning on or after the date interest rate of 5.5% for 2009. Accordingly, election made by Plan V’s sponsor to offset the prefunding balance used for this purpose section 430 applies for purposes of ¥ the minimum required contribution for 2010 determining the minimum required is $116,050 [($125,000 $15,000 deemed ($25,528) and so the election remains valid. reduction) × 1.055]. contribution for the plan. (iii) The fair market value of plan assets (h) Effective/applicability date and (5) Pre-effective plan year. For used for the December 31, 2010, valuation is transition rules—(1) Statutory effective purposes of this section, the term pre- $883,950 ($1,000,000 ¥ $116,050). date/applicability date. Section 430 effective plan year means the plan year Example 11. (i) The facts are the same as generally applies to plan years immediately preceding the first effective in Example 10. The minimum contribution beginning on or after January 1, 2008. plan year. for Plan V for the 2010 plan year is $45,000; ■ no quarterly installments are required for The applicability of section 430 for Par. 4. Section 1.430(g)–1 is added to Plan V for 2010. Plan V’s sponsor makes a purposes of determining the minimum read as follows: contribution of $20,000 for the 2010 plan required contribution is delayed for year on July 1, 2011. The actual rate of return certain plans in accordance with § 1.430(g)–1 Valuation date and valuation of plan assets. on assets for Plan V during 2010 is 10%. sections 104 through 106 of PPA ’06. (ii) The contribution of $20,000 is (2) Effective date/applicability date of (a) In general—(1) Overview. This discounted to December 31, 2010, using the regulations. This section applies to plan section provides rules relating to a effective interest rate of 5.5% to determine years beginning on or after January 1, plan’s valuation date and the valuation the remaining balance of the 2010 minimum of a plan’s assets for a plan year under required contribution. Accordingly, the 2010. For plan years beginning before January 1, 2010, plans are permitted to section 430(g). Section 430 and this contribution is adjusted to $19,472 ($20,000 section apply to single employer ÷ 1.055 0.5) as of December 31, 2010, and the rely on the provisions set forth in this balance of the minimum required section for purposes of satisfying the defined benefit plans (including contribution is $25,528 ($45,000 ¥ $19,472). requirements of section 430. multiple employer plans as defined in This balance will be covered by the plan (3) Special lookback rule for 2007 section 413(c)) that are subject to the sponsor’s election to use the prefunding plan year’s funding ratio—(i) Plan rules of section 412, but do not apply to balance to offset any portion of the minimum assets. For purposes of determining a multiemployer plans (as defined in required contribution not covered by cash plan’s prior plan year funding ratio section 414(f)). Paragraph (b) of this contributions. under paragraph (d)(3) of this section section describes valuation date rules. (iii) Under section (b)(4)(ii) of this section, Paragraph (c) of this section describes the amount used to offset the 2010 minimum with respect to the first plan year required contribution for the purpose of beginning on or after January 1, 2008, rules regarding the determination of the adjusting the prefunding balance is the value of plan assets on the valuation asset value for purposes of a plan’s discounted to January 1, 2010, using the date of the preceding plan year (the actuarial valuation. Paragraph (d) of this effective interest rate for 2010. This amount ‘‘2007 plan year’’) is determined under section contains rules for taking is calculated as $24,197 ($25,528 ÷ 1.055). section 412(c)(2) as in effect for the 2007 employer contributions into account in (iv) The prefunding balance as of January plan year, except that, for this the determination of the value of plan 1, 2011, is reduced by the deemed election purpose— assets. Paragraph (e) of this section of $15,000 and the discounted amount used contains examples. Paragraph (f) of this to offset the 2010 minimum required (A) If the value of plan assets is less contribution ($24,197), and adjusted for than 90 percent of the fair market value section sets forth effective/applicability investment experience for 2010 using the of plan assets for the 2007 plan year on dates and transition rules. actual rate of return of 10%. Accordingly, the that date, such value is considered to be (2) Special rules for multiple prefunding balance as of January 1, 2011 is 90 percent of the fair market value; and employer plans. In the case of a multiple $94,383 [($125,000 ¥ $15,000 ¥ $24,197) × (B) If the value of plan assets is greater employer plan to which section 1.10]. than 110 percent of the fair market value 413(c)(4)(A) applies, the rules of section Example 12. (i) The facts are the same as of plan assets for the 2007 plan year on 430 and this section are applied in Example 11, except that the enrolled that date, such value is considered to be separately for each employer under the actuary’s certification of the AFTAP as of plan as if each employer maintained a March 31, 2011, results in a deemed 110 percent of the fair market value. reduction of the prefunding balance as of (ii) Funding target. For purposes of separate plan. Thus, in such a case, the January 1, 2011, of $75,000. determining a plan’s prior plan year value of plan assets is determined (ii) Under paragraph (d)(1)(ii) of this funding ratio under paragraph (d)(3) of separately for each employer under the section, the deemed reduction of the this section with respect to the first plan plan. In the case of a multiple employer

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plan to which section 413(c)(4)(A) does day of the plan year is automatically determination date is the fair market not apply (that is, a plan described in approved by the Commissioner. value of plan assets on that date, section 413(c)(4)(B) that has not made (c) Determination of asset value—(1) increased for contributions included in the election for section 413(c)(4)(A) to In general—(i) General use of fair the plan’s asset balance on the valuation apply), the rules of section 430 and this market value. Except as otherwise date that were not included in the plan’s section are applied as if all participants provided in this paragraph (c), the value asset balance on the earlier in the plan were employed by a single of plan assets for purposes of section determination date, reduced for benefits employer. 430 is equal to the fair market value of and all other amounts paid from plan (b) Valuation date—(1) In general. plan assets on the valuation date. Prior assets during the period beginning with The determination of the funding target, year contributions made after the the prior determination date and ending target normal cost, and value of plan valuation date and current year immediately before the valuation date, assets for a plan year is made as of the contributions made before the valuation and adjusted for expected earnings as valuation date for that plan year. Except date are taken into account to the extent described in paragraph (c)(2)(ii)(D) of as otherwise provided in paragraph provided in paragraph (d) of this this section. For this purpose, the fair (b)(2) of this section, the valuation date section. market value of assets as of a for any plan year is the first day of the (ii) Fair market value. The fair market determination date includes any plan year. value of an asset is determined as the contribution for a plan year that ends (2) Exception for small plans—(i) In price at which the asset would change with or prior to the determination date general. If, on each day during the hands between a willing buyer and a that is receivable as of the determination preceding plan year, a plan had 100 or willing seller, neither being under any date (but only if the contribution is fewer participants determined by compulsion to buy or sell and both actually made within 81⁄2 months after applying the rules of § 1.430(d)–1(e)(1) having reasonable knowledge of the end of the applicable plan year). If and (2) (including active and inactive relevant facts. Except as otherwise the contribution that is receivable as of participants and all other individuals provided by the Commissioner, any the determination date is for a plan year entitled to future benefits), then the plan guidance on the valuation of insurance beginning on or after January 1, 2008, may designate any day during the plan contracts under Subchapter D of then only the present value as of the year as its valuation date for that plan Chapter 1 the Internal Revenue Code determination date (determined using year and succeeding plan years. For applies for purposes of this paragraph the effective interest rate under section purposes of this paragraph (b)(2)(i), all (c)(1)(ii). 430(h)(2)(A) for the plan year for which defined benefit plans (other than (2) Averaging of fair market values— the contribution is made) is included in multiemployer plans as defined in (i) In general. Subject to the plan asset the fair market value of assets. section 414(f)) maintained by an corridor rules of paragraph (c)(2)(iii) of (C) Treatment of spin-offs and plan- employer are treated as one plan, but this section, a plan is permitted to to-plan transfers. For purposes of only participants with respect to that determine the value of plan assets on determining the adjusted fair market employer are taken into account. the valuation date as the average of the value of plan assets, assets spun-off (ii) Employer determination. For fair market value of assets on the from a plan as a result of a spin-off purposes of this paragraph (b)(2), the valuation date and the adjusted fair described in § 1.414(l)–1(b)(4) are employer includes all members of the market value of assets determined for treated as an amount paid from plan employer’s controlled group determined one or more earlier determination dates assets. Except as otherwise provided by pursuant to section 414(b), (c), (m), and (adjusted using the method described in the Commissioner, for purposes of (o) and includes any predecessor of the paragraph (c)(2)(ii) of this section). The determining the adjusted fair market employer that, during the prior year, method of determining the value of value of plan assets, assets that are employed any employees of the assets is part of the plan’s funding added to a plan as a result of a plan-to- employer who are covered by the plan. method and, accordingly, may only be plan transfer described in § 1.414(l)– (iii) Application of exception in first changed with the consent of the 1(b)(3) are treated in the same manner plan year. In the case of the first plan Commissioner. as contributions. year of any plan, the exception for small (ii) Adjusted fair market value—(A) (D) Adjustments for expected plans under paragraph (b)(2)(i) of this Determination dates. The period of time earnings. [Reserved] section is applied by taking into account between each determination date (E) Assumed rate of return. [Reserved] the number of participants that the plan (treating the valuation date as a (F) Limitation on the assumed rate of is reasonably expected to have on each determination date) must be equal and return for periods within plan years for day during the first plan year. that period of time cannot exceed 12 which the three segment rates were (iv) Valuation date is part of funding months. In addition, the earliest used. [Reserved] method. The selection of a plan’s determination date with respect to a (G) Limitation on the assumed rate of valuation date is part of the plan’s plan year cannot be earlier than the last return for periods within plan years for funding method and, accordingly, may day of the 25th month before the which the full yield curve was used. only be changed with the consent of the valuation date of the plan year (or a [Reserved] Commissioner. A change of a plan’s similar period in the case of a valuation (iii) Restriction to 90–110 percent valuation date that is required by date that is not the first day of a month). corridor—(A) In general. This paragraph section 430 is treated as having been In a typical situation, the earlier (c)(2)(iii) provides rules for applying the approved by the Commissioner and determination dates will be the two 90 to 110 percent corridor set forth in does not require the Commissioner’s immediately preceding valuation dates. section 430(g)(3)(B)(iii). The rules for prior specific approval. Thus, if a plan However, these rules also permit the use accounting for contribution receipts that ceases to be eligible for the small of more frequent determination dates. under paragraphs (d)(1) and (d)(2) of plan exception under this paragraph For example, monthly or quarterly this section are applied prior to the (b)(2) for a plan year because the determination dates may be used. application of the 90 to 110 percent number of participants exceeded 100 in (B) Adjustments for contributions and corridor under this paragraph (c)(2)(iii). the prior plan year, then the resulting distributions. The adjusted fair market (B) Asset value less than 90 percent of change in the valuation date to the first value of plan assets for a prior fair market value. If the value of plan

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assets determined under paragraph rules of paragraph (d)(1)(i) apply to the either the first plan year beginning in (c)(2)(i) of this section is less than 90 contribution except that the present 2008, the first plan year beginning in percent of the fair market value of plan value is determined using the valuation 2009, or the first plan year beginning in assets, then the value of plan assets interest rate under section 412(c)(2) for 2010 is treated as having been approved under this paragraph (c)(2) is equal to 90 that plan year. by the Commissioner and does not percent of the fair market value of plan (iii) Ordering rules. For purposes of require the Commissioner’s specific assets. this paragraph (d)(1), the ordering rules prior approval. In addition, a change in (C) Asset value greater than 110 of section 4971(c)(4)(B) apply for a plan’s valuation date or asset percent of fair market value. If the value purposes of determining the plan year valuation method for the first plan year of plan assets determined under for which a contribution is made. to which section 430 applies to paragraph (c)(2)(i) of this section is (2) Current year contributions made determine the plan’s minimum required greater than 110 percent of the fair before valuation date. In the case of a contribution (even if that plan year market value of plan assets, then the plan with a valuation date that is not the begins after December 31, 2010) that value of plan assets under this first day of the plan year, for purposes satisfies the rules of this section is paragraph (c)(2) is equal to 110 percent of determining the value of plan assets treated as having been approved by the of the fair market value of plan assets. under paragraph (c) of this section, if an Commissioner and does not require the (3) Qualified transfers to health employer makes a contribution for a Commissioner’s specific prior approval. benefit accounts. In the case of a plan year before that year’s valuation ■ qualified transfer (as defined in section date, that contribution (and any interest Par. 5. Section 1.430(h)(2)–1 is added 420), any assets so transferred are not on the contribution for the period to read as follows: treated as plan assets for purposes of between the contribution date and the § 1.430(h)(2)–1 Interest rates used to section 430 and this section. valuation date, determined using the determine present value. (d) Accounting for contribution effective interest rate under section (a) In general—(1) Overview. This receipts—(1) Prior year contributions— 430(h)(2)(A) for the plan year) must be section provides rules relating to the (i) In general. For purposes of subtracted from plan assets in interest rates to be applied for a plan determining the value of plan assets determining the value of plan assets as year under section 430(h)(2). Section under paragraph (c) of this section, if an of the valuation date. If the result of this 430(h)(2) and this section apply to employer makes a contribution to the subtraction is a number less than zero, single employer defined benefit plans plan after the valuation date for the the value of plan assets as of the (including multiple employer plans as current plan year and the contribution valuation date is equal to zero. is for an earlier plan year, then the (e) Examples. [Reserved] defined in section 413(c)) that are present value of the contribution (f) Effective/applicability dates and subject to section 412 but do not apply determined as of that valuation date is transition rules—(1) Statutory effective to multiemployer plans (as defined in taken into account as an asset of the date/applicability date. Section 430 section 414(f)). Paragraph (b) of this plan as of the valuation date, but only generally applies to plan years section describes how the segment if the contribution is made before the beginning on or after January 1, 2008. interest rates are used for a plan year. deadline for contributions as described The applicability of section 430 for Paragraph (c) of this section describes in section 430(j)(1) for the plan year purposes of determining the minimum those segment rates. Paragraph (d) of immediately preceding the current plan required contribution is delayed for this section describes the monthly year. For this purpose, the present value certain plans in accordance with corporate bond yield curve that is used is determined using the effective sections 104 through 106 of PPA ’06. to develop the segment rates. Paragraph interest rate under section 430(h)(2)(A) (2) Effective date/applicability date of (e) of this section describes certain for the plan year for which the regulations—(i) In general. This section elections that are permitted to be made contribution is made. applies to plan years beginning on or under this section. Paragraph (f) of this (ii) Special rule for contributions for after January 1, 2010, regardless of section describes other rules related to the 2007 plan year—(A) Timely whether section 430 applies to interest rates. Paragraph (g) of this contributions. Notwithstanding determine the minimum required section contains examples. Paragraph paragraph (d)(1)(i) of this section, if the contribution for the plan year. For plan (h) of this section contains effective/ employer makes a contribution to the years beginning before January 1, 2010, applicability dates and transition rules. plan after the valuation date for the first plans are permitted to rely on the (2) Special rules for multiple plan year that begins on or after January provisions set forth in this section for employer plans. In the case of a multiple 1, 2008, and the contribution is for the purposes of satisfying the requirements employer plan to which section immediately preceding plan year and is of section 430. 413(c)(4)(A) applies, the rules of section made by the deadline for contributions (ii) Permission to use averaging for 430 and this section are applied for that preceding plan year under 2008. For purposes of determining the separately for each employer under the section 412(c)(10) (as in effect before actuarial value of assets for a plan year plan as if each employer maintained a amendment by the Pension Protection beginning during 2008 using the separate plan. Thus, each employer Act of 2006 (PPA ’06), Public Law 109– averaging rules of paragraph (c)(2) of under such a multiple employer plan 280 (120 Stat. 780)), then the this section, a plan is permitted to apply may make elections with respect to the contribution is taken into account as a an assumed earnings rate of zero under interest rate rules under this section that plan asset under paragraph (d)(1)(i) of paragraph (c)(2)(ii)(E) of this section are independent of the elections of other this section without applying any (even if zero is not the actuary’s best employers under the plan. In the case of present value discount. estimate of the anticipated annual rate a multiple employer plan to which (B) Late contributions. If a of return on plan assets). section 413(c)(4)(A) does not apply (that contribution is for the plan year that (3) Approval for changes in the is, a plan described in section immediately precedes the first plan year valuation date and valuation method. 413(c)(4)(B) that has not made the that begins on or after January 1, 2008, Any change in a plan’s valuation date or election for section 413(c)(4)(A) to and is not described in paragraph asset valuation method that satisfies the apply), the rules of section 430 and this (d)(1)(ii)(A) of this section, then the rules of this section and is made for section are applied as if all participants

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in the plan were employed by a single used to determine the plan’s funding corporate bond yield curves (described employer. target for each of the 10 years under that in paragraph (d) of this section) for the (b) Interest rates for determining plan election is 8.25 percent (rather than the 24-month period ending with the month liabilities—(1) In general. The interest segment rates otherwise described in preceding that month, taking into rates used in determining the present this paragraph (b) or the full yield curve account only the portion of each of value of the benefits that are included as permitted under paragraph (e)(4) of those yield curves corresponding to the in the target normal cost and the this section). 40-year period that follows the end of funding target for the plan for a plan (ii) Special interest rate not applicable the 15-year period described in year are determined as set forth in this for other purposes. The special interest paragraph (c)(2)(ii) of this section. paragraph (b). rate described in paragraph (b)(6)(i) of (d) Monthly corporate bond yield (2) Benefits payable within 5 years— this section does not apply for other curve—(1) In general. For purposes of (i) Plans with valuation dates at the purposes such as the determination of this section, the monthly corporate bond beginning of the plan year. If the the plan’s target normal cost. yield curve is, with respect to any valuation date is the first day of the plan (c) Segment rates—(1) Overview. This month, a yield curve that is prescribed year, in the case of benefits expected to paragraph (c) sets forth rules for by the Commissioner for that month be payable during the 5-year period determining the first, second, and third based on yields for that month on beginning on the valuation date for the segment rates for purposes of paragraph investment grade corporate bonds with plan year, the interest rate used in (b) of this section. The first, second, and varying maturities that are in the top determining the present value of the third segment rates are set forth in three quality levels available. benefits that are included in the target revenue rulings, notices, or other (2) Determination and publication of normal cost and the funding target for guidance published in the Internal yield curve. A description of the the plan is the first segment rate with Revenue Bulletin. See § 601.601(d)(2) methodology for determining the respect to the applicable month, as relating to objectives and standards for monthly corporate bond yield curve is described in paragraph (c)(2)(i) of this publishing regulations, revenue rulings provided in guidance issued by the section. and revenue procedures in the Internal Commissioner that is published in the (ii) Plans with valuation dates other Revenue Bulletin. See paragraph (h)(4) Internal Revenue Bulletin. The yield than the first day of the plan year. of this section for a transition rule under curve for a month will be set forth in [Reserved] which the definition of the segment revenue rulings, notices, or other (3) Benefits payable after 5 years and rates is modified for plan years guidance published in the Internal within 20 years. In the case of benefits beginning in 2008 and 2009. Revenue Bulletin. See § 601.601(d)(2) expected to be payable during the 15- (2) Definition of segment rates—(i) relating to objectives and standards for year period beginning after the end of First segment rate. For purposes of this publishing regulations, revenue rulings the period described in paragraph (b)(2) section, except as otherwise provided and revenue procedures in the Internal of this section, the interest rate used in under the transition rule of paragraph Revenue Bulletin. determining the present value of the (h)(4) of this section, the first segment (e) Elections—(1) In general. This benefits that are included in the target rate is, with respect to any month, the paragraph (e) describes elections for a normal cost and the funding target for single rate of interest determined by the plan year that a plan sponsor can make the plan is the second segment rate with Commissioner on the basis of the to use alternative interest rates under respect to the applicable month, as average of the monthly corporate bond this section. Any election under this described in paragraph (c)(2)(ii) of this yield curves (described in paragraph (d) paragraph (e) must be made by section. of this section) for the 24-month period providing written notification of the (4) Benefits payable after 20 years. In ending with the month preceding that election to the plan’s enrolled actuary. the case of benefits expected to be month, taking into account only the first Any election in this paragraph (e) may payable after the period described in 5 years of each of those yield curves. be adopted for a plan year without paragraph (b)(3) of this section, the (ii) Second segment rate. For purposes obtaining the consent of the interest rate used in determining the of this section, except as otherwise Commissioner, but, once adopted, that present value of the benefits that are provided under the transition rule of election will apply for that plan year included in the target normal cost and paragraph (h)(4) of this section, the and all future plan years and may be the funding target for the plan is the second segment rate is, with respect to changed only with the consent of the third segment rate with respect to the any month, the single rate of interest Commissioner. applicable month, as described in determined by the Commissioner on the (2) Election for alternative applicable paragraph (c)(2)(iii) of this section. basis of the average of the monthly month. As an alternative to defining the (5) Applicable month. Except as corporate bond yield curves (described applicable month as the month that otherwise provided in paragraph (e) of in paragraph (d) of this section) for the includes the valuation date for the plan this section, the term applicable month 24-month period ending with the month year, a plan sponsor that is using for purposes of this paragraph (b) means preceding that month, taking into segment rates as provided under the month that includes the valuation account only the portion of each of paragraph (b) of this section may elect date of the plan for the plan year. those yield curves corresponding to the to use one of the 4 months preceding (6) Special rule for certain airlines— 15-year period that follows the end of that month as the applicable month. (i) In general. Pursuant to section 6615 the 5-year period described in paragraph (3) Election not to apply transition of the U.S. Troop Readiness, Veterans’ (c)(2)(i) of this section. rule. The plan sponsor may elect not to Care, Katrina Recovery, and Iraq (iii) Third segment rate. For purposes apply the transition rule in paragraph Accountability Appropriations Act, of this section, except as otherwise (h)(4) of this section. 2007, Public Law 110–28 (121 Stat. provided under the transition rule of (4) Election to use full yield curve— 112), for a plan sponsor that makes the paragraph (h)(4) of this section, the third (i) In general. For purposes of election described in section 402(a)(2) of segment rate is, with respect to any determining the plan’s funding target the Pension Protection Act of 2006 (PPA month, the single rate of interest and target normal cost, and for all other ’06), Public Law 109–280 (120 Stat. determined by the Commissioner on the purposes under section 430 (including 780), the interest rate required to be basis of the average of the monthly the determination of shortfall

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amortization installments, waiver determined for the plan year under male nonannuitant rates for ages prior to age installments, and the present values of section 430(b) as described in 50, the applicable mortality rates under those installments as described in § 1.430(d)–1(b)(1) (without regard to section 417(e)(3) for ages 50 and later, and paragraph (f)(2) of this section), the plan calculations for plans in at-risk status segment interest rates of 5.07% for the first 5 years after the valuation date, 6.09% for the sponsor may elect to use interest rates under section 430(i)). next 15 years, and 6.56% for periods more under the monthly corporate bond yield (2) Interest rates used for determining than 20 years after the valuation date. (See curve described in paragraph (d) of this shortfall amortization installments and § 1.430(d)–1(f)(9), Example 10, for additional section for the month preceding the waiver amortization installments. The details.) month that includes the valuation date interest rates used to determine the (iii) The present value of Participant E’s in lieu of the segment rates determined amount of shortfall amortization benefits as of January 1, 2009, is $68,908 if under paragraph (c) of this section. In installments and waiver amortization a single interest rate of 6.52805% is order to address the timing of benefit installments and the present value of substituted for the segment interest rates but payments during a year, reasonable those installments are determined based all other assumptions remain the same. Thus (rounded), the effective interest rate for Plan approximations are permitted to be used on the dates those installments are P is 6.53% for 2009. to value benefit payments that are assumed to be paid, using the same Example 2. (i) The facts are the same as expected to be made during a plan year. timing rules that apply in determining for Example 1, except that Plan P offers a (ii) Reasonable techniques permitted. target normal cost as described in single-sum distribution equal to the present In the case of a plan sponsor using the paragraph (b) of this section. Thus, for value of the accrued benefit based on the monthly corporate bond yield curve a plan that uses the segment rates applicable interest rates under section under this paragraph (e)(4), if with described in paragraph (c) of this 417(e)(3) or an interest rate of 6.25%, respect to a decrement the benefit is section, the first segment rate applies to whichever produces the higher amount. The applicable mortality table under section only expected to be paid for one-half of the installments assumed to be paid a year (because the decrement was 417(e)(3) is used for both calculations. during the first 5-year period beginning (ii) The present value of Participant E’s assumed to occur in the middle of the on the valuation date for the plan year, age-50 single-sum distribution as of January year), the interest rate for that year can and the second segment rate applies to 1, 2009 (when Participant E is age 46) is be determined as if the benefit were the installments assumed to be paid $77,392. This amount is determined by being paid for the entire year. See during the subsequent 15-year period. calculating the projected single-sum § 1.430(d)–1(f)(7) for additional For purposes of this paragraph (f)(2), the distribution at age 50 using the applicable reasonable techniques that can be used shortfall amortization installments for a mortality table under section 417(e)(3) and an in determining present value. plan year are assumed to be paid on the interest rate of 6.25%, and discounting the result to January 1, 2009, using the first (5) Plan sponsor. For purposes of the valuation date for that plan year. For elections described in this section, any segment rate of 5.07% and male example, for a plan that uses the nonannuitant mortality rates for 2009. reference to the plan sponsor generally segment rates described in paragraph (c) means the employer or employers Because this amount is larger than the of this section, the shortfall amortization present value of Participant E’s single-sum responsible for making contributions to installment for the fifth plan year payment based on the applicable interest or under the plan. In the case of plans following the current plan year (the rates under section 417(e)(3) (that is, that are multiple employer plans to sixth installment) is assumed to be paid $68,908), the funding target for Plan P is which section 413(c)(4)(A) does not on the valuation date for that year so $77,392 as of January 1, 2009. (See apply, any reference to the plan sponsor that such shortfall amortization § 1.430(d)–1(f)(9), Example 12 for additional details.) means the plan administrator within the installment will be determined using meaning of section 414(g). (iii) The effective interest rate is the single the second segment rate. (f) Interest rates used for other interest rate that will produce the same (g) Examples. The following examples purposes—(1) Effective interest funding target if substituted for the segment illustrate the rules of this section: rate—(i) In general. Except as otherwise interest rates keeping all other assumptions provided in paragraph (f)(2) of this Example 1. (i) The January 1, 2009, the same, including the fixed interest rate valuation of Plan P is performed using the used by the plan to determine single-sum section, the effective interest rate payments. The only segment interest rate determined under section 430(h)(2)(A) segment rates applicable for September 2008 (determined without regard to the transition used to develop the funding target of $77,392 for the plan year is the single interest rule of section 430(h)(2)(G)), and the 2009 was the first segment rate of 5.07%. rate that, if used to determine the annuitant and nonannuitant (male and Therefore, considering only this calculation, present value of the benefits that are female) mortality tables as published in the single interest rate that would produce taken into account in determining the Notice 2008–85. See § 601.601(d)(2) relating the same funding target would be 5.07%. plan’s funding target for the plan year, to objectives and standards for publishing (iv) However, the effective interest rate would result in an amount equal to the regulations, revenue rulings and revenue must also reflect the fact that the single-sum plan’s funding target determined for the procedures in the Internal Revenue Bulletin. payment under Plan P is equal to the greater of the present value of Participant E’s plan year under section 430(d) as Plan P provides for early retirement benefits as early as age 50, and offers a single-sum accrued benefit based on the fixed rate of described in § 1.430(d)–1(b)(2) (without distribution payable immediately at 6.25% or the applicable interest rates under regard to calculations for plans in at-risk retirement. The single-sum payment is equal section 417(e)(3). If the single rate of 5.07% status under section 430(i)). to the present value of the participant’s is substituted for the segment rates used to (ii) Zero funding target. If, for the plan accrued benefit, based on the applicable calculate the present value of the single-sum year, the plan’s funding target is equal interest rates and the applicable mortality payment based on the applicable interest to zero, then the effective interest rate table under section 417(e)(3). Participant E is rates, the resulting funding target would be determined under section 430(h)(2)(A) the only participant in the plan, and is a male higher than $77,392. for the plan year is the single interest age 46 as of January 1, 2009, with an annual (v) Using a single interest rate of 6.0771%, rate that, if used to determine the accrued benefit of $23,000 payable beginning the January 1, 2009, present value of at age 65. The actuary assumes a 100% Participant E’s single-sum payment based on present value of the benefits that are probability that Participant E will terminate the applicable interest rates is $77,392, and taken into account in determining the at age 50 and will elect to receive his benefit the present value of Participant E’s single plan’s target normal cost for the plan in the form of a single-sum payment. sum payment based on the plan’s interest year, would result in an amount equal (ii) Plan P’s funding target is $68,908 as of rate of 6.25% is $74,494. Plan P’s funding to the plan’s target normal cost January 1, 2009. This figure is based on the target is the larger of the two, or $77,392,

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which is the same as the funding target based is determined under paragraph (b)(5) of (i) The funding target attainment on the segment interest rates used for the this section); or percentage for the preceding plan year 2009 valuation. Therefore, Plan P’s effective (C) The applicable month (if the (determined under paragraph (b)(3) of interest rate for 2009 (rounded) is 6.08%. applicable month is determined under this section) is less than 80 percent; and (h) Effective/applicability dates and paragraph (e)(2) of this section). (ii) The at-risk funding target transition rules—(1) Statutory effective (iv) New plans ineligible. The attainment percentage for the preceding date/applicability date. Section 430 transition rule of this paragraph (h)(4) plan year (determined under paragraph generally applies to plan years does not apply if the first plan year of (b)(4) of this section) is less than 70 beginning on or after January 1, 2008. the plan begins on or after January 1, percent. The applicability of section 430 for 2008. (2) Small plan exception. If, on each purposes of determining the minimum ■ Par. 6. Section 1.430(i)–1 is added to day during the preceding plan year, a required contribution is delayed for read as follows: plan had 500 or fewer participants certain plans in accordance with § 1.430(i)–1 Special rules for plans in at- (including both active and inactive sections 104 through 106 of PPA’06. risk status. participants), determined in accordance (2) Effective date/applicability date of with the same rules that apply for regulations. This section applies to plan (a) In general—(1) Overview. This section provides special rules related to purposes of § 1.430(g)–1(b)(2)(ii), then years beginning on or after January 1, the plan is not treated as being in at-risk 2010, regardless of whether section 430 determining the funding target and making other computations for certain status for the plan year. applies to determine the minimum (3) Funding target attainment required contribution for the plan year. defined benefit plans that are in at-risk status for the plan year. Section 430(i) percentage. For purposes of this section, For plan years beginning before January except as otherwise provided in 1, 2010, plans are permitted to rely on and this section apply to single employer defined benefit plans paragraph (b)(5) of this section, the the provisions set forth in this section funding target attainment percentage of for purposes of satisfying the (including multiple employer plans) but do not apply to multiemployer plans (as a plan for a plan year is the funding requirements of section 430. defined in section 414(f)). Paragraph (b) target attainment percentage as defined (3) Approval for changes in interest in § 1.430(d)–1(b)(3). rate. Any change to an election under of this section describes rules for determining whether a plan is in at-risk (4) At-risk funding target attainment paragraph (e) of this section that is made percentage. Except as otherwise for the first plan year beginning in 2009 status for a plan year, including the determination of a plan’s funding target provided in paragraph (b)(5) of this or the first plan year beginning in 2010 section, the at-risk funding target is treated as having been approved by attainment percentage and at-risk funding target attainment percentage. attainment percentage of a plan for a the Commissioner and does not require plan year is a fraction (expressed as a the Commissioner’s specific prior Paragraph (c) of this section describes the funding target for a plan in at-risk percentage)— approval. (i) The numerator of which is the (4) Transition rule—(i) In general. status. Paragraph (d) of this section value of plan assets for the plan year Notwithstanding the general rules for describes the target normal cost for a after subtraction of the prefunding determination of segment rates under plan in at-risk status. Paragraph (e) of balance and the funding standard paragraph (c)(2) of this section, for plan this section describes rules regarding carryover balance under section years beginning in 2008 or 2009, the how the funding target and the target 430(f)(4)(B); and first, second, or third segment rate for a normal cost are determined for a plan (ii) The denominator of which is the plan with respect to any month is equal that has been in at-risk status for fewer at-risk funding target of the plan for the to the sum of— than 5 consecutive plan years. (A) The product of that rate for that Paragraph (f) of this section sets forth plan year (determined under paragraph month determined without regard to effective/applicability dates and (c) of this section, but without regard to this paragraph (h)(4), multiplied by the transition rules. the loading factor imposed under applicable percentage; and (2) Special rules for multiple paragraph (c)(2)(ii) of this section). (B) The product of the weighted employer plans. In the case of a multiple (5) Special rules—(i) Special rule for average interest rate determined under employer plan to which section new plans. Except as otherwise the rules of paragraph (h)(4)(iii) of this 413(c)(4)(A) applies, the rules of section provided in paragraph (b)(5)(iii) of this section, multiplied by a percentage 430 and this section are applied section, in the case of a new plan that equal to 100 percent minus the separately for each employer under the was neither the result of a merger nor applicable percentage. plan, as if each employer maintained a involved in a spinoff, the funding target (ii) Applicable percentage. For separate plan. For example, at-risk attainment percentage under paragraph purposes of this paragraph (h)(4), the status is determined separately for each (b)(3) of this section and the at-risk applicable percentage is 331⁄3 percent employer under such a multiple funding target attainment percentage for plan years beginning in 2008 and employer plan. In the case of a multiple under paragraph (b)(4) of this section 662⁄3 percent for plan years beginning in employer plan to which section are equal to 100 percent for years before 2009. 413(c)(4)(A) does not apply (that is, a the plan exists. (iii) Weighted average interest rate. plan described in section 413(c)(4)(B) (ii) Special rule for plans with zero The weighted average interest rate for that has not made the election for funding target. Except as otherwise purposes of paragraph (h)(4)(i)(B) of this section 413(c)(4)(A) to apply), the rules provided in paragraph (b)(5)(iii) of this section is the weighted average interest of section 430 and this section are section, if the funding target of the plan rate under section 412(b)(5)(B)(ii)(II) (as applied as if all participants in the plan is equal to zero for a plan year, then the that provision was in effect for plan were employed by a single employer. funding target attainment percentage years beginning in 2007) as of— (b) Determination of at-risk status of under paragraph (b)(3) of this section (A) The month which contains the a plan—(1) General rule. Except as and the at-risk funding target attainment first day of the plan year; otherwise provided in this section, a percentage under paragraph (b)(4) of (B) The month which contains the plan is in at-risk status for a plan year this section are equal to 100 percent for valuation date (if the applicable month if— that plan year.

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(iii) Exception when plan has of this section, if a participant would be this section. See paragraph (e) of this predecessor plan that was in at-risk eligible to commence an immediate section for the determination of the status. [Reserved] distribution by the end of the 10th plan target normal cost where the plan is in (iv) Special rules for plans that are the year after the current plan year (that is, at-risk status for the plan year but was result of a merger. [Reserved] the end of the 11th plan year beginning not in at-risk status for one or more of (v) Special rules for plans that are with the current plan year), that the 4 preceding plan years. involved in a spinoff. [Reserved] participant is assumed to commence an (2) At-risk target normal cost—(i) Use (6) Special rule for determining at-risk immediate distribution at the earliest of modified actuarial assumptions—(A) status of plans of specified automobile retirement age under the plan, or, if In general. Except as otherwise manufacturers. See section 430(i)(4)(C) later, at the end of the current plan year. provided in this paragraph (d)(2), the at- for special rules for determining the at- The rule of this paragraph (c)(3)(ii)(A) risk target normal cost of a plan for the risk status of plans of specified does not affect the application of plan plan year is equal to the present value automobile and automobile parts assumptions regarding an employee’s (determined as of the valuation date) of manufacturers. termination of employment prior to the all benefits that accrue during, are (c) Funding target for plans in at-risk employee’s earliest retirement age. earned during, or are otherwise status—(1) In general. If the plan has (B) Participants otherwise assumed to allocated to service in the plan year, as been in at-risk status for 5 consecutive retire immediately. The special determined in accordance with years, including the current plan year, retirement age assumption of paragraph § 1.430(d)–1 but using the additional then the funding target for the plan is (c)(3)(ii)(A) of this section does not actuarial assumptions described in the at-risk funding target determined apply to a participant to the extent the paragraph (c)(3) of this section. under paragraph (c)(2) of this section. participant is otherwise assumed to (B) Special adjustments. The target See paragraph (e) of this section for the commence benefits during the current normal cost of the plan for the plan year determination of the funding target plan year under the actuarial (determined under paragraph where the plan is in at-risk status for the assumptions for the plan. For example, (d)(2)(i)(A) of this section) is adjusted plan year but was not in at-risk status if generally applicable retirement (not below zero) by adding the amount for one or more of the 4 preceding plan assumptions would provide for a 25 of plan-related expenses expected to be years. percent probability that a participant paid from plan assets during the plan (2) At-risk funding target—(i) Use of will commence benefits during the year and subtracting the amount of any modified actuarial assumptions. Except current plan year, the special retirement mandatory employee contributions as otherwise provided in this paragraph age assumption of paragraph (c)(3)(ii)(A) expected to be made during the plan (c)(2), the at-risk funding target of the of this section requires the plan’s year. plan under this paragraph (c)(2) for the enrolled actuary to assume a 75 percent (C) Plan-related expenses. For plan year is equal to the present value probability that the participant will purposes of this paragraph (d)(2), plan- of all benefits accrued or earned under commence benefits at the end of the related expenses are determined using the plan as of the beginning of the plan plan year. the rules of § 1.430(d)–1(b)(1)(iii)(B). year, as determined in accordance with (C) Definition of earliest retirement (ii) Loading factor. The at-risk target § 1.430(d)–1 but using the additional date. For purposes of this paragraph normal cost is increased by a loading actuarial assumptions described in (c)(3)(ii), a plan’s earliest retirement factor equal to 4 percent of the present paragraph (c)(3) of this section. date for an employee is the earliest date (ii) Funding target includes load. The on which the employee can commence value (determined as of the valuation at-risk funding target is increased by the receiving an immediate distribution of a date) of all benefits under the plan that sum of— fully vested benefit under the plan. See accrue, are earned, or are otherwise (A) $700 multiplied by the number of § 1.401(a)–20, Q&A–17(b). allocated to service for the plan year participants in the plan (including (iii) Requirement to assume most under the applicable rules of § 1.430(d)– active participants, inactive valuable benefit. All participants and 1(c)(1)(ii)(B), (C), or (D), determined as participants, and beneficiaries); plus beneficiaries who are assumed to retire if the plan were not in at-risk status. (B) Four percent of the funding target on a particular date are assumed to elect (iii) Minimum amount. The at-risk (determined under § 1.430(d)–1(b)(2) as the optional form of benefit available target normal cost of a plan for a plan if the plan was not in at-risk status) of under the plan that would result in the year is not less than the plan’s target the plan for the plan year. highest present value of benefits normal cost determined without regard (iii) Minimum amount. commencing at that date. to section 430(i) and this section. Notwithstanding any otherwise (iv) Reasonable techniques permitted. (e) Transition between applicable applicable provisions of this section, the The plan’s actuary is permitted to use funding targets and applicable target at-risk funding target of a plan for a plan reasonable techniques in determining normal costs—(1) Funding target. If a year is not less than the plan’s funding the actuarial assumptions that are plan that is in at-risk status for the plan target for the plan year determined required to be used pursuant to this year has not been in at-risk status for without regard to this section. paragraph (c)(3). For example, the plan’s one or more of the preceding 4 plan (3) Additional actuarial actuary is permitted to use reasonable years, the plan’s funding target for the assumptions—(i) In general. The assumptions in determining the plan year is determined as the sum of— actuarial assumptions used to determine optional form of benefit under the plan (i) The funding target determined a plan’s at-risk funding target for a plan that would result in the highest present without regard to section 430(i) and this year are the actuarial assumptions that value of benefits for this purpose. section; plus are applied under section 430, with the (d) Target normal cost of plans in at- (ii) The phase-in percentage for the modifications described in this risk status—(1) General rule. If the plan plan year multiplied by the excess of— paragraph (c)(3). has been in at-risk status for 5 (A) The at-risk funding target (ii) Special retirement age consecutive years, including the current determined under paragraph (c)(2) of assumption—(A) Participants eligible to plan year, then the target normal cost for this section (determined taking into retire and collect benefits within 11 the plan is the at-risk target normal cost account paragraph (e)(4) of this section); years. Subject to paragraph (c)(3)(ii)(B) determined under paragraph (d)(2) of over

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(B) The funding target determined Pension Protection Act of 2006 (PPA (3) Rules of application. without regard to section 430(i) and this ’06), Public Law 109–280 (120 Stat. (4) Prior unpredictable contingent event. section. 780). (c) Limitations on plan amendments (2) Target normal cost. If a plan that (ii) Applicability of special increasing liability for benefits. (1) In general. is in at-risk status for the plan year has adjustments to target normal cost. The (2) Exemption if section 436 contribution not been in at-risk status for one or more special adjustments of paragraph is made. of the preceding 4 plan years, the plan’s (d)(2)(i)(B) of this section (relating to (3) Rules of application regarding pre- target normal cost for the plan year is adjustments to the target normal cost for existing plan provisions. determined as the sum of— plan-related expenses and mandatory (4) Exceptions. (i) The target normal cost determined employee contributions) apply to plan (5) Rule for determining when an without regard to section 430(i) and this years beginning after December 31, amendment takes effect. section; plus 2008. In addition, a plan sponsor may (6) Treatment of mergers, consolidations, and transfers of plan assets into a plan. (ii) The phase-in percentage for the elect to make the special adjustments of plan year multiplied by the excess of— [Reserved] paragraph (d)(2)(i)(B) of this section for (d) Limitations on prohibited payments. (A) The at-risk target normal cost plan years beginning in 2008. This (1) AFTAP less than 60 percent. determined under paragraph (d)(2) of election is made in the same manner (2) Bankruptcy. this section (determined taking into and is subject to the same rules as an (3) Limited payment if AFTAP at least 60 account paragraph (e)(4) of this section); election to add an amount to the plan’s percent but less than 80 percent. over prefunding balance pursuant to (4) Exception for cessation of benefit accruals. (B) The target normal cost determined § 1.430(f)–1(f). Thus, the election can be without regard to section 430(i) and this (5) Right to delay commencement. made no later than the last day for (6) Plan alternative for special optional section. making the minimum required (3) Phase-in percentage. For purposes forms. contribution for the plan year to which of this paragraph (e), the phase-in (7) Exception for distributions permitted the election relates. without consent of the participant under percentage is 20 percent multiplied by (2) Effective date/applicability date of section 411(a)(11). the number of consecutive plan years regulations. This section applies to plan (e) Limitation on benefit accruals for plans that the plan has been in at-risk status years beginning on or after January 1, with severe funding shortfalls. (1) In general. (including the current plan year) and 2010. For plan years beginning before not taking into account years before the (2) Exemption if section 436 contribution January 1, 2010, plans are permitted to is made. first effective plan year for a plan. rely on the provisions set forth in this (4) Transition funding target and (3) Special rule under section 203 of the section for purposes of satisfying the target normal cost determined without Worker, Retiree, and Employer Recovery Act requirements of section 430. of 2008. [Reserved] load. Notwithstanding paragraph (3) First effective plan year. For (f) Methods to avoid or terminate benefit (c)(2)(ii) of this section, if a plan has not purposes of this section, the first limitations. been in at-risk status for 2 or more of the effective plan year for a plan is the first (1) In general. preceding 4 plan years (not taking into plan year to which section 430 applies (2) Current year contributions to avoid or terminate benefit limitations. account years before the first effective to the plan for purposes of determining plan year for a plan), then the plan’s at- (3) Security to increase adjusted funding the minimum required contribution. target attainment percentage. risk funding target that is used for (4) Transition rule for determining at- purposes of paragraph (e)(1)(ii)(A) of (4) Examples. risk status. In the case of plan years (g) Rules of operation for periods prior to this section (to calculate the plan’s beginning in 2008, 2009, and 2010, and after certification. funding target where the plan has been paragraph (b)(1)(i) of this section is (1) In general. in at-risk status for fewer than 5 plan applied by substituting the following (2) Periods prior to certification during years) is determined without regard to percentages for ‘‘80 percent’’— which a presumption applies. the loading factor set forth in paragraph (i) 65 percent in the case of 2008; (3) Periods prior to certification during (c)(2)(ii) of this section. Similarly, if a (ii) 70 percent in the case of 2009; and which no presumption applies. plan has not been in at-risk status for 2 (iii) 75 percent in the case of 2010. (4) Modification of the presumed AFTAP. (5) Periods after certification of AFTAP. or more of the preceding 4 plan years ■ Par. 7. Section 1.436–0 is added to (6) Examples. (not taking into account years before the read as follows: (h) Presumed underfunding for purposes of first effective plan year for a plan), then benefit limitations. the plan’s at-risk target normal cost that § 1.436–0 Table of contents. (1) Presumption of continued is used for purposes of paragraph This section contains a listing of the underfunding. (e)(2)(ii)(A) of this section (to calculate major headings of § 1.436–1. (2) Presumption of underfunding beginning the plan’s target normal cost where the on first day of 4th month for certain § 1.436–1 Limits on benefits and benefit underfunded plans. plan has been in at-risk status for fewer accruals under single employer defined than 5 plan years) is determined (3) Presumption of underfunding beginning benefit plans. on first day of 10th month. without regard to the loading factor set (a) General rules. (4) Certification of AFTAP. forth in paragraph (d)(2)(ii) of this (1) Qualification requirement. (5) Examples of rules of paragraphs (h)(1), section. (2) Organization of the regulation. (h)(2), and (h)(3) of this section. (f) Effective/applicability dates and (3) Special rules for certain plans. (6) Examples of application of paragraph transition rules—(1) Statutory effective (4) Treatment of plan as of close of (h)(4) of this section. date/applicability date—(i) General prohibited or cessation period. (i) [Reserved] rule. Section 430 generally applies to (5) Deemed election to reduce funding (j) Definitions. plan years beginning on or after January balances. (1) Adjusted funding target attainment 1, 2008. The applicability of section 430 (b) Limitation on shutdown benefits and percentage. other unpredictable contingent event (2) Annuity starting date. for purposes of determining the benefits. (3) First effective plan year. minimum required contribution is (1) In general. (4) Funding target. delayed for certain plans in accordance (2) Exemption if section 436 contribution (5) Prior year adjusted funding target with sections 104 through 106 of the is made. attainment percentage.

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(6) Prohibited payment. include the following (in addition to (4) Treatment of plan as of close of (7) Section 436 contributions. plan years during which the plan was prohibited or cessation period—(i) (8) Section 436 measurement date. maintained by the employer or plan Application to prohibited payments and (9) Unpredictable contingent event. sponsor): accruals—(A) Resumption of prohibited (10) Examples. (k) Effective/applicability dates. (A) Plan years when the plan was payments. If a limitation on prohibited (1) Statutory effective date. maintained by a predecessor employer payments under paragraph (d) of this (2) Collectively bargained plan exception. within the meaning of § 1.415(f)–1(c)(1). section applied to a plan as of a section (3) Effective date/applicability date of (B) Plan years of another defined 436 measurement date (as defined in regulations. benefit plan maintained by a paragraph (j)(8) of this section), but that predecessor employer within the limit no longer applies to the plan as of ■ Par. 8. Section 1.436–1 is added to meaning of § 1.415(f)–1(c)(2) within the a later section 436 measurement date, read as follows: preceding five years if any participants then the limitation on prohibited § 1.436–1 Limits on benefits and benefit in the plan participated in that other payments under the plan does not apply accruals under single employer defined defined benefit plan (even if the plan to benefits with annuity starting dates benefit plans. maintained by the employer is not the (as defined in paragraph (j)(2) of this (a) General rules—(1) Qualification plan that was maintained by the section) that are on or after that later requirement. Section 401(a)(29) predecessor employer). section 436 measurement date. Any provides that a defined benefit pension (C) Plan years of another defined amendment to eliminate an optional plan that is subject to section 412 and benefit plan maintained by the form of benefit that contains a that is not a multiemployer plan (within employer within the preceding five prohibited payment with respect to an the meaning of section 414(f)) is a years if any participants in the plan annuity starting date during a period in qualified plan only if it satisfies the participated in that other defined which the limitations of section 436(d) requirements of section 436. This benefit plan. and paragraph (d) of this section do not section provides rules relating to (ii) Application of section 436 after apply to the plan is subject to the rules funding-based limitations on certain termination of a plan—(A) In general. of section 411(d)(6). benefits under section 436, and the Except as otherwise provided in (B) Resumption of benefit accruals. If requirements of section 436 are satisfied paragraph (a)(3)(ii)(B) of this section, a limitation on benefit accruals under only if the plan meets the requirements any section 436 limitations in effect paragraph (e) of this section applied to of this section beginning with the plan’s immediately before the termination of a a plan as of a section 436 measurement first effective plan year. This section plan do not cease to apply thereafter. date, but that limit no longer applies to applies to single employer defined (B) Exception for payments pursuant the plan as of a later section 436 benefit plans (including multiple to plan termination. The limitations measurement date, then that limitation employer plans), but does not apply to under section 436(d) and paragraph (d) does not apply to benefit accruals that multiemployer plans. of this section do not apply to are based on service on or after that later (2) Organization of the regulation. prohibited payments (within the section 436 measurement date, except to Paragraph (b) of this section describes meaning of paragraph (j)(6) of this the extent that the plan provides that limitations on shutdown benefits and section) that are made to carry out the benefit accruals will not resume when other unpredictable contingent event termination of a plan in accordance the limitation ceases to apply. The plan benefits. Paragraph (c) of this section with applicable law. For example, a must comply with the rules relating to describes limitations on plan plan sponsor’s purchase of an partial years of participation and the amendments increasing liabilities. irrevocable commitment from an insurer prohibition on double proration under Paragraph (d) of this section describes to pay benefit liabilities in connection Department of Labor regulation 29 CFR limitations on prohibited payments. with the standard termination of a plan 2530.204–2(c) and (d). Paragraph (e) of this section describes in accordance with section 4041(b)(3) of (ii) Restoration of options and missed limitations on benefit accruals. the Employee Retirement Income benefit accruals—(A) Option to amend Paragraph (f) of this section provides Security Act of 1974, as amended plan. A plan is permitted to be amended rules relating to methods to avoid or (ERISA), and in accordance with 29 CFR to provide participants who had an terminate benefit limitations. Paragraph 4041.28, does not violate section 436(d) annuity starting date within a period (g) of this section provides rules for the or this section. during which a limitation under operation of the plan in relation to (iii) Multiple employer plans. In the paragraph (d) of this section applied to benefit limitations under section 436. case of a multiple employer plan to the plan with the opportunity to make Paragraph (h) of this section describes which section 413(c)(4)(A) applies, this a new election under which the form of related presumptions regarding section applies separately with respect benefit previously elected is modified, underfunding that apply for purposes of to each employer under the plan, as if subject to applicable qualification the benefit limitations under section 436 each employer maintained a separate requirements. A participant who makes and requirements relating to plan. Thus, the benefit limitations under such a new election is treated as having certifications. Paragraph (j) of this section 436 and this section could apply a new annuity starting date under section contains definitions. Paragraph differently to participants who are sections 415 and 417. Similarly, a plan (k) of this section contains effective/ employees of different employers under is permitted to be amended to provide applicability date provisions. such a multiple employer plan. In the that any benefit accruals which were (3) Special rules for certain plans—(i) case of a multiple employer plan to limited under the rules of paragraph (e) New plans. The limitations described in which section 413(c)(4)(A) does not of this section are credited under the paragraphs (b), (c), and (e) of this apply (that is, a plan described in plan when the limitation no longer section do not apply to a plan for the section 413(c)(4)(B) that has not made applies, subject to applicable first 5 plan years of the plan. Except as the election for section 413(c)(4)(A) to qualification requirements. Any such otherwise provided by the apply), this section applies as if all plan amendment with respect to a new Commissioner in guidance of general participants in the plan were employed annuity starting date or crediting of applicability, plan years of the plan by a single employer. benefit accruals is subject to the

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requirements of section 436(c) and this section or pursuant to the enrolled (5) Deemed election to reduce funding paragraph (c) of this section. actuary’s certification of the adjusted balances—(i) Limitations on accelerated (B) Automatic plan provisions. A plan funding target attainment percentage for benefit payments. If a benefit limitation is permitted to provide that participants the plan year that meets the under paragraph (d)(1) or (d)(3) of this who had an annuity starting date within requirements of paragraph (g)(5)(ii)(C) of section would (but for this paragraph a period during which a limitation this section, then the plan amendment (a)(5)) apply to a plan, the employer is under paragraph (d) of this section must automatically take effect as of the treated as having made an election applied to the plan will be provided first day of the plan year (or, if later, the under section 430(f) to reduce the with the opportunity to have a new original effective date of the prefunding balance or funding standard annuity starting date (which would amendment). If the plan amendment carryover balance by such amount as is constitute a new annuity starting date cannot take effect during the plan year, necessary for the adjusted funding target under sections 415 and 417) under then it must be treated as if it were attainment percentage to be at the which the form of benefit previously never adopted, unless the plan applicable threshold (60 or 80 percent, elected may be modified, subject to amendment provides otherwise. as the case may be) in order for the applicable qualification requirements, (v) Example. The following example benefit limitation not to apply to the once the limitations of paragraph (d) of illustrates the rules of this paragraph plan. The determination of whether a this section cease to apply. In addition, (a)(4): benefit limitation under paragraph (d) of subject to the rules of paragraph (c)(3) Example. (i) Plan T is a non-collectively this section would apply to a plan is of this section, a plan is permitted to bargained defined benefit plan with a plan based on whether the plan provides for provide for the automatic restoration of year that is the calendar year and a valuation an optional form of benefit that would benefit accruals that had been limited date of January 1. As of January 1, 2011, Plan be limited under section 436(d) and is under section 436(e) as of the section T does not have a funding standard carryover not based on whether any participant 436 measurement date that the balance or a prefunding balance. Plan T’s elects payment of benefits in such a limitation ceases to apply. sponsor is not in bankruptcy. Beginning form. (iii) Shutdown and other January 1, 2011, Plan T is subject to the (ii) Other limitations for collectively unpredictable contingent event benefits. restriction on prohibited payments under bargained plans—(A) General rule. In If unpredictable contingent event paragraph (d)(3) of this section based on a the case of a collectively bargained plan presumed adjusted funding target attainment benefits with respect to an percentage (AFTAP) of 75%. to which a benefit limitation under unpredictable contingent event that (ii) U is a participant in Plan T. Participant paragraph (b), (c), or (e) of this section occurs during the plan year are not U retires on February 1, 2011, and elects to would (but for this paragraph (a)(5)) permitted to be paid after the receive benefits in the form of a single sum. apply, the employer is treated as having occurrence of the event because of the Plan T may pay only a portion (generally, made an election under section 430(f) to limitations of section 436(b) and 50%) of the prohibited payment. reduce the prefunding balance or paragraph (b) of this section, but are Accordingly, U elects in accordance with funding standard carryover balance by permitted to be paid later in the plan paragraph (d)(3)(ii) of this section to receive such amount as is necessary for the year as a result of additional 50% of U’s benefit in a single sum (up to the adjusted funding target attainment 2011 PBGC maximum benefit guarantee contributions under paragraph (f)(2) of amount described in paragraph (d)(3)(iii)(C) percentage to be at the applicable this section or pursuant to the enrolled of this section) and the remainder as an threshold (60 or 80 percent, as the case actuary’s certification of the adjusted immediately commencing straight life may be) in order for the benefit funding target attainment percentage for annuity. limitation not to apply to the plan, the plan year that meets the (iii) On March 1, 2011, the enrolled actuary taking into account the adjustments requirements of paragraph (g)(5)(ii)(B) of for the Plan certifies that the AFTAP for 2011 described in paragraph (g)(2)(iii)(A), this section, then those unpredictable is 80%. Accordingly, beginning March 1, (g)(3)(ii)(A), or (g)(5)(i)(B) of this section, contingent event benefits must 2011, Plan T is no longer subject to the whichever applies. automatically become payable, restriction under paragraph (d)(3) of this (B) Collectively bargained plans. A section. retroactive to the period those benefits (iv) Effective March 1, 2011, Plan T is plan is considered a collectively would have been payable under the amended to provide that a participant whose bargained plan for purposes of this terms of the plan (other than plan terms benefits were restricted under paragraph paragraph (a)(5)(ii) if— implementing the requirements of (d)(3) of this section with respect to an (1) At least 50 percent of the section 436(b)). If the benefits do not annuity starting date between January 1, employees benefiting under the plan become payable during the plan year in 2011, and February 28, 2011, may elect, (within the meaning of § 1.410(b)–3(a)) accordance with the preceding sentence, within a specified period on or after March are members of collective bargaining then the plan is treated as if it does not 1, 2011, a new annuity starting date and units for which the benefit levels under provide for those benefits. However, all receive the remainder of his or her pension the plan are specified under a collective benefits in an accelerated form of payment. or any portion of those benefits can be Plan T’s enrolled actuary determines that the bargaining agreement; or restored pursuant to a plan amendment AFTAP, taking into account the amendment, (2) At least 25 percent of the that meets the requirements of section would still be 80%. The amendment is participants in the plan are members of 436(c) and paragraph (c) of this section permitted to take effect because Plan T would collective bargaining units for which the and other applicable qualification have an AFTAP of 80% taking into account benefit levels under the plan are requirements. the amendment and is therefore neither specified under a collective bargaining (iv) Treatment of plan amendments subject to the restriction on plan agreement. that do not take effect. If a plan amendments in paragraph (c) of this section (iii) Exception for insufficient funding amendment does not take effect as of the nor the restrictions on prohibited payments balances—(A) In general. Paragraphs effective date of the amendment because under paragraphs (d)(1) and (d)(3) of this (a)(5)(i) and (a)(5)(ii) of this section section. Accordingly, Participant U may of the limitations of section 436(c) and elect, within the specified period and subject apply with respect to a benefit paragraph (c) of this section, but is to otherwise applicable qualification rules, limitation for any plan year only if the permitted to take effect later in the plan including spousal consent, to receive the application of those paragraphs would year as a result of additional remainder of U’s benefits in the form of a result in the corresponding benefit contributions under paragraph (f)(2) of single sum on or after March 1, 2011. limitation not applying for such plan

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year. Thus, if the plan’s prefunding and benefits under a formula based on participant to benefits attributable to an funding standard carryover balances compensation, with an effective date of May unpredictable contingent event were reduced to zero and the resulting 1, 2010. (Because the formula is based on occurring during the plan year upon compensation, the exception in paragraph payment by the plan sponsor of the increase in plan assets taken into (c)(4)(i) of this section does not apply.) The account would still not increase the plan’s enrolled actuary determines that the contribution described in paragraph plan’s adjusted funding target plan’s AFTAP for 2010 would be 75% if the (f)(2)(iii) of this section with respect to attainment percentage enough to reach benefits attributable to the plan amendment that event. If the prior sentence applies the threshold percentage applicable to were taken into account in determining the with respect to an unpredictable the benefit limitation, the deemed funding target. contingent event, then all benefits with election to reduce those balances (iii) Because the AFTAP would be below respect to the unpredictable contingent pursuant to paragraph (a)(5)(i) or the 80% threshold if the benefits attributable event must be paid, including benefits to the plan amendment were taken into for periods prior to the contribution. See (a)(5)(ii) of this section does not apply. account in determining the funding target, (B) Presumed adjusted funding target Sponsor X is deemed pursuant to paragraph paragraph (f) of this section for attainment percentage less than 60 (a)(5)(ii) of this section to have made an additional rules. percent. During any period when a plan election to reduce Plan W’s prefunding and (3) Rules of application—(i) is presumed to have an adjusted funding funding standard carryover balances by the Participant-by-participant application. target attainment percentage of less than amount necessary for the AFTAP to reach the The limitations of section 436(b) and 60 percent as a result of paragraph (h)(3) 80% threshold (reflecting the increase in this paragraph (b) apply on a of this section, the plan is treated as if funding target attributable to the plan participant-by-participant basis. Thus, amendment), provided that the amount of the prefunding balance and the funding whether payment or commencement of those balances is sufficient for this purpose. an unpredictable contingent event standard carryover balance are (iv) If the deemed election described in insufficient to increase the adjusted paragraph (iii) of this example occurs, the benefit under a plan is restricted with funding target attainment percentage to plan amendment takes effect on its effective respect to a participant is determined the threshold percentage of 60 percent. date (May 1, 2010). See paragraph (f) of this based on whether the participant Accordingly, the deemed election to section for other methods to avoid or satisfies the plan’s eligibility reduce those balances pursuant to terminate benefit limitations (where, for requirements (other than the attainment paragraphs (a)(5)(i) and (a)(5)(ii) of this example, the amount necessary for a benefit of any age, performance of any service, limitation not to apply for a plan year section does not apply to the plan. receipt or derivation of any exceeds the sum of the prefunding balance compensation, or the occurrence of (iv) Other rules—(A) Date of deemed and the funding standard carryover balance). election. If an election is deemed to be death or disability) for such a benefit in made pursuant to this paragraph (a)(5), (6) Notice requirements. See section a plan year in which the limitations of then the plan sponsor is treated as 101(j) of ERISA for rules requiring the section 436(b) and this paragraph (b) having made that election on the date as plan administrator of a single employer apply. of which the applicable benefit plan to provide a written notice to (ii) Multiple contingencies. In the case limitation would otherwise apply. participants and beneficiaries within 30 of a plan that provides for a benefit that (B) Coordination with section 436 days after certain specified dates, which depends upon the occurrence of more contributions. The determination of depend on whether the plan has become than one unpredictable contingent event whether one of the benefit limitations subject to a restriction described in the with respect to a participant, the described in paragraph (a)(5)(ii)(A) of ERISA provisions that are parallel to unpredictable contingent event for this section would otherwise apply is Internal Revenue Code sections 436(b), purposes of section 436(b) and this made without regard to any contribution 436(d), and 436(e) (ERISA sections paragraph (b) occurs upon the last to described in paragraph (f)(2) of this 206(g)(1), 206(g)(3), and 206(g)(4), occur of those unpredictable contingent section. Thus, the requirement to reduce respectively). events. (iii) Cessation of benefits. Cessation of the prefunding balance or funding (b) Limitation on shutdown benefits a benefit under a plan upon the standard carryover balance under and other unpredictable contingent occurrence of a specified event is not an paragraph (a)(5)(ii) of this section event benefits—(1) In general. Except as unpredictable contingent event for cannot be avoided through the use of a otherwise provided in this paragraph purposes of section 436(b) and this section 436 contribution. (b), a plan satisfies section 436(b) and (C) Coordination with elections to this paragraph (b) only if it provides that paragraph (b). Thus, section 436(b) and this paragraph (b) do not prohibit offset minimum required contribution. unpredictable contingent event benefits provisions of a plan that provide for See § 1.430(f)–1(d)(1)(ii) for rules on the with respect to any unpredictable cessation, suspension, or reduction of coordination of elections to offset the contingent events occurring during a any benefits upon occurrence of any minimum required contribution and the plan year will not be paid if the adjusted event. However, upon any subsequent deemed election to reduce the funding target attainment percentage for recommencement of benefits (including prefunding and funding standard the plan year is— any restoration of benefits), the rules of carryover balances under this paragraph (i) Less than 60 percent; or (ii) 60 percent or more, but would be section 436 and this section will apply. (a)(5). (4) Prior unpredictable contingent (v) Example. The following example less than 60 percent if the adjusted event. Unpredictable contingent event illustrates the rules of this paragraph funding target attainment percentage benefits attributable to an unpredictable (a)(5): were redetermined applying an actuarial assumption that the likelihood of contingent event that occurred within a Example. (i) Plan W is a collectively occurrence of the unpredictable period during which no limitation bargained, single employer defined benefit contingent event during the plan year is under this paragraph (b) applied to the plan sponsored by Sponsor X, with a plan plan are not affected by the limitation year that is the calendar year and a valuation 100 percent. date of January 1. (2) Exemption if section 436 described in this paragraph (b) as it (ii) The enrolled actuary for Plan W issues contribution is made. The prohibition applies in a subsequent period. For a certification on March 1, 2010, that the on payment of unpredictable contingent example, if a plant shutdown occurs in 2010 AFTAP is 81%. Sponsor X adopts an event benefits under paragraph (b)(1) of 2010 and the plan’s funded status is amendment on March 25, 2010, to increase this section ceases to apply with respect such that benefits contingent upon that

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plant shutdown are not subject to the section 436(e) and paragraph (e) of this one that increases benefits for other limitation described in this paragraph section, the restoration of those accruals participants. In that case, the two (b) for that calendar plan year, this is generally treated as a plan amendments are considered separately paragraph (b) does not apply to restrict amendment that is subject to section in determining the increase in average payment of those benefits even if 436(c). However, such a provision is wages, and the exception in this another plant shutdown occurs in 2012 permitted to take effect without regard paragraph (c)(4)(i) applies separately to that results in the restriction of benefits to the limits of section 436(c) and this each amendment. Thus, the increase in that are contingent upon that later plant paragraph (c) if— benefits for currently employed shutdown under this paragraph (b) (i) The continuous period of the participants takes effect if it satisfies the (where the plan’s adjusted funding limitation is 12 months or less; and exception under this paragraph (c)(4), target attainment percentage for 2012 (ii) The plan’s enrolled actuary but the amendment increasing benefits would be less than 60 percent taking certifies that the adjusted funding target for other participants who received no into account the liability attributable to attainment percentage for the plan increase in wages from the employer those shutdown benefits). would not be less than 60 percent taking during the period over which the (c) Limitations on plan amendments into account the restored benefit increase in average wages is separately increasing liability for benefits—(1) In accruals for the prior plan year. subject to the rules of this paragraph (c) general. Except as otherwise provided (4) Exceptions—(i) Benefit increases without regard to the rules of this in this paragraph (c), a plan satisfies based on compensation—(A) In general. paragraph (c)(4). In accordance with section 436(c)(3), section 436(c) and this paragraph (c) (ii) Plan provisions providing for section 436(c) and this paragraph (c) do only if the plan provides that no accelerated vesting. To the extent that not apply to any amendment that amendment to the plan that has the any amendment provides for (or any provides for an increase in benefits effect of increasing liabilities of the plan pre-existing plan provision results in) a under a formula that is not based on a by reason of increases in benefits, mandatory increase in the vesting of participant’s compensation, but only if establishment of new benefits, changing benefits under the Code or ERISA (such the rate of increase in benefits does not the rate of benefit accrual, or changing as vesting rate increases pursuant to exceed the contemporaneous rate of the rate at which benefits become statute, plan termination amendments increase in average wages of nonforfeitable will take effect in a plan or partial terminations under section participants covered by the amendment. year if the adjusted funding target 411(d)(3), and vesting increases required attainment percentage for the plan year The determination of the rate of increase in average wages is made by taking into by the rules for top-heavy plans under is— section 416), that amendment (or pre- (i) Less than 80 percent; or consideration the net increase in (ii) 80 percent or more, but would be average wages from the period of time existing plan provision) does not less than 80 percent if the benefits beginning with the effective date of the constitute an amendment that changes attributable to the amendment were most recent benefit increase applicable the rate at which benefits become taken into account in determining the to all of those participants who are nonforfeitable for purposes of section adjusted funding target attainment covered by the current amendment and 436(c) and this paragraph (c). However, percentage. ending on the effective date of the this paragraph (c)(4)(ii) applies only to (2) Exemption if section 436 current amendment. the extent the increase in vesting is contribution is made—(i) General rule. (B) Application to participants who necessary to enable the plan to continue The limitations on plan amendments in are not currently employed. If an to satisfy the requirements for qualified paragraph (c)(1) of this section cease to amendment applies to both currently plans. apply with respect to an amendment employed participants and other (iii) Authority for additional upon payment by the plan sponsor of participants, all participants to whom exceptions. The Commissioner may, in the contribution described in paragraph the amendment applies are included in guidance of general applicability, issue (f)(2)(iv) of this section, so that the determining the increase in average additional rules under which other amendment is permitted to take effect as wages of the participants covered by the amendments to a plan are not treated as of the later of the first day of the plan amendment for purposes of this amendments to which section 436(c) year or the effective date of the paragraph (c)(4)(i). For this purpose, and this paragraph (c) apply. See amendment. See paragraph (f) of this participants who are not employees at § 601.601(d)(2) relating to objectives and section for additional rules. any time during the period from the standards for publishing regulations, (ii) Amendments that do not increase effective date of the most recent earlier revenue rulings and revenue procedures funding target. If the amount of the benefit increase applicable to all of the in the Internal Revenue Bulletin. contribution described in paragraph participants who are covered by the (5) Rule for determining when an (f)(2)(iv) of this section is $0 (because current amendment and ending on the amendment takes effect. For purposes of the amendment increases benefits solely effective date of the current amendment section 436(c) and this paragraph (c), in for future periods), the amendment is are treated as having no increase or the case of an amendment that increases permitted to take effect without regard decrease in wages for the period after benefits, the amendment takes effect to this paragraph (c). However, see severance from employment. under a plan on the first date on which § 1.430(d)–1(d)(2) for a rule that requires (C) Separate amendments for different any individual who is or could be a such an amendment to be taken into plan populations. In lieu of a single participant or beneficiary under the account in determining the funding amendment that applies to both plan would obtain a legal right to the target and the target normal cost in currently employed participants and increased benefit if the individual were certain situations. other participants as described in on that date to satisfy the applicable (3) Rules of application regarding pre- paragraph (c)(4)(i)(B) of this section, the requirements for entitlement to the existing plan provisions. If a plan employer can adopt multiple benefit (such as the attainment of any contains a provision that provides for amendments—such as one that age, performance of any service, receipt the automatic restoration of benefit increases benefits for participants or derivation of any compensation, or accruals that were not permitted to currently employed on the effective date the occurrence of death, disability, or accrue because of the application of of the current amendment and another severance from employment).

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(6) Treatment of mergers, described in paragraph (d)(3)(iii)(C) of the rule in the preceding sentence consolidations, and transfers of plan this section. applies only if— assets into a plan. [Reserved] (ii) Bifurcation if optional form (1) The plan applies the rule to all (d) Limitations on prohibited unavailable—(A) Requirement to offer such optional forms; and payments—(1) AFTAP less than 60 bifurcation. If an optional form of (2) The plan identifies the option that percent. A plan satisfies the benefit that is otherwise available under the bifurcation election replaces. requirements of section 436(d)(1) and the terms of the plan is not available as (iii) Definitions applicable to limited this paragraph (d)(1) only if the plan of the annuity starting date because of payment option—(A) In general. The provides that, if the plan’s adjusted the application of paragraph (d)(3)(i) of definitions in this paragraph (d)(3)(iii) funding target attainment percentage for this section, then the plan must permit apply for purposes of this paragraph a plan year is less than 60 percent, a the participant or beneficiary to elect (d)(3). participant or beneficiary is not to— (B) Portion of benefit being paid in a permitted to elect an optional form of (1) Receive the unrestricted portion of prohibited payment. If a benefit is being benefit that includes a prohibited that optional form of benefit paid in an optional form for which any payment, and the plan will not pay any (determined under the rules of of the payments is greater than the prohibited payment, with an annuity paragraph (d)(3)(iii)(D) of this section) at amount payable under a straight life starting date on or after the applicable that annuity starting date, determined annuity to the participant or beneficiary section 436 measurement date. by treating the unrestricted portion of (plus any social security supplements (2) Bankruptcy. A plan satisfies the the benefit as if it were the participant’s described in the last sentence of section requirements of section 436(d)(2) and or beneficiary’s entire benefit under the 411(a)(9) payable to the participant or plan; this paragraph (d)(2) only if the plan beneficiary) with the same annuity (2) Commence benefits with respect to provides that a participant or starting date, then the portion of the the participant’s or beneficiary’s entire beneficiary is not permitted to elect an benefit under the plan in any other benefit that is being paid in a prohibited optional form of benefit that includes a optional form of benefit available under payment is the excess of each payment prohibited payment, and the plan will the plan at the same annuity starting over the smallest payment during the not pay any prohibited payment, with date that satisfies paragraph (d)(3)(i) of participant’s lifetime under the optional an annuity starting date that occurs this section; or form of benefit (treating a period after during any period in which the plan (3) Defer commencement of the the annuity starting date and during the sponsor is a debtor in a case under title payments to the extent described in participant’s lifetime in which no 11, United States Code, or similar paragraph (d)(5) of this section. payments are made as a payment of Federal or State law, except for (B) Rules relating to bifurcation. If the zero). payments made within a plan year with participant or beneficiary elects (C) PBGC maximum benefit guarantee an annuity starting date that occurs on payment of the unrestricted portion of amount. The PBGC maximum benefit or after the date on which the enrolled the benefit as described in paragraph guarantee amount described in this actuary of the plan certifies that the (d)(3)(ii)(A)(1) of this section, then the paragraph (d)(3)(iii)(C) is the present plan’s adjusted funding target plan must permit the participant or value (determined under guidance attainment percentage for that plan year beneficiary to elect payment of the prescribed by the Pension Benefit is not less than 100 percent. remainder of the participant’s or Guaranty Corporation, using the interest (3) Limited payment if AFTAP at least beneficiary’s benefits under the plan in and mortality assumptions under 60 percent but less than 80 percent—(i) any optional form of benefit at that section 417(e)) of the maximum benefit In general. A plan satisfies the annuity starting date otherwise available guarantee with respect to a participant requirements of section 436(d)(3) and under the plan that would not have (based on the participant’s age or the this paragraph (d)(3) only if the plan included a prohibited payment if that beneficiary’s age at the annuity starting provides that, in any case in which the optional form applied to the entire date) under section 4022 of ERISA for plan’s adjusted funding target benefit of the participant or beneficiary. the year in which the annuity starting attainment percentage for a plan year is The rules of § 1.417(e)–1 are applied date occurs. 60 percent or more but is less than 80 separately to the separate optional forms (D) Unrestricted portion of the percent, a participant or beneficiary is for the unrestricted portion of the benefit—(1) General rule. Except as not permitted to elect the payment of an benefit and the remainder of the benefit otherwise provided in this paragraph optional form of benefit that includes a (the restricted portion). (d)(3)(iii)(D), the unrestricted portion of prohibited payment, and the plan will (C) Plan alternative that anticipates the benefit with respect to any optional not pay any prohibited payment, with election of payment that includes a form of benefit is 50 percent of the an annuity starting date on or after the prohibited payment. With respect to an amount payable under the optional form applicable section 436 measurement optional form of benefit that includes a of benefit. date, unless the present value, prohibited payment and that is not (2) Special rule for forms which determined in accordance with section permitted to be paid under paragraph include social security leveling or a 417(e)(3), of the portion of the benefit (d)(3)(i) of this section, for which no refund of employee contributions. For that is being paid in a prohibited additional information from the an optional form of benefit that is a payment (which portion is determined participant or beneficiary (such as prohibited payment on account of a under paragraph (d)(3)(iii)(B) of this information regarding a social security social security leveling feature (as section) does not exceed the lesser of— leveling optional form of benefit) is defined in § 1.411(d)–3(g)(16)) or a (A) 50 percent of the present value needed to make that determination, refund of employee contributions (determined in accordance with section rather than wait for the participant or feature (as defined in § 1.411(d)– 417(e)(3)) of the benefit payable in the beneficiary to elect such optional form 3(g)(11)), the unrestricted portion of the optional form of benefit that includes of benefit, a plan is permitted to provide benefit is the optional form of benefit the prohibited payment; or for separate elections with respect to the that would apply if the participant’s or (B) 100 percent of the PBGC restricted and unrestricted portions of beneficiary’s accrued benefit were 50 maximum benefit guarantee amount that optional form of benefit. However, percent smaller.

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(3) Limited to PBGC maximum benefit paragraph (j)(6)(i)(C) of this section of a single sum, then, with respect to the guarantee amount. After the application (relating to certain plan transfers), the $5,500 restricted portion, Plan A must permit of the preceding rules of this paragraph present value of the portion of the P to elect any form of benefit that would (d)(3)(iii)(D), the unrestricted portion of benefit that is being paid in a prohibited otherwise be permitted with respect to the full $10,000 and that is not a prohibited the benefit with respect to the optional payment is the present value of the payment. Alternatively, Plan A may provide form of benefit is reduced, to the extent liabilities transferred (determined in that P is permitted to elect to defer necessary, so that the present value accordance with section 414(l)). In commencement of the restricted portion, (determined in accordance with section addition, the present value of the subject to applicable qualification rules. 417(e)) of the unrestricted portion of accrued benefit is substituted for the Example 2. (i) The facts are the same as in that optional form of benefit does not present value of the benefit payable in Example 1. In addition, Plan A provides an exceed the PBGC maximum benefit the optional form of benefit that optional form of payment (subject to any guarantee amount (described in includes the prohibited payment in benefit restrictions under section 436) that paragraph (d)(3)(iii)(C) of this section). paragraph (d)(3)(i)(A) of this section. consists of a partial payment equal to the (iv) Other rules—(A) One time (Further, see § 1.411(d)–4, A–2(a)(3)(ii), total return of employee contributions to the plan accumulated with interest, with an application. A plan satisfies the for a rule under section 411(d)(6) that requirements of this paragraph (d)(3) annuity payment for the remainder of the applies to an optional form of benefit participant’s benefit. only if the plan provides that, in the that includes a prohibited payment (ii) Participant Q is not married, and retires case of a participant with respect to described in paragraph (j)(6)(i)(B) of this at age 65 during 2010, while Plan A is subject whom a prohibited payment (or series of section.) to the restriction under paragraph (d)(3) of prohibited payments under a single (v) Examples. The following examples this section. Participant Q has an accrued optional form of benefit) is made illustrate the rules of this paragraph benefit equal to a straight life annuity of pursuant to paragraph (d)(3)(i) or (ii) of (d)(3): $3,000 per month. Under the optional form this section, no additional prohibited described in paragraph (i) of this Example 2, Example 1. (i) Plan A has a plan year that Q may elect a partial payment of $99,120 payment may be made with respect to is the calendar year, and is subject to the that participant during any period of (representing the return of employee restriction on prohibited payments under contributions accumulated with interest), consecutive plan years for which paragraph (d)(3) of this section for the 2010 plus a straight life annuity of $2,300 per prohibited payments are limited under plan year. Participant P is not married, and month. The present value of Participant Q’s this paragraph (d). retires at age 65 during 2010, while the accrued benefit, using actuarial assumptions (B) Treatment of beneficiaries. For restriction under paragraph (d)(3) of this under section 417(e), is $424,800. purposes of this paragraph (d)(3), section applies to Plan A. P’s accrued benefit (iii) Because the present value of the benefits provided with respect to a is $10,000 per month, payable commencing portion of Q’s benefit that is being paid in a participant and any beneficiary of the at age 65 as a straight life annuity. Plan A prohibited payment ($99,120) does not participant (including an alternate provides for an optional single-sum payment exceed the lesser of 50% of the present value payee, as defined in section 414(p)(8)) (subject to the restrictions under section 436) of benefits (50% of $424,800) or 100% of the equal to the present value of the participant’s PBGC maximum benefit guarantee amount are aggregated. If the only benefits paid accrued benefit using actuarial assumptions ($637,200 at age 65 for 2010), the optional under the plan with respect to the under section 417(e). P’s single-sum form described in paragraph (i) of this participant are death benefits payable to payment, determined without regard to this Example 2 is permitted to be paid under the beneficiary, then paragraph paragraph (d), is calculated to be $1,416,000, paragraph (d)(3)(i) of this section. (d)(3)(iii)(B) of this section is applied by payable at age 65. Example 3. (i) The facts are the same as in substituting the lifetime of the (ii) The PBGC guaranteed monthly benefit Example 1. In addition, Plan A provides an beneficiary for the lifetime of the for a straight life annuity payable at age 65 optional form of payment under a social participant. If the accrued benefit of a in 2010 (for purposes of this example) is security leveling option (subject to any participant is allocated to such an assumed to be $4,500. The PBGC maximum benefit restrictions under section 436) that alternate payee and one or more other benefit guarantee amount at age 65 is consists of an increased temporary benefit assumed to be $637,200 for 2010. persons, then the unrestricted amount payable until age 62, with reduced payments (iii) Because Participant P retires during a beginning at age 62. The benefit is structured under paragraph (d)(3)(iii)(D) of this period when the restriction in paragraph so that the combination of the participant’s section is allocated among such persons (d)(3) of this section applies to Plan A, only pension benefit and Social Security benefit in the same manner as the accrued a portion of the benefit can be paid in the provides an approximately level income for benefit is allocated, unless a qualified form of a single sum. P elects a single-sum the participant’s lifetime. The PBGC domestic relations order (as defined in payment. Because a single-sum payment is a maximum benefit guarantee amount at age 55 section 414(p)(1)(A)) with respect to the prohibited payment, a determination must be is assumed to be $362,776 for 2010. participant or the alternate payee made whether the payment can be paid (ii) Participant R retires at age 55 in 2010 provides otherwise. See paragraphs under paragraph (d)(3)(i) of this section. In and is eligible to receive a level lifetime (j)(2)(ii) and (j)(6)(ii) of this section for this case, because the present value of the annuity of $1,200 per month beginning portion of Participant P’s benefit that is being immediately. Instead, Participant R elects to other special rules relating to paid in a prohibited payment exceeds the receive a benefit under the social security beneficiaries. lesser of 50% of the benefit or the PBGC leveling optional form of payment. (C) Treatment of annuity purchases maximum benefit guarantee amount, it Participant R’s Social Security benefit and plan transfers. This paragraph cannot be paid under paragraph (d)(3)(i) of payable at age 62 is projected, under the (d)(3)(iv)(C) applies for purposes of this section. Accordingly, the maximum terms specified in Plan A, to be $1,500 per applying paragraphs (d)(3)(i) and (iii)(D) single sum that P can receive is $637,200 month. The Plan A adjustment factor for the of this section. In the case of a (that is, the lesser of 50% of $1,416,000 or social security leveling option using the prohibited payment described in $637,200). minimum present value requirements of paragraph (j)(6)(i)(B) of this section (iv) Pursuant to paragraph (d)(3)(ii) of this section 417(e)(3) is .590 at age 55. Therefore, (relating to purchase from an insurer), section, Plan A must offer P the option to Participant R’s benefit payable from age 55 to bifurcate the benefit into unrestricted and age 62 is $2,085 per month ($1,200 + .590 × the present value of the portion of the restricted portions. The unrestricted portion $1,500), and the benefit payable for benefit that is being paid in a prohibited is a monthly straight life annuity of $4,500, Participant’s lifetime, beginning after age 62, payment is the cost to the plan of the which can be paid in a single sum of is $585 per month ($2,085¥$1,500). irrevocable commitment and, in the case $637,200. If P elects to receive the (iii) Because the optional form provides of a prohibited payment described in unrestricted portion of the benefit in the form some payments which are greater than

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payments described in paragraph (j)(6)(i)(A) plan amendment as benefit accruals), satisfaction of section 417(e) and section of this section ($1,200), the portion of the this paragraph (d)(4) ceases to apply for 415 (at each annuity starting date). benefit that is being paid in a prohibited the plan as of the date any benefits (7) Exception for distributions payment is $1,500 per month which is accrue under the plan (or the date the permitted without consent of the payable from age 55 to age 62. Using the participant under section 411(a)(11). applicable interest and mortality rates under amendment takes effect). For example, section 417(e) as in effect for Plan A at the the exception in this paragraph (d)(4) [Reserved] time the benefit commences, the present does not apply to a plan after the plan (e) Limitation on benefit accruals for value of a temporary benefit of $1,500 per increases benefits to take into account plans with severe funding shortfalls—(1) month ($2,085¥$585) payable from age 55 to increases in the limitations under In general. Except as otherwise age 62 is $106,417, and the present value of section 415(b) on or after September 1, provided in this paragraph (e), a plan the entire benefit (a temporary benefit of 2005. satisfies the requirements of section $2,085 per month payable from age 55 to age 436(e) and this paragraph (e) only if it 62 plus a deferred lifetime benefit of $585 (5) Right to delay commencement. If a participant or beneficiary requests a provides that, in any case in which the commencing at age 62) is $207,468. plan’s adjusted funding target (iv) Because $106,417 is more than 50% of distribution in an optional form of $207,468 (and because 50% of Participant R’s benefit that includes a prohibited attainment percentage for a plan year is benefit is less than $362,776, which is the payment that is not permitted to be paid less than 60 percent, benefit accruals PBGC maximum guaranteed benefit amount under paragraph (d)(1), (d)(2), or (d)(3) under the plan will cease as of the at age 55 for 2010), Participant R can only of this section, the participant retains applicable section 436 measurement receive 50% of the benefit in the form of the the right to delay commencement of date. If a plan is required to cease social security leveling option. Pursuant to benefit accruals under this paragraph paragraph (d)(3)(ii) of this section, Plan A benefits in accordance with the terms of the plan and applicable qualification (e), then the plan is not permitted to be must offer Participant R the option to amended in a manner that would requirements (such as sections bifurcate the benefit into unrestricted and increase the liabilities of the plan by restricted portions. Participant R elects to 411(a)(11) and 401(a)(9)). reason of an increase in benefits or receive the restricted portion of the early (6) Plan alternative for special retirement benefit as a level lifetime annuity establishment of new benefits. The optional forms. A plan is permitted to preceding sentence applies regardless of of $600 commencing at age 55. offer optional forms of benefit that are (v) Participant R elects to receive the whether an amendment would unrestricted portion of the early retirement solely available during the period in otherwise be permissible under benefit in the social security leveling form of which paragraph (d)(1), (d)(2), or (d)(3) paragraph (c)(2) or (c)(3) of this section. payment. This portion of the benefit is of this section applies to limit (2) Exemption if section 436 determined under the social security leveling prohibited payments under the plan. contribution is made. The prohibition form of payment as if Participant R’s benefit For example, a plan may permit on additional benefit accruals under a was one-half of the early retirement benefit, participants or beneficiaries who plan described in paragraph (e)(1) of or $600. However, using a monthly level commence benefits during the period in this section ceases to apply with respect lifetime benefit of $600 and a monthly social which paragraph (d)(1) of this section security benefit of $1,500, Participant R to a plan year, effective as of the first would have a negative benefit after age 62 (or paragraph (d)(2) of this section) day of the plan year, upon payment by ($600 + .590 × $1,500 is only $1,485; applies to limit prohibited payments the plan sponsor of the contribution offsetting $1,500 at age 62 would produce a under the plan to elect, within a described in paragraph (f)(2)(v) of this negative amount). Plan A provides that in specified period after the date on which section. See paragraph (f) of this section this situation, the benefit under the social that paragraph ceases to apply to limit for additional rules. security leveling option is an actuarially prohibited payments under the plan, to (3) Special rule under section 203 of equivalent monthly annuity payable until age receive the remaining benefit in the the Worker, Retiree, and Employer 62, with zero payable thereafter. Using the form of a single-sum payment equal to Recovery Act of 2008. [Reserved] actuarial equivalence factor of .590 at age 55, the plan administrator determines that the the present value of the remaining (f) Methods to avoid or terminate unrestricted portion of Participant R’s benefit benefit, but only to the extent then benefit limitations—(1) In general. This is $1,463 per month, payable from age 55 to permitted under this paragraph (d). As paragraph (f) sets forth rules relating to age 62 ($600 + .590 × $1,463 = $1,463 another example, during a period when employer contributions and other payable until age 62; $1,463¥$1,463 = zero paragraph (d)(3) of this section applies methods to avoid or terminate the payable after age 62). to a plan, the plan may permit application of section 436 limitations (vi) Combining the unrestricted and participants and beneficiaries to elect under a plan for a plan year. In general, restricted portions of the benefit, Participant payment in an optional form of benefit there are four methods a plan sponsor R will receive a total of $2,063 per month that provides for the current payment of may utilize to avoid or terminate one or from age 55 to age 62 ($1,463 from the unrestricted portion of the benefit plus $600 the unrestricted portion of the benefit, more of the benefit limitations under from the restricted portion of the benefit), with a delayed commencement for the this section for a plan year. Two of these and $600 per month beginning at age 62 (zero restricted portion of the benefit (subject methods (where the plan sponsor elects from the unrestricted portion of the benefit to other applicable qualification to reduce the prefunding balance or plus $600 from the restricted portion of the requirements, such as sections funding standard carryover balance and benefit). 411(a)(11) and 401(a)(9)), or may satisfy where the plan sponsor makes (4) Exception for cessation of benefit paragraph (d)(3)(i) of this section by additional contributions under section accruals. This paragraph (d) does not permitting participants and 430 for the prior plan year within the apply to a plan for a plan year if the beneficiaries to elect an optional form of time period provided by section terms of the plan, as in effect for the benefit that combines an unsubsidized 430(j)(1) that are not added to the period beginning on September 1, 2005, single-sum payment for over 50 percent prefunding balance) involve increasing provided for no benefit accruals with of the accrued benefit with a subsidized the amount of plan assets which are respect to any participants. If a plan that early retirement life annuity for the taken into account in determining the is described in this paragraph (d)(4) remainder of the accrued benefit. Any adjusted funding target attainment provides for benefit accruals during any such optional forms must satisfy this percentage. The other two methods time on or after September 1, 2005 paragraph (d) and applicable (making a contribution that is (treating benefit increases pursuant to a qualification requirements, including specifically designated as a current year

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contribution to avoid or terminate (A) In general. The contributions enrolled actuary certifies the adjusted application of a benefit limitation under described in this paragraph (f)(2) are funding target attainment percentage for paragraph (b), (c), or (e) of this section, contributions described in sections the plan year). and providing security under section 436(b)(2), 436(c)(2), and 436(e)(2), and (iii) Contribution for unpredictable 436(f)(1)) are described in paragraphs are separate from any minimum contingent event benefits. In the case of (f)(2) and (f)(3) of this section, required contributions under section a contribution to avoid or terminate the respectively. 430. Thus, if a plan sponsor makes a application of the limitation on benefits (2) Current year contributions to avoid contribution described in this paragraph attributable to an unpredictable or terminate benefit limitations—(i) (f)(2) for a plan year but does not make contingent event under section 436(b)— General rules—(A) Amount of the minimum required contribution for (A) In the event that the adjusted contribution—(1) In general. This the plan year, the plan fails to satisfy the funding target attainment percentage for paragraph (f)(2) sets forth rules minimum funding requirements under the plan year determined without taking regarding contributions to avoid or section 430 for the plan year. In into account the liability attributable to terminate the application of section 436 addition, a contribution described in the unpredictable contingent event limitations under a plan for a plan year this paragraph (f)(2) is disregarded in benefits is less than 60 percent, the that apply to unpredictable contingent determining the maximum addition to amount of the contribution under event benefits, plan amendments that the prefunding balance under section section 436(b)(2) is equal to the amount increase liabilities for benefits, and 430(f)(6) and § 1.430(f)–1(b)(1)(ii). of the increase in the funding target of benefit accruals. (B) Designation requirement. Any the plan for the plan year if the benefits (2) Interest adjustment. Any contribution made by a plan sponsor attributable to the unpredictable contribution made by a plan sponsor pursuant to this paragraph (f)(2) must be contingent event were included in the pursuant to this paragraph (f)(2) on a designated as such at the time the determination of the funding target. date other than the valuation date for contribution is used to avoid or (B) In the event that the adjusted the plan year must be adjusted with terminate the limitations under this funding target attainment percentage for interest at the plan’s effective interest paragraph (f)(2), including designation the plan year determined without taking rate under section 430(h)(2)(A) for the of the benefits or amendments to which into account the liability attributable to plan year. If the plan’s effective interest the limits do not apply because of the the unpredictable contingent event rate for the plan year has not been contribution. Except as specifically benefits is 60 percent or more, the determined at the time of the provided in paragraph (f)(2)(i)(A)(2), (g) amount of the contribution under contribution, then this interest or (h) of this section, such a section 436(b)(2) is the amount that adjustment must be made using the contribution cannot be subsequently would be sufficient to result in an highest of the three segment rates as recharacterized with respect to any plan adjusted funding target attainment applicable for the plan year under year as a contribution to satisfy a percentage for the plan year of 60 section 430(h)(2)(C). In such a case, if minimum required contribution percent if the contribution (and any the effective interest rate for the plan obligation, or otherwise. The prior section 436 contributions made for year under section 430(h)(2)(A) is designation must be made in accordance the plan year) were included as part of subsequently determined to be less than with the rules and procedures that the plan assets and the funding target that highest rate, the excess is otherwise apply to elections under were to take into account the recharacterized as an employer § 1.430(f)–1(f) with respect to the adjustments described in paragraph contribution taken into account under prefunding and funding standard (g)(2)(iii)(A), (g)(3)(ii)(A), or (g)(5)(i)(B) section 430 for the current plan year. carryover balances. of this section, whichever applies. (B) Timing requirement for section (C) Requirement to recertify AFTAP. If (iv) Contribution for plan 436 contributions. Any contribution the plan’s enrolled actuary has already amendments increasing liability for described in this paragraph (f)(2) must certified the adjusted funding target benefits. In the case of a contribution to be paid before the unpredictable attainment percentage for the plan year, avoid or terminate the application of the contingent event benefits are permitted a plan sponsor is treated as making the limitation on benefits attributable to a to be paid, the plan amendment is contribution described in paragraph plan amendment under section 436(c)— permitted to take effect, or the benefit (f)(2)(iii)(B), (f)(2)(iv)(B), or (f)(2)(v) of (A) In the event that the adjusted accruals are permitted to resume. In this section for the plan year only after funding target attainment percentage for addition, any contribution described in the plan’s enrolled actuary certifies an the plan year determined without taking this paragraph (f)(2) must be paid during updated adjusted funding target into account the liability attributable to the plan year. attainment percentage for the plan year the plan amendment is less than 80 (C) Prefunding balance or funding that takes into account the increased percent, the amount of the contribution standard carryover balance may not be liability for the unpredictable under section 436(c)(2) is equal to the used. No prefunding balance or funding contingent event benefits, the plan amount of the increase in the funding standard carryover balance under amendments, or restored accruals, and target of the plan for the plan year if the section 430(f) may be used as a the associated section 436 contribution, liabilities attributable to the amendment contribution described in this paragraph under the rules of paragraph (h)(4)(v) of were included in the determination of (f)(2). However, a plan sponsor is this section. See also paragraph (g)(4)(i) the funding target. permitted to elect to reduce the funding of this section for a requirement to (B) In the event that the adjusted standard carryover balance or the modify the presumed adjusted funding funding target attainment percentage for prefunding balance in order to increase target attainment percentage to take the the plan year determined without taking the adjusted funding target attainment liability for the unpredictable into account the liability attributable to percentage for a plan year. See contingent event benefits or plan the plan amendment is 80 percent or paragraph (a)(5) of this section for a rule amendments, and the associated section more, the amount of the contribution mandating such a reduction in certain 436 contribution, into account (if the under section 436(c)(2) is the amount situations. contribution described in paragraph that would be sufficient to result in an (ii) Section 436 contributions separate (f)(2)(iii)(B), (f)(2)(iv)(B), or (f)(2)(v) of adjusted funding target attainment from minimum required contributions— this section is made before the plan’s percentage for the plan year of 80

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percent if the contribution (and any 60 percent (without regard to any 2011, Plan Z does not have a funding prior section 436 contributions made for security provided under this paragraph standard carryover balance or a prefunding the plan year) were included as part of (f)(3)) for a consecutive period of 7 plan balance, and is not in at-risk status. As of that the plan assets and the funding target years, the valuation date for the last date, Plan Z has plan assets (and adjusted plan assets) of $2,000,000 and a funding were to take into account the plan year in the 7-year period; and target (and an adjusted funding target) of adjustments described in paragraph (B) That the plan administrator must $2,550,000. On March 1, 2011, the enrolled (g)(2)(iii)(A), (g)(3)(ii)(A), or (g)(5)(i)(B) notify the surety, bank, or insurance actuary for the plan certifies that the AFTAP of this section, whichever applies. company that issued or holds the as of January 1, 2011, is 78.43%. The (v) Contribution required for security of any event described in effective interest rate for Plan Z for the 2011 continued benefit accruals. In the case paragraph (f)(3)(iii)(A) of this section plan year is 5.5%. of a contribution to avoid or terminate within 10 days of its occurrence. (ii) On May 1, 2011, the plan sponsor the application of the limitation on (iv) Release of security. The form of amends Plan Z to increase benefits. The accruals under section 436(e), the security is permitted to provide that it enrolled actuary for the plan determines that the present value, as of January 1, 2011, of amount of the contribution under will be released (and any amounts the increase in the funding target due to the section 436(e)(2) is equal to the amount thereunder will be refunded to the plan amendment is $400,000. Because the AFTAP sufficient to result in an adjusted sponsor together with any interest prior to the plan amendment is less than funding target attainment percentage for accrued thereon) as provided in the 80%, Plan Z is subject to the restriction on the plan year of 60 percent if the agreement governing the security, but plan amendments in paragraph (c) of this contribution (and any prior section 436 such release is not permitted until the section, and the amendment cannot take contributions made for the plan year) plan’s enrolled actuary has certified that effect unless the employer utilizes one of the were included as part of the plan assets the plan’s adjusted funding target methods described in paragraph (f) of this attainment percentage for a plan year is section to avoid benefit limitations. and the funding target were to take into (iii) In order for the amendment to be account the adjustments described in at least 90 percent (without regard to permitted to take effect, the plan sponsor paragraph (g)(2)(iii)(A) or (g)(5)(i)(B) of any security provided under this makes a contribution described in paragraph this section, whichever applies. paragraph (f)(3)) or until replacement (f)(2) of this section. Because the AFTAP (3) Security to increase adjusted security has been provided in prior to the amendment was less than 80%, funding target attainment percentage— accordance with paragraph (f)(3)(vi) of the provisions of paragraph (f)(2)(iv)(A) of (i) In general. For purposes of avoiding this section. this section apply. The amount of the benefit limitations under section 436, a (v) Contribution of security to plan. contribution as of January 1, 2011, needed to plan sponsor may provide security in Any security provided under this avoid the restriction on plan amendments the form described in paragraph (f)(3)(ii) paragraph (f)(3) that is subsequently under paragraph (c) of this section is equal turned over to the plan (whether to the amount of the increase in funding of this section. In such a case, the target attributable to the amendment, or adjusted funding target attainment pursuant to the enforcement mechanism $400,000. Under the provisions of paragraph percentage for the plan year is of paragraph (f)(3)(iii) of this section or (f)(2)(iv)(A) of this section, this contribution determined by treating as an asset of the after its release under paragraph is required even though, if the contribution plan any security provided by a plan (f)(3)(iv) of this section) is treated as a were included as part of the plan assets and sponsor by the valuation date for the contribution by the plan sponsor taken the liabilities attributable to the plan plan year in a form meeting the into account under section 430 when amendment were included in the funding requirements of paragraph (f)(3)(ii) of contributed and, if turned over pursuant target, the AFTAP would be 81.36% (that is, this section. However, this security is to paragraph (f)(3)(iii) of this section, is adjusted plan assets of $2,000,000 plus the not a contribution under paragraph (f)(2) contribution of $400,000 as of January 1, not taken into account as a plan asset for 2011; divided by the adjusted funding target any other purpose, including section of this section. of $2,550,000 increased to reflect the 430. (vi) Replacement security. If security additional $400,000 in the funding target (ii) Form of security. The forms of has been provided to a plan pursuant to attributable to the plan amendment). security permitted under paragraph this paragraph (f)(3), the plan sponsor (iv) However, because the contribution is (f)(3)(i) of this section are limited to— may provide new security to the plan not paid until May 1, 2011, the necessary (A) A bond issued by a corporate and subsequently or simultaneously contribution amount must be adjusted to surety company that is an acceptable have the original security released, but reflect interest from the valuation date to the surety for purposes of section 412 of only if— date of the contribution, at Plan Z’s effective ERISA; or (A) The new security is in a form that interest rate for the 2011 plan year. The (B) Cash, or United States obligations satisfies the requirements of paragraph amount of the required contribution after adjustment is $407,203, determined as which mature in 3 years or less, held in (f)(3)(ii) of this section; $400,000 increased for 4 months of escrow by a bank or an insurance (B) The amount of the new security is compound interest at an effective annual company. no less than the amount of the original interest rate of 5.5%. (iii) Enforcement. Any form of security, determined at the time the (v) A contribution of $407,203 is made on security provided under paragraph original security is released; and May 1, 2011, and is designated as a (f)(3)(i) of this section must provide— (C) The period described in paragraph contribution under paragraph (f)(2) of this (A) That it will be paid to the plan (f)(3)(iii)(A)(3) of this section with section with respect to the May 1, 2011, plan upon the earliest of— respect to the new security is the same amendment. Accordingly, the contribution is (1) The plan termination date as as the period that applied under that not applied toward minimum funding defined in section 4048 of ERISA; paragraph to the original security. requirements under section 430, and is not (2) If there is a failure to make a (4) Examples. The following examples eligible for inclusion in the prefunding payment of the minimum required balance under § 1.430(f)–1(b)(1). Since this illustrate the rules of this paragraph (f): contribution meets the requirements of contribution for any plan year beginning Example 1. (i) Plan Z is a non-collectively paragraph (f)(2) of this section, the plan after the security is provided, the due bargained defined benefit plan with a plan amendment takes effect in accordance with date for the payment under section year that is the calendar year and a valuation its terms. 430(j)(1) or 430(j)(3); or date of January 1. Plan Z’s sponsor is not in Example 2. (i) The facts are the same as in (3) If the plan’s adjusted funding bankruptcy, and Plan Z did not purchase any Example 1, except that the plan is in at-risk target attainment percentage is less than annuities in 2009 or 2010. As of January 1, status under section 430(i). The funding

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target determined under section 430(i) is (ii) Because the enrolled actuary has not during the period those presumptions $2,600,000, and the funding target certified the actual AFTAP as of January 1, apply to the plan, and describes the determined without regard to section 430(i) 2011, and the amendment is scheduled to interaction of those presumptions with is $2,550,000. take effect after April 1, 2011, the rules of plan operations after the plan’s enrolled (ii) On May 1, 2011, the plan sponsor paragraph (h)(2)(iii) of this section apply. amends Plan Z to increase benefits. The Accordingly, the AFTAP for 2011 (prior to actuary has issued a certification of the plan’s enrolled actuary determines that the reflecting the effect of the amendment) is plan’s adjusted funding target present value as of January 1, 2011 of the presumed to be 10 percentage points lower attainment percentage for the plan year. increase in the funding target due to the than the 2010 AFTAP, or 72%. Because this Paragraph (g)(2) of this section sets forth amendment (taking into account the at-risk presumed AFTAP is less than 80%, the rules that apply to periods during which status of the plan) is $440,000. Because the restriction on plan amendments in paragraph a presumption under section 436(h) and AFTAP prior to the plan amendment is (c) of this section applies, and the plan paragraph (h) of this section applies. 78.43% (determined taking into account the amendment cannot take effect. Paragraph (g)(3) of this section sets forth at-risk status of Plan Z), Plan Z is subject to (iii) In order to allow the plan amendment the restriction on plan amendments in to take effect, the plan sponsor decides to rules that apply to periods during which paragraph (c) of this section, and the make a contribution under paragraph (f)(2) of no presumptions under section 436(h) amendment cannot take effect unless the this section on May 1, 2011. Because the and paragraph (h) of this section apply employer utilizes one of the methods presumed AFTAP was less than 80% prior to but which are prior to the enrolled described in this paragraph (f) to avoid reflecting the plan amendment, the rules of actuary’s certification of the plan’s benefit limitations. paragraph (f)(2)(iv)(A) of this section apply, adjusted funding target attainment (iii) In order for this amendment to be and the amount of the contribution under percentage for the plan year. Paragraph permitted to take effect, the plan sponsor section 436(c)(2) is the amount of the (g)(4) of this section sets forth rules for makes a contribution described in paragraph increase in the funding target for the year if (f)(2) of this section. Because the AFTAP the plan amendment were included in the modifying the plan’s presumed adjusted prior to the amendment was less than 80%, determination of the funding target. funding target attainment percentage in the provisions of paragraph (f)(2)(iv)(A) of Accordingly, an additional contribution of certain situations. Paragraph (g)(5) of this section apply. The amount of the $400,000 is required as of January 1, 2011, to this section sets forth rules that apply contribution as of January 1, 2011, needed to avoid the restriction on plan amendments after the enrolled actuary’s certification avoid the restriction on plan amendments under paragraph (c) of this section. of the plan’s adjusted funding target under paragraph (c) of this section is equal (iv) However, since the contribution is not attainment percentage for a plan year. to the amount of the increase in funding made until May 1, 2011, the amount of the Paragraph (g)(6) of this section sets forth target attributable to the amendment, or required contribution must be adjusted to examples illustrating the rules in this $440,000. Under the provisions of paragraph reflect interest from the valuation date to the (f)(2)(iv)(A) of this section, this contribution date of the contribution. Since the effective paragraph (g). is required even though, if the contribution interest rate has not yet been determined, the (2) Periods prior to certification were included as part of the plan assets and interest adjustment is based on the highest of during which a presumption applies— the liability attributable to the plan the three segment rates applicable for the (i) Plan must follow presumptions. A amendment were included in the funding 2011 plan year under section 430(h)(2)(C), or plan must provide that, for any period target, the AFTAP would exceed 80%. 6%. The amount of the required contribution during which a presumption under (iv) However, because the contribution is after adjustment is $407,845, determined as section 436(h) and paragraph (h)(1), (2), not paid until May 1, 2011, the necessary $400,000 increased for 4 months of or (3) of this section applies to the plan, contribution amount must be adjusted to compound interest at the highest segment the limitations applicable under section reflect interest from the valuation date to the interest rate for 2011, or 6%. date of the contribution, at Plan Z’s effective (v) A contribution of $407,845 is made on 436 and paragraphs (b), (c), (d), and (e) interest rate for the 2011 plan year. The May 1, 2011, and is designated as a of this section are applied to the plan as amount of the required contribution after contribution under paragraph (f)(2) of this if the adjusted funding target attainment adjustment is $447,923, determined as section with respect to the May 1, 2011, plan percentage for the year were the $440,000 increased for 4 months of amendment. Accordingly, the contribution is presumed adjusted funding target compound interest at an effective annual not applied toward minimum funding attainment percentage determined interest rate of 5.5%. requirements under section 430, and is not under the rules of section 436(h) and (v) A contribution of $447,923 is made on eligible for inclusion in the prefunding paragraph (h)(1), (2), or (3) of this May 1, 2011, and is designated as a balance under § 1.430(f)–1(b)(1). Since this section, as applicable, updated to take contribution under paragraph (f)(2) of this contribution meets the requirements of section with respect to the May 1, 2011, plan paragraph (f)(2) of this section, the plan into account certain unpredictable amendment. Accordingly, the contribution is amendment takes effect in accordance with contingent event benefits and plan not applied toward minimum funding its terms. amendments in accordance with section requirements under section 430, and is not (vi) After the plan’s effective interest rate 436 and the rules of this paragraph (g). eligible for inclusion in the prefunding for 2011 has been determined to be 5.5%, the (ii) Determination of amount of balance under § 1.430(f)–1(b)(1). Since this amount of excess interest previously reduction in balances—(A) In general. contribution meets the requirements of contributed is recharacterized as an employer During the period described in this paragraph (f)(2) of this section, the plan contribution taken into account under paragraph (g)(2), the rules of paragraph amendment takes effect in accordance with section 430 for 2011 (because that rate for the (a)(5) of this section (relating to the its terms. year is less than 6%). Example 3. (i) The facts are the same as in deemed election to reduce the funding Example 1, except that the enrolled actuary (g) Rules of operation for periods prior standard carryover balance and the for the plan does not issue the certification to and after certification—(1) In general. prefunding balance) must be applied of the 2011 AFTAP until September 1, 2011. Section 436(h) and paragraph (h) of this based on the presumed adjusted funding Prior to October 1, 2010, the enrolled actuary section set forth a series of target attainment percentage. This had certified the 2010 AFTAP to be 82%. presumptions that apply before the paragraph (g)(2)(ii) provides rules for Other than this amendment, no other enrolled actuary for a plan issues a the determination of the reduction that amendment or unpredictable contingent certification of the plan’s adjusted applies as of the first day of the plan event has occurred that requires a funding target attainment percentage for recertification. As of May 1, 2011, the plan’s year, and, in certain circumstances, that effective interest rate for the 2011 plan year the plan year. This paragraph (g) sets applies later in the plan year. Paragraph has not yet been determined. The highest of forth rules for the application of (g)(2)(iii) of this section provides the three segment rates applicable to the 2011 limitations under sections 436(b), additional rules that apply with respect plan year under section 430(h)(2)(C) is 6%. 436(c), 436(d), and 436(e) prior to and to unpredictable contingent event

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benefits or plan amendments, which amount of the prefunding balance or the contributions for the prior plan year and rules must be applied prior to the funding standard carryover balance that section 430(f) elections with respect to application of paragraph (g)(2)(iv) of this is available for reduction. the plan’s prefunding and funding section relating to section 436 (2) Plans with presumed AFTAP standard carryover balances made contributions. The reapplication of the deemed under 60 percent. If paragraph before the date of the change in the rules under this paragraph (g)(2) (g)(2)(ii)(B)(1) of this section does not presumed adjusted funding target regarding the deemed election in apply to the plan for a plan year and the attainment percentage, and the new paragraph (a)(5) of this section may last day of the plan year is on or after presumed adjusted funding target is require an additional reduction in the the first day of the 10th month of the equal to the updated interim value of prefunding and funding standard plan year, such that the presumed adjusted plan assets divided by the new carryover balances if the amount of the adjusted funding target attainment presumed adjusted funding target reduction in those balances that is percentage for the prior plan year is attainment percentage. necessary to reach the applicable conclusively presumed to be less than (D) Plans funded below the threshold. threshold to avoid the application of a 60 percent under section 436(h)(2) and If, after application of paragraph section 436 limitation exceeds the paragraph (h)(3) of this section, then no (g)(2)(ii)(B) and (C) of this section, the amount that was initially reduced. Prior reduction in the funding standard presumed adjusted funding target reductions of the prefunding and carryover balance and prefunding attainment percentage under this funding standard carryover balances balance is required under this paragraph paragraph (g)(2)(ii) is less than the 60 continue to apply. (g)(2)(ii)(B). However, see paragraph percent threshold under section 436(e), (g)(2)(iv)(A) of this section for rules for then no benefit accruals are permitted (B) Reduction in balances at the first determining the amount of a section 436 under the plan unless the plan sponsor day of plan year—(1) Plans with a contribution that would permit makes a section 436 contribution as certified AFTAP for the prior plan year. unpredictable contingent event benefits provided in paragraph (g)(2)(iv)(A) of If section 436(h)(1) and paragraph (h)(1) to be paid in such a case. this section. See paragraph (g)(5)(ii) of of this section apply to determine the (3) Treatment of short plan years. If this section for rules that apply on and presumed adjusted funding target paragraph (g)(2)(ii)(B)(1) of this section after the date the enrolled actuary for attainment percentage as of the first day does not apply to the plan for a plan the plan issues a certification of the of the current plan year based on the year but the last day of the plan year is adjusted funding target attainment plan’s enrolled actuary certification of before the first day of the 10th month of percentage of the plan for the current the adjusted funding target attainment the plan year, such that section plan year. percentage for the prior plan year made 436(h)(2) and paragraph (h)(3) of this (iii) Calculation of inclusive presumed during that prior plan year, then, in section did not apply for that plan year, AFTAP for application to unpredictable order to determine the amount of the then paragraph (g)(2)(ii)(B)(1) of this contingent event benefits and plan reduction (if any) in the funding section must be applied as of the first amendments—(A) Requirement to standard carryover balance and day of the next plan year based on the calculate inclusive presumed AFTAP. prefunding balance under this presumed adjusted funding target For purposes of applying the limitations paragraph (g)(2)(ii), a presumed adjusted attainment percentage as of that last day under paragraphs (b) and (c) of this funding target must be established as of of the prior short plan year. section during the period described in the first day of the plan year, and that (C) Change in presumed AFTAP later this paragraph (g)(2), an inclusive amount is then compared to the interim in the plan year. If the presumed presumed adjusted funding target value of adjusted plan assets as of that adjusted funding target attainment attainment percentage must be date. For this purpose, the interim value percentage for the plan year changes calculated. The inclusive presumed of adjusted plan assets is equal to the during the year, the rules regarding the adjusted funding target attainment value of adjusted plan assets (within the deemed election to reduce the percentage is the ratio (expressed as a meaning of paragraph (j)(1)(ii) of this prefunding and funding standard percentage) of the interim value of section) as of the first day of the plan carryover balances described in adjusted plan assets (updated to take year, determined without regard to paragraph (a)(5) of this section must be into account contributions for the prior future contributions and future elections reapplied based on the new presumed plan year, any prior section 436 with respect to the plan’s prefunding adjusted funding target attainment contributions made for the plan year to and funding standard carryover percentage. This will typically occur on the extent not previously taken into balances under section 430(f) (for the first day of the 4th month of a plan account in the interim value of adjusted example, elections to add to the year, but could happen at a different plan assets for the plan year, and section prefunding balance for the prior plan date if the enrolled actuary certifies the 430(f) elections with respect to the year, elections to use the prefunding adjusted funding target attainment plan’s prefunding and funding standard and funding standard carryover percentage for the prior plan year during carryover balances made before the date balances to offset the minimum required the current plan year. In order to of the unpredictable contingent event or contribution for a year, and elections determine the amount of any reduction the date the plan amendment would (including deemed elections under in the prefunding and funding standard take effect) to the inclusive presumed paragraph (a)(5) of this section) to carryover balances that would apply in adjusted funding target. The inclusive reduce the prefunding and funding such a situation, a new presumed presumed adjusted funding target is standard carryover balances for the adjusted funding target must be calculated as the presumed adjusted current plan year), and the presumed established, which is then compared to funding target determined under adjusted funding target is equal to the the updated interim value of adjusted paragraph (g)(2)(ii)(B) or (C) of this interim value of adjusted plan assets for plan assets. For this purpose, the section, increased to take into account— the plan year divided by the presumed updated interim value of adjusted plan (1) The unpredictable contingent adjusted funding target attainment assets for the plan year is determined as event benefits or plan amendment; percentage. As provided in § 1.430(f)– the interim value of adjusted plan assets (2) Any unpredictable contingent 1(e)(1), the rules of § 1.430(f)–1(d)(1)(ii) as of the first day of the plan year event benefits that are permitted to be apply for purposes of determining the updated to take into account paid as a result of any unpredictable

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contingent event that occurred, or plan percentage is greater than or equal to the take effect during the period described amendment that has taken effect, in the applicable threshold under section in this paragraph (g)(2) if the plan prior plan year to the extent not taken 436(b) or 436(c), then the plan is not sponsor makes a section 436 into account in the prior plan year permitted to limit the payment of contribution described in paragraph adjusted funding target attainment unpredictable contingent event benefits (f)(2)(iv)(A) of this section. percentage; and described in paragraph (b) of this (C) Contributions required to reach (3) Any other unpredictable section, nor is the plan permitted to threshold. If a plan is described in contingent event benefits that are restrict a plan amendment increasing paragraph (g)(2)(iii)(D) of this section permitted to be paid as a result of any benefit liabilities described in paragraph and neither paragraph (g)(2)(iv)(A) nor unpredictable contingent event that (c) of this section from taking effect, (B) of this section apply to the plan, occurred, or plan amendment that has based on an expectation that the then unpredictable contingent event taken effect, in the current plan year to limitations under paragraph (b) or (c) of benefits are permitted to be paid or the the extent not previously taken into this section will apply following the plan amendment is permitted to become account in the presumed adjusted enrolled actuary’s certification of the effective during the period this funding target for the plan year. adjusted funding target attainment paragraph (g)(2) applies to the plan only (B) Mandatory reduction for percentage for the plan year. if the plan sponsor makes a section 436 collectively bargained plans. During the (iv) Section 436 contributions—(A) contribution in the amount necessary to period described in this paragraph Plans with presumed AFTAP below 60 bring the ratio of the updated interim (g)(2), the rules of paragraph (a)(5)(ii) of percent—(1) Unpredictable contingent value of adjusted plan assets to the this section (relating to the deemed event benefits. If the presumed adjusted inclusive presumed adjusted funding election to reduce the funding standard funding target attainment percentage for target up to the applicable threshold carryover balance and the prefunding a plan is less than 60 percent, then under section 436(b) or (c), as described balance) must be applied by treating the unpredictable contingent event benefits in paragraph (f)(2)(iii)(B) or (f)(2)(iv)(B) inclusive presumed adjusted funding are permitted to be paid as a result of of this section. This paragraph target attainment percentage determined an unpredictable contingent event (g)(2)(iv)(C) applies, for example, if an under this paragraph (g)(2)(iii) as if it occurring during the period described in unpredictable contingent event occurs were the adjusted funding target this paragraph (g)(2) if the plan sponsor in the case of a plan with a presumed attainment percentage. makes the section 436 contribution adjusted funding target attainment (C) Optional reduction for plans that described in paragraph (f)(2)(iii)(A) of percentage of more than 60 percent are not collectively bargained plans. A this section. where taking into account the plan sponsor of a plan that is not a (2) Plan amendments. If the presumed unpredictable contingent event benefit collectively bargained plan (and, thus, is adjusted funding target attainment in the inclusive presumed adjusted not required to reduce the funding percentage for a plan is less than 60 funding target would cause the ratio of standard carryover balance and the percent, then no plan amendment the interim value of adjusted plan assets prefunding balance under the rules of increasing plan liabilities is permitted to to the inclusive presumed adjusted paragraph (a)(5)(ii) of this section) is take effect during the period described funding target to be less than 60 percent. permitted to elect to reduce those in this paragraph (g)(2). See paragraph (v) Bankruptcy of plan sponsor. balances in order to increase the (e)(1) of this section. Pursuant to section 436(d)(2), during updated interim value of adjusted plan (3) Benefit accruals. If the presumed any period in which the plan sponsor of assets that is used to determine the adjusted funding target attainment a plan is a debtor in a case under title inclusive presumed adjusted funding percentage for a plan year of less than 11, United States Code, or any similar target attainment percentage under this 60 percent is determined based on the Federal or State law (as described in paragraph (g)(2)(iii). plan’s enrolled actuary certification of paragraph (d)(2) of this section), no (D) Plans funded below the threshold. the adjusted funding target attainment prohibited payment within the meaning If, after application of paragraph percentage for the prior plan year made of paragraph (j)(6) of this section may be (g)(2)(iii)(B) and (C) of this section, the during that prior plan year (as opposed paid if the plan’s enrolled actuary has inclusive presumed adjusted funding to being presumed to be less than 60 not yet certified the plan’s adjusted target attainment percentage determined percent under the rules of section funding target attainment percentage for under this paragraph (g)(2)(iii) is less 436(h)(2) and paragraph (h)(3) of this the plan year to be at least 100 percent. than the applicable threshold under section because the actuary has not Thus, the presumption rules of section 436(b) or 436(c), then the plan certified the adjusted funding target paragraph (h) of this section do not is not permitted to provide any benefits attainment percentage for the prior plan apply for purposes of section 436(d)(2) attributable to the unpredictable year before the first day of the 10th and this paragraph (g)(2)(v). contingent event, nor is the plan month of the prior plan year), then (3) Periods prior to certification amendment permitted to take effect, benefits are permitted to accrue if the during which no presumption applies— unless the plan sponsor makes a section plan sponsor makes a section 436 (i) Prohibited payments and benefit 436 contribution as provided in contribution in the amount necessary to accruals. If no presumptions under paragraph (g)(2)(iv) of this section. See bring the ratio of the updated interim section 436(h) apply to a plan during a paragraph (g)(5)(ii) of this section for value of adjusted plan assets to the period and the plan’s enrolled actuary rules that apply on and after the date the presumed adjusted funding target up to has not yet issued the certification of the enrolled actuary for the plan issues a 60 percent, as described in paragraph plan’s actual adjusted funding target certification of the adjusted funding (f)(2)(v) of this section. attainment percentage for the plan year, target attainment percentage of the plan (B) Plan amendments for plans with the plan is not permitted to limit for the current plan year. presumed AFTAP below 80 percent. If prohibited payments under paragraph (E) Plans funded at or above the the presumed adjusted funding target (d) of this section or the accrual of threshold. If, after application of attainment percentage for a plan is less benefits under paragraph (e) of this paragraph (g)(2)(iii)(B) or (C) of this than 80 percent, but is not less than 60 section based on an expectation that section, the inclusive presumed percent, then a plan amendment those paragraphs will apply to the plan adjusted funding target attainment increasing plan liabilities is permitted to once an actuarial certification is issued.

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However, see paragraph (g)(2)(v) of this current plan year that takes into account For example, the plan must provide that section for a restriction on prohibited the increase in the liability attributable the limitations on prohibited payments payments during any period in which to the unpredictable contingent event apply for distributions with annuity the plan sponsor of a plan is a debtor benefits or plan amendment, the excess starting dates on and after the date of in a case under title 11, United States section 436 contributions are that certification using the certified Code, or any similar Federal or State recharacterized as employer adjusted funding target attainment law. contributions taken into account under percentage of the plan for the plan year. (ii) Unpredictable contingent event section 430 for the current plan year. Similarly, the plan must provide that benefits and plan amendments (4) Modification of the presumed any prohibition on accruals under increasing benefit liability—(A) In AFTAP—(i) Section 436 contributions. paragraph (e) of this section as a result general. If no presumptions under If, in accordance with the rules of of the enrolled actuary’s certification section 436(h) apply to a plan during a paragraph (g)(2)(iv) of this section, that the adjusted funding target period and the plan’s enrolled actuary unpredictable contingent event benefits attainment percentage of the plan for the has not yet issued a certification of the are permitted to be paid, or a plan plan year is less than 60 percent is plan’s adjusted funding target amendment takes effect, during the plan effective as of the date of the attainment percentage for the plan year, year because the plan sponsor makes a certification and that any prohibition on the limitations on unpredictable contribution described in paragraph accruals ceases to be effective on the contingent event benefits under (f)(2)(iii)(B) or (f)(2)(iv)(B) of this date the enrolled actuary issues a paragraph (b) of this section and plan section, then the presumed adjusted certification that the adjusted funding amendments increasing benefit funding target must be adjusted to target attainment percentage of the plan liabilities under paragraph (c) of this reflect any increase in the funding target for the plan year is at least 60 percent. section must be applied during that attributable to the unpredictable (B) Unpredictable contingent events period by following the rules of contingent event benefits or the plan and plan amendments. In the case of a paragraphs (g)(2)(iii) of this section, amendment and the interim value of plan that has been issued a certification based on the inclusive presumed plan assets must be increased by the of the plan’s adjusted funding target adjusted funding target determined present value of the contribution. attainment percentage for a plan year by using the prior plan year adjusted Similarly, if benefit accruals are the plan’s enrolled actuary, the plan funding target attainment percentage. permitted to resume in a plan year sponsor must comply with the Thus, whether unpredictable contingent because the plan sponsor makes the requirements of paragraphs (b) and (c) of event benefits are permitted to be paid contribution described in paragraph this section for an unpredictable or a plan amendment is permitted to (f)(2)(v) of this section, then the contingent event that occurs or a plan take effect during a plan year is presumed adjusted funding target must amendment that takes effect on or after determined by calculating the ratio of be adjusted to reflect any increase in the the date of the enrolled actuary’s the interim value of adjusted plan assets funding target attributable to the benefit certification. Thus, the plan to the inclusive presumed adjusted accruals for the prior plan year and the administrator must determine if the funding target, where the inclusive interim value of adjusted plan assets adjusted funding target attainment presumed adjusted funding target is must be increased by the present value percentage would be at or above the determined by dividing the interim of the contribution. The adjustment to applicable threshold if it were modified value of adjusted plan assets by the the presumed adjusted funding target is to take into account— prior plan year adjusted funding target made as of the date of the contribution, (1) The unpredictable contingent attainment percentage and then adding and that date is a section 436 event or plan amendment; the adjustments described in paragraphs measurement date. (2) Any other unpredictable (g)(2)(iii)(A)(1), (2) and (3) of this (ii) Modification of the presumed contingent event benefits that were section. If, after application of AFTAP for reduction in balances. If a permitted to be paid as a result of any paragraphs (g)(2)(iii)(B) and (C) of this plan’s funding standard carryover unpredictable contingent event that section, that ratio is less than the balance or prefunding balance is occurred, and any other plan applicable threshold under section reduced under the rules of paragraph amendment that took effect, earlier 436(b) or 436(c), then the plan is not (g)(2) or (g)(3) of this section, then the during the plan year to the extent not permitted to provide any benefits presumed adjusted funding target taken into account in the certified attributable to the unpredictable attainment percentage for the plan year adjusted funding target attainment contingent event, nor is the plan is increased to reflect the higher interim percentage for the plan year; and amendment permitted to take effect, value of adjusted plan assets resulting (3) Any earlier section 436 unless the plan sponsor makes the from the reduction in the funding contributions made for the plan year to contribution described in paragraph standard carryover balance or the extent those contributions were not (g)(2)(iv)(C) of this section. prefunding balance. The date of the taken into account in the certified (B) Recharacterization of event that causes the reduction is a adjusted funding target attainment contributions made to avoid benefit section 436 measurement date. percentage. limitations. In any case where, pursuant (5) Periods after certification of (C) Application of rule for deemed to paragraph (g)(3)(ii)(A) of this section, AFTAP—(i) Plan must follow certified election to reduce funding balances. the plan sponsor makes section 436 AFTAP—(A) In general. The rules of After the adjusted funding target contributions to avoid the application of paragraphs (g)(2) and (g)(3) of this attainment percentage for a plan year is the applicable benefit limitation, to the section no longer apply for a plan year certified by the plan’s enrolled actuary, extent those contributions would not be on and after the date the enrolled the deemed election to reduce the needed to permit the payment of the actuary for the plan issues a certification prefunding and funding standard unpredictable contingent event benefits of the adjusted funding target carryover balances under paragraph or for the plan amendment to go into attainment percentage of the plan for the (a)(5) of this section must be reapplied effect based on a subsequent current plan year, provided that the based on the actual funding target for certification of the adjusted funding certification is issued before the first the year (provided the certification is target attainment percentage for the day of the 10th month of the plan year. issued before the first day of the 10th

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month of the plan year). The section, the plan amendment must go is, $300,000 minus $200,000) and the interim reapplication of the rules under this into effect if it would be permitted value of adjusted plan assets is increased to paragraph (g)(5) regarding the deemed under the rules of section 436 based on $3,200,000 (that is, $3,300,000 minus the election in paragraph (a)(5) of this a certified actual adjusted funding target reduced prefunding balance of $100,000). Pursuant to paragraph (g)(4)(ii) of this section may require an additional attainment percentage for the plan year section, the presumed adjusted funding target reduction in the prefunding and funding that takes into account the increase in attainment percentage for Plan A is standard carryover balances if the the funding target attributable to the redetermined as 80% and Plan A must pay amount of the reduction in the plan amendment, unless the plan the full amount of the accelerated benefit prefunding and funding standard amendment provides otherwise. distributions elected by participants with an carryover balances that is necessary to (D) Ordering rule for multiple annuity starting date of January 1, 2011, or reach the applicable threshold to avoid unpredictable contingent events or plan later. the application of a section 436 amendments. [Reserved] Example 2. (i) The facts are the same as in limitation exceeds the amount that was (6) Examples. The following examples Example 1. As of April 1, 2011, the enrolled actuary for Plan A has not certified the 2011 initially reduced. Prior reductions of the illustrate the rules of this paragraph (g). AFTAP. Therefore, beginning April 1, 2011, prefunding and funding standard Unless otherwise indicated, these Plan A’s AFTAP is presumed to be reduced carryover balances continue to apply. examples are based on the following by 10 percentage points to 70%, in (ii) Applicability to prior periods—(A) facts: each plan has a plan year that is accordance with paragraph (h)(2) of this In general. Except as otherwise the calendar year and a valuation date section. Under the provisions of paragraph provided in this paragraph (g)(5)(ii), the of January 1; section 436 applies to the (g)(2)(ii)(B) of this section, the deemed enrolled actuary’s certification of the plan beginning in 2008; the plan has no election to reduce the prefunding and adjusted funding target attainment funding standard carryover balance; the funding standard carryover balances percentage for the plan for the plan year plan sponsor is not in bankruptcy; no described in paragraph (a)(5) of this section does not affect prior periods. For must be reapplied based on the new annuity purchases have been made from presumed AFTAP. example, the certification does not affect the plan; and the plan offers a lump sum (ii) In accordance with paragraph the application of the limitation under form of payment. No plan is in at-risk (g)(2)(ii)(C) of this section, a new presumed paragraph (d) of this section for status for the years discussed in the adjusted funding target must be determined distributions with annuity starting dates examples. The examples read as based on the new presumed AFTAP and before the certification or the follows: must be compared to an updated interim application of the limitation under value of adjusted plan assets. The new Example 1. (i) The plan’s certified AFTAP paragraph (e) of this section prior to the presumed adjusted funding target is as of January 1, 2010, is 75%. As of January $3,200,000 divided by the new presumed date of that certification. See paragraph 1, 2011, Plan A has assets of $3,300,000 and AFTAP of 70%, or $4,571,429. (a)(4) of this section for rules relating to a prefunding balance of $300,000. Beginning (iii) In order to avoid the restriction on the period of time after benefits cease to on January 1, 2011, Plan A’s AFTAP for 2011 prohibited payments in paragraph (d)(3) of is presumed to be 75%, under the rules of be limited. Except as otherwise this section, Plan A’s presumed AFTAP must provided in this paragraph (g)(5)(ii), the paragraph (h) of this section and based on the certified AFTAP for 2010. be increased to 80%. This requires an enrolled actuary’s certification of the additional increase in Plan A’s adjusted plan adjusted funding target attainment (ii) Based on Plan A’s presumed AFTAP of 75%, Plan A would continue to be subject to assets of $457,143 (that is, 80% of the new percentage for the plan for the plan year the restriction on prohibited payments in presumed adjusted funding target of does not affect the application of the paragraph (d)(3) of this section as of January $4,571,429, minus the updated interim value limitation under paragraph (b) or (c) of 1, 2011. However, under the provisions of of the adjusted plan assets of $3,200,000 this section to unpredictable contingent paragraph (a)(5) of this section, if the reflecting the deemed reduction in Plan A’s event benefits, or a plan amendment prefunding balance is large enough, Plan A’s prefunding balance). that increases the liability for benefits, sponsor is deemed to elect to reduce the (iv) Plan A’s remaining prefunding balance as of January 1, 2011, is only $100,000, where the unpredictable contingent prefunding balance to the extent needed to avoid this restriction. which is not enough to avoid the restriction event occurs or the amendment takes on prohibited payments under paragraph effect during the periods to which (iii) The amount needed to avoid the restriction in paragraph (d)(3) of this section (d)(3) of this section. Accordingly, unless paragraphs (g)(2) and (g)(3) of this is determined by comparing the presumed Plan A’s sponsor utilizes one of the methods section apply. adjusted funding target for Plan A with the described in paragraph (f) of this section to (B) Special rule for unpredictable interim value of adjusted plan assets as of the avoid the restriction, Plan A is subject to the contingent event benefits. If a plan does valuation date. The interim value of adjusted restriction on prohibited payments in not pay benefits attributable to an plan assets for Plan A is $3,000,000 (that is, paragraph (d)(3) of this section and cannot unpredictable contingent event because the asset value of $3,300,000 reduced by the pay accelerated benefit distributions elected of the application of paragraph prefunding balance of $300,000). The by participants with an annuity starting date (g)(2)(iii)(D) or (g)(3)(ii)(A) of this presumed adjusted funding target for Plan A of April 1, 2011, or later. is the interim value of the adjusted plan (v) Plan A’s prefunding balance remains at section, then the plan must pay the $100,000 because, under paragraph (a)(5)(iii) benefits attributable to that event that assets divided by the presumed AFTAP, or $4,000,000 (that is, $3,000,000 divided by of this section, the deemed reduction rules were not previously paid if such 75%). do not apply if the prefunding balance is not benefits would be permitted under the (iv) In order to avoid the restriction on large enough to increase the adjusted value rules of section 436 based on a certified prohibited payments in paragraph (d)(3) of of plan assets enough to avoid the restriction. adjusted funding target attainment this section, Plan A’s presumed AFTAP must However, the earlier deemed reduction of percentage for the plan year that takes be increased to 80%. This requires an $200,000 continues to apply because all into account the increase in the funding increase in Plan A’s adjusted plan assets of elections (including deemed elections) to target that would be attributable to those $200,000 (that is, 80% of the presumed reduce a plan’s funding standard carryover adjusted funding target of $4,000,000, minus balance or prefunding balance are irrevocable unpredictable contingent event benefits. and must be unconditional in accordance (C) Special rule for plan amendments the interim value of the adjusted plan assets of $3,000,000). Plan A’s prefunding balance with paragraph (g)(2)(ii)(A) of this section. that increase liability. If a plan as of January 1, 2011, is reduced by $200,000 Example 3. (i) The facts are the same as in amendment does not take effect because under the deemed election provisions of Example 1. On July 1, 2011, the enrolled of the application of paragraph paragraph (a)(5) of this section. Accordingly, actuary for Plan A calculates the actual (g)(2)(iii)(D) or (g)(3)(ii)(A) of this Plan A’s prefunding balance is $100,000 (that adjusted funding target as $3,700,000 as of

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January 1, 2011. Therefore, the 2011 AFTAP restriction on plan amendments, and $90,385 (that is, $90,000 adjusted for would have been 81.08% without reducing therefore the deemed election to reduce the compound interest for one month at Plan B’s the prefunding balance (that is, plan assets of prefunding balance under paragraph (a)(5) of effective interest rate of 5.25% per year). $3,300,000 minus the prefunding balance of this section does not apply, and the (iii) Under paragraph (g)(3)(ii)(B) of this $300,000, divided by the adjusted funding amendment cannot take effect unless the section, the contribution made on February 1, target of $3,700,000), and Plan A would not plan sponsor makes a contribution described 2011, is recharacterized as an employer have been subject to the restrictions under in paragraph (f)(2) of this section. contribution under section 430 to the extent paragraph (d)(3) of this section. Example 5. (i) The facts are the same as in that it exceeded the amount necessary to (ii) However, paragraph (g)(5)(i)(C) of this Example 4, except that Plan B’s sponsor avoid application of the restriction on plan section requires that any prior reductions in decides to make a contribution on February amendments under paragraph (c) of this the prefunding or funding standard carryover 1, 2011, to avoid the benefit limitation as section. Therefore, $105,663 (that is, the balances continue to apply, and so Plan A’s provided in paragraph (f)(2) of this section. $196,048 actual contribution paid on prefunding balance remains at the reduced As of February 1, 2011, Plan B’s effective February 1, 2011, minus the $90,385 required amount of $100,000 as of January 1, 2011. interest rate for the 2011 plan year has not contribution based on the actual AFTAP) is The enrolled actuary certifies that the 2011 yet been determined. Pursuant to paragraph recharacterized as an employer contribution AFTAP is 86.49% (that is, plan assets of (f)(2)(i)(A)(2) of this section, Plan B’s under section 430 for the 2011 plan year. As $3,300,000 reduced by the prefunding effective interest rate for 2011 is treated as such, it may be applied toward the minimum balance of $100,000, divided by the adjusted 6.25%, which is the largest of the three required contribution for 2011, or the plan funding target of $3,700,000). segment interest rates applicable to the 2011 sponsor can elect to credit the contribution Example 4. (i) Plan B is a collectively plan year, as provided in paragraph to Plan B’s prefunding balance to the extent bargained plan with assets of $2,500,000 and (f)(2)(i)(A)(2) of this section. that the contributions for the 2011 plan year a prefunding balance of $150,000 as of (ii) The amount of the contribution as of exceed the minimum required contribution. January 1, 2011. On August 14, 2010, the January 1, 2011, needed to avoid the (iv) This recharacterization applied only enrolled actuary for Plan B certified the restriction on plan amendments under because the 436 contribution was made AFTAP for 2010 to be 83%. No unpredictable paragraph (c) of this section is $195,060. during a period prior to the certification of contingent events giving rise to unpredictable However, because the contribution is not Plan B’s actual AFTAP for 2011 and during contingent event benefits occurred during paid until February 1, 2011, the necessary which no presumption applied (that is, when 2010 and no plan amendments took effect in contribution amount must be adjusted to section 436 is applied based on the 2010 2010 that were not taken into account in the reflect interest that would otherwise have AFTAP, which was high enough that no certified AFTAP. accrued between the valuation date and the restrictions applied for 2010). If the (ii) On January 10, 2011, Plan B’s sponsor date of the contribution, at Plan B’s effective contribution had been made during a time amends the plan to increase benefits effective interest rate for the 2011 plan year. The when the presumptions applied (for instance, on February 1, 2011. The amendment would amount of the required contribution after after April 1, 2011, when the presumed increase Plan B’s funding target by $350,000. adjustment is $196,048, determined as AFTAP was under 80%) then the only Under the rules of paragraph (g)(3) of this $195,060 increased for one month of portion of the 436 contribution that would be section, the determination of whether the compound interest at an effective annual recharacterized as an employer contribution amendment is permitted to take effect is interest rate of 6.25%. under section 430 would be the portion of based on a comparison of the inclusive (iii) In accordance with paragraph (g)(4)(i) the interest adjustment attributable to the presumed adjusted funding target with the of this section, the inclusive presumed difference between the highest segment rate updated interim value of adjusted plan AFTAP as of February 1, 2011, is 80 percent. (6.25%) and the plan’s actual effective assets. Example 6. (i) The facts are the same as in interest rate (5.25%), in accordance with (iii) Plan B’s interim value of adjusted plan Example 5. As of April 1, 2011, the enrolled paragraph (f)(2)(i)(A)(2) of this section. assets as of the valuation date is $2,350,000 actuary for the plan has not certified the 2011 (v) After reflecting the plan amendment (that is, $2,500,000 minus the prefunding AFTAP. Beginning April 1, 2011, Plan A’s and the present value of the portion of the balance of $150,000). Prior to reflecting the presumed AFTAP is equal to be 70%, 10 section 436 contribution that is not amendment, Plan B’s presumed adjusted percentage points lower than the inclusive recharacterized as an employer contribution funding target as of January 1, 2011, is presumed AFTAP as of February 1, 2011, in under section 430, the adjusted assets as of $2,831,325, which is equal to the interim accordance with paragraphs (g)(2)(iii)(A) and January 1, 2011, for purposes of section 436 value of adjusted plan assets as of the (h)(2) of this section. On July 1, 2011, the are $2,440,000 ($2,350,000 plus $90,000) and valuation date of $2,350,000, divided by the enrolled actuary for the plan calculates the the inclusive adjusted funding target is presumed AFTAP of 83%. Increasing Plan actual adjusted funding target, prior to taking $3,050,000. Accordingly, the enrolled actuary B’s presumed adjusted funding target by the plan amendment into account, as certifies the inclusive AFTAP for 2011 as $350,000 to reflect the amendment results in $2,700,000, and determines the actual 80% ($2,440,00 ÷ $3,050,000). Note that an inclusive presumed adjusted funding effective interest rate for 2011 to be 5.25%. assets for section 430 purposes are not target of $3,181,325 and would result in a On this basis, the actual AFTAP for 2011 increased to reflect the section 436 presumed AFTAP of 73.87% (that is, the (prior to taking the amendment into account) contribution as of January 1, 2011. interim value of adjusted plan assets as of the as 87.04% (that is, adjusted assets of Example 7. (i) The facts are the same as in valuation date of $2,350,000 divided by the $2,350,000 divided by the adjusted funding Example 6, except that on July 1, 2011, the inclusive presumed adjusted funding target target of $2,700,000). Reflecting the $350,000 enrolled actuary for Plan B calculates the of $3,181,325). increase in funding target due to the plan actual adjusted funding target (before (iv) Because Plan B’s presumed AFTAP amendment would increase the adjusted reflecting the plan amendment) as $3,000,000 was over 80% prior to taking the amendment funding target to $3,050,000 and would and certifies the actual AFTAP as 78.33% into account but would be less than 80% if decrease Plan B’s AFTAP to 77.05%. prior to reflecting the plan amendment (that the amendment were taken into account, (ii) Based on the calculated adjusted is, adjusted plan assets of $2,350,000 divided section 436(c) and paragraph (c) of this funding target, the amount that was by the actual adjusted funding target of section prohibit the plan amendment from necessary to avoid the benefit restriction $3,000,000). Based on the provisions of taking effect unless the adjusted plan assets under paragraph (c) of this section was paragraph (c) of this section, because the are increased so that the inclusive presumed $90,000 (that is, 80% of the adjusted funding AFTAP prior to reflecting the amendment is AFTAP would be increased to 80%. This target reflecting the plan amendment (or less than 80%, the contribution required to would require an additional amount of $3,050,000), minus the adjusted value of plan avoid the restriction on plan amendments $195,060 (that is, 80% of the inclusive assets of $2,350,000). This amount must be would have been the amount equal to the presumed adjusted funding target of adjusted for interest between the valuation increase in funding target due to the plan $3,181,325 less the interim value of adjusted date and the date the contribution was made amendment, or $350,000. plan assets of $2,350,000). using the effective interest rate for Plan B. (ii) However, according to paragraph (v) Plan B’s prefunding balance of $150,000 Therefore, the amount required on the (g)(5)(ii)(A) of this section, the enrolled is not large enough for Plan B to avoid the payment date of February 1, 2011, was actuary’s certification of the 2011 AFTAP

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does not affect the application of the preceding the current plan year during (B) The first day of the 10th month of limitation under paragraph (c) of this section that prior plan year, the presumed the plan year if paragraph (h)(3) of this to the amendment, because the amendment adjusted funding target attainment section applies; to Plan B took effect prior to the date of the percentage of the plan for the current (C) The date of a change in the certification. Therefore, it is not necessary for presumed adjusted funding target Plan B’s sponsor to contribute an additional plan year is equal to the presumed amount in order for the plan amendment to adjusted funding target attainment attainment percentage under paragraph remain in effect regardless of the extent to percentage that applied on the last day (g)(4) of this section; or which the certified AFTAP for the plan year of the preceding plan year until the (D) The date the enrolled actuary is less than the presumed inclusive AFTAP. presumed adjusted funding target issues a certification under paragraph (h) Presumed underfunding for attainment percentage is changed under (h)(4) of this section of the adjusted purposes of benefit limitations—(1) paragraph (h)(1)(iii)(B) or (h)(1)(iv) of funding target attainment percentage for Presumption of continued this section. Thus, if the prior plan year the plan year. underfunding—(i) In general. This was a 12-month plan year (so that the (2) Presumption of underfunding paragraph (h)(1) applies to a plan for a last day of the plan year was after the beginning on first day of 4th month for plan year if a limitation under first day of the 10th month of the plan certain underfunded plans—(i) In paragraph (b), (c), (d), or (e) of this year and the rules of section 436(h)(2) general. This paragraph (h)(2) applies to section applied to the plan on the last and paragraph (h)(3) of this section a plan for a plan year if— day of the preceding plan year. If this applied to the plan for that plan year), (A) The enrolled actuary for the plan paragraph (h)(1) applies to a plan, the then the presumed adjusted funding has not issued a certification of the first day of the plan year is a section 436 target attainment percentage for the adjusted funding target attainment measurement date and the presumed current plan year is presumed to be less percentage for the plan year before the first day of the 4th month of the plan adjusted funding target attainment than 60 percent. By contrast, if the prior year; and percentage for the plan is the percentage plan year was less than 9 months, the (B) The plan’s adjusted funding target under paragraph (h)(1)(ii) or (iii) of this presumed adjusted funding target attainment percentage for the preceding section, whichever applies to the plan, attainment percentage for the current plan year was either— beginning on that first day of the plan plan year is the presumed adjusted (1) At least 60 percent but less than year and ending on the date specified in funding target attainment percentage at 70 percent; or paragraph (h)(1)(iv) of this section. the last day of the preceding plan year. (2) At least 80 percent but less than (ii) Rule where preceding year (B) Enrolled actuary’s certification in 90 percent. certification issued during preceding following year. In any case in which the (ii) Special rule for first plan year a year—(A) General rule. In any case in plan’s enrolled actuary has issued the plan is subject to section 436. This which the plan’s enrolled actuary has certification under paragraph (h)(4) of paragraph (h)(2) also applies to a plan issued a certification under paragraph this section of the adjusted funding for the first effective plan year if— (h)(4) of this section of the adjusted target attainment percentage of the plan (A) The enrolled actuary for the plan funding target attainment percentage for for the plan year preceding the current has not issued a certification of the the plan year preceding the current plan plan year on or after the first day of the adjusted funding target attainment year before the first day of the current current plan year, the date of that prior percentage for the plan year before the plan year, the presumed adjusted plan year certification is a new section first day of the 4th month of the plan funding target attainment percentage of 436 measurement date for the current year; and the plan for the current plan year is plan year. In such a case, the presumed (B) The prior plan year adjusted equal to the prior plan year adjusted adjusted funding target attainment funding target attainment percentage is funding target attainment percentage percentage for the current plan year is at least 70 percent but less than 80 until it is changed under paragraph equal to the prior plan year adjusted percent. (h)(1)(iv) of this section. funding target attainment percentage (iii) Presumed adjusted funding target (B) Special rule for late certifications. (reduced by 10 percentage points if attainment percentage. If this paragraph If the certification of the adjusted paragraph (h)(2)(iv) of this section (h)(2) applies to a plan for a plan year funding target attainment percentage for applies to the plan) until it is changed and the date of the enrolled actuary’s the prior plan year occurred after the under paragraph (h)(1)(iv) of this certification of the adjusted funding first day of the 10th month of that prior section. The rules of paragraph target attainment percentage under plan year, the plan is treated as if no (h)(1)(ii)(B) of this section apply for paragraph (h)(4) of this section for the such certification was made, unless the purposes of determining whether the prior plan year (taking into account the certification took into account the effect enrolled actuary has issued a special rules for late certifications under of any unpredictable contingent event certification of the adjusted funding paragraph (h)(1)(ii)(B) of this section) benefits that are permitted to be paid target attainment percentage for the occurred before the first day of the 4th based on unpredictable contingent prior plan year during the current plan month of the current plan year, then, events that occurred, and any plan year. commencing on the first day of the 4th amendments that became effective, month of the current plan year— during the prior plan year but before the (iv) Duration of use of presumed (A) The presumed adjusted funding certification (and any associated section adjusted funding target attainment target attainment percentage of the plan 436 contributions). percentage. If this paragraph (h)(1) for the plan year is reduced by 10 (iii) No certification for preceding applies to a plan for a plan year, the percentage points; and year issued during preceding year—(A) presumed adjusted funding target (B) The first day of the 4th month of Deemed percentage continues. In any attainment percentage determined the plan year is a section 436 case in which the plan’s enrolled under this paragraph (h)(1) applies until measurement date. actuary has not issued a certification the earliest of— (iv) Certification for prior plan year. If under paragraph (h)(4) of this section of (A) The first day of the 4th month of this paragraph (h)(2) applies to a plan the adjusted funding target attainment the plan year if paragraph (h)(2) of this and the date of the enrolled actuary’s percentage of the plan for the plan year section applies; certification of the adjusted funding

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target attainment percentage under paragraph (h)(4)(ii) of this section, the certification for a plan year and the paragraph (h)(4) of this section for the certification must set forth the value of enrolled actuary subsequently issues a prior plan year (taking into account the plan assets, the prefunding balance, the certification of the specific adjusted rules for late certifications under funding standard carryover balance, the funding target attainment percentage for paragraph (h)(1)(ii)(B) of this section) value of the funding target used in the the plan before the end of that plan year, occurs on or after the first day of the 4th determination, the aggregate amount of then the certification of the specific month of the current plan year, then, annuity purchases included in the adjusted funding target attainment commencing on the date of that prior adjusted value of plan assets and the percentage is treated as a change in the plan year certification— adjusted funding target, the applicable percentage to which (A) The presumed adjusted funding unpredictable contingent event benefits paragraph (h)(4)(iii) of this section target attainment percentage of the plan permitted to be paid for unpredictable applies. for the current plan year is equal to 10 contingent events that occurred during (B) Effect of range certification before percentage points less than the prior the current plan year that were taken certification of specific percentage. If a plan year adjusted funding target into account for the current plan year plan’s enrolled actuary issues a range attainment percentage; and (including any associated section 436 certification pursuant to this paragraph (B) The date of the prior plan year contributions), the plan amendments (h)(4)(ii), then, for purposes of this certification is a section 436 that took effect in the current plan year section (including application of the measurement date. that were taken into account for the limitations of sections 436(b) and (c), (v) Duration of use of presumed current plan year (including any contributions described in sections adjusted funding target attainment associated section 436 contributions), 436(b)(2), 436(c)(2), and 436(e)(2), and percentage. If this paragraph (h)(2) any benefit accruals that were restored the mandatory reduction of the applies to a plan for a plan year, the for the plan year (including any section prefunding and funding standard presumed adjusted funding target 436 contributions), and any other carryover balances under paragraph attainment percentage determined relevant factors. The actuarial (a)(5) of this section), the plan is treated under this paragraph (h)(2) applies until assumptions and funding methods used as having a certified percentage at the the earliest of— in the calculation for the certification smallest value within the applicable (A) The first day of the 10th month of must be the actuarial assumptions and range until a certification of the plan’s the plan year if paragraph (h)(3) of this funding methods used for the plan for specific adjusted funding target section applies; purposes of determining the minimum attainment percentage for the plan year (B) The date of a change in the required contributions under section has been issued under paragraph presumed adjusted funding target 430 for the plan year. (h)(4)(i) of this section. However, if the attainment percentage under paragraph (B) Determination of plan assets. For plan’s enrolled actuary has issued a (g)(4) of this section; or purposes of making any determination range certification for the plan year but (C) The date the enrolled actuary of the adjusted funding target does not issue a certification of the issues a certification under paragraph attainment percentage under this specific adjusted funding target (h)(4) of this section of the adjusted section, the determination is not attainment percentage for the plan by funding target attainment percentage for permitted to include in plan assets the last day of that plan year, the the plan year. contributions that have not been made adjusted funding target attainment (3) Presumption of underfunding to the plan by the certification date. percentage for the plan is retroactively beginning on first day of 10th month. In Thus, the enrolled actuary’s certification deemed to be less than 60 percent as of any case in which no certification of the of the adjusted funding target the first day of the 10th month of the specific adjusted funding target attainment percentage for a plan year plan year. attainment percentage for the current cannot take into account contributions (C) Effect of range certification on and plan year under paragraph (h)(4) of this that are expected to be made after the after certification of specific percentage. section is made with respect to the plan certification date. Notwithstanding the Once the certification of the specific before the first day of the 10th month of foregoing, for plan years beginning adjusted funding target attainment the plan year, then, commencing on the before January 1, 2009, the enrolled percentage is issued by the plan’s first day of the 10th month of the actuary’s certification of the adjusted enrolled actuary, the certified current plan year— funding target attainment percentage is percentage applies for all purposes of (i) The presumed adjusted funding permitted to take into account employer this section on and after the date of that target attainment percentage of the plan contributions for the prior plan year that certification. If the plan sponsor made for the plan year is presumed to be less are reasonably expected to be made for section 436 contributions to avoid than 60 percent; and that prior plan year but have not been application of a benefit limitation (ii) The first day of the 10th month of contributed by the date of the enrolled during the period a range certification the plan year is a section 436 actuary’s certification. See paragraphs was in effect, those section 436 measurement date. (h)(4)(iii) and (v) of this section for rules contributions are recharacterized as (4) Certification of AFTAP—(i) Rules relating to changes in the certified employer contributions under section generally applicable to certifications— percentage. 430 to the extent the contributions (A) In general. The enrolled actuary’s (ii) Special rules for certification exceed the amount necessary to avoid certification referred to in this section within range—(A) In general. Under this application of a limitation based on the must be made in writing, must be signed paragraph (h)(4)(ii), the plan’s enrolled specific adjusted funding target and dated to show the date of the actuary is permitted to certify during a attainment percentage as certified by the signature, must be provided to the plan plan year that the plan’s adjusted plan’s enrolled actuary on or before the administrator, and, except as otherwise funding target attainment percentage for last day of the plan year. provided in paragraph (h)(4)(ii) of this that plan year either is less than 60 (iii) Change of certified percentage— section, must certify the plan’s adjusted percent, is 60 percent or higher (but is (A) Application of new percentage. If funding target attainment percentage for less than 80 percent), is 80 percent or the enrolled actuary for the plan the plan year. Except in the case of a higher, or is 100 percent or higher. If the provides a certification of the adjusted range certification described in enrolled actuary has issued such a range funding target attainment percentage of

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the plan for the plan year under this standard carryover balance to offset the prior certification until the date of the paragraph (h)(4) (including a range prior plan year’s minimum required subsequent certification. certification) and that certified contribution; (B) Immaterial change. An immaterial percentage is superseded by a (4) A change in funding method or change in the adjusted funding target subsequent determination of the actuarial assumptions, where such attainment percentage applies adjusted funding target attainment change required actual approval of the prospectively only and does not change percentage for that plan year, then, Commissioner (rather than deemed the inapplicability of the presumptions except to the extent provided in approval); under paragraphs (h)(1), (2), and (3) of paragraph (h)(4)(iv)(B) of this section, (5) Unpredictable contingent event this section prior to the date of the later that later percentage must be applied for benefits which are permitted to be paid certification. the portion of the plan year beginning because the employer makes the section (v) Rules relating to updated on the date of the earlier certification. 436 contribution described in paragraph certification—(A) In general. This The subsequent determination could be (f)(2)(iii)(A) of this section; paragraph (h)(4)(v) sets forth rules the correction of a prior incorrect (6) Unpredictable contingent event relating to updates of an actuary’s certification or it could be an update of benefits which are permitted to be paid certification of the plan’s adjusted a prior correct certification to take into because the plan’s enrolled actuary funding target attainment percentage for account subsequent facts under the determines that the increase in the a plan year. Paragraphs (h)(4)(v)(B) and rules of paragraph (h)(4)(v) of this funding target attributable to the (D) of this section require that an section. The implications of such a occurrence of the unpredictable updated adjusted funding target change depend on whether the change contingent event would not cause the attainment percentage be certified in is a material change or an immaterial plan’s adjusted funding target certain situations. Even if the updated change. See paragraph (h)(4)(iv) of this attainment percentage to fall below 60 adjusted funding target attainment section. percent; percentage is not required to be (B) Material change. A change in a (7) A plan amendment which takes certified, plan administrators may plan’s certified adjusted funding target effect because the employer makes the request that the actuary prepare an attainment percentage constitutes a section 436 contribution described in updated certification of the adjusted material change for a plan year if plan paragraph (f)(2)(iv)(A) of this section, funding target attainment percentage, as operations with respect to benefits that the liability for which was not taken described in paragraphs (h)(4)(v)(C) and are addressed by section 436, taking into into account in the certification of the (E) of this section. Any updated account any actual contributions and adjusted funding target attainment adjusted funding target attainment elections under section 430(f) made by percentage; or percentage determined under this the plan sponsor based on the prior (8) A plan amendment which takes paragraph (h)(4)(v) will apply beginning certified percentage, would have been effect because the plan’s enrolled as of the date of the event that gave rise different based on the subsequent actuary determines that the increase in to the need for the update which is a determination of the plan’s adjusted the funding target attributable to the section 436 measurement date. Thus, funding target attainment percentage for plan amendment would not cause the pursuant to this paragraph (h)(4)(v), the the plan year. A change in a plan’s plan’s adjusted funding target updated funding target attainment adjusted funding target attainment attainment percentage to fall below 80 percentage applies thereafter for all percentage for a plan year can be a percent, the liability for which was not purposes of section 436, including material change even if the only impact taken into account in the certification of application with respect to of the change occurs in the following the adjusted funding target attainment unpredictable contingent events plan year under the rules for percentage. occurring on or after the measurement determining the presumed adjusted (iv) Effect of change in percentage— date (but not for unpredictable funding target attainment percentage in (A) Material change. In the case of a contingent events that occurred before that following year. material change, if the plan’s prior such measurement date or for benefits (C) Immaterial change. In general, an operations were in accordance with the with annuity starting dates before that immaterial change is any change in an prior certification of the adjusted measurement date). The updated adjusted funding target attainment funding target attainment percentage for adjusted funding target attainment percentage for a plan year that is not a the plan year (rather than the actual percentage will continue to apply for material change. In addition, subject to adjusted funding target attainment the remainder of the plan year and will the requirement to recertify the adjusted percentage for the plan year), then the be used for the presumed adjusted funding target attainment percentage in plan will not have satisfied the funding target attainment percentage for paragraph (h)(4)(v)(B) of this section, a requirements of section 401(a)(29) and the next plan year, unless there is a later change in adjusted funding target section 436. Even if the plan’s prior updated certification of adjusted attainment percentage is deemed to be operations were in accordance with the funding target attainment percentage for an immaterial change if it merely subsequent certification of the adjusted the plan year. reflects a change in the funding target funding target attainment percentage, (B) Requirement to recertify AFTAP if for the plan year or the value of the the plan will not have satisfied the plan sponsor contributes to threshold. adjusted plan assets after the date of the qualification requirements of section If, during the plan year, unpredictable enrolled actuary’s certification resulting 401(a) because the plan will not have contingent event benefits are permitted from— been operated in accordance with its to be paid, a plan amendment takes (1) Additional contributions for the terms during the period of time the prior effect, or benefits are permitted to preceding year that are made by the certification applied. In addition, in the accrue because the plan sponsor makes plan sponsor; case of a material change, the rules a contribution described in paragraph (2) The plan sponsor’s election to requiring application of a presumed (f)(2)(iii)(B), (f)(2)(iv)(B), or (f)(2)(v) of reduce the prefunding balance or adjusted funding target attainment this section, then, in accordance with funding standard carryover balance; percentage under paragraphs (h)(1) paragraph (f)(2)(ii)(C) of this section, the (3) The plan sponsor’s election to through (h)(3) of this section continue to plan’s enrolled actuary must issue an apply the prefunding balance or funding apply from and after the date of the updated certification of the adjusted

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funding target attainment percentage indicated, the examples in this section under paragraph (d)(3) of this section. Plan that takes into account such are based on the information in this T must resume paying prohibited payments, contribution as well as the liability for paragraph (h)(5). Each plan is a non- as restricted under paragraph (d)(3) of this unpredictable contingent event benefits collectively bargained defined benefit section, for participants who elect benefits in accelerated forms of payment and who have that are permitted to be paid, plan plan with a plan year that is the an annuity starting date of June 1, 2011, or amendments that take effect during the calendar year and a valuation date of later. In addition, Plan T must provide plan year, and restored benefits. January 1. The plan year is subject to benefits for any unpredictable contingent (C) Optional recertification of AFTAP section 436 in 2008. The plan does not event occurring on or after January 1, 2011, after other unpredictable contingent have a funding standard carryover to the extent permitted under paragraph (b) event or plan amendment. Except as balance or a prefunding balance as of of this section. Similarly, Plan T is no longer provided in paragraph (h)(4)(v)(D) of any of the dates mentioned, and the subject to the restriction on benefit accruals this section, if, during a plan year, plan sponsor does not elect to utilize under paragraph (e) of this section, and benefit accruals resume under Plan T unpredictable contingent event benefits any of the methods in paragraph (f) of are permitted to be paid, or a plan beginning June 1, 2011, unless Plan T this section to avoid applicable benefit provides otherwise. amendment takes effect, because either restrictions. No range certification under Example 3. (i) The facts are the same as the plan sponsor makes a contribution paragraph (h)(4) of this section has been in Example 1, except that the enrolled described in paragraph (f)(2)(iii)(A) or issued. The plan sponsor is not in actuary for the plan does not certify the 2011 (f)(2)(iv)(A) of this section, or the plan’s bankruptcy. The examples read as AFTAP until November 15, 2011. Beginning enrolled actuary determines that the follows: October 1, 2011, Plan T is conclusively increase in the funding target presumed to have an AFTAP of less than attributable to the occurrence of the Example 1. (i) On July 15, 2010, the 60%, in accordance with the provisions of adjusted funding target attainment paragraph (h)(3) of this section. Accordingly, unpredictable contingent event or the percentage (‘‘AFTAP’’) for Plan T for 2010 is plan amendment would not cause the Plan T is subject to the restrictions in certified to be 65%. Based on this AFTAP, paragraphs (b), (d)(1), and (e) of this section plan’s adjusted funding target Plan T is subject to the restriction on commencing on October 1, 2011. attainment percentage to fall below the prohibited payments in paragraph (d)(3) of (ii) On November 15, 2011, the enrolled applicable 60 percent or 80 percent this section for the remainder of 2010. actuary for the plan certifies that the AFTAP threshold (taking into account the (ii) Beginning January 1, 2011, Plan T’s for 2011 is 72%. However, because the occurrence of all previous unpredictable AFTAP for 2011 is presumed to be equal to certification occurred after September 30, contingent event benefits and plan the AFTAP for 2010, or 65%, under the 2011, the certification does not constitute a provisions of paragraph (h)(1)(ii) of this new section 436 measurement date, and Plan amendments to the extent not already section. Accordingly, the restriction on T continues to be subject to the restrictions reflected in the certified adjusted prohibited payments in paragraph (d)(3) of on unpredictable contingent event benefits, funding target attainment percentage for this section continues to apply. prohibited payments, and benefit accruals the plan year (or update)), then the plan (iii) On March 1, 2011, the enrolled actuary for the plan certifies that the actual AFTAP under paragraphs (b), (d)(1), and (e) of this administrator may request that the plan section. actuary issue an updated certification of for 2011 is 80%. Therefore, beginning March 1, 2011, Plan T is no longer subject to the (iii) Beginning January 1, 2012, the 2012 the adjusted funding target attainment AFTAP for Plan T is presumed to be equal percentage that takes into account the restriction under paragraph (d)(3) of this section, and so Plan T resumes paying the to the 2011 AFTAP of 72%. Because the unpredictable contingent event benefits full amount of any prohibited payments presumed 2012 AFTAP is between 70% and or plan amendments and any associated elected by participants with an annuity 80% and, therefore, paragraph (h)(2) of this section 436 contribution. starting date of March 1, 2011, or later. section (which provides for a 10 percentage (D) Requirement to recertify AFTAP Example 2. (i) The facts are the same as in point reduction in a plan’s AFTAP in certain after deemed immaterial change. If a Example 1, except that the enrolled actuary cases) will not apply, the presumed AFTAP change in the adjusted funding target for the plan does not certify the AFTAP for will remain at 72% until the plan’s enrolled attainment percentage as a result of one 2011 until June 1, 2011, when it is certified actuary certifies the AFTAP for 2012 or until paragraph (h)(3) of this section applies on the of the items listed in paragraph to be 66%. (ii) Beginning January 1, 2011, Plan T’s first day of the 10th month of the plan year. (h)(4)(iii)(C) of this section would be a Because the presumed AFTAP is 72%, Plan material change, then the change is AFTAP for 2011 is presumed to be equal to the AFTAP for 2010, or 65%, under the T is no longer subject to the restrictions on treated as an immaterial change only if provisions of paragraph (h)(1)(ii) of this prohibited payments under paragraph (d)(1) the plan’s enrolled actuary recertifies section. Accordingly, the restriction on of this section, and Plan T must provide the adjusted funding target attainment prohibited payments in paragraph (d)(3) of benefits for any unpredictable contingent percentage for the plan year as soon as this section continues to apply. event occurring on or after January 1, 2012, practicable after the event that gives rise (iii) Pursuant to paragraph (h)(2)(iv) of this to the extent permitted under paragraph (b) to the change. section, beginning April 1, 2011, the AFTAP of this section and must resume paying (E) Optional recertification after other for 2011 is presumed to be 55% (10 prohibited payments, as restricted under percentage points less than the AFTAP for paragraph (d)(3) of this section, that are immaterial change. If a change in the elected by participants with annuity starting adjusted funding target attainment 2010). Plan T is subject to the restriction on prohibited payments under paragraph (d)(1) dates on or after January 1, 2012. Similarly, percentage is immaterial, then the plan of this section for annuity starting dates on Plan T is no longer subject to the restriction administrator may request that the plan or after April 1, 2011. In addition, Plan T is on benefit accruals under paragraph (e) of actuary issue an updated certification of subject to the restriction on unpredictable this section, and benefit accruals resume the adjusted funding target attainment contingent event benefits under paragraph (b) under Plan T beginning January 1, 2012, percentage that takes into account the of this section for unpredictable contingent unless Plan T provides otherwise. unpredictable contingent event benefits events occurring on or after April 1, 2011 and Example 4. (i) The facts are the same as or plan amendments and any associated benefits are required to be frozen on and after in Example 3, except that the enrolled April 1, 2011 under paragraph (e) of this actuary for the plan does not issue a section 436 contribution. certification of the AFTAP for 2011 for Plan (5) Examples of rules of paragraphs section. (iv) Once the enrolled actuary for the plan T until February 1, 2012. (h)(1), (h)(2), and (h)(3) of this section. certifies that the AFTAP for 2011 for Plan T (ii) Beginning on January 1, 2012, the The following examples illustrate the is 66%, Plan T is no longer subject to the presumptions in paragraph (h)(1)(iii) of this rules of paragraphs (h)(1), (h)(2), and restriction under paragraph (d)(1) of this section apply for the 2012 plan year. Because (h)(3) of this section. Unless otherwise section, but it is subject to the restriction the enrolled actuary for the plan has not

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certified the AFTAP for 2011, the presumed (iv) On May 1, 2012, the enrolled actuary period from April 1, 2011, through May 31, AFTAP as of October 1, 2011, continues to for the plan certifies that the actual AFTAP 2011, would be able to elect a new annuity apply for the period beginning January 1, for 2011 for Plan T is 65%. Because the starting date with a partial distribution of 2012. Therefore, the AFTAP as of January 1, enrolled actuary for the plan has not issued accelerated benefits effective June 1, 2011, if 2012, is presumed to be less than 60%, and a certification of the actual AFTAP as of Plan V contained a preexisting provision Plan T continues to be subject to the January 1, 2012, the provisions of paragraph permitting such an election after the restrictions on unpredictable contingent (h)(2)(iv) of this section apply. Accordingly, restriction in paragraph (d)(1) of this section event benefits under paragraph (b) of this on May 1, 2012, the 2012 AFTAP is no longer applies. This is permitted because, section, prohibited payments under presumed to be 10 percentage points less under paragraph (a)(4)(ii)(B) of this section, paragraph (d)(1) of this section, and benefit than the 2011 AFTAP, or 55%, so that the a preexisting provision of this type is not accruals under paragraph (e) of this section. restrictions under paragraphs (b), (d), and (e) considered a plan amendment and is (iii) On February 1, 2012, the enrolled of this section continue to apply. therefore not subject to the plan amendment actuary for the plan certifies that the AFTAP Example 6. (i) The enrolled actuary for restriction in paragraph (c) of this section for 2011 for Plan T is 65%. Because the Plan V certifies the plan’s AFTAP for 2010 even though Plan V’s AFTAP for 2011 is less enrolled actuary for the plan has not issued to be 69%. Based on this AFTAP, Plan V is than 80%. a certification of the AFTAP for 2012, the subject to the restriction in paragraph (d)(3) (vi) Benefit accruals for the period provisions of paragraph (h)(1)(iii)(B) of this of this section, and can only pay a portion beginning April 1, 2011, through May 31, section apply. Accordingly, the certification (generally 50%) of the prohibited payments 2011, would be automatically restored if Plan date for the 2011 AFTAP (February 1, 2012) otherwise due to plan participants who V contained a preexisting provision to is a section 436 measurement date and 65% commence benefits while the restriction is in retroactively restore benefit accruals is the presumed AFTAP for 2012 beginning effect. The enrolled actuary for the plan does restricted under paragraph (e) of this section on that date. not issue a certification of the AFTAP for after the restriction no longer applies. This is (iv) Because the presumed AFTAP is over 2011 until June 1, 2011. permitted because under paragraph 60% but less than 80%, the full restriction (ii) Beginning January 1, 2011, Plan V’s (a)(4)(ii)(B) of this section, a preexisting on prohibited payments under paragraph 2011 AFTAP is presumed to be equal to the provision of this type is not considered to be (d)(1) of this section no longer applies; 2010 AFTAP, or 69%, under the provisions a plan amendment and is therefore not however, the partial restriction on prohibited of paragraph (h)(1)(ii) of this section. subject to the plan amendment restriction in payments under paragraph (d)(3) of this Accordingly, the restriction on prohibited paragraph (c) of this section even though section applies beginning on February 1, payments in paragraph (d)(3) of this section Plan V’s AFTAP for 2011 is less than 80%, 2012. Therefore, Plan T must pay a portion continues to apply from January 1, 2011, because the period of the restriction did not of the prohibited payments elected by through March 31, 2011, and Plan T may exceed 12 months. participants with annuity starting dates on or only pay a portion of the prohibited after February 1, 2012. Furthermore, based on (6) Examples of rules of paragraph payments otherwise due to participants who the presumed AFTAP of 65%, the restriction (h)(4) of this section. The following commence benefit payments during this on unpredictable contingent event benefits period. examples illustrate the rules of under paragraph (b) of this section ceases to (iii) Beginning April 1, 2011, the paragraph (h)(4) of this section: apply for events occurring on or after February 1, 2012, to the extent permitted provisions of paragraph (h)(2)(ii) of this Example 1. (i) Plan Y is a non-collectively under paragraph (b) of this section and the section apply. Under those provisions, the bargained defined benefit plan with a plan restriction on benefit accruals under AFTAP beginning April 1, 2011, is presumed year that is the calendar year and a valuation paragraph (e) of this section no longer applies to be 10 percentage points lower than the date of January 1. Plan Y does not have a so that, unless Plan T provides otherwise, presumed 2011 AFTAP, or 59%. Because funding standard carryover balance or a benefit accruals will resume as of Plan V’s presumed AFTAP for 2011 is less prefunding balance. Plan Y’s sponsor is not February 1, 2012. than 60%, the restrictions on unpredictable in bankruptcy. In June of 2010, the actual Example 5. (i) The facts are the same as in contingent event benefits under paragraph (b) AFTAP for 2010 for Plan Y is certified as Example 3, except that the enrolled actuary of this section, on the payment of accelerated 65%. On the last day of the 2010 plan year, for the plan does not issue a certification of benefit distributions under paragraph (d)(1) Plan Y is subject to the restrictions in the actual AFTAP for Plan T as of January 1, of this section, and on benefit accruals under paragraph (d)(3) of this section. 2011, until May 1, 2012. paragraph (e) of this section apply. (ii) The enrolled actuary for the plan issues (ii) Beginning on January 1, 2012, the Accordingly, Plan V cannot pay any a range certification on March 21, 2011, presumptions in paragraph (h)(1)(iii) of this unpredictable contingent event benefits for certifying that the AFTAP for 2011 is at least section apply for the 2012 plan year. Because events occurring on or after April 1, 2011, or 60% and less than 80%. Because the the enrolled actuary for the plan has not prohibited payments to participants with an certification was issued before the first day certified the actual AFTAP as of January 1, annuity starting date on or after April 1, of the 4th month of the plan year, the 10 2011, the presumed AFTAP as of October 1, 2011, and benefit accruals cease as of percentage point reduction in the presumed 2011, continues to apply for the period April 1, 2011. AFTAP under paragraph (h)(2) of this section beginning January 1, 2012. Therefore, the (iv) On June 1, 2011, Plan V’s enrolled does not apply. In addition, because the AFTAP as of January 1, 2012, is presumed to actuary certifies that the plan’s AFTAP for enrolled actuary for the plan has certified be less than 60%, and Plan T continues to 2011 is 71%. Therefore, the restrictions on that the AFTAP is within this range, Plan Y be subject to the restrictions on unpredictable unpredictable contingent event benefits, is not subject to the full restriction on contingent event benefits under paragraph (b) prohibited payments, and benefit accruals in accelerated benefit payments in paragraph of this section, on prohibited payments under paragraphs (b), (d)(1), and (e) of this section (d)(1) of this section or the restriction on paragraph (d)(1) of this section, and on no longer apply, but the partial restriction on benefit accruals under paragraph (e) of this benefit accruals under paragraph (e) of this benefit payments in paragraph (d)(3) of this section. section. section does apply. Accordingly, Plan V (iii) On August 1, 2011, the enrolled (iii) Since the enrolled actuary for the plan begins paying unpredictable contingent event actuary for the plan certifies that the actual has not issued a certification of the actual benefits for events occurring on or after AFTAP as of January 1, 2011, is 75.86%. This AFTAP as of January 1, 2011, the rules of January 1, 2011, to the extent permitted AFTAP falls within the previously certified paragraph (h)(1)(iii) of this section apply under paragraph (b) of this section and a range. Thus, the change is immaterial under beginning April 1, 2012, and the AFTAP is portion of the prohibited payments elected paragraph (h)(4)(iii) of this section and the presumed to remain less than 60%. Plan T by participants with an annuity starting date new certification does not change the continues to be subject to the restrictions on on or after June 1, 2011. Benefit accruals applicability or inapplicability of the unpredictable contingent event benefits previously restricted under paragraph (e) of restrictions in this section. under paragraph (b) of this section, on this section resume effective June 1, 2011, Example 2. (i) The facts are the same as in prohibited payments under paragraph (d)(1) unless Plan V provides otherwise. Example 1, except that the plan sponsor of this section, and on benefit accruals under (v) Participants who were not able to elect makes an additional contribution for the paragraph (e) of this section. an accelerated form of payment during the 2010 plan year on September 1, 2011, that is

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not added to the prefunding balance. target attainment percentage for the plan paragraph (j)(1)(ii)(A)(2) of this section. Reflecting this contribution, the enrolled year is determined without subtracting The definition of adjusted funding target actuary for the plan issues a revised the plan’s funding standard carryover for a plan maintained by a commercial certification stating that the AFTAP for 2011 balance and prefunding balance from airline for which the plan sponsor has is 81%, and Plan Y is no longer subject to the value of plan assets for the plan the restriction on accelerated benefit made the election described in section payments under paragraph (d)(3) of this year. 402(a)(1) of Pension Protection Act of section on that date. (C) Special rule for plans with section 2006 (PPA ’06), Public Law 109–280 (ii) Although the revised certification 436 contributions. If an employer makes (120 Stat. 780), is the same as if it did changes the applicability of the restriction a contribution described in paragraph not make such an election. under paragraph (d)(3) of this section, the (f)(2) of this section after the valuation (B) Adjusted funding target after change is not a material change under date in order to avoid or terminate updated certification. After the plan’s paragraph (h)(4)(iii)(C)(1) of this section limitations under section 436, then the enrolled actuary prepares an updated because the AFTAP changed only because of present value of that contribution certification of the adjusted funding additional contributions for the preceding (determined using the effective interest target attainment percentage under year made by the plan sponsor after the date rate under section 430(h)(2)(A) for the of the enrolled actuary’s initial certification. paragraph (h)(4)(v) of this section, the plan year) is permitted to be added to adjusted funding target will also be (i) [Reserved] the plan assets as of the valuation date updated to reflect unpredictable (j) Definitions. For purposes of this for purposes of determining or contingent event benefits and plan section— redetermining the adjusted funding amendments not already taken into (1) Adjusted funding target target attainment percentage for a plan account. attainment percentage—(i) In general. year, but only if the liability for the (iv) Plans with zero adjusted funding Except as otherwise provided in this benefits, amendment, or accruals that target. If the adjusted funding target for paragraph (j)(1), the adjusted funding would have been limited (but for the the plan year is zero, then the adjusted target attainment percentage for a plan contribution) is included in determining funding target attainment percentage for year is the fraction (expressed as a the adjusted funding target for the plan the plan year is 100 percent. percentage)— year. (v) Plans with end of year valuation (A) The numerator of which is the (D) Transition rule. Paragraph dates. [Reserved] adjusted plan assets for the plan year (j)(1)(ii)(B) of this section is applied to (vi) Special rule for plans that are the described in paragraph (j)(1)(ii) of this plan years beginning after 2007 and result of a merger. [Reserved] section; and before 2011 by substituting for ‘‘100 (vii) Special rule for plans that are (B) The denominator of which is the percent’’ the applicable percentage involved in a spinoff. [Reserved] adjusted funding target for the plan year determined in accordance with the (2) Annuity starting date—(i) General described in paragraph (j)(1)(iii) of this following table: rule. The term annuity starting date section. means, as applicable— (ii) Adjusted plan assets—(A) General In the case of a plan year The applicable (A) The first day of the first period for rule. The adjusted plan assets for a plan beginning in calendar which an amount is payable as an year: percentage is: year is generally determined by— annuity as described in section (1) Subtracting the plan’s funding 2008 ...... 92 417(f)(2)(A)(i); standard carryover balance and 2009 ...... 94 (B) In the case of a benefit not payable prefunding balance as of the valuation 2010 ...... 96 in the form of an annuity, the annuity date from the value of plan assets for the starting date is the annuity starting date plan year under section 430(g) (but (E) Limitation on transition rule. for the qualified joint and survivor treating the resulting value as zero if it Paragraph (j)(1)(ii)(D) of this section annuity that is payable under the plan is below zero); and does not apply with respect to the at the same time as the benefit that is (2) Increasing the resulting value by current plan year unless, for each plan not payable as an annuity; the aggregate amount of purchases of year beginning after December 31, 2007, (C) In the case of an amount payable annuities for participants and and before the current plan year, the under a retroactive annuity starting beneficiaries (other than participants value of plan assets determined without date, the benefit commencement date who, at the time of the purchase, were subtracting the funding standard (instead of the date determined under highly compensated employees as carryover balance and the prefunding paragraphs (j)(2)(i)(A) and (B) of this defined in section 414(q), which balance is not less than the product of— section); definition includes highly compensated (1) The applicable percentage (D) The date of the purchase of an former employees under § 1.414(q)–1T, determined under paragraph (j)(1)(ii)(D) irrevocable commitment from an insurer Q&A–4) which were made by the plan of this section for that plan year; and to pay benefits under the plan; and during the preceding 2 plan years, to the (2) The funding target (determined (E) The date of any transfer to another extent not included in plan assets for without regard to the at-risk rules of plan described in paragraph (j)(6)(i)(C) purposes of section 430. section 430(i)) for that plan year. of this section. (B) Special rule for plans that are fully (iii) Adjusted funding target—(A) In (ii) Special rule for beneficiaries. If a funded without regard to subtraction of general. Except as otherwise provided participant commences benefits at an funding balances from plan assets. If for in this paragraph (j)(1)(iii), the adjusted annuity starting date (as defined in a plan year the value of plan assets funding target equals the funding target paragraph (j)(2)(i) of this section) and, determined without subtracting the for the plan year, determined in after the death of the participant, funding standard carryover balance and accordance with the rules set forth in payments continue to a beneficiary, the the prefunding balance is not less than § 1.430(d)–1, but without regard to the annuity starting date for the payments to 100 percent of the plan’s funding target at-risk rules under section 430(i), the participant constitutes the annuity determined under section 430 without increased by the aggregate amount of starting date for payments to the regard to section 430(i), then the purchases of annuities that were added beneficiary, except that a new annuity adjusted value of plan assets used in the to assets for purposes of determining the starting date occurs (determined by calculation of the adjusted funding plan’s adjusted plan assets under applying paragraph (j)(2)(i)(A), (B), and

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(C) of this section to the payments to the (1) The numerator of which is the of the funding standard account credit beneficiary) if the amounts payable to value of plan assets determined under balance when that balance is subtracted all beneficiaries of the participant in the paragraph (j)(5)(iii)(B) of this section from the asset value under paragraph aggregate at any future date can exceed increased by the aggregate amount of (j)(5)(iii)(B)(2) of this section. the monthly amount that would have purchases of annuities for participants (C) Plan with end-of-year valuation been paid to the participant had he or and beneficiaries (other than date. With respect to the first plan year she not died. participants who, at the time of the beginning in 2008, if the plan had a (3) First effective plan year. The first purchase, were highly compensated valuation date under section 412 that effective plan year for a plan is the first employees as defined in section 414(q), was the last day of the plan year for plan year to which section 436 applies which definition includes highly each of the plan years beginning in 2006 to the plan under paragraph (k)(1) or compensated former employees under and 2007, the adjusted funding target (k)(2) of this section. § 1.414(q)–1T, Q&A–4 which were made attainment percentage for the 2007 plan (4) Funding target. In general, the by the plan during the preceding 2 plan year may be determined as the fraction funding target means the funding target years, to the extent not included in plan (expressed as a percentage)— under § 1.430(d)–1, without regard to assets under section 412(c)(2) (as in (1) The numerator of which is the the at-risk rules under section 430(i) and effect prior to amendment by PPA ’06); value of plan assets determined under § 1.430(i)–1. However, solely for and paragraph (j)(5)(iii)(D) of this section purposes of sections 436(b)(2)(A) and (2) The denominator of which is the increased by the aggregate amount of (c)(2)(A), the funding target means the plan’s current liability determined purchases of annuities for participants funding target under § 1.430(i)–1 if the pursuant to section 412(l)(7) (as in effect and beneficiaries (other than plan is in at-risk status for the plan year. prior to amendment by PPA ’06) on the participants who, at the time of the (5) Prior plan year adjusted funding valuation date for the 2007 plan year purchase, were highly compensated target attainment percentage—(i) In increased by the aggregate amount of employees as defined in section 414(q), general. Except as otherwise provided purchases of annuities that were added which definition includes highly in this paragraph (j)(5), the prior plan to the plan assets under the rules of compensated former employees under year adjusted funding target attainment paragraph (j)(5)(iii)(A)(1) of this section. § 1.414(q)–1T, Q&A–4 which were made percentage is the adjusted funding target (B) General determination of value of by the plan during the preceding 2 plan attainment percentage determined plan assets—(1) In general. The value of years, to the extent not included in plan under paragraph (j)(1) of this section for plan assets for purposes of this assets under section 412(c)(2) (as in the immediately preceding plan year. paragraph (j)(5)(iii) is determined under effect prior to amendment by PPA ’06); (ii) Special rules—(A) Special rule for section 412(c)(2) as in effect for the 2007 and new plans. In the case of a plan plan year, except that the value of plan (2) The denominator of which is the established during the plan year that assets prior to subtracting the plan’s plan’s current liability determined was not the result of a merger or spinoff, funding standard account credit balance pursuant to section 412(l)(7) (as in effect the adjusted funding target attainment described in paragraph (j)(5)(iii)(B)(2) of prior to amendment by PPA ’06) on the percentage is equal to 100 percent for this section must be adjusted so that the valuation date for the second plan year plan years before the plan was value of plan assets is neither less than that begins before 2008 (the 2006 plan established. Except as otherwise 90 percent of the fair market value of year), including the increase in current provided in paragraph (j)(5)(ii)(B) of this plan assets nor greater than 110 percent liability for the 2006 plan year, section, a plan that has a predecessor of the fair market value of plan assets on increased by the aggregate amount of plan in accordance with § 1.415(f)–1(c) the valuation date for that plan year. purchases of annuities that were added is not a plan established during the plan (2) Subtraction of credit balance. If a to the plan assets under the rules of year under this paragraph (j)(5)(ii)(A). plan has a funding standard account paragraph (j)(5)(iii)(C)(1) of this section. Instead, if the plan has a predecessor credit balance as of the valuation date (D) Special asset determinations for plan, the adjusted funding target for the 2007 plan year, that balance is 2006 adjusted funding target attainment attainment percentage for the prior plan subtracted from the value of plan assets percentage—(1) General rule. If the year is the adjusted funding target described in paragraph (j)(5)(iii)(B)(1) of adjusted funding target attainment attainment percentage for the prior plan this section as of that valuation date. percentage for the 2007 plan year is year for the predecessor plan (and that However, the subtraction does not apply determined under the rules of paragraph predecessor plan’s adjusted funding if the value of plan assets prior to (j)(5)(iii)(C) of this section, then the target attainment percentage is treated adjustment under paragraph value of plan assets is determined as the as equal to 100 percent on any date on (j)(5)(iii)(B)(1) of this section is greater value of plan assets under section which it is terminated, other than in a than or equal to 90 percent of the plan’s 412(c)(2) as in effect for the 2006 plan distress termination). current liability as of the valuation date year, adjusted as provided in this (B) Special rules for plans that are the for the 2007 plan year. paragraph (j)(5)(iii)(D). result of a merger. [Reserved] (3) Effect of funding standard (2) Inclusion of contributions for (C) Special rules for plans that are carryover balance reduction for 2007 2006. Contributions made for the 2006 involved in a spinoff. [Reserved] plan year. Notwithstanding paragraph plan year are taken into account in (iii) Special rules for 2007 plan year— (j)(5)(iii)(B)(2) of this section, if, for the determining the value of plan assets, (A) General determination of 2007 first plan year beginning in 2008, the regardless of whether those adjusted funding target attainment employer has made an election to contributions are made during the plan percentage. In the case of the first plan reduce some or all of the funding year or after the end of the plan year and year beginning in 2008, except as standard carryover balance as of the first within the period specified under otherwise provided in this paragraph day of that year in accordance with section 412(c)(10) (as in effect prior to (j)(5), the adjusted funding target § 1.430(f)–1(e), then the present value amendment by PPA ’06). attainment percentage for the (determined as of the valuation date for (3) Restriction to 90–110 percent immediately preceding plan year (the the 2007 plan year using the valuation corridor. The value of plan assets taking 2007 plan year) is determined as the interest rate for that plan year) of the into account the amount of fraction (expressed as a percentage)— amount so reduced is not treated as part contributions made for the 2006 plan

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year is increased or decreased, as amount payable in installments over Example 1. (i) Plan S is a non-collectively necessary, so that it is neither less than 240 months that is actuarially bargained defined benefit plan with a plan 90 percent of the fair market value of equivalent to the benefit payable to the year that is the calendar year and a valuation plan assets nor greater than 110 percent beneficiary. date of January 1. The first effective plan year is 2008. Plan S is not in at-risk status for of the fair market value of plan assets on (7) Section 436 contributions. Section 2008. the valuation date for the 2006 plan year 436 contributions are the contributions (ii) As of January 1, 2008, Plan S has a (taking into account assets attributable described in paragraph (f)(2) of this value of plan assets (equal to the market to contributions for the 2006 plan year). section that are made in order to avoid value of assets) of $2,100,000 and a funding (4) Subtraction of credit balance. The the application of section 436 standard carryover balance of $200,000. plan’s funding standard account credit During 2006, assets from Plan S were used limitations under a plan for a plan year. balance as of the end of the 2006 plan to purchase a total of $100,000 in annuities year is generally subtracted from the (8) Section 436 measurement date. A for employees other than highly compensated value of plan assets determined after section 436 measurement date is the employees. No annuities were purchased application of paragraph (j)(5)(iii)(D)(3) date that is used to determine when the during 2007. On May 1, 2008, the enrolled actuary for the plan determines that the of this section. However, this limitations of sections 436(d) and 436(e) apply or cease to apply, and is also used funding target as of January 1, 2008, is subtraction does not apply if the value $2,500,000. of plan assets is greater than or equal to for calculations with respect to applying (iii) The adjusted value of assets for Plan 90 percent of the plan’s current liability the limitations of paragraphs (b) and (c) S as of January 1, 2008, is $2,000,000 (that determined under section 412(l)(7) (as of this section. See paragraphs (h)(1)(i), is, plan assets of $2,100,000, plus annuity in effect prior to amendment by PPA (h)(2)(iii)(B), (h)(2)(iv)(B), and (h)(3)(i) of purchases of $100,000, and minus the ’06) on the valuation date for the 2006 this section regarding section 436 funding standard carryover balance of plan year. measurement dates that result from $200,000). The adjusted funding target is (E) Special rules for mergers and application of the presumptions under $2,600,000 (that is, the funding target of paragraph (h) of this section. $2,500,000, increased by the annuity spinoffs. Rules similar to the rules of purchases of $100,000). paragraph (j)(5)(ii) of this section apply (9) Unpredictable contingent event. (iv) Based on the above adjusted plan for purposes of determining the adjusted An unpredictable contingent event assets and adjusted funding target, the funding target attainment percentage for benefit means any benefit or increase in adjusted funding target attainment the 2007 plan year in the case of a benefits to the extent the benefit or percentage (AFTAP) as of January 1, 2008, newly established plan, a plan that is increase would not be payable but for would be 76.92%. Since the AFTAP is less the result of a merger of two plans, or the occurrence of an unpredictable than 80% but is at least 60%, Plan S is a plan that is in involved in a spinoff. subject to the restrictions in paragraph (d)(3) contingent event. For this purpose, an of this section. (6) Prohibited payment—(i) General unpredictable contingent event means a rule. The term prohibited payment Example 2. (i) The facts are the same as plant shutdown (whether full or partial) in Example 1, except that it is reasonable to means— or similar event, or an event (including expect that the plan sponsor will make a (A) Any payment for a month that is the absence of an event) other than the contribution of $80,000 to Plan S for the 2007 in excess of the monthly amount paid attainment of any age, performance of plan year by September 15, 2008. This under a straight life annuity (plus any any service, receipt or derivation of any amount is in excess of the minimum required social security supplements described compensation, or the occurrence of contribution for 2007. The plan sponsor in the last sentence of section 411(a)(9)) death or disability. For example, if a elects to reduce the funding standard to a participant or beneficiary whose carryover balance by $80,000. plan provides for an unreduced early (ii) Because it is reasonable to expect that annuity starting date occurs during any retirement benefit upon the occurrence period that a limitation under paragraph the $80,000 will be contributed by the plan of an event other than the attainment of sponsor, that amount is taken into account (d) of this section is in effect; any age, performance of any service, (B) Any payment for the purchase of when the enrolled actuary certifies the 2008 receipt or derivation of any AFTAP under the special rule in paragraph an irrevocable commitment from an compensation, or the occurrence of (h)(4)(i)(B) of this section for plan years insurer to pay benefits; death or disability, then that unreduced beginning before 2009. Accordingly, the (C) Any transfer of assets and early retirement benefit is an enrolled actuary for the plan certifies the liabilities to another plan maintained by unpredictable contingent event benefit 2008 AFTAP as 80% (that is, adjusted plan the same employer (or by any member assets of $2,080,000, reflecting the $80,000 in to the extent of any portion of the of the employer’s controlled group) that contributions receivable, divided by the benefit that would not be payable but is made in order to avoid or terminate adjusted funding target of $2,600,000). for the occurrence of the event, even if the application of section 436 benefit (iii) The ability to take contributions into the remainder of the benefit is payable limitations; and account before they are actually paid to the (D) Any other amount that is without regard to the occurrence of the plan is available only for plan years beginning before 2009. Furthermore, if the identified as a prohibited payment by event. Similarly, if a plan includes a benefit payable upon the presence employer does not actually make the the Commissioner in revenue rulings contribution and the difference between the and procedures, notices, and other (including the absence) of circumstances specified in the plan incorrect certification and the corrected guidance published in the Internal AFTAP constitutes a material change, the Revenue Bulletin (see § 601.601(d)(2) (other than the attainment of any age, plan will have violated section 401(a)(29) or relating to objectives and standards for performance of any service, receipt or will not have been operated in accordance publishing regulations, revenue rulings derivation of any compensation, or the with its terms. and revenue procedures in the Internal occurrence of death or disability), but Example 3. (i) Plan R is a defined benefit Revenue Bulletin). not upon a severance from employment plan with a plan year that is the calendar (ii) Special rule for beneficiaries. In that does not include those year and a valuation date of January 1. Section 436 applies to Plan R for 2008. The the case of a beneficiary that is not an circumstances, that benefit is an unpredictable contingent event benefit. valuation interest rate for the 2007 plan year individual, the amount that is a for Plan R is 7%. The fair market value of prohibited payment is determined by (10) Examples. The following assets of Plan R as of January 1, 2007, is substituting for the amount in paragraph examples illustrate the rules of this $1,000,000. The actuarial value of assets of (j)(1)(i)(A) of this section the monthly paragraph (j): Plan R as of January 1, 2007, is $1,200,000.

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The current liability of Plan R as of January funding target ($3,000,000 ÷ $3,200,000). The (iii) Treatment of plans with both 1, 2007, is $1,500,000. The funding standard applicable transitional percentage in collectively bargained and non- account credit balance as of January 1, 2007, paragraph (j)(1)(ii)(D) of this section is 94% collectively bargained employees. In the is $80,000. The funding standard carryover for 2009. Because the percentage calculated case of a plan with respect to which a balance of Plan R is $50,000 as of the above is less than 94%, the transition rule beginning of the 2008 plan year. The sponsor does not apply to Plan T. collective bargaining agreement applies of Plan R, Sponsor T, elects in 2008 to reduce (iii) Accordingly, the January 1, 2009, to some, but not all, of the plan the funding standard carryover balance in AFTAP for Plan T is calculated without participants, the plan is considered a accordance with § 1.430(f)–1 by $45,000. No reflecting the special rule in paragraph collectively bargained plan for purposes annuities were purchased using plan assets (j)(1)(ii)(B) of this section. The AFTAP as of of this paragraph (k)(2) if it is during 2005 or 2006. January 1, 2009, is calculated by dividing the considered a collectively bargained plan (ii) Pursuant to paragraph (j)(5)(iii)(B)(1) of adjusted assets by the adjusted funding under the rules of paragraph (a)(5)(ii)(B) target. For this purpose, the value of assets this section, the asset value used to of this section. determine the AFTAP for the 2007 plan year is increased by the annuities purchased for is limited to 110% of the fair market value nonhighly compensated employees during (3) Effective date/applicability date of of assets on January 1, 2007, or $1,100,000 2007 and 2008, and decreased by the funding regulations. This section applies to plan (110% of $1,000,000). standard carryover balance and the years beginning on or after January 1, (iii) Pursuant to paragraph (j)(5)(iii)(B)(2) of prefunding balance as of January 1, 2009, resulting in an adjusted asset value of 2010. For plan years beginning before this section, the funding standard account January 1, 2010, plans are permitted to credit balance as of January 1, 2007, is $3,200,000 (that is, $3,000,000 + ¥ ¥ subtracted from the asset value used to $400,000 $150,000 $50,000). The funding rely on the provisions set forth in this determine the AFTAP for the 2007 plan year. target is increased by the annuities purchased section for purposes of satisfying the However, pursuant to paragraph for nonhighly compensated employees requirements of section 436. (j)(5)(iii)(B)(3) of this section, the present during 2007 and 2008, resulting in an value of the amount by which Sponsor T adjusted funding target of $3,600,000 (that is, PART 602—OMB CONTROL NUMBERS elected to reduce the funding standard $3,200,000 + $400,000). The AFTAP for Plan UNDER THE PAPERWORK ÷ carryover balance in 2008 is not subtracted. T for 2009 is therefore $3,200,000 REDUCTION ACT (iv) The present value, determined at an $3,600,000, or 88.89%. interest rate of 7%, of the $45,000 reduction (k) Effective/applicability dates—(1) in the funding standard carryover balance Statutory effective date. Section 436 ■ Par. 9. The authority citation for part elected by Sponsor T in 2008 is $42,056. generally applies to plan years 602 continues to read as follows: Thus, $42,056 is not subtracted from the beginning on or after January 1, 2008. Authority: 26 U.S.C. 7805. 2007 plan year asset value. Accordingly, the funding standard account credit balance that The applicability of section 436 for ■ is subtracted from the 2007 plan year asset purposes of determining the minimum Par. 10. In § 602.101, paragraph (b) is value is $37,944 (that is, $80,000 less required contribution is delayed for amended by adding entries for $42,056). certain plans in accordance with §§ 1.430(f)–1, 1.430(g)–1, 1.430(h)(2)–1, (v) Thus, the asset value that is used to sections 104 through 106 of PPA ‘06. and 1.436–1 to the table to read as determine the FTAP for the 2007 plan year (2) Collectively bargained plan follows: is $1,100,000 less $37,944, or $1,062,056. exception—(i) In general. In the case of Accordingly, for purposes of this section, the a collectively bargained plan that is § 602.101 OMB Control numbers. FTAP for the 2007 plan year for Plan R is maintained pursuant to one or more * * * * * 70.8% (that is, $1,062,056 divided by $1,500,000). collective bargaining agreements (b) * * * Example 4. (i) Plan T is a non-collectively between employee representatives and bargained defined benefit plan that was one or more employers ratified before CFR part or section where Current OMB established prior to 2007. Plan T has a plan January 1, 2008, section 436 does not identified and described control No. year that is the calendar year and a valuation apply to plan years beginning before the date of January 1. The first effective plan year earlier of— is 2008; the plan met the conditions of (A) January 1, 2010; or ***** paragraph (j)(1)(ii)(E) of this section for 2008. (B) The later of— As of January 1, 2009, Plan T has a value of (1) The date on which the last such 1.430(f)–1 ...... 1545–2095 plan assets (equal to the market value of collective bargaining agreement relating 1.430(g)–1 ...... 1545–2095 1.430(h)(2)–1 ...... 1545–2095 assets) of $3,000,000, a funding standard to the plan terminates (determined carryover balance of $150,000, and a 1.436–1 ...... 1545–2095 prefunding balance of $50,000. During 2007 without regard to any extension thereof and 2008, assets from Plan T were used to agreed to after August 17, 2006); or ***** purchase a total of $400,000 in annuities for (2) The first day of the first plan year employees other than highly compensated to which section 436 would (but for this employees. The funding target for Plan T paragraph (k)(2)) apply. Steven Miller, (without regard to the at-risk rules of section (ii) Treatment of certain plan 430(i)) is $3,200,000 as of January 1, 2009. amendments. For purposes of this Acting Deputy Commissioner for Services and (ii) The plan’s funding status is calculated paragraph (k)(2), any plan amendment Enforcement. in accordance with paragraph (j)(1)(ii)(B) of made pursuant to a collective bargaining Approved: September 24, 2009. this section to determine whether the special agreement relating to the plan which Michael Mundaca, rule for fully-funded plans applies to Plan T. Acting Assistant Secretary of the Treasury Accordingly, the value of plan assets amends the plan solely to conform to (Tax Policy). determined without subtracting the funding any requirement added by section 436 is standard carryover balance and the not treated as a termination of the [FR Doc. E9–24284 Filed 10–14–09; 8:45 am] prefunding balance is 93.75% of the plan’s collective bargaining agreement. BILLING CODE 4830–01–P

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Part III

Securities and Exchange Commission 17 CFR Parts 220, 229, 239, et al. Credit Ratings Disclosure and Concept Release on Possible Rescission of Rule 436(g) Under the Securities Act of 1933; Proposed Rules

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SECURITIES AND EXCHANGE if e-mail is used. To help us process and proposals reflect our concerns that even COMMISSION review your comments more efficiently, though credit ratings appear to be a please use only one method. The major factor in the investment decision 17 CFR Parts 229, 239, 240, 249 and Commission will post all comments on for investors and play a key role in 274 the Commission’s Web site (http:// marketing and pricing of the 14 [Release Nos. 33–9070; 34–60797; IC– www.sec.gov/rules/proposed.shtml). securities, investors may not have 28942; File No. S7–20–09] Comments are also available for public access to sufficient information about inspection and copying in the credit ratings. We believe our proposed RIN 3235–AK41 Commission’s Public Reference Room, rules would improve investor protection 100 F Street, NE., Washington, DC Credit Ratings Disclosure by providing information about credit 20549, on official business days ratings that will place the credit rating AGENCY: Securities and Exchange between the hours of 10 a.m. and 3 p.m. in an appropriate context. Commission. All comments received will be posted We have four principal areas of ACTION: Proposed rule. without change; we do not edit personal concern. First, we are concerned that identifying information from investors may not be provided with SUMMARY: We are proposing submissions. You should submit only sufficient information to understand the amendments to our rules to require information that you wish to make scope or meaning of ratings being used disclosure of information regarding available publicly. to market various securities. credit ratings used by registrants, FOR FURTHER INFORMATION CONTACT: Historically, credit ratings were including closed-end management Blair F. Petrillo, Special Counsel in the intended to be a measure of the investment companies, in connection Office of Rulemaking, Division of registrant’s ability to repay its corporate with a registered offering of securities so Corporation Finance, at (202) 551–3430, debt.15 As the types of investment that investors will better understand the or with respect to questions regarding products expand and become more credit rating and its limitations. The investment companies, Devin F. complex, however, the returns amendments we are proposing today Sullivan, Staff Attorney in the Office of (including the prospect of repayment) also would require additional disclosure Disclosure Regulation, Division of on these securities often are dependent that would inform investors about Investment Management, at (202) 551– on factors other than the potential conflicts of interest that could 6784, 100 F Street, NE., Washington, DC creditworthiness of the registrant.16 As affect the credit rating. In addition, we 20549. a result, the information conveyed by are proposing amendments to require SUPPLEMENTARY INFORMATION: The ratings has become increasingly less disclosure of preliminary credit ratings Commission is proposing amendments comparable across types of securities.17 in certain circumstances so that to Regulation S–K,1 and forms under the Investors, however, may not be aware of investors have enhanced information Securities Act of 1933,2 the Securities the differences underlying two about the credit ratings process that may Exchange Act of 1934 3 and the bear on the quality or reliability of the Investment Company Act of 1940.4 In 14 See Report on the Role and Function of Credit rating. The proposed amendments Rating Agencies in the Operation of the Securities Regulation S–K, the Commission is Markets, January 2003, at http://www.sec.gov/news/ would be applicable to registration proposing to amend Items 10 5 and 202.6 studies/credratingreport0103.pdf (noting that statements filed under the Securities Under the Securities Act, the issuers use credit ratings in part ‘‘to improve the Act of 1933, the Securities Exchange Act Commission is proposing to amend marketability or pricing of their financial of 1934 and the Investment Company 7 8 obligations.’’). See also Bo Becker and Todd Form S–3 and Form S–4. Under the Milbourn, Reputation and Competition: Evidence Act of 1940, and Forms 8–K and 20–F. Exchange Act, the Commission is from the Credit Rating Industry, Working Paper, DATES: Comments should be received on proposing to amend Rule 13a–11 9 and (June 2009) at http://www.hbs.edu/research/pdf/09- or before December 14, 2009. Rule 15d–11,10 as well as Form 8–K 11 051.pdf. 15 and Form 20–F.12 The Commission is See Disclosure of Ratings in Registration ADDRESSES: Comments may be Statements, Release No. 33–6336 (Aug. 6, 1981) [46 submitted by any of the following also proposing amendments to Form FR 42024]. methods: N–2 13 under the Securities Act and the 16 See Disclosure of Security Ratings, Release No. Investment Company Act. 33–7086 (Aug. 31, 1994) [59 FR 46304] (‘‘1994 Electronic Comments Ratings Release’’) (noting that ‘‘[b]ecause of these • I. Proposed Amendments non-credit payment risks, there is substantially Use the Commission’s Internet greater uncertainty relating to yield and total return comment form (http://www.sec.gov/ A. Introduction than for traditional debt obligations of comparable rules/proposed.shtml); or The disclosure requirements we are credit rating’’). See also Joseph Mason and Joshua • Send an e-mail to rule- Rosner, Where Did the Risk Go? How Misapplied proposing today are intended to Bond Ratings Cause Mortgage Backed Securities [email protected]. Please include File enhance credit rating disclosure so that and Collateralized Debt Obligation Market Number S7–20–09 on the subject line; investors will better understand credit Disruptions, Working Paper, (May 2007), at or ratings and their limitations. These http://ssrn.com/abstract=1027475. Use the Federal eRulemaking Portal 17 As we noted in 1994: Today, a traditional corporate debt instrument (http://www.regulations.gov). Follow the 1 17 CFR 229.10 through 1123. with fixed principal and interest obligations, a instructions for submitting comments. 2 15 U.S.C. 77a et seq. structured note whose principal and interest is tied, 3 Paper Comments 15 U.S.C. 78a et seq. for example, to an index of securities, an ‘‘interest- 4 15 U.S.C. 80a–1 et seq. only’’ strip, a collateralized mortgage obligation Send paper comments in triplicate to 5 17 CFR 229.10. security, a residual interest in a CMO offering, and Elizabeth M. Murphy, Secretary, 6 17 CFR 229.202. a cash flow (or ‘‘kitchen-sink’’) bond all can be 7 17 CFR 239.13. designated ‘‘triple-a,’’ notwithstanding that Securities and Exchange Commission, investment returns on most of these instruments are 8 17 CFR 239.25. 100 F Street, NE., Washington, DC largely dependent on factors in addition to the 9 20549–1090. 17 CFR 240.13a–11. issuer’s creditworthiness and that the scope of the 10 17 CFR 240.15d–11. rating differs among the securities. All submissions should refer to File 11 17 CFR 249.308. See 1994 Ratings Release in note 16 above. See Number S7–20–09. This file number 12 17 CFR 249.220f. also Alan Blinder, Six Fingers of Blame in the should be included on the subject line 13 17 CFR 239.14; 17 CFR 274.11a–1. Mortgage Mess, N.Y. Times, Sept. 30, 2007.

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securities with the same credit rating source of revenue for the credit rating In a companion concept release,25 we even if the securities were issued by the agency.23 seek comment on whether we should same registrant. The recent turmoil in Third, there has been significant propose to repeal the exemption for the credit markets has raised serious discussion of the possibility that credit ratings provided by NRSROs from concerns that investors may not have ‘‘ratings shopping’’ may lead to inflated being considered a part of the registration statement prepared or fully understood what credit ratings ratings.24 Ratings shopping occurs when 18 certified by a person within the meaning mean, or the limits inherent in them. a registrant, or someone acting on its of Sections 7 26 and 11 27 of the Even when securities are highly rated, behalf, seeks the highest credit rating investors can suffer significant losses, as Securities Act currently contained in available from multiple credit rating was evident during the recent market Rule 436(g) under the Securities Act.28 agencies. We are concerned that crisis.19 For example, the value of AAA- If Rule 436(g) were eliminated, there investors have not been informed about rated mortgage-backed securities fell 70 would no longer be a distinction this practice, which we believe could percent from January 2007 to January between NRSROs and credit rating color their assessment of the reliability 2008.20 As a result, we believe that agencies that are not NRSROs for investors should be provided with of the credit ratings ultimately obtained. purposes of liability under Section 11 of additional disclosure regarding credit Finally, even though credit ratings the Securities Act. ratings so that investors can choose how appear to be a key part of investment As we noted, we continue to have much weight to place on a credit rating decisions and are used to market concerns about the appropriate use of when making an investment decision. securities, disclosure about ratings is credit ratings by investors, but we recognize the reality that credit ratings Second, we are concerned that not required in prospectuses currently. As a result, we are concerned that are important to investors. Therefore, investors may not have access to we seek to improve investor protection information allowing them to appreciate investors may not be receiving even basic information about a potentially through enhanced disclosure about fully the potential conflicts of interest credit ratings. In addition to proposing faced by credit rating agencies and how key element of their investment decisions. the rule amendments set forth in this these conflicts may impact ratings. For release, the Commission today is also example, most credit rating agencies are To address these concerns, we are adopting certain amendments to its paid by the registrants who receive the proposing several enhancements to our existing rules regulating NRSROs, as 21 credit ratings. This situation creates disclosure rules. As a threshold matter, well as proposing additional the potential for a rating to be inflated we are proposing to require disclosure amendments and a new rule.29 We by a credit rating agency as a result of by registrants regarding credit ratings in believe that today’s proposals could the credit rating agency’s desire to keep their registration statements under the help reduce undue reliance on credit the registrant’s business for future Securities Act and the Exchange Act, ratings by providing investors with 22 ratings. Credit rating agencies also and by closed-end management information about what a credit rating may provide additional services to investment companies (‘‘closed-end is, and what it is not, and other registrants, which can be an important funds’’) in registration statements under information bearing on the reliability of the Securities Act and the Investment ratings to place the credit rating in its 18 See e.g. Recommendations of the Securities Company Act, if the registrant uses the proper context. In light of the Industry and Financial Markets Association Credit importance of credit ratings to investors Rating Agency Task Force (July 2008), at rating in connection with a registered http://www.sifma.org/capital_markets/docs/SIFMA- offering. The disclosure requirements and their use by registrants in marketing CRA-Recommendations.pdf (recommending that are intended to address the concerns securities, we believe it is appropriate to investor education regarding the nature and noted above. To keep investors apprised require that this information be limitations of the credit rating process is necessary included in a registrant’s prospectus so to prevent over-reliance on credit ratings). See also of developments relating to credit Report of the Financial Stability Forum on ratings for their investments, we are also that all investors receive this Enhancing Market and Institutional Resilience proposing amendments to Exchange Act information. (Apr. 7, 2008), at reports to require registrants to disclose http://www.financialstabilityboard.org/ B. Background changes to credit ratings. We are not publications/r_0804.pdf. In 1981, the Commission issued a 19 proposing to require registrants to For a more detailed discussion of the role of statement of policy regarding its view of nationally recognized statistical rating organizations obtain credit ratings; instead, we are disclosure of credit ratings in (‘‘NRSROs’’) in determining ratings for structured proposing to require disclosure about products, particularly subprime residential registration statements under the credit ratings used by registrants and mortgage backed securities and collateralized debt Securities Act.30 This statement marked other offering participants in connection obligations, in the time period leading up to the a clear shift from the Commission’s credit crisis, see Proposed Rules for Nationally with a registered offering in order to historic practice of discouraging the Recognized Statistical Rating Organizations, place the credit rating in its proper Release No. 34–57967 (June 16, 2008) [73 FR 36212]. context for investors. 25 See the companion concept release considered 20 See e.g., Marco Pagano and Paolo Volpin, by the Commission on September 17, 2009 Credit Ratings Failures: Causes and Policy Options, 23 As discussed below, Exchange Act Section regarding Rule 436(g) under the Securities Act. Working Paper, (Feb. 9, 2009), at http:// 15E(h) and (i) and Exchange Act Rule 17g–5 [17 26 15 U.S.C. 77g. www.italianacademy.columbia.edu/publications/ CFR 240.17g–5] identify a series of conflicts arising 27 15 U.S.C. 77k. _ _ _ working papers/2008 2009/pagano volpin from the business of determining credit ratings. 28 17 CFR 220.436(g). _ _ seminar IA.pdf. Under the rule, some of these conflicts must be 29 See the releases considered by the Commission 21 See Briefing Paper: Roundtable to Examine disclosed and managed, while others are prohibited on September 17, 2009 regarding (i) amendments to Oversight of Credit Rating Agencies (Apr. 2009), at outright. Rule 17g–2 under the Exchange Act; (ii) http://www.sec.gov/spotlight/cra-oversight- 24 See e.g. Vasiliki Skreta and Laura Veldkamp, amendments to Rule 17g–5 under the Exchange Act; roundtable/briefing-paper.htm (noting that seven of Ratings Shopping and Asset Complexity: A Theory (iii) amendments to Regulation FD; (iv) proposed the ten NRSROs registered with the Commission of Ratings Inflation, working paper, (Feb. 2009), at amendments to Rule 17g–3 under the Exchange Act; operate under the issuer-pay model and that the http://pages.stern.nyu.edu/%7Elveldkam/pdfs/ (v) proposed amendments to the Instructions to issuer-pay NRSROs have determined 98% of the ratings.pdf; Patrick Bolton, Xavier Freixas and Joel Exhibit 6 of Form NRSRO; and (vi) proposed new currently outstanding credit ratings issued by Shapiro, The Credit Ratings Game, Working Paper, Rule 17g–7 under the Exchange Act. NRSROs). (Feb. 2009), at http://www.nber.org/papers/w14712; 30 See Disclosure of Ratings in Registration 22 See Pagano and Volpin in note 20 above. Becker and Milbourn in note 14 above. Statements, in note 15 above.

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disclosure of credit ratings in these At various times since the policy In 2002, as part of the broader changes filings and reflected the Commission’s statement and the adoption of these to the Form 8–K current reporting then-developing acknowledgement of rules and form eligibility requirements, requirements, the Commission again the growing importance of credit ratings the Commission has reviewed and proposed to require a registrant to file a in the securities markets and in the reconsidered its approach to the Form 8–K current report when it regulation of those markets.31 Soon disclosure of credit ratings in filings and received a notice or other thereafter, the Commission amended the reliance on ratings in the communication from any rating agency Regulation S–K to reflect its new policy Commission’s form eligibility regarding, for example, a change or of permitting the voluntary disclosure of requirements. For example, in 1994, the withdrawal of a particular rating.39 credit ratings in registration statements Commission published a proposing Comments were mixed on whether along with clear disclosure explaining release that would have mandated changes to a credit rating should be the rating.32 The Commission also disclosure in Securities Act reported on a Form 8–K.40 Commenters adopted rules to permit the voluntary prospectuses of a credit rating given by against the requirement generally disclosure of credit ratings in tombstone an NRSRO whenever a credit rating believed it was unnecessary because the advertisements,33 and provided that a with respect to the securities being information was publicly available.41 credit rating by an NRSRO generally is offered is ‘‘obtained by or on behalf of Commenters who supported the not part of a registration statement or an issuer.’’ 35 The proposals would have requirement generally believed it should report prepared or certified by a person required disclosure of specified be limited to ratings provided by within the meaning of Sections 7 and 11 information with respect to credit NRSROs.42 The new Form 8–K filing of the Securities Act.34 ratings, whether or not disclosed regime adopted in 2004 did not include voluntarily or mandated by the then- this requirement.43 In declining to adopt 31 See Release No. 33–6336 in note 15 above. The proposed rules. In addition, the release a Form 8–K reporting requirement for Commission announced ‘‘that, contrary to prior sought comment on various areas credit rating changes, the Commission general staff positions on this matter, it will now permit the disclosure of security ratings assigned by relating to the disclosure of credit noted that it was continuing to consider rating organizations in registration statements.’’ In ratings. The release also proposed to the appropriate regulatory approach for support of this shift in policy, the Commission cited require disclosure on a Form 8–K of any rating agencies.44 ‘‘the general usefulness’’ of credit ratings to material change in the credit rating In 2003, the Commission issued a investors and the ‘‘importance that the Commission and other regulatory entities have attached to the assigned to the registrant’s securities by concept release requesting comment on issuance’’ of a credit rating. Id. an NRSRO.36 The Commission received whether it should cease using the 32 See Adoption of Integrated Disclosure System, wide-ranging comments on those NRSRO designation and, as an Release No. 33–6383 (Mar. 3, 1982) [47 FR 11380] proposals. Commenters’ views on alternative to the ratings criteria, (‘‘Integrated Disclosure Release’’). See also whether registrants should be required Registration Form for Closed-End Management provide for Form S–3 eligibility where Investment Companies, Release No. 33–6967 to provide disclosure regarding credit investor sophistication or large size (November 20, 1992) [57 FR 56826] (adopting ratings of their securities in a final denomination criteria are met.45 In amendment to Form N–2 regarding voluntary prospectus reflected a wide variety of 2008, the Commission proposed disclosure of credit ratings for closed-end funds). opinions. Commenters who were against changes to certain of its forms and rules 33 See Integrated Disclosure Release in note 32 above (adopting amendments to Rule 134(a) under the mandatory disclosure of credit that would have removed references to the Securities Act to provide that certain ratings argued, among other things, that: credit ratings and would have amended communications containing a security rating or NRSROs have incentives to provide Securities Act Rule 436(g), which ratings of a class of debt securities, convertible debt quality ratings; information about credit securities and preferred stock and the name(s) of exempts NRSROs from liability under the rating organization would not be deemed to be ratings is widely available and Section 11 of the Securities Act, so that a prospectus under Section 2(10) of the Securities understood; requiring disclosure would Act). be costly and burdensome; and letter regarding file No. S7–24–94 of A.G. Edwards 34 Concurrent with the adoption of these rules requiring disclosure of ratings may & Sons, Inc. and guidance, the Commission adopted Securities increase investors’ reliance on them.37 39 See Additional Form 8–K Disclosure Act Form S–3, the short-form Securities Act Commenters who supported mandatory Requirements and Acceleration of Filing Date, registration statement for eligible domestic issuers Release No. 33–8106 (June 17, 2002) [67 FR 42914]. [17 CFR 239.13]. Form S–3 provides that a primary disclosure regarding credit ratings 40 See also the discussion of Form 8–K in Section offering of non-convertible debt securities may be argued, among other things, that: credit I.D. below. eligible for registration on the form if rated ratings have the potential to confuse and 41 See e.g. letter regarding File No. S7–22–02 of investment grade. A non-convertible security is an CIGNA Corporation (Aug. 26, 2002), at http:// ‘‘investment grade security’’ for purposes of form mislead investors; investors do not www.sec.gov/rules/proposed/s72202.shtml. eligibility if at the time of sale, at least one NRSRO receive sufficient information about the 42 has rated the security in one of its generic rating See e.g. letter regarding File No. S7–22–02 of credit rating; and investors expect to Investment Counsel Association of America (Aug. categories which signifies investment grade, know the credit rating when buying a typically one of the four highest rating categories. 26, 2002), at http://www.sec.gov/rules/proposed/ In adopting this requirement, the Commission security, so the proposed required s72202.shtml. specifically noted that commenters believed that disclosure would comport with investor 43 See Additional Form 8–K Filing Requirements the component relating to investment grade ratings expectations.38 The Commission did not and Acceleration of Filing Date, Release No. 33– was appropriate because non-convertible debt act on the proposals. 8400 (Mar. 16, 2004) [69 FR 15594], amended by securities generally are purchased on the basis of Additional Form 8–K Disclosure Requirements and interest rates and credit ratings. See Section III.A.1 Acceleration of Filing Dates; Correction, Release No. of the Integrated Disclosure Release in note 32 foreign private issuers. Shelf registration 33–8400A (Aug. 4, 2004) [69 FR 48370]. above. Later, in 1992, the Commission expanded requirements for asset-backed securities, originally 44 Id. the eligibility requirement to delete references to adopted in 1992, also depend on a credit ratings 45 See Rating Agencies and the Use of Credit debt or preferred securities and to provide Form S– component. See General Instruction I.B.5 of Form Ratings under the Federal Securities Laws, Release 3 eligibility for other investment grade securities S–3. No. 33–8236 (June 4, 2003) [68 FR 35258] (‘‘2003 (such as foreign currency or other cash settled 35 See the 1994 Ratings Release in note 16 above. Concept Release’’). Most of the commenters that derivative securities). See Simplification of 36 See the 1994 Ratings Release in note 16 above. addressed the issue supported retaining the Registration Procedures for Securities Offerings, 37 See e.g. letter regarding File No. S7–24–94 of requirement to use NRSRO ratings for purposes of Release No. 33–6964 (Oct. 22, 1992) [57 FR 48970]. Moody’s Investor Service, Inc. (Dec. 5, 1994); and Form S–3 eligibility. Comments on the concept Consistent with Form S–3, the Commission adopted letter regarding File No. S7–24–94 of Fitch Investors release are available at http://www.sec.gov/rules/ a provision in Form F–3 [17 CFR 239.33] providing Service Inc. (Dec. 6, 1994). concept/s71203.shtml. See also the extensive for the eligibility of a primary offering of investment 38 See e.g. letter regarding File No. S7–24–94 of discussion of market developments in Release No. grade non-convertible debt securities by eligible Savings & Community Bankers of America; and 34–57967 in note 19.

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the exemption would apply to all credit provides the Commission’s views on senior securities that are rated by one or rating agencies, including those that are important matters registrants should more credit rating agency and currently not NRSROs.46 consider in disclosing credit ratings in are permitted to voluntarily disclose In April 2009, the Commission held a Securities Act and Exchange Act filings. these credit ratings in their registration roundtable to examine the oversight of So that all investors are provided with statements.51 We are proposing to credit rating agencies.47 Topics appropriate information about credit amend Form N–2 to require that closed- addressed by the panels at the ratings, the amendments we propose end funds include credit ratings roundtable included current actions today would mandate much of the disclosure in their registration being taken by NRSROs, competition disclosure permitted under Item 10(c) statements under the Securities Act and within the industry and how to improve when a registrant uses a credit rating in the Investment Company Act. We are oversight of the industry. Participants connection with a registered offering also proposing to amend Exchange Act and the public were invited to submit and would remove the policy statement Rules 13a-11 and 15d-11 to require comments regarding the issues and recommended disclosure from that reporting by closed-end funds of addressed at the roundtable. Item. changes in credit ratings in certain Commenters addressed a wide range of Specifically, we are proposing a new circumstances. issues. paragraph in Item 202 of Regulation S– We believe that the proposed The Commission’s history in K that would require much of the amendments to require disclosure of considering the possibility of mandating specific disclosure currently permitted certain information regarding credit disclosure of credit ratings reflects the under Item 10(c).49 As more fully ratings, rather than permitting voluntary complexity of the issues raised by described below, proposed Item 202(g) disclosure, would provide investors investors’ reliance on them. Our rules would require disclosure of all material with the information they need about under the Securities Act and the scope limitations of the credit rating and credit ratings to put the rating in the Exchange Act require that investors be any related published designation, such appropriate context. The proposed provided material information in order as non-credit payment risks, assigned by amendments also may benefit to evaluate investment opportunities. the rating organization with respect to companies that in the past may have We understand that investors will the security.50 In addition, in order to hesitated to provide disclosure continue to use credit ratings in making highlight potential conflicts of interest, voluntarily by leveling the playing field investment decisions; therefore, we are the proposed rule would require so that all companies using credit proposing disclosure requirements we disclosure of the source of payment for ratings in connection with a registered believe will provide investors with the credit rating; and if any additional offering of securities would be required additional meaningful information that non-rating services have been provided to provide disclosure. they can use to make those decisions. by the credit rating agency or its 1. Trigger for Required Disclosure We acknowledge the risk that requiring affiliates to the registrant or its affiliates disclosure of credit ratings could over a specified period of time, We believe that it is appropriate for emphasize their significance and draw disclosure of the services and the fees registrants to provide the proposed attention away from other, more paid for those services would be disclosure when they use a credit rating important information about the required. Disclosure required pursuant in connection with a registered offering registrant and its securities. However, to proposed Item 202(g) of Regulation of their securities. As discussed above, we believe the recent market crisis and S–K would be required in Securities Act investors rely on credit ratings in questions about the use of credit ratings and Exchange Act registration making investment decisions. We suggest that investors may not have statements. We are proposing to amend believe requiring disclosure when a sufficient information to understand Item 9 of Form S–3 and Item 4(a)(3) of registrant uses the credit rating to offer credit ratings fully. In light of the Form S–4 so that disclosure regarding or sell securities would provide concerns discussed above, we believe credit ratings is provided in all investors with the information they all investors would benefit from the registration statements on that form need about the credit rating to put the proposed revisions to our disclosure when the trigger for disclosure is met. credit rating in its appropriate context. rules to require specific disclosures Specifically, we are proposing to amend We also are proposing to require, in 52 about ratings. certain circumstances, disclosure of Item 202 of Regulation S–K, Item 12 of Form 20–F,53 and Item 10.6 of Form C. Mandatory Disclosure of Credit preliminary ratings, as well as final ratings not used by a registrant, so that Ratings 51 Section 18(f) of the Investment Company Act investors will be informed when a As noted above, the Commission’s [15 U.S.C. 80a-18(f)] generally prohibits a registered registrant may have engaged in ratings open-end management investment company (i.e., policy on credit ratings currently is set shopping. Finally, we are proposing to mutual fund) from issuing senior securities. forth in Item 10(c) of Regulation S–K. amend Exchange Act reports to require 52 See proposed new paragraph (g) to Item 202 of Specifically, the policy permits reporting of changes in credit ratings in Regulation S–K. 53 Form 20–F is the combined registration registrants to voluntarily disclose certain circumstances. ratings assigned by credit rating statement and annual report form for foreign private We are proposing to apply similar issuers under the Exchange Act. It also sets forth agencies to classes of debt securities, mandatory disclosure requirements disclosure requirements for registration statements convertible debt securities and preferred regarding credit ratings of senior filed by foreign private issuers under the Securities stock in registration statements and securities issued by closed-end funds Act. ‘‘Foreign private issuer’’ is defined in periodic reports.48 Item 10(c) also Securities Act Rule 405 [17 CFR 230.405] and registered under the Investment Exchange Act Rule 12b-2 [17 CFR 240.12b-2]. We Company Act. Like other companies, are proposing to amend Item 12 of Form 20–F, 46 See Security Ratings, Release No. 33–8940 closed-end funds sometimes issue which pertains to securities other than equity (Jul.1, 2008) [73 FR 40106]. securities, to elicit the same disclosure that would 47 See generally http://www.sec.gov/spotlight/cra- be required by proposed Item 202(g) of Regulation oversight-roundtable.htm. prospectuses filed pursuant to Rule 433 [17 CFR S–K. We also propose to amend Item 10 of Form 48 We understand that only a small number of 230.433]. 20–F to require the same disclosure under proposed registrants include disclosure regarding credit 49 See proposed new paragraph (g) to Item 202 of Regulation S–K Item 202(g) for a class of preferred ratings in their prospectuses. Generally, if ratings Regulation S–K. securities, including non-participatory preferred are disclosed, they are disclosed in free writing 50 See note 67 below. Continued

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N–2 54 to require registrants to provide securities that is made in reliance on an credit rating unless the rating is used in detailed disclosure regarding credit exemption from registration under the connection with a registered offering of ratings if the registrant, any selling Securities Act when the privately its securities, as we believe that such a security holder, any underwriter, or any offered securities are exchanged shortly requirement may create an undue member of a selling group uses a credit thereafter for substantially identical burden for registrants to follow and rating 55 from a credit rating agency 56 registered securities.58 Disclosure would provide disclosure on all of the ratings with respect to the registrant or a class be required even if the rating was not outstanding on their securities. In this of securities issued by the registrant, in disclosed in the registered exchange regard, we note that regulatory changes connection with a registered offering. offer.59 As a result, registrants would could increase the number of The proposed rule would not require not be able to avoid the proposed unsolicited ratings being provided. 60 If that registrants obtain a credit rating on disclosure requirements regarding credit we were to require disclosure of any security; however, if a registrant ratings by disclosing a credit rating to unsolicited ratings not used in uses a credit rating in connection with investors in a private offering but not connection with a registered offering of a registered offering, then disclosure using it in connection with the a security, a registrant would have to would be required. registered exchange offer to those same monitor all of the credit rating agencies We have proposed to require investors of substantially identical to determine not only whether a credit disclosure regarding credit ratings if the securities. rating had been issued with respect to registrant, a selling security holder, We intend for the proposed rule to a security, but also whether the rating underwriter or any member of a selling apply to both oral and written selling has been changed or withdrawn. group uses a credit rating in connection efforts. Thus, for example, disclosure We are aware that some registrants with a registered offering. We included would be required when a credit rating discuss their credit rating in other selling security holders, underwriters is disclosed to potential purchasers by contexts in their periodic reports or and other members of the selling group the registrant, any selling security Securities Act registration statements. in the proposed trigger for disclosure so holder, any underwriter or any member As proposed, the disclosure requirement that registrants would not be able to of a selling group in response to an regarding credit ratings would not be structure their selling efforts in a inquiry from an investor. A registrant triggered if the only disclosure of a manner that would avoid triggering would not be able to avoid providing credit rating in a filing with the disclosure under the proposed rule. In the proposed disclosure by using a Commission is related to changes to a addition, there are circumstances where rating only in oral selling efforts and not credit rating, the liquidity of the the underwriter obtains the credit rating including it in written communications registrant, the cost of funds for a on behalf of the registrant, and if the related to an offering, by not registrant or the terms of agreements underwriter uses that rating, we believe ‘‘volunteering’’ the information about that refer to credit ratings, and the credit disclosure should be required. the credit rating except upon request or rating is not otherwise used in A credit rating may be ‘‘used’’ in a by referring an investor to a Web site connection with a registered offering. variety of ways. For example, in that discloses the credit rating. We For instance, some registrants note their addition to oral and written selling believe that if a credit rating is used in ratings in the context of a risk factor efforts of the registrant and other connection with a registered offering, discussion regarding the risk of failure members of the selling group, we would then investors should have the benefit to maintain a certain rating and the consider a credit rating to be used in of all of the disclosure required by our potential impact a change in credit connection with a registered offering of proposed amendments. rating would have on the registrant. A securities when it is disclosed in a We have not proposed to require that registrant also may refer to its rating in prospectus or a term sheet filed a registrant provide disclosure when it the context of its liquidity discussion in pursuant to Rule 433 or Rule 497 57 has not sought or otherwise solicited the Management’s Discussion and Analysis under the Securities Act. of Financial Condition and Results of Furthermore, as proposed, a credit 58 See proposed Instruction 3 to Item 202(g). Operations (‘‘MD&A’’). Registrants may 59 rating also would be considered to be These transactions are sometimes referred to as need to discuss ratings when they used in connection with a registered Exxon Capital exchange offers based on a series of no-action letters issued by the staff beginning in describe debt covenants, interest or offering of securities if it is used in May 1988 that outline the staff’s interpretive dividends that are tied to credit ratings connection with a private offering of positions regarding such exchange offers. In a or potential support to variable interest typical Exxon Capital exchange offer, an issuer sells entities. We have proposed to exclude stock as that term is used under 17 CFR debt securities to a broker-dealer in reliance on the 230.902(a)(1). exemption in Section 4(2) of the Securities Act [15 these references to credit ratings from 54 Form N–2 is the registration form used by U.S.C. 77d(2)]. The broker-dealer then immediately the trigger that would require additional closed-end funds to register under the Investment resells those securities to qualified institutional disclosure regarding credit ratings Company Act and to offer their securities under the buyers in reliance on Rule 144A under the Securities Act. [17 CFR 230.144A]. The issuer then because we believe that the additional Securities Act. We are proposing to amend Item information is not necessary in that 10.6 of Form N–2 to elicit the same disclosure that files a registration statement on Form S–4 to register would be required by proposed Item 202(g) of the exchange of the securities for substantially setting. We believe that the material identical securities. Upon effectiveness of the S–4 Regulation S–K. information to be conveyed in that 55 registration statement, the qualified institutional As proposed, a ‘‘credit rating’’ would have the buyers exchange restricted securities for registered setting relates to the fact that a credit same meaning as the definition in Section 3(a)(60) securities, and therefore, may resell the securities rating has the potential to have a of the Securities Exchange Act [15 U.S.C. they receive in the exchange offer without further material impact on the registrant. We 78c(a)(60)]. registration or prospectus delivery. See Exxon 56 believe additional information about As proposed, a ‘‘credit rating agency’’ would Capital Holdings Corporation, SEC No-Action Letter have the same meaning as the definition in Section (pub. avail. May 13, 1988); Morgan Stanley & Co., 3(a)(61) of the Securities Exchange Act [15 U.S.C. Inc., SEC No-Action Letter (pub. avail. June 5, 60 The Commission is adopting today various 78c(a)(61)]. 1991); Mary Kay Cosmetics, Inc., SEC No-Action changes to Exchange Act Rule 17g–5 [17 CFR 57 17 CFR 230.497. This would include closed- Letter (pub. avail. June 5, 1991); K–III 240.17g–5] that would provide the opportunity for end fund advertisements that, under Rule 497(i) [17 Communications Corp., SEC No-Action Letter (pub. other credit rating agencies to use the information CFR 230.497(i)], are considered to be filed with the avail. May 14, 1993); Shearman & Sterling, SEC No- provided to NRSROs by the registrant to develop Commission upon filing with a national securities Action Letter (pub. avail. July 2, 1993); Brown & ‘‘unsolicited ratings’’ for certain rated asset-backed association registered under Section 15A of the Wood LLP, SEC No-Action Letter (pub. avail. securities. See the adopting release considered by Exchange Act [15 U.S.C. 78o]. Feb. 5, 1997). the Commission on September 17, 2009.

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scope limitations, conflicts of interest, registrant discloses a rating? Do the for substantially identical securities, preliminary ratings and other matters triggers in the requirement encourage appropriate for closed-end funds? does not appear to be necessary to the use and related disclosure of only • As proposed, a registrant would not understand that disclosure. favorable ratings? Are there other be required to make disclosure with We are proposing to amend Item 9 of circumstances that should trigger the regard to solicited or unsolicited ratings Form S–3 and Item 4(a)(3) of Form S– proposed disclosure? • unless the rating is used in connection 4 so that disclosure regarding credit Would the rule, as proposed, have with the registered offering of a security. ratings is included in all registration an effect on the frequency with which Is there a difference between solicited statements where appropriate. registrants seek credit ratings? Why or and unsolicited ratings such that they Currently, Item 9 requires registrants to why not? should be treated differently for include the disclosure required by Item • As proposed, we would consider a purposes of this proposal? Would 202 of Regulation S–K in a registration credit rating to be used in connection requiring disclosure of all unsolicited statement on Form S–3 unless capital with a registered offering of securities if ratings regardless of whether they are stock is to be registered and securities it is disclosed upon request of an used in connection with a registered of the same class are registered pursuant investor. We believe this approach offering be too burdensome for to Section 12 of the Exchange Act.61 should reduce the risk that practices registrants? Should disclosure be Item 4(a)(3) of Form S–4 requires might develop that would undermine registrants to include the disclosure the purpose of our proposal, such as a triggered only if the registrant, or required by Item 202 of Regulation registrant or member of a selling group someone acting on its behalf, obtains the S–K unless the registrant would meet not offering the information about a credit rating (i.e., a solicited rating) and the requirements for use of Form S–3 credit rating unless asked. Is this uses the rating in connection with a and capital stock is to be registered, approach necessary or appropriate? registered offering? If we were to require securities of the same class are Should registrants be excluded from the disclosure of unsolicited ratings registered pursuant to Section 12 of the proposed requirement to provide regardless of whether they are used in Exchange Act, and the security is listed disclosure regarding credit ratings if connection with a registered offering of on a national securities exchange. We they and the offering participants decide securities, should we impose limitations are proposing to amend these items so not to use the rating in selling efforts, on how many ratings, or which credit that the disclosure required by proposed but disclose the rating in response to an rating agencies’ ratings, should be Item 202(g) of Regulation S–K would be investor who specifically asks about the required to be disclosed? For example, included in a registration statement on rating? should we require disclosure for Form S–3 or Form S–4 even if securities • Would registrants and other unsolicited ratings issued by NRSROs of the same class are registered under members of a selling group be able to only? Would such disclosure impose an Section 12 of the Exchange Act so long circumvent the rule as proposed? How undue burden on the registrant? as the trigger for disclosure under would they be able to do that? How • Should the proposed mandatory proposed Item 202(g) has been met. We could we modify the rule proposal to disclosure of credit ratings apply to believe these amendments are avoid circumvention? Could the closed-end funds? proposed trigger for disclosure lead to appropriate so that investors would • Investment companies, including procedural modifications to the practice receive information about credit ratings both closed-end funds and mutual of assigning credit ratings so that in circumstances where securities of the funds, sometimes represent that they registrants could avoid the disclosure same class have been previously invest only in securities that have a requirement even though the credit registered because securities of the same specified credit rating, such as rating is used in connection with a class that are issued at different times investment grade, or disclose the registered offering? If so, how could we may have different ratings. percentage of their portfolios comprised modify the proposal to avoid such of securities with specified ratings. As Request for Comments modifications? • As proposed, we would require • As proposed, a credit rating would noted above, investors may not have disclosure of credit ratings if the be considered used for purposes of the access to sufficient information in order registrant, any selling securityholder, proposed disclosure trigger if it is used to understand fully what credit ratings underwriter or member of a selling in connection with a private offering mean, or the limits inherent in them. Do group uses a credit rating in connection even if not used in a subsequent current investment company disclosure with a registered offering. Are there any registered exchange offering for requirements adequately address the other persons that should be included as substantially identical securities made meaning and limitations of credit persons who could cause the disclosure to the purchasers in the private ratings of portfolio securities? If not, requirement to be triggered? Are there placement. Is this trigger for disclosure how could investment company reasons to exclude any of the persons or appropriate in light of the unique disclosure requirements be changed to entities currently included in the structure of these transactions? Should better promote investor understanding proposal? we expand the instruction to include a of credit ratings of portfolio securities? • Should the proposed rule mandate credit rating obtained in connection • The proposed amendments apply to disclosure of a credit rating obtained by with a private offering if those securities the disclosure of credit ratings. Mutual a registrant regardless of whether the are subsequently registered for resale? funds sometimes obtain other non-credit rating is used in connection with a • Is the instruction, as proposed, that ratings and use such ratings in registered offering? For example, should a credit rating would be considered connection with the offer or sale of their we require disclosure whenever a used if it is used in connection with a securities. For example, rating agencies private offering but not used in a issue credit quality ratings to fixed- 61 15 U.S.C. 78l. subsequent registered exchange offering income funds, which examine credit

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risk in the fund’s underlying portfolio.62 provided to investors when a credit be adopted for foreign government Ratings agencies may also issue rating is used in connection with a issuers? What are those considerations? volatility ratings, which are designed to registered offering? 2. Required Disclosure identify the potential volatility of the • Schedule B under the Securities Act market value of a fund’s shares.63 In Under the proposed amendments, a provides the disclosure requirements for registrant would be required to disclose addition, at least one rating agency foreign governments or political issues principal stability ratings that are the information for each credit rating subdivisions thereof that register their that triggers disclosure. The proposed designed to identify a money market securities for public offering in the fund’s capacity to maintain stable disclosure seeks to provide investors United States. The disclosure principal or a stable net asset value.64 with a specific description of the ratings requirements for those issuers are Should we require the mandatory and to make clear to investors: located directly in the Securities Act, • disclosure of these additional fund The elements of the securities that and there are no corresponding ratings as part of a fund’s prospectus or the credit rating addresses; • statement of additional information if disclosure regulations or forms under The material limitations or the ratings are used in connection with Schedule B applicable to foreign qualifications on the credit rating; and 65 • the offer or sale of an investment governments or their political Any related published designation, 66 company’s securities? If so, what subdivisions. However, through such as non-credit payment risks, disclosures should we require? market practice and investor assigned by the credit rating agency • The proposed disclosure item expectation, registration statements with respect to the security. includes an instruction that provides prepared under Schedule B generally The disclosure would be required in that a registrant would not trigger the contain disclosure beyond the registration statements under the disclosure requirement regarding credit requirements of the statute, and may Securities Act and the Exchange Act, ratings if the credit rating is not include, for example, credit rating including Form 10 and Form 20–F, and otherwise used in connection with a information relating to the sovereign in registration statements filed by registered offering, and the only issuer’s debt. Should we extend the closed-end funds on Form N–2 under disclosure of a credit rating in a filing proposals for the disclosure of credit the Securities Act and the Investment with the Commission is related to ratings to foreign government issuers? Company Act. changes to a credit rating, the liquidity Or should we continue to permit foreign (a) General Information Including Scope of the registrant, the cost of funds for a governments to disclose credit ratings and Limitations on a voluntary basis? Should a foreign registrant or the terms of agreements As proposed, our amendments would that refer to credit ratings. Is this government be required to disclose require disclosure of certain general approach appropriate? Are there other credit ratings in Schedule B registration information regarding credit ratings, disclosures about credit ratings of a statements under the Securities Act and including the scope of the rating and similar nature that should be added to in Exchange Act documents, including any limitations on the scope of the this instruction? Would registrants the annual report on Form 18–K and the rating. In this regard, our proposed rules avoid such references because of registration statement on Form 18, if it would require: concerns that it might trigger the uses the credit rating in connection with • The identity of the credit rating proposed additional disclosure a registered offering of its debt agency assigning the rating and whether requirements? Would this instruction be securities? If we extend the credit rating such organization is an NRSRO; used to circumvent the disclosure disclosure requirements to foreign • The credit rating assigned by the requirement? governments, are there some forms or • credit rating agency; We are proposing to amend Item 9 documents that in whole or in part • The date the credit rating was of Form S–3 and Item 4(a)(3) of Form should be exempt from these assigned; S–4 so that disclosure regarding credit requirements? Would disclosure of • The relative rank of the credit rating ratings would be included (if credit ratings be appropriate for foreign within the credit rating agency’s applicable) in registration statements for government issuers? If so, why? If not, classification system; offerings of capital stock even if why should they be exempt? If • A credit rating agency’s definition securities of the same class have mandatory credit ratings disclosure in or description of the category in which previously been registered pursuant to filings under the Securities Act or the the credit rating agency rated the class Section 12 of the Exchange Act. Are Exchange Act is appropriate for foreign of securities; there any other circumstances where we government issuers, should they be • All material scope limitations of the need to amend forms so that subject to requirements analogous to credit rating; 67 • information regarding credit ratings is those proposed for other issuers or are How any contingencies related to there different factors that should be the securities are or are not reflected in 62 See, e.g., Fitch’s Fund and Asset Manager considered in any amendments that may the credit rating; Ratings, at http://www.fitchratings.com/jsp/sector/ • Any published designation Sector.faces?selectedTab=Overview&Ne= reflecting the results of any other 11%2b4293330821 (last visited on Aug. 11, 2009) 65 ‘‘Foreign government’’ refers to any issuer that (‘‘Fitch’s Fund and Asset Manager Ratings’’); is eligible to register securities under Schedule B of evaluation done by the credit rating Moody’s Ratings Definitions, Money Market and the Securities Act, including political subdivisions agency in connection with the rating, Bond Fund Ratings, at http://v3.moodys.com/ and some quasi-governmental entities. along with an explanation of the ratings-process/Money-Market-and-Bond-Fund- 66 Unlike other issuers, foreign government designation’s meaning and the relative Ratings/002001018 (last visited Aug. 11, 2009) issuers that register securities under Schedule B of (‘‘Moody’s Ratings Definitions’’); Standard & Poor’s the Securities Act are not subject to reporting rank of the designation; Ratings Definitions, Ratings Direct, (Apr. 30, 2009), obligations under Section 15(d) of the Exchange Act available at http://www2.standardandpoors.com/ [15 U.S.C. 78o(d)]. However, foreign government 67 A limited scope rating is a rating that assesses _ _ spf/pdf/fixedincome/Ratings Definitions securities listed on a U.S. exchange must be less than the promised or expected return on a Update.pdf (‘‘Standard & Poor’s Ratings registered under Section 12(b) of the Exchange Act security. We are proposing disclosure of any Definitions’’). [15 U.S.C. 78l(b)], as is the case with the securities material scope limitations in order to mitigate the 63 See, e.g., Fitch’s Fund and Asset Manager of other issuers. Foreign governments that have potential risk that investors may not understand the Ratings; Standard & Poor’s Ratings Definitions. securities registered under Section 12(b) file annual limited scope of the rating. See the 1994 Release in 64 See, e.g., Standard & Poor’s Ratings Definitions. reports with the Commission on Form 18. note 15 above.

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• Any material differences between the credit rating and how any believe disclosure of these published the terms of the securities as assumed or contingencies related to the securities designations together with a description considered by the credit rating agency are or are not reflected in the credit of the analysis would provide in rating the securities and (i) the rating. For example, a registrant would meaningful additional information to minimum obligations of the security as be required to disclose if the credit investors regarding the information specified in the governing instruments rating takes into account less than the taken into consideration by the credit of the security; and (ii) the terms of the promised return on a security. A rating agency. We also believe securities as used in any marketing or residual security, for example, typically disclosure of these related designations selling efforts; and represents a beneficial interest in would signal to investors that • A statement informing investors whatever cash flows remain in a pool of significant differences may exist that a credit rating is not a financial assets after obligations to pay between a security with a credit rating recommendation to buy, sell, or hold all other outstanding classes have been that includes a published designation securities; that it may be subject to satisfied. Sometimes, because of the indicating that an evaluation of revision or withdrawal at any time by highly speculative nature of these cash additional risk was done by the credit the assigning credit rating agency; that flows, a residual security incorporates a rating agency and a security with a each credit rating is applicable only to fixed promise to pay a nominal amount similar credit rating without such a the specific class of securities to which of principal to the residual holder in the designation. In addition, we believe it applies; and that investors should early months of the securities’’ disclosure of published designations perform their own evaluation as to existence. The amount of the nominal would help investors understand the whether an investment in the security is fixed obligation may have no limitations on comparing credit ratings appropriate.68 relationship to the amount paid for the across different types of securities. A preliminary prospectus would residual security, nor to the anticipated Under the proposed amendments, include information about any credit residual cash flow. The credit rating for registrants would be required to disclose rating that is used in connection with a the residual interest represents only an any material differences between the registered offering of securities. For evaluation of the likelihood that the terms of the security as considered or example, a registrant would disclose the nominal fixed obligation would be paid. assumed by the credit rating agency for initial rating (if any) assigned by the It does not evaluate whether there will purposes of determining the rating, the credit rating agency in the preliminary be any residual cash flow. Under the terms in the governing documents of the prospectus when a final rating is not proposed rule, such a limitation would securities and the terms of the securities assigned until after the effectiveness of be required to be disclosed. We believe as marketed to investors. We believe a registration statement. If a disclosed this type of disclosure would help this disclosure may allow investors to rating is changed or if a different rating investors understand what the rating is better evaluate the credit rating and the becomes available before effectiveness, intended to cover, and, just as security to which it applies because the registrant would be required to importantly, the limitations on the they would understand if the credit convey the rating change to the rating issued. In addition, if the security rating was based on assumptions or purchaser. The registrant would be is subject to contingent payment terms different from the information required to update the final prospectus obligations, registrants would be provided to investors. For example, this to reflect the final rating assigned and required to disclose how those item would require disclosure if the all related disclosure. In connection contingencies are reflected in the credit security was rated using a yield with delayed shelf offerings, the final rating. We believe these requirements assumption which differs from the rating would be disclosed in a will provide investors with better expected yield being disclosed to prospectus supplement.69 information so that they can make investors. We are proposing to require important distinctions about the nature We have also proposed to require that disclosure of the relative rank of the of risks presented by securities with the registrants include a statement credit rating within the credit rating same or similar ratings. informing investors that a credit rating If the credit rating includes a related agency’s classification system and the is not a recommendation to buy, sell, or published designation, such as non- credit rating agency’s definition or hold securities; that it may be subject to credit payment risk assessments, description of the category in which the revision or withdrawal at any time by volatility assessments or other analyses credit rating agency rated the class of the assigning credit rating agency; that performed by the credit rating agency securities. We believe this disclosure each credit rating is applicable only to that do not solely reflect credit risk, the will help put the credit rating in its the specific class of securities to which proposed amendments would require a appropriate context and provide it applies; and that investors should description of the additional analysis, so investors with important information perform their own evaluation as to that investors relying on the designation about the credit rating agency’s whether an investment in the security is are not left unaware of the related assessment of the degree of risk appropriate. We believe this statement evaluation. For example, the related presented by the security. will alert investors to some of the evaluations covered by such designation Under the proposed amendments, a limitations inherent in a credit rating so could include an analysis of registrant would be required to disclose that the credit rating is placed in an prepayment speeds, effects of interest any material limitations on the scope of appropriate context. rates or other market based factors, or Under the proposed amendments, a 68 See proposed amendments to Item 202(g) of volatility assessments done in closed-end fund would be required to 70 Regulation S–K, Item 12 of Form 20–F, and Item connection with a credit rating. We 10.6 of Form N–2. sensitive the ratings are to changes in those 69 The registrant could also disclose the credit 70 See e.g., Moody’s Global Credit Policy, Rating assumptions); Fitch Ratings Structured Finance rating in a free writing prospectus, such as a term Methodology, Updated Report on V Scores and Global Criteria Report, Criteria for Structured sheet, as long as it was also included in the Parameter Sensitivities for Structured Finance Finance Loss Severity Ratings (Feb. 2009), at registration statement (including through disclosure Securities (Dec. 2008), at http://www.moodys.com http://www.fitchratings.com indicating that a Loss in a prospectus supplement that becomes a part of indicating that the evaluations are intended to Severity Rating is intended to indicate the relative the registration statement in accordance with Rule address the degree of uncertainty underlying the risk that a security will incur a severe loss in the 430B). assumptions made in determining ratings and how event of default).

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include the disclosure concerning credit Request for Comments capture any additional material ratings in its prospectus, unless the information? 74 • We have proposed to require prospectus relates to securities other • Should our proposed disclosure disclosure similar to the disclosure than senior securities that have been distinguish between corporate debt and recommended in Item 10(c) of rated by a credit rating agency, in which structured finance products? Is there Regulation S–K. Is there a better model case such disclosure may be provided in different information that would be for providing disclosure about credit the statement of additional information relevant for ratings of corporate debt ratings? Should we adopt a general rule unless the rating criteria will materially and structured finance products? that all material elements of a credit affect the registrant’s investment Should we require disclosure of the rating be disclosed and give examples of policies.71 differences in risk characteristics the types of information that should be between corporate debt and structured For closed-end funds, current Item disclosed? Does our proposed approach finance products? Is this information 10.6 of Form N–2 requires that, if a capture the information that investors already available to investors in all registrant discloses a rating assigned by would need to make informed cases? an NRSRO in its prospectus, the investment decisions? registrant must briefly discuss the • Would investors benefit from the • Does the proposed disclosure significance of the rating, the basis upon disclosure of the relative rank of the requirement add too much weight to the which ratings are issued, any conditions credit rating within the credit rating credit rating? or guidelines imposed by the NRSRO for agency’s classification system and the • the registrant to maintain the rating, and Non-investment company credit rating agency’s definition or whether or not the registrant intends, or registrants would be required to make description of the category in which the has any contractual obligation, to the Item 202(g) disclosures in their credit rating agency rated the class of comply with these conditions or Securities Act and Exchange Act securities? Is there other or additional guidelines. Current Item 10.6 also registration statements, and closed-end information that would assist investors requires disclosure of the material terms funds would be required to make in placing the credit rating in context? of any agreement between the registrant similar disclosures in their Securities • In addition to requiring the or its affiliates and the NRSRO under Act and Investment Company Act disclosure about a credit rating that which the NRSRO provides the rating. registration statements. Is disclosure currently is recommended in Item 10(c) The proposed amendments would, if about a registrant’s credit ratings of Regulation S–K, proposed Item 202(g) adopted, replace those requirements appropriate disclosure for such filings? of Regulation S–K, Item 12 of Form 20– with the same disclosure requirements Are there alternative or additional F and Item 10.6 of Form N–2 would contained in proposed Item 202(g) of filings in which the disclosure should require disclosure of all material scope Regulation S-K, which, in some cases, be made? Should we also require that limitations of the rating, how any are substantially similar to the current similar disclosure be provided in any contingencies are or are not reflected in requirements and, in other cases, written selling materials that disclose the credit rating and any related provide information that is intended to the rating? Should this disclosure be designation (or other published allow investors to more easily put the recommended rather than required? evaluation) of non-credit payment risks • credit rating in its appropriate context Is there another means that could be assigned by the rating agency with than the disclosure requirements of used to provide investors with this respect to the security. Would this current Item 10.6 of Form N–2.72 We are information, and the information additional disclosure assist investors in also proposing technical amendments to described below, when a credit rating is better understanding the credit rating remove the current instructions to Item used in connection with a registered and assessing the risks of an investment 10.6.73 offering? in the security? What additional • Is the proposed disclosure regarding disclosure would be helpful to investors 71 See proposed Instruction 4 to Item 10.6 of Form credit ratings adequate to provide in making these assessments? N–2. Cf. Item 10.6 of Form N–2 (similar current investors with sufficient information to • provision regarding inclusion of disclosure in As noted above, under proposed statement of additional information). be able to understand the ratings Item 12 to Form 20–F, foreign private 72 Proposed Item 10.6 of Form N–2 is assigned by a credit rating agency and issuers would be required to provide the substantially similar to current Item 10.6 in that a to understand the limitations associated same disclosure that would be required registrant would be required to disclose the relative with a rating? Is there other information rank of the credit rating within the rating agency’s by proposed Item 202(g) of Regulation overall classification system, the rating agency’s that would be useful? S–K for domestic issuers. Is this type of definition or description of the category in which • As proposed, Item 202(g) and Item ratings information disclosed by foreign the rating agency rated the class of securities, all 10.6 of Form N–2 include a list of private issuers in their home material scope limitations, how any contingencies related to the securities are or are not reflected in specific items that must be disclosed jurisdictions? Should foreign private the credit rating, and any material differences about the credit rating. Is this approach issuers be required to provide this type between the terms of the securities as assumed or appropriate? Should we also include a of information? Is there a basis on which considered by the rating agency and (i) the ‘‘catch-all’’ provision that would require to distinguish between foreign private minimum obligations of the security as specified in its governing instruments and (ii) the terms of the any other information necessary to issuers and other registrants for this security as used in any marketing or selling efforts. understand the credit rating? Would purpose? If so, please explain. Is there Rather than require disclosure of the material terms including a catch-all help to assure that any other type of credit ratings of any agreement between the registrant or its our rules will be flexible enough to information that foreign private issuers affiliates and the NRSRO under which the NRSRO provides the rating as set forth in current Item 10.6, elicit material information about credit should disclose? proposed Item 10.6 would require disclosure of the ratings, as securities and credit ratings identity of the person compensating the rating change in response to innovations and 74 17 CFR 230.408. Rule 408 provides that, in agency for providing the rating and a description of market developments? Would Rule 408 addition to the information expressly required to be any other non-rating services provided by the rating under the Securities Act be sufficient to included in a registration statement, the registrant agency to the registrant or its affiliates and any fees is required to include any additional material paid for such non-rating services. information necessary to make the required 73 The current instructions to Item 10.6 define Securities Act, and cross-reference Item 10(c) of statements, in the light of the circumstances under NRSRO, cross-reference Rule 436(g)(1) under the Regulation S–K. which they are made, not misleading.

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• As proposed, a registrant would be would address potential conflicts of rating. This business model can create a required to disclose additional interest.75 Specifically, our proposed conflict of interest because the NRSRO information about any published rules would require disclosure of the providing the credit rating may be designation that reflects the results of identity of the party who is concerned that if it issues a lower rating any other evaluation done by a credit compensating the credit rating agency than the registrant expects, the rating agency. Should we require for providing the credit rating. In registrant would no longer seek credit disclosure for any evaluation by a credit addition, if during the registrant’s last ratings from that NRSRO. As a result, an rating agency that is communicated to completed fiscal year and any NRSRO that is paid by a registrant may the registrant, regardless of whether it is subsequent interim period up to the have an incentive to give a higher credit published? Do credit rating agencies date of the filing, the credit rating rating than it would have if no potential communicate information of this type to agency or its affiliates has provided non- conflict of interest existed. In addition, the registrant? If so, what types of rating services to the registrant or its we believe that the disclosure we are information would this cover? affiliates, the proposed rules would proposing to require regarding non- • We are proposing to require require a description of the other non- rating services and related fees paid to registrants to disclose any material rating services and separate disclosure the credit rating agency should help differences between the terms of the of the fee paid for the credit rating investors gauge whether the credit security as assumed or considered by required to be disclosed and the rating agency’s decision may have been the credit rating agency in rating the aggregate fees paid for any other non- influenced by a desire to gain or retain security and (i) the minimum rating services provided during such other business from the registrant.76 obligations of the security as specified period. We are not proposing to require in the governing instruments, and (ii) We believe that the proposed disclosure of the fee paid for the credit the terms of the security as marketed to disclosure regarding fees and services rating unless disclosure of other non- investors. Would this disclosure be would alert investors to potential rating services is required as described helpful to investors in making an conflicts of interest that may have above. We preliminarily believe that investment decision? influenced the rating decision of the when no such other non-rating services • Does the proposed requirement that credit rating agency. We believe are provided, disclosure of the source of registrants include a statement investors should know who paid for the the payment for the rating as proposed informing investors that a credit rating rating since that may influence their would sufficiently convey the potential is not a recommendation to buy, sell, or assessment of the impartiality of the conflict of interest. We are requesting hold securities; that it may be subject to credit rating agency in assigning the comment, however, on whether we revision or withdrawal at any time by rating. For example, many of the should require the amount of the fee to the assigning credit rating agency; that NRSROs are paid by the registrants for be disclosed in all cases.77 each credit rating is applicable only to whom they are providing the credit the specific class of securities to which Request for Comments it applies; and that investors should 75 There are rules applicable to NRSROs currently • We have proposed to require perform their own evaluation as to in place that are designed to address certain disclosure of information related to the whether an investment in the security is conflicts of interest of NRSROs. Pursuant to party paying for the rating, as well as Exchange Act Rule 17g–5 [17 CFR 240.17g–5], an appropriate provide meaningful NRSRO must disclose and manage certain conflicts any additional non-rating services information to investors? Would this of interest, while certain other conflicts are provided by the credit rating agency or statement help to place the credit rating prohibited outright. Paragraph (b) of Rule 17g–5 its affiliates to the registrant or its in an appropriate context? Why or why identifies nine types of conflicts to be disclosed and affiliates. Would the proposed not? managed by an NRSRO, including a new type of disclosure provide helpful information • conflict being adopted today by the Commission in Are the proposed disclosure a companion adopting release: issuing or for investors in order for them to judge requirements appropriate for closed-end maintaining a credit rating for a security or money whether potential conflicts of interest funds or should they be modified? market instrument issued by an asset pool or as part may have impacted the rating? Is the of any asset-backed or mortgage-backed securities provision of other services indicative of Should we instead, or in addition, transaction that was paid for by the issuer, sponsor, require all or any of the disclosures that or underwriter of the security or money market are enumerated in current Item 10.6 of instrument. Paragraph (c) of Rule 17g–5 identifies 76 See note 21 above. Form N–2? For example, should we seven conflicts of interest that are prohibited 77 In a companion proposing release, the outright, including three added by the Commission Commission is also today proposing a new rule that expressly require disclosure of the basis in February 2009: issuing or maintaining a credit would require an NRSRO, on an annual basis, to upon which ratings are issued by the rating with respect to an obligor or security where make publicly available on its Internet Web site a credit rating agency or disclosure of any the NRSRO or a person associated with the NRSRO consolidated report that shows three items of conditions or guidelines imposed by a made recommendations to the obligor or the issuer, information with respect to each person that paid underwriter, or sponsor of the security about the an NRSRO to issue or maintain a credit rating; credit rating agency for the registrant to corporate or legal structure, assets, liabilities, or specifically, (1) the percent of the net revenue maintain a credit rating? Is it activities of the obligor or issuer of the security; attributable to the person that was earned by the appropriate, as proposed, to permit issuing or maintaining a credit rating where the fee NRSRO for that fiscal for year from providing closed-end funds to include the paid for the rating was negotiated, discussed, or services and products other than credit rating arranged by a person within the NRSRO who has services; (2) the relative standing (top 10%, top proposed disclosure in the statement of responsibility for participating in determining or 25%, top 50%, bottom 50%, and bottom 25%) of additional information, rather than the approving credit ratings or for developing or the person in terms of the person’s contribution to prospectus, if the prospectus relates to approving procedures or methodologies used for the total net revenue of the NRSRO for the fiscal securities other than senior securities of determining credit ratings, including qualitative year as compared with other persons who provided and quantitative models; and issuing or maintaining the NRSRO with revenue; and (3) all outstanding the registrant that have been rated by a a credit rating where a credit analyst who credit ratings paid for by the person. The proposed credit rating agency unless the rating participated in determining or monitoring the credit rule also would provide that the NRSRO must criteria will materially affect the rating, or a person responsible for approving the include a generic disclosure statement each time registrant’s investment policies? credit rating received gifts, including entertainment, the NRSRO publishes a credit rating or credit from the obligor being rated, or from the issuer, ratings indicating where on its Internet Web site the (b) Potential Conflicts of Interest underwriter, or sponsor of the securities being consolidated report is located. See the proposing rated, other than items provided in the context of release considered by the Commission on We also are proposing to require normal business activities such as meetings that September 17, 2009 related to proposed new Rule disclosure regarding credit ratings that have an aggregate value greater that $25. 17g–7 under the Exchange Act.

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potential conflicts of interest? Would to raise capital? Would investors benefit investors benefit from having this requiring disclosure regarding other from having this information in the disclosure in the registration statement? services decrease the other services registration statement? • Exchange Act Rule 17g–5(c) being provided? Would that have an • Our proposed disclosure provides a category of conflicts that an effect on the quality of ratings? If so, requirements relate only to fees paid to NRSRO is prohibited from having with how? Is there other disclosure that the credit rating agency. We are aware respect to a credit rating. These would provide additional or better that there are other relationships that prohibited conflicts include: Providing a information regarding potential conflicts could present potential conflicts of rating to an entity that accounted for of interest? If so, what information interest. Item 509 of Regulation S–K 78 10% or more of the NRSRO’s net would provide investors the ability to currently requires disclosure by a credit revenue; direct ownership interests by assess potential conflicts of interest? rating agency that is not an NRSRO the NRSRO or an analyst preparing the • Is the information that we have when it (i) is paid on a contingent basis, rating in the issuer; issuing or proposed to require meaningful? Should (ii) has a substantial direct or indirect maintaining a rating on a person we require additional context such as interest in the registrant, or (iii) has a associated with the NRSRO; issuing or the percentage of revenue that the connection to the registrant as a maintaining a rating where a person NRSRO or other credit rating agency promoter, underwriter, officer, director determining or approving the rating is earns from the registrant so that an or employee or voting trustee. Is this an officer or director of the issuer; investor would be aware of when a disclosure sufficient, or should there be issuing or maintaining a rating where registrant accounts for a significant a more specific disclosure requirement? the NRSRO made recommendations For example, Exchange Act Rule 17g– with respect to the structure of the percentage of the NRSRO’s revenue? 5(a) and (b) provides that certain rating; issuing or maintaining a rating Would requiring disclosure only if non- conflicts are permitted if they are where the fee for such rating was rating services are provided place too disclosed and managed by the NRSRO. discussed or negotiated by a person at much emphasis on the mix of revenue Such permitted conflicts include: the NRSRO with responsibility for that the registrant provides to the credit Conflicts related to being paid by issuers determining or approving the rating; rating agency, rather than the total for rating and non-rating services; and issuing or maintaining a rating revenue earned from the registrant? In conflicts related to subscription based where a person determining or proposed Exchange Act Rule 17g–7, the services; conflicts related to ownership approving the rating received gifts in Commission is proposing to require that interests in entities being rated by the excess of $25. These prohibitions are NRSROs publish a report on an annual NRSRO; conflicts related to business only applicable to NRSROs. To the basis with respect to each person that relationships with issuers being rated by extent not otherwise required to be paid an NRSRO to issue or maintain a the NRSRO; conflicts related to the disclosed by Item 509 of Regulation S– rating disclosing (1) the percent of the NRSRO having a broker or dealer K, should we require disclosure of the net revenue attributable to the person associated with it; and any other conflicts described above if credit rating that was earned by the NRSRO for that conflict that would be material to the agencies that are not NRSROs provide a fiscal year from providing services and NRSRO. Should registrants be required rating to a registrant and if these products other than credit rating to disclose conflicts: Conflicts related to conflicts exist or have existed during the services; (2) the relative standing (top being paid by a registrant for rating and registrant’s previous two fiscal years 10%, top 25%, top 50%, bottom 50%, non-rating services, regardless of through the date of the registration and bottom 25%) of the person in terms whether non-rating services are being statement so that investors would be of the person’s contribution to the total provided, paying the credit rating aware of such conflicts? Would net revenue of the NRSRO for the fiscal agency for subscription-based services, registrants have this information? If not, year as compared with other persons any ownership interest by the credit could they negotiate with the credit who provided the NRSRO with revenue; rating agency in the registrants or its rating agency so that this information and (3) all outstanding credit ratings affiliates, any business relationships could be obtained from the credit rating paid for by the person. Should between the credit rating agency and the agency, such as through the contract for registrants be required to disclose the registrant and its affiliates, any interest services? What would the costs of aggregate fees paid by the registrant to the credit rating agency has in a broker providing such disclosure be? Would the credit rating agency for ratings and or dealer associated with it and any requiring this disclosure affect a non-rating services, regardless of other material conflicts? Would all of registrant’s ability to obtain a rating or whether non-rating services have been the information be relevant to investors? to raise capital? Would investors benefit provided, and the relative standing of Would registrants have access to this from having this disclosure in the the registrant in terms of the registrant’s information? If not, could they negotiate registration statement? contribution to the total net revenue of with the credit rating agency so that this • Are there competitive or proprietary the credit rating agency in registration information could be obtained from the concerns that the proposed disclosed statements? If we were to require this credit rating agency, such as through the requirements should account for? If so, disclosure, should it be updated to the contract for services? Rule 17g–5 how? For example, will disclosing fees date of the registration statement instead currently requires annual reporting by have any effect on the ability to of being provided as of the end of the NRSROs of these conflicts. If registrants negotiate for services? last fiscal year? Would registrants have were also required to disclose these • If non-rating services have been access to this information? If not, could types of conflicts, should we require the provided to the registrant or any of its they negotiate with the credit rating disclosure to be updated to the date of affiliates by the credit rating agency or agency so that this information could be the registration statement? What would any of its affiliates, we have proposed to obtained from the credit rating agency, the costs of providing such disclosure require a description of the other non- such as through the contract for be? Would requiring this disclosure rating services and separate disclosure services? What would the costs of affect a registrant’s ability to obtain a of the fee paid for the credit rating and providing such disclosure be? Would rating or to raise capital? Would the aggregate fees paid for any other requiring this disclosure affect a non-rating services provided by the registrant’s ability to obtain a rating or 78 17 CFR 229.509. credit rating agency or its affiliates

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during the registrant’s last completed fee? 79 Would registrants have access to disclosed, then investors may not have fiscal year and any subsequent interim this information? Is there other access to potentially important periods up to the filing date. Should we information that would convey the information that may suggest that the require disclosure for fees paid over a significance of the fee to the credit credit rating that is disclosed may be longer period such as two or five years? rating agency? Should we require inflated.83 Similarly, when the credit Should we require disclosure of fees for registrants to disclose the total amount rating agency knows that the registrant non-rating services that have been of rating-related fees paid to the credit will likely choose to use the credit contracted and paid for but not yet rating agency during the most recent rating agency that provides the most delivered? Should we require disclosure fiscal year completed and any interim favorable rating, there may be an for services that have been proposed or periods? During the two most recent incentive for ratings to be inflated by the solicited but not yet finalized? fiscal years (or longer?) completed and credit rating agency in order to keep the • Should we require disclosure of any interim periods? business of the registrant. Currently, our fees paid by the underwriter or its • Would disclosure of fees paid to rules do not require disclosure of any affiliates to the credit rating agency or credit rating agencies affect the amount credit ratings, whether preliminary or its affiliates for non-rating services if the of fees charged, or otherwise affect the not. As a result, investors are not aware underwriter is the party paying for the competitive landscape for credit rating of when registrants seek a preliminary rating? Should we require disclosure agencies? rating or when registrants obtain • about services provided by the credit We note that there may be other additional credit ratings but choose not rating agency to the underwriter if the factors that could influence the to use them, and investors are not aware underwriter is paying for the rating? independence of the credit rating of any differences between the Should the underwriter be treated as agency, such as a reliance on preliminary rating and the final rating. acting on behalf of the issuer in such underwriters that refer business to the We are proposing that if a registrant circumstances? Would the registrant be credit rating agency or the general has obtained a credit rating and is able to obtain this information? If not, importance of a particular registrant to required to disclose that credit rating, should we consider initiating the credit rating agency. Should we then all preliminary ratings of the same rulemaking to provide that underwriters require disclosure of these sorts of class of securities as the final rating that shall make this information available to relationships? are obtained from credit rating agencies issuers upon reasonable request? Is (c) Ratings Shopping other than the credit rating agency providing the final rating must also be there any additional information Reports that registrants, or persons regarding credit rating agency fees that disclosed. In addition, we are proposing acting on behalf of registrants, may that if a rating is disclosed pursuant to would be important to investors? engage in ‘‘ratings shopping’’ raise Should we require disclosure of any the trigger described above, then any serious issues about the integrity of the credit rating obtained by the registrant current or anticipated arrangements or credit ratings process.80 We believe agreements regarding future services? If but not used must also be disclosed. We investors should be made aware of believe this disclosure requirement so, should we require an estimate of the when a registrant (or a person acting on fees to be paid for such services? would provide investors with important • a registrant’s behalf) may have engaged information to assess whether any Under our proposal, disclosure of in ratings shopping.81 It is our fees would not be triggered if the ratings shopping may have occurred, understanding that ratings shopping and whether any rating inflation may services in addition to the credit rating occurs because registrants, among are other credit rating services, such as have occurred between the preliminary others, can solicit preliminary credit rating and the final rating obtained by fees to rate another security of the ratings from a rating agency. If the registrant. Is this approach appropriate? a registrant as a result of the ratings registrant believes the preliminary shopping, or whether the registrant has Do fees for other credit rating services rating is too low, the registrant can seek raise conflict of interest issues similar to other credit ratings that it has not used a different credit rating from another in connection with the offering. fees for non-rating services? Is the 82 credit rating agency. When a registrant We have not proposed to require distinction between a credit rating can choose which ratings to disclose, disclosure of preliminary ratings service and a non-credit rating service including which final ratings to obtained by a registrant from the credit sufficiently clear? Should we provide disclose, we believe the registrant will rating agency that issues the final rating. further guidance on this point? Should most likely choose the most favorable We are concerned that such a disclosure we reference the categories in Form rating. If less favorable ratings are not requirement may impede useful NRSRO in this regard? communications between credit rating • Should we require disclosure of the 79 See note 77 above. agencies and registrants as the credit fee paid for the credit rating regardless 80 See note 24 above. rating agencies determine their initial of whether additional services have 81 In this regard, we note that three of the largest ratings and perform continuing work been provided? Would this disclosure NRSROs entered into an agreement with the Attorney General for the State of New York in June related to monitoring the rating. In provide information that is important in 2008 that provides for certain disclosure regarding addition, there are rules applicable to evaluating potential conflicts of interest preliminary ratings. See Press Release, Office of the NRSROs that are intended to prevent inherent in the issuer-paid ratings Attorney General, ‘‘Attorney General Cuomo some of the problematic practices in this model? Is the information useful Announces Landmark Reform Agreements with the Nation’s Three Principal Credit Rating Agencies,’’ area. For example, Rule 17g–5 under the without additional context, such as the (June 5, 2008), at http://www.oag.state.ny.us/ Exchange Act prohibits an NRSRO from significance of the fee to the credit media_center/2008/jun/june5a_08.html. Our issuing or maintaining a rating where it rating agency? If context is necessary to proposed rule, however, would apply to all credit rating agencies. In addition, because our proposed made recommendations with respect to make the disclosure of fees meaningful, rules apply to registrants, investors would be able the structure of the security. should we require disclosure of the to find disclosure regarding preliminary ratings on When disclosure of any preliminary significance of the fee to the credit a registrant-by-registrant and offering-by-offering rating or unused final rating is required, rating agency? For example, should we basis instead of having to search the disclosure of require a registrant to disclose the the NRSROs. 82 See Roger Lowenstein, Triple-A Failure, N.Y. 83 See Skreta and Veldkamp and Bolton, Freixas percentage of revenue derived from the Times Magazine, April 27, 2008. and Shapiro in note 24 above.

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we are proposing to require similar preliminary rating would be required final ratings but not use them? Why disclosure as is proposed to be required even if there have been changes to the might a registrant choose not to use a for a final rating. Because preliminary security for which a final rating is credit rating? Would requiring ratings may vary in their form and level disclosed. We believe this disclosure disclosure of such ratings reveal of detail, it is possible that all of the would place the information about potential ratings shopping practices of information required to be disclosed ratings in context. registrants? If not, is there other about a particular rating would not be disclosure that would elicit disclosure Request for Comments available to the registrant. In preparing about potential ratings shopping? this disclosure, registrants would be • Should we require disclosure of • Would requiring the proposed able to rely on Securities Act Rule 409 84 preliminary ratings, as proposed? Is disclosure for preliminary or unused if the information otherwise required to there any other information regarding final ratings enhance investors’ be disclosed cannot be obtained without preliminary ratings that should be understanding of, and therefore the unreasonable effort or expense. required to be disclosed? Would the rule value of, the ratings? Would such We believe disclosure of preliminary as proposed capture all potential ratings disclosure help to address our concerns ratings as described above would shopping practices? As an alternative, with ratings shopping? If you do not provide important information for should the rule require disclosure of believe such disclosure would be investors about potential ratings contacts between the registrant and the helpful, how would you suggest that we shopping. We believe registrants could credit rating agency as a means of address these concerns? Is disclosure of identify any preliminary ratings disclosing preliminary ratings and an indication from a credit rating agency required to be disclosed in the negotiations between the registrant and of a likely or possible rating registration statement in a manner that the credit rating agency? 86 Would the appropriate? What effect would our would avoid confusion for investors. rule reduce the number of preliminary proposed rule have on ratings shopping? For example, registrants could disclose ratings sought? Would it encourage or discourage the any preliminary ratings under a separate • We have expressed our concerns practice? Why? sub-heading, or the registrant could about ratings shopping by registrants • To the extent that a preliminary include written disclosure as to the and the potential for credit rating rating that would be required to be limitations of preliminary ratings. agencies to use less conservative rating disclosed pursuant to the proposed rule For purposes of this proposed methodologies in order to gain or retain is not based on final and full disclosure requirement, a credit rating, business, presumably lessening the information, to what extent would including a preliminary credit rating, value of the ratings. As proposed, a disclosure of such preliminary rating generally would be obtained from a registrant would only be required to present a risk that investors could form credit rating agency if it is solicited by provide disclosure of a preliminary a mistaken impression about the credit or on behalf of a registrant from a credit rating if it is of the same class of quality of the security or the registrant’s rating agency. For these purposes, we securities as a final rating otherwise ratings shopping? would view an underwriter and others required to be disclosed by the rule and • How would our proposed rule affect involved in structuring a deal, such as is received from a credit rating agency communications between registrants a sponsor or depositor, who obtains a other than the credit rating agency and credit rating agencies? Would the credit rating, including a preliminary providing the final rating. Are these proposed requirement result in fewer credit rating, for a deal structure to be limitations appropriate? Are there discussions between credit rating acting on behalf of the registrant. circumstances where disclosure of agencies and registrants? Would it affect We intend for the phrase ‘‘preliminary preliminary ratings would be important the quality of information provided by credit rating’’ to be read broadly and to even if a final rating was never registrants to obtain a rating? include any rating that is not published, obtained? Should we require disclosure • What types of activities might any range of ratings, any oral or other of all preliminary ratings obtained by a replace the issuance of preliminary indications of a potential rating or range registrant, including from the credit ratings if the proposed rule is adopted? of ratings and all other preliminary rating agency that issues the final To what extent might some alternative indications of a rating. We believe that rating? ratings shopping behavior develop? • a broad reading would better facilitate • We have proposed to require Would the proposal have a negative the purpose of the proposed disclosure disclosure of unused final credit ratings impact on smaller or newer credit rating in order to alert investors if the obtained by a registrant if a credit rating agencies? Would smaller or newer credit registrant has obtained indications of a is otherwise disclosed pursuant to the rating agencies have a difficult time rating from one credit rating agency but proposed rules so that investors would establishing their market position if chooses to use a credit rating from be aware of any potential ratings registrants no longer seek multiple another. We are not proposing to limit shopping by the registrant in choosing preliminary ratings? For example, the required disclosure of preliminary which credit rating to use. Would this would registrants be less likely to ratings to ratings specific to the provide important information for engage in initial conversations with registrant. For example, a preliminary investors? Do registrants ever obtain smaller or newer credit rating agencies rating would include ratings on a in order to understand their particular structure of a security even if the assets, although certain criteria for the assets methodologies and procedures if we not tied to a specific registrant or pool could be outlined. The preliminary rating that is require the disclosure of preliminary assigned to the structure would need to be of assets.85 As proposed, disclosure of a ratings? disclosed under our proposal if a rating is used in • How would changes in the structure connection with a registered offering of securities 84 17 CFR 230.409. by the underwriter with that structure. of a security affect disclosure of 85 For instance, an underwriter may approach a 86 For example, in the context of roll-up preliminary ratings? Would it be rating agency about a newly developed or refined transactions, Item 911(a)(5) of Regulation S–K [17 difficult for registrants to track structure for an asset-backed offering of a certain CFR 229.911(a)(5)] requires disclosure of any preliminary ratings? class of assets generally. In some cases, the rating contacts between the sponsor or general partner and • agency may be asked to provide an indication of a a third party providing a report, opinion or As proposed, a credit rating, rating on that structure without knowledge of the appraisal on the roll-up transaction. See also Item including a preliminary credit rating, specific pool assets or names of the originators for 1005 of Regulation M–A [17 CFR 229.1105]. would be ‘‘obtained’’ if it is solicited by

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or on behalf of a registrant from a credit registrant to provide investors with would provide the registrant with rating agency. Is this sufficient to updated disclosure regarding changes to additional time to analyze the impact of capture all of the preliminary ratings a previously disclosed credit rating. the rating change to the registrant sought from other credit rating agencies? If a credit rating that was previously between the filing of a current report • Should we include additional disclosed under the rules proposed and the filing of its next periodic guidance as to what constitutes a above has been changed, including reports. We note, though, that a change preliminary rating? Would additional when a rating has been withdrawn or is in a credit rating may require the guidance allow registrants and credit no longer being updated, that change registrant to make related disclosures rating agencies to structure their would be required to be disclosed in a under other Form 8–K items, such as dealings to avoid disclosure? Are there current report on Form 8–K.87 We are Item 2.04—Triggering Events that less formal preliminary indications proposing a new item requirement to Accelerate or Increase a Direct Financial given by credit rating agencies that Form 8–K, which would require a Obligation or an Obligation under an should be included in the required registrant (including a closed-end fund) Off-Balance Sheet Arrangement. disclosure? Would requiring disclosure to file a report within four business days Disclosure under this item would not of preliminary ratings interfere with of receiving a notice or other be required until the rating agency other types of communications between communication from any credit rating notifies the registrant that the rating registrants and credit rating agencies, agency, that the organization has agency has made a decision to change such as discussions related to decided to change or withdraw a credit the credit rating. If the registrant is still surveillance or maintenance ratings that rating assigned to the registrant or any in negotiations or appealing a credit rating agencies may provide on class of debt or preferred security or preliminary indication that a credit other classes of securities issued by the other indebtedness of the registrant rating agency intends an action covered same registrant for which credit ratings (including securities or obligations as to by the proposed item, no disclosure have been provided? If so, how should which the registrant is a guarantor or would be required. However, once good we address this concern? Would the has a contingent financial obligation) or faith negotiations and appeals cease, broad view of ‘‘preliminary credit take any similar action with respect to disclosure would be required. rating’’ as proposed interfere with any a credit rating that was previously As noted above, we believe the non-rating services provided to the disclosed pursuant to proposed Item application of our current rules would registrant? If so, how could we address 202(g) of Regulation S–K or proposed require a registrant to disclose in its this? Item 10.6 of Form N–2. periodic reports the impact on it, if • Are there any concerns about the As discussed above, we previously material, of any change in a rating that availability of the information about proposed in 2002 to require disclosure was previously disclosed under the preliminary ratings that we are in current reports of changes in credit rules proposed above.90 For example, if proposing registrants be required to ratings when we amended the item a credit rating agency withdraws or disclose? Would credit rating agencies requirements for current reports on stops updating a rating, the registrant object to registrant’s disclosure of Form 8–K. We did not adopt the would be required by the proposed preliminary ratings where no proposal at the time.88 amendment to disclose that fact in a compensation was paid to the credit Under the proposed item, the current report on Form 8–K, and our rating agency? registrant would have to disclose the current rule requirements would require • Would disclosure of preliminary date that the registrant received the the registrant to discuss the impact of ratings have negative effects for credit rating agency’s notice or the change on the company, if material, investors, registrants or credit rating communication, the name of the rating either in MD&A or in an appropriate agencies? For example, would investors agency, and the nature of the rating location in its next periodic report. be confused by disclosure of agency’s decision. We are not proposing We have proposed to limit the preliminary ratings? Would disclosure to require the registrant also discuss the disclosure regarding changes to a credit of preliminary ratings be confusing or impact of the change or other decision rating in a current report to credit misleading? If so, how could we revise on the registrant, though it would be ratings that were disclosed previously the proposal to reduce the risk that permitted to do so. Rather, consistent pursuant to the rules we propose today. investors would be confused or misled? with similar Form 8–K items, we believe Thus, a registrant would not be subject Would credit rating agencies change that a discussion of any material impact to the new requirement to disclose their practices if preliminary ratings are of the change in credit rating would be changes to credit ratings that were required to be disclosed? If so, how required to be disclosed in a registrant’s obtained or used prior to the might their practices change? periodic reports.89 We believe this effectiveness of any new disclosure • Should our proposed disclosure requirements adopted as a result of this regarding preliminary ratings 87 As discussed in this section, we are proposing proposal. We believe this distinction distinguish among issuers of corporate that foreign private issuers be required to provide debt, structured finance products and/or disclosure regarding credit rating changes in their the filing of the 8–K and that the analysis might be closed-end funds? Do corporate issuers, annual reports on Form 20–F. As a result, the more relevant and complete in the context of disclosure for foreign private issuers would not be financial statements. The Commission reminded issuers of structured finance products required to be made within four business days of registrants, however, that any disclosure made in a and closed-end funds engage in ratings the rating change. report on Form 8–K must include all other material shopping equally or in the same 88 See note 39 above and the related discussion. information, if any, that is necessary to make the manner? What are the differences? Is 89 When revisions were adopted to the 8–K required disclosure, in the light of the reporting requirements in 2004, the Commission circumstances under which it is made, not there different information regarding noted that it was not adopting requirements for misleading. See Additional Form 8–K Disclosure preliminary ratings that would be certain new items such as Item 2.04—Triggering Requirements and Acceleration of Filing Date in relevant for corporate debt, structured Events that Accelerate or Increase a Direct Financial note 43 above. finance products and closed-end funds? Obligation or an Obligation under an Off-Balance 90 As proposed, this new item in Form 8–K would Sheet Arrangement that would have required also be applicable to asset-backed issuers. However, D. Disclosure in Exchange Act Reports registrants to provide a management’s analysis of such issuers are unlikely to have additional the change to be included in the Form 8–K. The disclosure in their periodic reports because a We are proposing to amend Exchange Commission noted that the analysis might be change in a rating of an asset-backed issuer’s own Act reports and rules to require a difficult to provide in the time period required for securities typically does not affect that issuer.

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strikes an appropriate balance between particular companies and securities. Form 8–K, and analysis of the impact is the burden on registrants in preparing However, we believe some investors allowed to be deferred to the next the disclosure and the needs of may not routinely monitor all press periodic report? investors for information about credit releases issued by credit rating agencies • We believe our current rules would ratings. Although our new requirements and therefore likely would benefit from require registrants to discuss the would not be applicable in that setting, disclosure about ratings changes filed by significance of a credit rating change in we note that disclosure of credit ratings companies on Form 8–K. its next periodic report if the impact and changes in ratings may be required Once a credit rating agency stops would be material to the company. Are in periodic reports under our current rating the securities, a registrant would there circumstances where a credit rules as discussed above.91 be required to disclose that information rating change would not trigger We are proposing to require closed- in a current report, update a prospectus disclosure in the next periodic report? end funds to make the same disclosures if necessary, and include any relevant Should we adopt an explicit regarding changes to a credit rating as analysis in its next periodic report but requirement that any credit rating other registrants because we believe that would then have no further disclosure change disclosed on Form 8–K would be this information is of similar relevance obligation related to that rating in required to be analyzed and discussed to investors in closed-end funds and subsequent filings. in the following periodic report? other registrants. Specifically, we Request for Comments • We have proposed to require propose to amend Exchange Act Rules • disclosure when a rating has changed. 13a–11(b) 92 and 15d–11(b) 93 to require As proposed, we would require disclosure about changes to previously Should we also require disclosure of a closed-end fund to file a current report other ratings actions, such as placing an on Form 8–K containing the disclosures disclosed credit ratings in a registrant’s Exchange Act reports, including issuer on ‘‘credit watch’’ or assigning a regarding changes to a credit rating whether a rating has been withdrawn or different outlook to the registrant’s within the period specified in Form 8– will no longer be updated. Would the rating? Are these actions viewed as K unless substantially the same proposed disclosure provide helpful important by investors? Would information has been previously information for investors? Is there other requiring this disclosure create a burden reported by the fund.94 information about ratings that would be for registrants not in the public interest? We are proposing to require foreign more important to investors? For • private issuers to provide disclosure The proposed disclosure would example, should we include a regarding changes to a credit rating apply only to credit ratings originally requirement that the reason for the annually in their reports on Form 20–F. used in connection with registered change in rating be disclosed? Would offerings. Are there reasons that While the disclosure would not be the disclosure increase reliance on required as frequently or timely as it disclosure should be limited to credit ratings? If so, how? registered offerings? Should we require would be for domestic issuers, investors • We have proposed to limit the disclosure of credit ratings used in would still have access to the disclosure regarding changes to a rating information in a foreign private issuer’s connection with private offerings? Are to ratings previously disclosed pursuant there any concerns regarding disclosure annual report. to proposed Item 202(g) of Regulation In proposing these amendments, we of credit ratings related to private S–K or proposed Item 10.6 of Form N– offerings? recognize that credit rating changes can 2. As a result, changes to ratings that be important information to an investor • Is it appropriate to require closed- were obtained prior to the effectiveness end funds to file reports on Form 8–K in making investment and voting of the rule, if adopted, will not be decisions. Credit rating agencies disclosing credit rating changes? Instead required to be disclosed. Should we of filing reports on Form 8–K, should typically disclose rating changes expand the scope of the proposed rule publicly via press release at the same closed-end funds be permitted to to require that all changes to ratings be disclose changes to credit ratings time or shortly after they notify affected disclosed regardless of whether they companies of the changes. Therefore, through other methods, such as a were disclosed previously? Would this different filing with the Commission or investors already can obtain access to create a burden on registrants not in the information about rating changes if they a notice posted on an internet Web site public interest? Why or why not? How and/or issuance of a press release? Is know where to find the press releases could this information be disclosed at and are willing to routinely monitor there empirical or other evidence the least cost to registrants? demonstrating that one or more of those these releases to find information about • Is a requirement to file a current other methods would provide better report on Form 8–K necessary in view 91 dissemination of the information with Disclosure may also be required pursuant to of the typical practice by credit rating Exchange Act Rule 12b–20 [17 CFR 240.12b–20], respect to closed-end funds? What agencies to promptly issue press which requires that in addition to the information would be the disadvantages, if any, of expressly required to be included in a report, the releases about rating changes under the not requiring a filing that would be report is required to include any further material subscriber paid model? Is current available in the Commission’s EDGAR information necessary to make the required disclosure by credit rating agencies statements, in the light of the circumstances under system? through press releases adequate? Would which they are made not misleading. • 92 17 CFR 240.13a–11(b). investors benefit from having companies Is the content of the proposed 93 17 CFR 240.15d–11(b). disclose this information in a uniform disclosure requirements on Form 8–K 94 Under Regulation FD [17 CFR 243.100 et seq.], place? appropriate for closed-end funds or closed-end funds are currently required to make • Could registrants provide an should it be modified? Are there public disclosure of certain material information on additional disclosures regarding Form 8–K unless they disseminate the information analysis of the credit rating change in a through other methods of disclosure that are Form 8–K in the time allowed for filing changes to a credit rating that closed- reasonably designed to provide broad, non- a Form 8–K? How does this disclosure end funds should be required to make? exclusionary distribution of the information to the compare to disclosure of other matters For example, closed-end funds are not public. In addition, pursuant to Rule 104 of required to include MD&A in their Regulation BTR [17 CFR 245.104], closed-end funds such as the acceleration of a direct or are required to file notice of a blackout period, if off-balance sheet obligation where periodic reports. Should a closed-end any, on Form 8–K. disclosure of the event is required in a fund be required to disclose in a Form

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8–K or Form N–CSR 95 the impact on it, number. The titles for the collections of We are proposing parallel amendments if material, of any change in a credit information are: 97 for closed-end funds and foreign private rating that was previously disclosed ‘‘Regulation S–K’’ (OMB Control No. issuers. We are also proposing to amend under proposed Item 10.6 of Form N–2? 3235–0071); Exchange Act reporting requirements to • Are the proposed amendments for ‘‘Form S–1’’ (OMB Control No. 3235– require disclosure when there has been foreign private issuers appropriate? 0065); a change to a previously disclosed credit Should they be modified? Are there ‘‘Form S–3’’ (OMB Control No. 3235– rating. additional disclosures that foreign 0073); If a credit rating is used by the private issuers should make? Is the ‘‘Form S–4’’ (OMB Control No. 3235– registrant, a selling securityholder, an information relevant to investors if it is 0324); underwriter or a member of a selling only required in the next annual report? ‘‘Form S–8’’ (OMB Control No. 3235– 0066); group in connection with a registered II. General Request for Comments ‘‘Form S–11’’ (OMB Control No. 3235– offering, then the registrant would be We request and encourage any 0067); required to provide information about interested person to submit comments ‘‘Form 10’’ (OMB Control No. 3235– the credit rating in the registration regarding: 0064); statement. Such information would • The proposed amendments that are ‘‘Form 8–A’’ (OMB Control No. 3235– include general information about the the subject of this release; 0056); rating, including any scope limitations • additional or different changes; or ‘‘Form 8–K’’ (OMB Control No. 3235– on the rating, the identity of the person • other matters that may have an 0060); paying for the rating, a description of effect on the proposals contained in this ‘‘Form F–1’’ (OMB Control No. 3235– any non-rating services provided to the release. 0258); registrant within a specified period of We request comment from the point ‘‘Form F–3’’ (OMB Control No. 3235– time, including disclosure of the fees of view of companies, investors, and 0256); paid for such non-rating services, and ‘‘Form F–4’’ (OMB Control No. 3235– other market participants, including disclosure of preliminary ratings 0325); NRSROs and other credit rating obtained from a credit rating agency ‘‘Form 20–F’’ (OMB Control No. 3235– agencies. With regard to any comments, 0288); and other than the credit rating agency we note that such comments are of great ‘‘Form N–2’’ (OMB Control No. 3235– providing the final rating and unused assistance to our rulemaking initiative if 0026). final ratings. A registrant would also be accompanied by supporting data and required to update the prospectus if a analysis of the issues addressed in those We adopted all of the existing final rating is changed or is not available comments. regulations and forms pursuant to the until after the effectiveness of the In addition, we request comment on Securities Act, the Exchange Act or the registration statement. the following: Investment Company Act. These We are also proposing amendments to • Should the Commission include a regulations and forms set forth the phase-in for registrants beyond the disclosure requirements for registration Form 8–K (for operating companies and effective date to accommodate pending statements and Exchange Act reports closed-end funds) and to Form 20–F (for offerings? As proposed, compliance that are prepared by registrants to foreign private issuers) to require with the new standards would begin on provide investors with information to disclosure of changes in a credit rating, the effective date of the new rules. Will make investment decisions in registered including when the rating is no longer a significant number of registrants have offerings and in secondary market being updated or has been withdrawn. their offerings limited by the proposed transactions. For operating companies and closed-end rules? If a phase-in is appropriate, The hours and costs associated with funds, the change in a credit rating should it be for a certain period of time preparing disclosure, filing forms, and would be required to be reported within (for example, six months or one year or retaining records constitute reporting four business days on Form 8–K. For longer) or only for the term of a pending and cost burdens imposed by the foreign private issuers, disclosure would registration statement? collection of information. There is no be required annually on Form 20–F. mandatory retention period for the The proposals would increase existing III. Paperwork Reduction Act information disclosed, and the disclosure burdens for Exchange Act information disclosed would be made A. Background reports on Form 8–K and registration publicly available on the EDGAR filing statements by requiring disclosure of Certain provisions of the proposed system. rule amendments contain a ‘‘collection credit ratings, whether or not issued by of information’’ within the meaning of B. Summary of Collection of an NRSRO, in registrants’’ registration the Paperwork Reduction Act of 1995 Information Requirements statements and reports. (PRA).96 The Commission is submitting We are proposing to amend Item 202 these proposed amendments and C. Paperwork Reduction Act Burden of Regulation S–K to mandate disclosure Estimates proposed rules to the Office of by registrants regarding their credit Management and Budget (OMB) for ratings in their registration statements For purposes of the Paperwork review in accordance with the PRA. An when a credit rating is used in Reduction Act, we estimate that over a agency may not conduct or sponsor, and connection with a registered offering. three-year period the average annual a person is not required to comply with, incremental increase in the paperwork a collection of information unless it 97 The paperwork burden from Regulation S–K is burden for non-investment company displays a currently valid control imposed through the forms that are subject to the requirements in those regulations and is reflected registrants to comply with our proposed in the analysis of those forms. To avoid a collection of information requirements 95 17 CFR 249.331; 17 CFR 274.128. Form N–CSR Paperwork Reduction Act inventory reflecting is the periodic reporting form used by registered to be approximately 2,120 hours of in- duplicative burdens and for administrative house company personnel time and to management investment companies. convenience, we assign a one-hour burden to 96 44 U.S.C. 3501 et seq.; 5 CFR 1320.11. Regulation S–K. be approximately $816,000 for the

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services of outside professionals.98 For such as the relative rank of the rating in sample of these filings, we estimate that closed-end funds, we estimate the the credit rating agency’s classification 20 Form 20–F registration statements annual incremental increase to be system. Further, based on statistics would include the required disclosure approximately 157 hours of in-house related to the number of registration and that 20 Form 20–F annual reports company personnel time and statements filed for debt offerings in would include disclosure regarding approximately $108,400 for the services fiscal years 2007 and 2008 from our changes to a credit rating. of outside professionals. These Office of EDGAR Information and For current reports on Form 8–K, Analysis, we estimate that 500 estimates include the time and the cost including Forms 8–K filed by closed- of preparing and reviewing disclosure registration statements on Forms S–1, end funds, we estimate that registrants and filing documents. Our S–3, and S–4 will be affected annually spend, on average, five hours methodologies for deriving the above by the disclosure requirements.101 We completing the form. We estimate that estimates are discussed below.99 have attempted to be conservative in our 75% of that burden is carried by the Our methodologies for deriving the estimates of affected filings. We company while 25% is carried by burden hour and cost estimates recognize that not all debt offerings have outside counsel at a cost of $400 per presented below represent the average credit ratings associated with them; hour. In order to estimate the number of burdens for all registrants who are however, given the relatively low additional Form 8–Ks that would be required to provide the disclosure, both number of debt filings over the past two required to be filed pursuant to our large and small. For registration fiscal years, we have included most of statements, we estimate that 25% of the those filings within our estimate. For proposed amendments, we have looked burden of preparation is carried by the closed-end funds, we also estimate that to the number of Forms 8–K filed with company internally and that 75% of the approximately 82 registration disclosure pursuant to Item 2.04- burden is carried by outside statements on Form N–2 102 would be Triggering Events That Accelerate or professionals retained by the registrant affected annually by the disclosure Increase a Direct Financial Obligation or at an average cost of $400 per hour.100 requirements. For purposes of Form 20– an Obligation under an Off-Balance The portion of the burden carried by F, there would be an increased burden Sheet Arrangement. We believe that outside professionals is reflected as a in Forms 20–F used as registration many rating changes may also accelerate cost, while the portion of the burden statements and as annual reports. There financial obligations, so that looking to carried by the company internally is were an average of 77 Forms 20–F filed Item 2.04 gives some indication of the reflected in hours. as registration statements in fiscal years number of Forms 8–K that may be filed Our estimates are based on the 2007 and 2008. Based on a review of a even though it does not cover the same assumption that the proposed disclosure disclosure. For example, we are aware would add disclosure for a subset of 101 All of the registration statements would be that Item 2.04 likely would not be affected registrants (i.e. those issuing required to contain the proposed disclosure if the triggered by a credit rating upgrade. We rated securities). We further assume that proposed trigger for the disclosure has been solicit comment on better ways to satisfied. We have assumed for purposes of this estimate the number of 8–Ks that would the new disclosure requirement would PRA analysis that the distribution of the estimated not affect the number of registrants. For 500 filings will be proportional to the number of be filed pursuant to our proposed registration statements, we estimate that Forms S–1, S–3 and S–4 registration statements requirements. In our fiscal year 2007 filed for debt offerings with approximately 60% of and 2008, there were an average of 396 the proposed amendments would filings on Form S–3, 20% on Form S–1, and 20% impose an average of a 60 minute on Form S–4. We have not included estimates for Forms 8–K filed pursuant to Item 2.04. burden of preparation carried by the Form 10, Form S–8 and Form S–11 as we believe In addition, based on publicly available company internally and a $1,200 cost a negligible number of registrants use those forms information concerning changes in to register debt securities. for outside professionals retained by the credit ratings of senior securities issued 102 Based on Commission filings, we estimate that by closed-end funds occurring during registrant reflecting three hours of their there are approximately 802 active registered time. This estimate includes the time closed-end funds and approximately 205 annual calendar years 2007 and 2008, necessary to obtain the relevant responses to Form N–2. According to statistics Commission staff estimates that maintained by the Investment Company Institute, approximately 20 additional Forms 8–K information, including certain approximately 322 of these closed-end funds have information that would likely be issued senior securities. See Investment Company would be filed annually by closed-end provided by the credit rating agency Institute, Total Net Assets of Closed-End Funds, funds pursuant to proposed Item 3.04. 2009: Q1, available at http://www.ici.org/pdf/ As a result, we estimate that 420 cef_ql_09_sup_tables.pdf (last visited on Aug. 17, 98 additional Forms 8–K would be filed We calculated an annual average over a three- 2009) (showing data as of Mar. 31, 2009). Based on year period because OMB approval of Paperwork the proportion of the number of closed-end funds pursuant to proposed Item 3.04. Reduction Act submissions covers a three-year that have issued senior securities to the total Table 1 below illustrates the period. For administrative convenience, the number of active registered closed-end funds, we presentation of the totals related to the paperwork have assumed, for purposes of the PRA, that incremental annual compliance burden burden hours have been rounded to the nearest approximately 40% (322 divided by 802) of the in the collection of information in hours whole number and the cost totals have been annual Form N–2 responses will involve closed-end and cost for current reports and rounded to the nearest thousand. funds that have issued senior securities. We have registration statements.103 99 The estimates reflect the burden of collecting further assumed that all closed-end funds issuing and disclosing information under the PRA. Other senior securities also will be required to disclose 103 The number of responses for Form N–2 costs associated with the proposed amendments are credit ratings in their registration statements under reflected in the table equals the actual number of discussed in Section IV below. the proposed amendments. Therefore, we estimate 100 We estimate an hourly rate of $400 as the that approximately 82 (40% of 205) registration forms filed with the Commission during the 2008 average cost of outside professionals that assist statements on Form N–2 filed annually would fiscal year. This amount is an increase from the registrants in preparing disclosure and conducting include disclosure of credit ratings under the current approved number of annual responses to registered offerings. proposed amendments. Form N–2 of 200.

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D. Solicitation of Comments after publication of this release. addition, we are proposing to amend We request comments in order to Consequently, a comment to OMB is Exchange Act reports to require evaluate: (1) Whether the proposed best assured of having its full effect if disclosure of a change in previously collection of information is necessary OMB receives it within 30 days of disclosed credit rating. for the proper performance of the publication. The additional information and functions of the agency, including IV. Cost-Benefit Analysis transparency provided by our proposed whether the information would have amendments are intended to help A. Proposed Amendments practical utility; (2) the accuracy of our provide investors with the information estimate of the burden of the proposed they need about credit ratings to put the collection of information; (3) whether The proposed amendments would require disclosure regarding credit rating in the appropriate context. The there are ways to enhance the quality, proposed amendments are aimed at utility, and clarity of the information to ratings by registrants in their addressing concerns that investors may be collected; and (4) whether there are registration statements under the ways to minimize the burden of the Securities Act, Exchange Act and not have sufficient information to collection of information on those who Investment Company Act if the understand the scope or meaning of are to respond, including through the registrant uses the rating in connection ratings being used to market various use of automated collection techniques with the offer or sale of securities in a securities, that they may not fully or other forms of information registered offering. Under proposed new appreciate the potential conflicts of technology.104 paragraph (g) to Item 202 of Regulation interest faced by credit rating agencies Any member of the public may direct S–K, Item 12 of Form 20–F and Item and how these conflicts may impact to us any comments concerning the 10.6 of Form N–2, registrants would be ratings, that ratings shopping may be accuracy of these burden estimates and required to disclose much of the specific occurring and may be leading to inflated any suggestions for reducing these disclosure currently permitted under ratings, and that our current disclosure burdens. Persons submitting comments Item 10(c) of Regulation S–K. The rules do not require certain basic on the collection of information proposal would require disclosure of all information about a potentially key requirements should direct the material scope limitations of the credit element of their investment decision. comments to the Office of Management rating and any related published The proposed amendments may affect and Budget, Attention: Desk Officer for designation, such as non-credit payment the Securities and Exchange risks, assigned by the rating agency with economic behavior if the amendments Commission, Office of Information and respect to the security. The proposed alter (a) the use of ratings by investors, Regulatory Affairs, Washington, DC changes would also require disclosure (b) registrants’ security issuance and 20503, and should send a copy to of the source of the payment for the ratings-seeking behavior, and (c) the Elizabeth M. Murphy, Secretary, credit rating. If any non-rating services credit rating agencies’ behavior when Securities and Exchange Commission, have been provided by the credit rating providing ratings, These effects will 100 F Street, NE., Washington, DC agency to the registrant, disclosure of likely vary depending on the asset class 20549–1090, with reference to File No. the fees paid for those services also (e.g., corporate issues, structured S7–20–09. Requests for materials would be required, so that investors finance products), the type of the submitted to OMB by the Commission would be aware of potential conflicts of registrant (e.g., corporate registrant, with regard to these collections of interest with respect to the credit rating sponsor of the financial product, closed- information should be in writing, refer used by the registrant. Under the end funds), the type of credit rating to File No. S7–20–09, and be submitted proposed amendments, if a registrant is agency (e.g., subscriber-paid rating to the Securities and Exchange required to disclose a credit rating, then agencies, issuer-paid NRSROs, Commission, Records Management, it would also be required to disclose all unregistered credit rating agencies), the Office of Filings and Information preliminary ratings and unused final type of investor (e.g., retail investors, Services, 100 F Street, NE., Washington, ratings it received from rating agencies institutional investors), and the ongoing other than the credit rating agency that DC 20549. OMB is required to make a changes in the regulatory environment. provided the final rating. This decision concerning the collection of The economic benefits and costs on information between 30 and 60 days disclosure is intended to provide investors with useful information to market participants associated with these economic effects are discussed 104 We request comment pursuant to 44 U.S.C. assess whether a registrant may have 3506(c)(2)(B). engaged in ratings shopping. In below.

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B. Benefits possibility of investors placing undue ratings than they intend to use, reliance on ratings. Alternatively, preliminary and unused final ratings Benefits to investors resulting from however, if new disclosures cause increased contextual information about would be made public if the registrant investors to believe that ratings are not ratings used a rating in connection with a subject to any potential conflict of registered offering. Credit rating The proposed amendments would interest, the additional disclosures may agencies would know that their ratings require disclosure of information related increase the degree to which investors would be disclosed if the registrant uses to the rating used in a registered rely on ratings. a final rating from a different credit offering, such as the relative rank of the The proposed amendments would rating agency in connection with a credit rating within the assigning credit enable investors to distinguish between registered offering. Thus, the market rating agency’s overall classification solicited ratings (which can rely on both could assess the relative system, all material scope limitations of public and non-public information) and informativeness of ratings used to sell the rating, and any published unsolicited ratings (which generally rely the security and ratings from other designation that reflects the results of on only public information). Currently, agencies. This ability to compare a any other evaluation done by the credit it is not possible in every case for broader group of ratings, including rating agency in connection with the investors to make this distinction. preliminary ratings, for the same issue credit rating. Some investors may Under the proposed amendments, if may allow investors to identify agencies benefit from an improved understanding registrants use a rating to sell a security of the meaning and scope of ratings in a registered offering, it will be whose ratings they perceive to be less resulting from these new disclosures. included in the registration statement; reliable. This ability may be limited, While much of this information is in other cases, it may not be. If a rating however, as direct comparisons between publicly available, requiring it to be is disclosed in a registration statement, preliminary ratings and final ratings presented in the registration statement the registrant would be required to may be affected by factors such as may increase the degree to which disclose who paid for the rating. changes in information made available investors understand what the rating to the credit rating agency throughout means. Additionally, new information, Benefits to Investors From Increased the ratings process. The proposed such as changes in ratings, would be Informativeness of Ratings disclosure could cause credit rating disclosed in Exchange Act reports. The proposed amendments may have agencies to expend greater effort to While ratings are typically public the long-term benefit of increasing the examine the financial health of the information, available through news informativeness of credit ratings to underlying entity. Ultimately, increased services or from the credit rating agency, investors, that is, the degree to which efforts in the ratings process could investors may find it easier to access ratings correspond to the credit quality improve ratings informativeness. ratings in a central repository that is of the rated security or entity. Investors The proposed amendments may available over time. Investors should be benefit from increased informativeness change the way rating agencies compete. better able to put the ratings in context in several ways. Entities with different This may indirectly improve ratings when ratings and the proposed credit quality are exposed to distinct informativeness. Rating agencies may disclosure are presented together with economic factors, and investors may compete on the quality of ratings or they other information in the registration take this fact into account when making may engage in ratings-based statement. Less sophisticated investors investment decisions. Additionally, competition that focuses on producing investors can use credit ratings in may benefit more from these high ratings. Any potential reduction in conducting fundamental analysis of disclosures, as sophisticated investors ratings-based competition may result in individual securities. As a result, may already have absorbed this credit rating agencies focusing on information from other sources. investors benefit from credit ratings that enhancing their reputations for Disclosure of potential conflicts of are more informative. interests faced by credit rating agencies Increased informativeness of ratings producing quality ratings and would provide information to investors can result from a reduction in ‘‘ratings competing on that basis, rather than that is not currently available. Potential shopping.’’ 106 Currently registrants may competing to produce high ratings so conflicts of interest may arise when a solicit more ratings than they intend to that registrants select them. Rating credit rating agency derives significant use, choosing from among ratings agencies may have greater incentives to revenue from a registrant whose providers without making any compete on the basis of the quality of securities it also rates. Credit rating disclosure regarding the other solicited ratings as they are likely to face reduced agencies, in some cases, offer non- ratings. Criteria for selecting ratings incentives to produce optimistic ratings ratings services to registrants, such as agencies include the reputation of the in the hopes of being selected, since consulting services.105 Both agency and the rating itself.107 There registrants’’ incentives to obtain a higher sophisticated and unsophisticated may be other, non-shopping reasons for rating would be reduced. These changes investors could benefit from soliciting multiple ratings, such as in registrants’’ incentives and their understanding whether the rating was obtaining multiple expert views on the consequent effect on credit rating received in the context of other services; registrant’s financial health. If the agencies’’ incentives, however, will be in particular, they may place less weight proposed amendments are adopted and limited, to the extent that preliminary on ratings in which the agency was registrants continue to solicit more ratings are incomplete or based on less substantially compensated for other than full and final information, or that services. This additional information 106 See Aaron Lucchetti and Serena Ng, How registrants replace the use of Rating Firms’ Calls Fueled Subprime Mess, (Aug. preliminary ratings for ratings shopping may, in some cases, reduce the 16, 2007), at http://www.realestatejournal.com/ buysell/mortgages/20070816-lucchetti.html. See with new alternative mechanisms. Any 105 See Frank Partnoy, How and Why Credit also Skreta and Veldkamp, and Bolton, Freixas and potential reduction in the rating-based Rating Agencies are Not Like Other Gatekeepers, Shapiro in note 24 above. competition is likely to result in more (2006) at http://papers.ssrn.com/sol3/ 107 See Dion Bongaerts, Martijn Cremers, and informative ratings.108 papers.cfm?abstract_id=900257 for a discussion of William N. Goetzmann Multiple Ratings and Credit non-rating services provided by credit rating Spreads (June 30, 2009), at http://papers.ssrn.com/ agencies. sol3/papers.cfm?abstract_id=1307782. 108 See Becker and Milbourn in note 14 above.

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Benefits to Certain Rating Agencies If the proposed amendments have the Temporary Uncertainty Resulting From From Enhanced Competitive Position effect of reducing ratings shopping and Potential Shift in Ratings The proposed amendments may ratings inflation that may result from As discussed, the proposed benefit certain rating agencies by such shopping, ratings scales may shift amendments may cause ratings scales to enhancing their competitive position, downward that is, debt issues of the shift downward; disclosure of relative to others. Enhanced competitive same credit quality may receive a lower preliminary and unused final ratings in position may result in these agencies rating than currently as an indirect certain circumstances may reduce charging higher fees, rating more effect of the proposed amendments. In ratings shopping, in turn reducing the securities, or being more selective in the some cases, because of ratings-based upward bias in ratings resulting from securities they rate. These effects result investment restrictions faced by some registrants choosing the highest of from two factors. First, smaller agencies institutional investors, this may result several ratings. The amount of this shift may be asked to provide preliminary in changes in the cost of capital for is uncertain. This uncertainty represents ratings less frequently, and may registrants, including potential increases a potential cost to investors, who may therefore see information about fewer and decreases. For example, registrants temporarily have fewer highly rated rated securities, thereby limiting their of securities that would currently be investment options. It also represents a ability to assess the credit quality of the given an investment grade rating, but cost to registrants, who may be less sure issue that they are rating relative to the of the rating they will receive for that would receive a lower rating as an rest of the rated issues.109 Second, securities. indirect result of the proposed registrants may not choose to use ratings Costs to Investors Resulting From from smaller agencies if the registrants amendments, could face a higher cost of Potential Undue Reliance on Ratings elect not to seek the smaller agencies’’ capital. Those registrants whose preliminary ratings. Competitive securities would be investment grade Requiring ratings disclosure may realignment may represent a cost to the under both sets of circumstances may reinforce the importance of ratings, credit rating agencies who are not face a lower cost of capital. Reductions possibly causing investors to place market leaders. Competitive effects are in cost of capital constitute benefits to undue reliance on the rating. This effect discussed in detail in the Costs section, registrants. Additional potential costs may be mitigated by accompanying below. are discussed in more detail in the Costs contextual disclosures, such as section, below. disclosures on ratings limitations and by Reductions in Cost of Capital for Some any improvements in the quality of Registrants C. Costs ratings. As discussed, the proposed Costs of New Disclosures Costs to Registrants Resulting From amendments may increase the Increased Prices of Ratings informativeness of ratings. Credit rating Registrants will face costs associated agencies interpret non-public with the process of preparing and Any enhancement of the competitive information to which they have access, reporting the proposed disclosures. For position of market leaders that may arise together with public information.110 purposes of the Paperwork Reduction in the medium- or long-term may result in higher prices for assigning ratings, This practice may reduce the asymmetry Act, we estimate that over a three-year both through a reduction in potential of information between registrants and period the average annual incremental investors. Additionally, the mandatory price competition among existing increase in the paperwork burden for agencies and a reduction in the threat of disclosure of information about credit non-investment company registrants to ratings used in connection with a entry by new agencies. Competitive comply with our proposed collection of registered offering could level the effects of the proposed amendments are information requirements to be playing field for all registrants and discussed below in this section, as well would benefit registrants that in the past approximately 2,120 hours of in-house as in the Competition, Efficiency, and may have hesitated to provide such company personnel time and to be Capital Formation section. approximately $816,000 for the services disclosure voluntarily. These reductions Increases in Cost of Capital for Some in the asymmetry of information of outside professionals. For closed-end funds, we estimate the annual Registrants Resulting From Potential between registrants and investors could Declines in the Level of Ratings reduce registrants’’ cost of capital as incremental increase to be investors may demand a lower risk approximately 157 hours of in-house As mentioned in the Benefits section, premium when they have access to company personnel time and in some cases, the proposed more information.111 approximately $108,400 for the services amendments may alter issuance of outside professionals. These behavior by affecting investor demand 109 See Jeremy Fons, Rating Competition and estimates include the time and the cost for securities with specific ratings. Some Structured Finance, J. Structured Fin. (Fall 2008), of preparing and reviewing disclosure investors are limited, either by at http://www.iijournals.com/doi/abs/10.3905/ and filing documents. These disclosure regulation or custom, to investing only JSF.2008.14.3.007. in the highest rated securities, while 110 costs may be limited by the fact that In the discussion of their rating others are limited to investing in methodologies, Standard and Poor’s and Moody’s close-end funds that disclose ratings in ‘‘investment grade’’ securities. If ratings explain how they use confidential non-public their registration statements are already information that registrants provide for the purpose shift downward as a result of the of assigning ratings. See http:// subject to comparable disclosure proposed amendments, there may be www2.standardandpoors.com/aboutcreditratings/ requirements and that some operating fewer securities available meeting these RatingsManual_PrintGuide.html for the Standard companies may already be providing and Poor’s rating methodology. See http:// investment criteria, potentially resulting v3.moodys.com/sites/products/ this information voluntarily. in a larger price premium for top-rated AboutMoodysRatingsAttachments/ securities and for investment-grade 2001400000389218.pdf?frameOfRef=corporatefor (arguing that the information composition between securities. These price premia may Moody’s description of their use of non-public public and non-public information affects the cost information. of capital since investors demand a higher return affect issuance behavior. For example, 111 See David Easley and Maureen O’Hara, from their investments when they face asymmetric registrants of securities that would Information and the Cost of Capital, J. Fin. (2004) information). currently be given an investment grade

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rating, but that would receive a lower the dominant agencies or a reduction in information about the industry or rating as an indirect result of the market share of the remaining agencies. registrant from public sources may proposed amendments, would The proposed disclosure requirements become available. Additionally, the potentially face a higher cost of capital, for preliminary and unused final ratings registrant (or those acting on its behalf) while those registrants whose securities may lead registrants to solicit fewer may continue to share information with would be investment grade under both ratings, potentially only as many as they rating agencies. Consequently, investors sets of circumstances may face a lower intend to ultimately use. In structured may consider preliminary ratings to be cost of capital. These changes in cost of financial products, for example, the informative only in a limited sense, and capital may, in turn, affect issuance market may customarily require registrants may not experience a decisions. In particular, registrants registrants to obtain two ratings, but significant penalty for using a final whose securities would no longer be registrants can solicit preliminary rating that is substantially different than considered investment grade may face ratings from more than two agencies. If preliminary ratings.113 Thus, to some greater difficulty in raising capital. the registrant knows that preliminary degree, registrants may still shop for These differences in the cost of capital ratings must be disclosed in certain ratings, and agencies may continue to across new classes of ‘‘investment- circumstances, including the most compete based on the level of ratings. grade’’ and ‘‘non-investment grade’’ optimistic ratings, then its incentive to The changes in the competitive securities may diminish in the long- shop for ratings may be reduced, position of rating agencies discussed term. In the short-term, however, the because such a practice would become above may not occur for structured differential in the cost of capital across apparent to the market, and its selection finance products because of the these two classes of securities are likely of the higher rating may be discounted. amendments to Rule 17g–5 being to remain due to the limited access to Registrants may instead choose to adopted today, since all NRSRO’s would ‘‘non-investment grade’’ securities by initially solicit ratings only from be entitled to receive information about certain investors. Similar considerations agencies who are market leaders in the all such issues.114 This would depend, apply to the ratings at the top of the type of product they are issuing. however, on whether credit rating scale. Some registrants may be Specifically, they may gravitate toward agencies choose to access this effectively shut out from the commercial agencies that have established information. Access comes with certain paper market, for example, if they can reputations for high quality ratings and obligations, including the obligation to no longer obtain top ratings. agencies that, for other reasons, such as rate 10% of the securities for which These effects depend on the rigidity of branding or market share, are best information is received. institutional ratings-based constraints. If known to investors. They may choose to Another factor that could potentially ratings scale downward, these involve other credit rating agencies only impact the competitive forces among the constraints may adapt. For example, a if they do not meet specific ratings credit rating agencies is the mandatory wider range of ratings may be hurdles, such as the top rating category, disclosure that a fee was paid for the considered investment grade, and the or investment grade. Agencies who are credit rating and the aggregate fees paid commercial paper market may become not market leaders may, as a result, for any other non-rating services viable for lower rated registrants. Any receive information about fewer issues, provided during such period. This such adaptation is more likely to occur potentially affecting the perceived disclosure may present some costs to in the long term, however, as ratings- quality of their ratings. This may cause the extent that it reveals competitive or based investment restrictions are costly registrants to purchase fewer ratings proprietary information about the from such agencies. Ultimately, this to modify. business model of the credit rating could strengthen the relative position of agency proving the credit rating. To the Costs to Certain Rating Agencies market leaders and potentially harm the extent that there are negative Resulting From Potential Changes in competitive position of other rating competitive effects, some rating Competitive Environment agencies. Relatedly, registrants’ agencies may stop providing some of Although NRSROs and other credit conversations with smaller, less- these non-rating services which could rating agencies are not subject to the established NRSROs and other credit result in declines in their revenues. proposed amendments, some of these rating agencies may help them to understand the agencies’ methodologies V. Consideration of Burden on rating agencies may incur costs. As Competition and Promotion of mentioned in the benefits section, and procedures; these conversations may help smaller NRSROs introduce Efficiency, Competition, and Capital established market leaders in ratings themselves to registrants. To the extent Formation may indirectly benefit from the that registrants contact only established 115 proposed amendments, at the expense Section 23(a) of the Exchange Act NRSROs, they may not develop this of smaller, less established credit rating requires the Commission, when making understanding of other agencies’ agencies. Currently, the credit ratings rules and regulations under the methodologies. industry is highly concentrated. For Exchange Act, to consider the impact a The effect on market leaders’ new rule would have on competition. ‘‘corporate issuers’’ in 2007, for competitive position could be mitigated example, Standard and Poor’s, Moody’s, Section 23(a)(2) prohibits the by an additional factor. A decrease in Commission from adopting any rule and Fitch issued 39%, 33%, and 21% of ratings shopping depends in part on the outstanding credit ratings, respectively, which would impose a burden on ability of investors to easily compare competition not necessary or for a total of 93% of outstanding credit final and preliminary ratings. However, 112 appropriate in furtherance of the ratings. This concentration could investors may feel that they cannot increase in several ways as described easily compare these ratings. When 113 These factors would also reduce the efficacy below, such as an increase in market rating agencies make preliminary of ratings shopping, however, since registrants share of certain ratings agencies among ratings, they do so with a more limited would also face some uncertainty about what the set of information. As the ratings final rating would be. 112 See Annual Report on Nationally Recognized 114 See the proposing release related to Rule 17g– Statistical Rating Organizations (2008) at http:// process proceeds to a final rating, more 5 under the Exchange Act considered by the www.sec.gov/divisions/marketreg/ratingagency/ information can become available. For Commission on September 17, 2009. nrsroannrep0608.pdf. example, as time passes, material 115 15 U.S.C. 78w(a).

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purposes of the Exchange Act. Section rating agencies’ incentives, however, faced by some institutional investors, 2(b) of the Securities Act,116 Section 3(f) will be limited, to the extent that this may result in changes in the cost of of the Exchange Act,117 and Section 2(c) preliminary ratings are incomplete or capital for registrants, including of the Investment Company Act 118 based on less than full and final potential increases and decreases. For require the Commission, when engaging information, or that registrants replace example, registrants of securities that in rulemaking that requires it to the use of preliminary ratings for ratings would currently be given an investment consider or determine whether an action shopping with new alternative grade rating, but that would receive a is necessary or appropriate in the public mechanisms. lower rating as an indirect result of the interest, to consider, in addition to the Furthermore, the proposed proposed amendments, would protection of investors, whether the amendments may also increase the potentially face a higher cost of capital, action would promote efficiency, informativeness of ratings by reducing while those registrants whose securities competition, and capital formation. the asymmetry of information between would be investment grade under both The proposed amendments would registrants and investors. The sets of circumstances may face a lower require registrants to make specified mandatory disclosure of credit ratings in cost of capital. disclosure to investors regarding credit registration documents would level the The Commission solicits comment on ratings if credit ratings are used in playing field for all companies and the effects of the proposed amendments connection with a registered offering. would benefit companies that in the on efficiency, competition, and capital We believe these disclosures would past may have hesitated to provide such formation. The Commission requests help investors understand the limits and disclosure voluntarily, thereby comment on whether the required purposes of credit ratings as well as promoting competition. Furthermore, disclosure of ratings in registration potential conflicts of interest or ratings these reductions in the asymmetry of statements, especially ratings that a shopping practices that could affect the information between registrants and registrant would otherwise choose not quality of the credit rating. Therefore, if investors could reduce registrants’ cost to disclose, may affect positively or adopted, the Commission believes that of capital as investors may demand a negatively registrants’ ability to raise the disclosure required by these lower risk premium when they have capital. The Commission requests amendments would promote investor access to more information. comment on the anticipated effect of the protection. We believe that if investors Market efficiency and capital new disclosure requirements on have more information regarding credit formation may be enhanced by more competition in the market for credit ratings, including the scope of the informative ratings because investors rating agencies. The Commission rating, they will be better able to place would have access to better information requests commenters to provide the rating in its proper context. The and could act on that information empirical data and other factual support Commission anticipates that these accordingly. for their views, if possible. proposed amendments could improve The Commission recognizes that VI. Initial Regulatory Flexibility Act investors’ ability to make informed requiring disclosure of preliminary Analysis investment decisions, which will, ratings and unused final ratings could therefore, lead to potential increased have an effect on competition among the This Initial Regulatory Flexibility efficiency and competitiveness of the credit rating agencies. To the extent that Analysis (IRFA) has been prepared in U.S. capital markets. The Commission the proposed disclosure reduces ratings accordance with the Regulatory expects that this increased market shopping, then competition among Flexibility Act.119 It relates to proposed efficiency and investor confidence also credit rating agencies may be reduced as revisions to Regulation S–K, rules under may encourage more efficient capital registrants seek only ratings they intend the Securities Act, and forms under the formation for the reasons discussed to use and do not shop around among Exchange Act, the Securities Act, and below and in Section IV above. many agencies. The proposed the Investment Company Act regarding Specifically, the proposed amendments amendments may benefit the disclosure regarding credit ratings. would enhance the availability of competitive position of certain rating agencies if, for example, registrants seek A. Reasons for, and Objectives of, the information to investors and the markets Proposed Action with regard to credit ratings so that fewer credit ratings. Enhanced investors will more clearly understand competitive position would enable these As discussed throughout the release, the terms of the credit rating and its agencies to charge higher fees, to rate we are proposing amendments to our limitations. more securities, or to be more selective rules to require disclosure of As discussed in more detail in Section in the securities they rate. Competitive information regarding credit ratings IV, the proposed amendments may realignment may represent a cost to the used by registrants in connection with reduce the level of ratings-based credit rating agencies who are not a registered offering of securities so that competition among credit rating market leaders. This may increase the investors will better understand the agencies. This may indirectly improve cost of capital for issuers who use credit rating and its limitations. The ratings informativeness. Any potential smaller credit rating agencies if they are amendments we are proposing today reduction in ratings-based competition unable to pay the increased fees of the also would require additional disclosure may result in credit rating agencies larger credit rating agencies or if the that would inform investors about increasingly focusing on enhancing larger credit rating agencies elect not to potential conflicts of interest that could their reputations for producing quality rate them. affect the credit rating. In addition, we ratings and competing on that basis, If the proposed amendments have the are proposing amendments to require rather than competing to produce high effect of reducing ratings shopping and disclosure of preliminary credit ratings ratings so that registrants select them. ratings inflation resulting from such and unused final ratings in certain These changes in registrants’ incentives shopping, rating scales may shift circumstances so that investors have and their consequent effect on credit downward—that is, debt issues may enhanced information about the credit receive a lower rating than currently as ratings process that may bear on the 116 15 U.S.C. 77b(b). an indirect effect of the proposed quality or reliability of the rating. The 117 15 U.S.C. 78c(f). amendments. In some cases, because of 118 15 U.S.C. 8a–2(c). ratings-based investment restrictions 119 5 U.S.C. 601.

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proposed amendments would be reports under Section 15(d) of the • Establishing different compliance or applicable to registration statements Exchange Act or Section 30 of the reporting requirements or timetables filed under the Securities Act, the Investment Company Act. In addition, that take into account the resources Securities Exchange Act and the the proposals also could affect small available to small entities; Investment Company Act, and Forms 8– entities that file, or have filed, a • Clarifying, consolidating or K and 20–F. registration statement that has not yet simplifying compliance and reporting become effective under the Securities B. Legal Basis requirements under the rules for small Act or the Investment Company Act and entities; We are proposing the amendments that has not been withdrawn. • contained in this document under the Use of performance rather than authority set forth in Sections 6, 7, 10, D. Reporting, Recordkeeping, and Other design standards; and and 19(a) of the Securities Act, Sections Compliance Requirements • Exempting small entities from all or 12, 13, 15(d) and 23(a) of the Exchange The disclosure requirements we are part of the requirements. Act, and Sections 8, 24(a), 30, and 38 of proposing today are intended to The proposed amendments would the Investment Company Act. enhance credit rating disclosure so that provide investors with more investors will better understand credit information regarding credit ratings and C. Small Entities Subject to the ratings and their limitations. These Proposed Action their limitations so that investors will be amendments would require small able to place the credit rating in its The proposed amendments could entities that are operating companies or appropriate context. We do not believe affect some companies that are small closed-end funds to provide the same these disclosures will create a entities. The disclosure requirements as disclosure as larger entities if they use significant new burden on smaller proposed would apply to any registrant a credit rating in connection with a entities subject to the proposed that uses a credit rating in connection registered offering. The disclosure amendments. To the extent that a small with a registered offering, though based required would include general entity must comply with the proposed on the staff’s observations of market information about the credit rating, amendments, we believe uniform, practice, we believe it is unlikely that a including all material scope limitations comparable disclosures across all small entity would use a credit rating in of the credit rating and any related companies will help investors and the connection with a registered offering. published designation, such as non- markets. Therefore, we are not The Regulatory Flexibility Act defines credit payment risks, assigned by the proposing special requirements, ‘‘small entity’’ to mean ‘‘small rating organization with respect to the standards or exemptions for small business,’’ ‘‘small organization,’’ or security. In addition, the proposed entities. However, because small entities 120 ‘‘small governmental jurisdiction.’’ amendments would require disclosure rarely receive credit ratings from credit The Commission’s rules define ‘‘small of additional non-rating services rating agencies in connection with their business’’ and ‘‘small organization’’ for provided by the credit rating agency and offerings, it is unlikely that the purposes of the Regulatory Flexibility its affiliates to the registrant and its proposed amendments would have a Act for each of the types of entities affiliates, including disclosure of the significant impact on a substantial regulated by the Commission. Securities fees paid for those services, so that number of small entities. Act Rule 157 121 and Exchange Act Rule investors will be aware of potential 0–10(a) 122 defines a company, other conflicts of interest with respect to the G. Solicitation of Comments than an investment company, to be a credit rating obtained by the registrant. We encourage the submission of ‘‘small business’’ or ‘‘small Small entities would be required to comments with respect to any aspect of organization’’ if it had total assets of $5 include the disclosure in their this Initial Regulatory Flexibility million or less on the last day of its most Securities Act, Exchange Act, and Analysis. In particular, we request recent fiscal year. We estimate that there Investment Company Act registration comments regarding: are approximately 1,229 companies, statements. In addition, small entities • other than registered investment would be required to provide updating How the proposed amendments can companies, that may be considered of the rating disclosure. In certain achieve their objective while lowering small entities. Investment Company Act circumstances, small entities would be the burden on smaller entities subject to Rule 0–10(a) 123 defines a ‘‘small required to provide disclosure of the rules; business’’ or ‘‘small organization’’ for preliminary ratings or unused final • The number of small entity purposes of the Investment Company ratings so that investors will be companies that may be affected by the Act as an investment company that, informed of when a registrant may have proposed amendments; together with other investment engaged in ratings shopping. • The existence or nature of the companies in the same group of related E. Duplicative, Overlapping, or potential impact of the proposed investment companies, has net assets of Conflicting Federal Rules amendments on small entity companies $50 million or less as of the end of its discussed in the analysis; and most recent fiscal year. We estimate that We believe the proposed amendments • would not duplicate, overlap, or conflict How to quantify the impact of the there are approximately 30 registered proposed amendments. closed-end funds that may be with other federal rules. Respondents are asked to describe the considered small entities. The proposed F. Significant Alternatives amendments could affect small entities nature of any impact and provide that have a class of securities that are The Regulatory Flexibility Act directs empirical data supporting the extent of registered under Section 12 of the us to consider alternatives that would the impact. Such comments will be Exchange Act or that are required to file accomplish our stated objectives, while considered in the preparation of the minimizing any significant adverse Final Regulatory Flexibility Analysis, if 120 5 U.S.C. 601(6). impact on small entities subject to the the proposed rule amendments are 121 17 CFR 230.157. rules. In connection with the proposed adopted, and will be placed in the same 122 17 CFR 240.0–10(a). disclosure amendments, we considered public file as comments on the proposed 123 15 U.S.C. 270.0–10(a) the following alternatives: amendments themselves.

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VII. Small Business Regulatory § 229.10 [Amended] considered by the credit rating agency Enforcement Fairness Act 2. Amend § 229.10 by removing and in rating the securities and: For purposes of the Small Business reserving paragraph (c). (i) The minimum obligations of the 3. Amend § 229.202 by: security as specified in the governing Regulatory Enforcement Fairness Act of a. Adding paragraph (g); and 1996,124 a rule is ‘‘major’’ if it has instruments of the security; and b. Adding Instructions 1 through 5 to (ii) The terms of the securities as used resulted, or is likely to result in: Item 202(g). • in any marketing or selling efforts; An annual effect on the U.S. The additions read as follows: economy of $100 million or more; (12) A statement informing investors that a credit rating is not a • A major increase in costs or prices § 229.202 (Item 202) Description of recommendation to buy, sell, or hold for consumers or individual industries; registrant’s securities. securities; that it may be subject to or * * * * * revision or withdrawal at any time by • Significant adverse effects on (g) Credit ratings. If a registrant, any the assigning credit rating agency; that competition, investment, or innovation. selling security holder, any underwriter, each credit rating is applicable only to We request comment on whether our or any member of a selling group in a the specific security to which it applies; proposal would be a ‘‘major rule’’ for registered offering uses a credit rating, and that investors should make their purposes of the Small Business as that term is defined in 15 U.S.C. own evaluation as to whether an Regulatory Enforcement Fairness Act. 78c(a)(60), from a credit rating agency, investment in the security is We solicit comment and empirical data as that term is defined in 15 U.S.C. appropriate; on: 78c(a)(61), with respect to the registrant (13) A description of a final rating • The potential effect on the U.S. or a class of securities issued by the obtained by the registrant but not used economy on an annual basis; registrant, in connection with a in connection with the offering, • Any potential increase in costs or registered offering, the registrant shall including the information set forth in prices for consumers or individual disclose the following information for paragraphs (g)(1) through (12) of this industries; and each rating used: (1) The identity of the credit rating section; and • Any potential effect on competition, agency assigning the credit rating and (14) A description of any preliminary investment, or innovation. whether such organization is a rating of the class of securities that VIII. Statutory Authority and Text of nationally recognized statistical rating received the rating being disclosed Rule and Form Amendments organization as that term is defined in pursuant to this Item 202(g) of this part 15 U.S.C. 78c(a)(62); if such preliminary rating was obtained We are proposing the amendments (2) The credit rating assigned; by or on behalf of the registrant and contained in this document under the (3) The relative rank of the credit received from a credit rating agency authority set forth in Sections 6, 7, 10, rating within the assigning credit rating other than the credit rating agency that and 19(a) of the Securities Act; Sections agency’s overall classification system; provided the credit rating disclosed 12, 13, 15(d) and 23(a) of the Exchange (4) The date the credit rating was pursuant to this Item 202(g) of this part. Act; and Sections 8, 24(a), 30, and 38 of assigned; Such description shall include: the Investment Company Act. (5) The credit rating agency’s (i) The identity of the credit rating List of Subjects definition or description of the category agency that determined or indicated the in which the credit rating agency rated rating and an indication of whether 17 CFR Parts 229, 239, 240, 249 and 274 the class of securities; such organization is a nationally Reporting and recordkeeping (6) The identity of the party who is recognized statistical rating organization requirements, Securities. compensating the credit rating agency as that term is defined in 15 U.S.C. for providing the credit rating; 78c(a)(62); For the reasons set out in the (7) A description of any other non- (ii) The preliminary rating determined preamble, Title 17, Chapter II of the rating services provided by the credit or indicated or a description of the Code of Federal Regulations is proposed rating agency or its affiliates to the category or range of categories in which to be amended as follows: registrant or its affiliates, and if such the preliminary credit rating agency other services have been provided, PART 229—STANDARD placed the class of securities; separate disclosure of the fee paid for INSTRUCTIONS FOR FILING FORMS (iii) The date the preliminary rating the credit rating required to be disclosed UNDER SECURITIES ACT OF 1933, was conveyed to the registrant, any and the aggregate fees paid for any other SECURITIES EXCHANGE ACT OF 1934 party acting on the registrant’s behalf or non-rating services provided during the AND ENERGY POLICY AND the underwriters; registrant’s last completed fiscal year CONSERVATION ACT OF 1975— (iv) The relative rank of the and any subsequent interim period up REGULATION S–K preliminary rating within the to the date of the filing; preliminary credit rating agency’s 1. The authority citation for part 229 (8) All material scope limitations of overall classification system; continues to read in part as follows: the credit rating; (9) How any contingencies related to (v) Any material scope limitations of Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, the preliminary rating; and 77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26), the securities are or are not reflected in the credit rating; (vi) Any material differences between 77ddd, 77eee, 77ggg, 77hhh, 777iii, 77jjj, the terms of the securities on which the 77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, (10) Any published designation 78o, 78u–5, 78w, 78ll, 78mm, 80a–8, 80a–9, reflecting the results of any other preliminary rating was determined and 80a–20, 80a–29, 80a–30, 80a–31(c), 80a–37, evaluation done by the credit rating the terms of the securities on which the 80a–38(a), 80a–39, 80b–11, and 7201 et seq.; agency in connection with the credit final rating was determined. 18 U.S.C. 1350, unless otherwise noted. rating, along with an explanation of the * * * * * * * * * * designation’s meaning and the relative Instructions to Item 202(g): rank of the designation; 1. Disclosure is not required by this 124 Pub. L. No. 104–121, Title II, 110 Stat. 857 (11) Any material differences between Item 202(g) if the only disclosure of a (1996). the terms of the securities as assumed or credit rating in a filing with the

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Commission relates to changes to a rating agency if it is solicited by or on trading or admitted to unlisted trading credit rating, liquidity of the registrant, behalf of a registrant from a credit rating privileges on a national securities the cost of funds of a registrant or the agency. exchange; or (ii) are securities for which terms of agreements that refer to credit * * * * * bid and offer quotations are reported in ratings, and the credit rating is not an automated quotations system otherwise used in connection with a PART 239—FORMS PRESCRIBED operated by a national securities registered offering. UNDER THE SECURITIES ACT OF 1933 association. Notwithstanding the 2. If a registrant includes information foregoing, furnish the information about credit ratings in a prospectus 4. The authority citation for part 239 required by Item 202(g) of Regulation pursuant to this Item 202(g) and the continues to read in part as follows: S–K. rating has not yet been issued in final Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, * * * * * form, the registrant shall update the 77z–2, 77z–3, 77sss, 78c, 78l, 78m, 78n, description of each rating as set forth 78o(d), 78u–5, 78w(a), 78ll, 78mm, 80a–2(a), PART 240—GENERAL RULES AND below: 80a–3, 80a–8, 80a–9, 80a–10, 80a–13, 80a– REGULATIONS, SECURITIES A. If a change in a rating, including 24, 80a–26, 80a–29, 80a–30, and 80a–37, EXCHANGE ACT OF 1934 the assignment of a final rating, already unless otherwise noted. included in the prospectus is available * * * * * 7. The authority citation for part 240 subsequent to the filing of the 5. Amend Form S–3 (referenced in continues to read, in part, as follows: registration statement, but prior to its § 239.13) by revising Part I, Item 9 to Authority: 15 U.S.C. 77c, 77d, 77g, 77j, effectiveness, the registrant shall convey read as follows: 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, to the purchaser the rating change. Note The text of Form S–3 does not, and 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, B. If an additional rating, including a this amendment will not, appear in the Code 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, final rating, that the registrant is of Federal Regulations. 78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a– required to disclose, or if a material 20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 80b–11, and 7201, et seq.; and 18 U.S.C. change in a rating already included, FORM S–3 1350, unless otherwise noted. becomes available during any period in REGISTRATION STATEMENT UNDER which offers or sales are being made, the * * * * * THE SECURITIES ACT OF 1933 8. Amend § 240.13a–11 by revising registrant shall disclose such additional paragraph (b) to read as follows: rating or rating change by means of a * * * * * post-effective amendment, or Item 9. Description of Securities To Be § 240.13a–11 Current reports on Form 8–K supplement to the prospectus pursuant Registered (§ 249.308 of this chapter). to § 230.424(b) of this chapter, unless, in * * * * * Furnish the information required by the case of a registration statement on (b) This section shall not apply to Item 202 of Regulation S–K (§ 229.202 of Form S–3 (§ 239.13 of this chapter), it foreign governments, foreign private this chapter), unless capital stock is to has been disclosed in a document issuers required to make reports on be registered and securities of the same incorporated by reference into the Form 6–K (17 CFR 249.306) pursuant to class are registered pursuant to Section registration statement subsequent to its § 240.13a–16, issuers of American 12 of the Exchange Act, in which case effectiveness and prior to the Depositary Receipts for securities of any furnish only the information required by termination of the offering or foreign issuer, or investment companies Item 202(g) of Regulation S–K. completion of sales. required to file reports pursuant to 3. For purposes of this Item 202(g), a * * * * * § 270.30b1–1 of this chapter under the credit rating is ‘‘used in connection with 6. Amend Form S–4 (referenced in Investment Company Act of 1940, a registered offering of securities’’ in § 239.25) by revising Part I, Item 4(a)(3) except: circumstances, including but limited to, to read as follows: (1) Where such investment companies when such rating is used in connection Note The text of Form S–4 does not, and are required to file notice of a blackout with an unregistered offering of this amendment will not, appear in the Code period pursuant to § 245.104 of this securities, and the securities offered of Federal Regulations. chapter; and privately are subsequently exchanged (2) A closed-end company (as defined for substantially similar registered FORM S–4 in 15 U.S.C. 80a–5(a)(2)) is required to securities even if the credit rating was REGISTRATION STATEMENT UNDER file a current report on Form 8–K not used in connection with the THE SECURITIES ACT OF 1933 containing the information required by registered exchange offering. Item 3.04 of Form 8–K within the period 4. A preliminary rating includes any * * * * * specified in that form unless rating that is not published, any range Item 4. Terms of the Transaction substantially the same information as of ratings, any oral or other indications required by that item has been (a) Furnish a summary of the material of a potential rating or range of ratings previously reported by the registrant. features of the proposed transaction. and all other preliminary indications of * * * * * a rating. A preliminary rating includes The summary should include, where applicable: 9. Amend § 240.15d–11 by revising ratings on a particular structure of a paragraph (b) to read as follows: security even if not tied to a specific * * * * * registrant or group of assets. Disclosure (3) The information required by Item § 240.15d–11 Current reports on Form 8–K of a preliminary rating is required even 202 of Regulation S–K (§ 229.202 of this (§ 249.308 of this chapter). if there have been changes to the chapter), description of registrant’s * * * * * security for which a final rating is securities, unless: (i) The registrant (b) This section shall not apply to disclosed pursuant to this Item 202(g). would meet the requirements for use of foreign governments, foreign private 5. For purposes of determining Form S–3, (ii) capital stock is to be issuers required to make reports on whether disclosure of any preliminary registered and (iii) securities of the same Form 6–K (17 CFR 249.306) pursuant to rating or unused final rating is required, class are registered pursuant to Section § 240.15d–16, issuers of American a credit rating is obtained from a credit 12 of the Exchange Act and (i) listed for Depositary Receipts for securities of any

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foreign issuer, or investment companies Item 12. Description of Securities Other (l) A statement informing investors required to file reports pursuant to than Equity Securities that a credit rating is not a § 270.30b1–1 of this chapter under the * * * * * recommendation to buy, sell, or hold Investment Company Act of 1940, C. Credit ratings. securities; that it may be subject to except: 1. If a company, any selling security revision or withdrawal at any time by (1) Where such investment companies holder, any underwriter, or any member the assigning credit rating agency; that are required to file notice of a blackout of a selling group in a registered offering each credit rating is applicable only to period pursuant to § 245.104 of this uses use a credit rating, as that term is the specific security to which it applies; chapter; and defined in 15 U.S.C. 78c(a)(60), from a and that investors should make their (2) A closed-end company (as defined credit rating agency, as that term is own evaluation as to whether an in 15 U.S.C. 80a–5(a)(2)) is required to defined in 15 U.S.C. 78c(a)(61), with investment in the security is file a current report on Form 8–K respect to the company or a class of appropriate; containing the information required by securities issued by the company, in (m) A description of a final rating Item 3.04 of Form 8–K within the period connection with a registered offering, obtained by the company but not used specified in that form unless the company shall disclose the in connection with the offering, substantially the same information as following information for each rating including the information set forth in required by that item has been used: paragraphs (a)–(l) of this item; and (n) A description of any preliminary previously reported by the registrant. (a) The identity of the credit rating rating of the class of securities that * * * * * agency assigning the credit rating and whether such organization is a received the rating being disclosed pursuant to this Item 12 if such PART 249—FORMS, SECURITIES nationally recognized statistical rating preliminary rating was obtained by or EXCHANGE ACT OF 1934 organization as that term is defined in 15 U.S.C. 78c(a)(62); on behalf of the company and received 10. The authority citation for part 249 (b) The credit rating assigned; from a credit rating agency other than continues to read in part as follows: (c) The relative rank of the credit the credit rating agency that provided rating within the assigning credit rating the credit rating disclosed pursuant to Authority: 15 U.S.C. 78a et seq., 7201 et this Item 12. Such description shall seq., and 18 U.S.C. 1350, unless otherwise agency’s overall classification system; noted. (d) The date the credit rating was include: assigned; (i) The identity of the credit rating * * * * * (e) The credit rating agency’s agency that determined or indicated the 11. Amend Form 20–F (referenced in definition or description of the category rating and whether such organization is § 249.220f) by redesignating Instruction in which the credit rating agency rated a nationally recognized statistical rating 3 to Item 10 as Instruction 4, adding the class of securities; organization as that term is defined in new Instruction 3 to Item 10, (f) The identity of the party who is 15 U.S.C. 78c(a)(62); redesignating Items 12.C. and 12.D. as compensating the credit rating agency (ii) The preliminary rating determined Items 12.D. and 12.E., adding new Item for providing the rating; or indicated or a description of the 12.C. and the Instructions to Item 12.C., (g) A description of any other non- category or range of categories in which and revising Instruction 1 to Item 12. to rating services provided by the credit the preliminary credit rating agency read as follows: rating agency or its affiliates to the placed the class of securities; Note: The text of Form 20–F does not, and company or its affiliates, and if such (iii) The date the preliminary rating this amendment will not, appear in the Code other services have been provided, was conveyed to the company, any of Federal Regulations. separate disclosure of the fee paid for party acting on the company’s behalf or the credit rating required to be disclosed the underwriters; FORM 20–F and the aggregate fees paid for any other (iv) The relative rank of the preliminary rating within the * * * * * non-rating services provided during the company’s last completed fiscal year preliminary credit rating agency’s Item 10. Additional Information and any subsequent interim period up overall classification system; (v) Any material scope limitations of * * * * * to the date of the filing; (h) All material scope limitations of the preliminary rating; and Instructions to Item 10 the credit rating; (vi) Any material differences between the terms of the securities on which the * * * * * (i) How any contingencies related to the securities are or are not reflected in preliminary rating was determined and 3. In registration statements filed the credit rating; the terms of the securities on which the under the Securities Act or Exchange (j) Any published designation final rating was determined. Act that relate to a class of preferred reflecting the results of any other 2. Credit rating agency decisions. securities for which a credit rating, as evaluation done by the credit rating (a) Disclose the information required that term is defined in 15 U.S.C. agency in connection with the credit by paragraph (b) of this Item 12.C.2. if 78c(a)(60), from a credit rating agency, rating, along with an explanation of the the company is notified by, or receives as that term is defined in 15 U.S.C. designation’s meaning and the relative any communication from, any credit 78c(a)(61), is being used in connection rank of the designation; rating agency to the effect that the with the registered offering, disclose the (k) Any material differences between organization has decided to change or information required under Item 12.C.1 the terms of the securities as assumed or withdraw the credit rating assigned to of Form 20–F. If filing Form 20–F as an considered by the credit rating agency the company or any class of debt or annual report, furnish the information in rating the securities and: preferred security or other indebtedness required by Item 12.C.2 of Form 20–F if (i) The minimum obligations of the of the company (including securities or there have been any changes to a rating security as specified in the governing obligations as to which the company is required to be disclosed by Item 12.C.1 instruments of the security; and a guarantor, or may become directly or of Form 20–F. (ii) The terms of the securities as used contingently liable for arising out of an * * * * * in any marketing or selling efforts; off-balance sheet arrangement) that was

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previously required to be disclosed company shall disclose such additional 12. Amend Form 8–K (referenced in pursuant to Item 12.C.1 of this Form. rating or rating change by means of a § 249.308) by revising Section 3— (b) If the registrant has received any post-effective amendment, or Securities and Trading Markets to add notification or other communication as supplement to the prospectus pursuant Item 3.04 to read as follows: described in paragraph (a) of this Item to Rule 424(b) under the Securities Act Note: The text of Form 8–K does not, and 12.C.2., file the notice as an exhibit to (§ 230.424(b) of this chapter), unless, in this amendment will not, appear in the Code the annual report on Form 20–F and the case of a registration statement on of Federal Regulations. disclose the following information: Form F–3 under the Securities Act (i) The date the company received the (referenced in § 239.33 of this chapter), Form 8–K notification or communication; it has been disclosed in a document * * * * * (ii) The name of the credit rating incorporated by reference into the agency and whether such organization registration statement subsequent to its Item 3.04. Credit Rating Agency is a nationally recognized statistical effectiveness and prior to the Decisions rating organization as that term is termination of the offering or (a) Furnish the information required defined in 15 U.S.C. 78c(a)(62); and completion of sales. by paragraph (b) of this Item 3.04 if the (iii) The nature of the rating agency’s 3. For purposes of this Item 12, a registrant is notified by, or receives any decision. credit rating is ‘‘used in connection with communication from, any credit rating a registered offering’’ in circumstances, * * * * * agency to the effect that the organization including but limited to, when such has decided to change or withdraw the Instructions to Item 12 rating is used in connection with an credit rating assigned to the registrant or unregistered offering of securities, and 1. You do not need to provide the any class of debt or preferred security or the securities offered privately are information called for by this Item 12 if other indebtedness of the registrant subsequently exchanged for you are using the form as an annual (including securities or obligations as to substantially similar registered report for your fiscal years ending before which the registrant is a guarantor or securities even if the credit rating was December 15, 2009. For your fiscal years may become directly or contingently not used in connection with the ending on or after December 15, 2009, liable for arising out of an off-balance registered exchange offering. except for Item 12.C.2, Item 12.E.3. and sheet arrangement) that was previously 4. A preliminary rating includes any Item 12.E.4 of this Form, you do not required to be disclosed pursuant to rating that is not published, any range need to provide the information called Item 202(g) of Regulation S–K or Item of ratings, any oral or other indications for by this Item 12 if you are using this 10.6 of Form N–2. form as an annual report. You do not of a potential rating or range of ratings need to provide the information and all other preliminary indications of (b) If the registrant has received any required by Item 12.C.2. of this Form if a rating. A preliminary rating includes notification or other communication as you are using the form as a registration ratings on a particular structure of a described in paragraph (a) of this Item statement. security even if not tied to a specific 3.04, file the notice as an exhibit to the report on Form 8–K and furnish the * * * * * company or group of assets. Disclosure of a preliminary rating is required even following information: Instructions to Item 12.C.1. if there have been changes to the (1) The date the registrant received 1. Disclosure is not required by this security for which a final rating is the notification or communication; Item 12.C.1. of this Form if the only disclosed pursuant to this Item 12. (2) The name of the credit rating disclosure of a credit rating in a filing 5. For purposes of determining agency and whether such organization with the Commission relates to changes whether disclosure of any preliminary is a nationally recognized statistical to a credit rating, liquidity of the rating or unused final rating is required, rating organization as that term is company, the cost of funds of a a credit rating is obtained from a credit defined in 15 U.S.C. 78c(a)(62); and company or terms of agreements that rating agency if it is solicited by or on (3) The nature of the rating agency’s refer to credit ratings, and the credit behalf of a company from a credit rating decision. rating is not otherwise used in agency. Instructions to Item 3.04 connection with a registered offering. Instructions to Item 12.C.2. 2. If a company includes information 1. No disclosure need be made under about credit ratings in a prospectus 1. No disclosure need be made under Item 12.C.2. of this Form during any this Item 3.04 during any discussions pursuant to Item 12.C.1. of this Form between the registrant and any credit and the rating has not yet been issued discussions between the company and any credit rating agency regarding any rating agency regarding any decision in final form, the company shall update required to be disclosed unless and the description of each rating as set decision required to be disclosed unless and until the credit rating agency until the credit rating agency notifies forth below: the registrant that the credit rating A. If a change in a rating, including notifies the company that the credit rating agency has made a final decision agency has made a final decision to take the assignment of a final rating, already such action. included in the prospectus is available to take such action. subsequent to the filing of the 2. For purposes of Item 12.C.2. of this 2. For purposes of this Item 3.04, the registration statement, but prior to its Form, the term ‘‘credit rating agency’’ term ‘‘credit rating agency’’ has the effectiveness, the company shall convey has the meaning set forth in Section meaning set forth in Section 3(a)(60) of to the purchaser the rating change. 3(a)(60) of the Exchange Act [15 U.S.C. the Exchange Act [15 U.S.C. 78c(a)(60]. B. If an additional rating, including a 78c(a)(60]. 3. For purposes of this Item 3.04, off- final rating, that the company is 3. For purposes of Item 12.C.2. of this balance sheet arrangement has the required to disclose, or if a material Form, off-balance sheet arrangement has meaning set forth in Item 303(a)(4)(ii) of change in a rating already included, the meaning set forth in Item 5.E.2. of Regulation S–K [17 CFR becomes available during any period in this Form. 229.303(a)(4)(ii)]. which offers or sales are being made, the * * * * * * * * * *

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PART 239—FORMS PRESCRIBED the credit rating required to be disclosed (3) The date the preliminary rating UNDER THE SECURITIES ACT OF 1933 and the aggregate fees paid for any other was conveyed to the Registrant, any non-rating services provided during the party acting on the Registrant’s behalf, PART 274—FORMS PRESCRIBED Registrant’s last completed fiscal year or the underwriters; UNDER THE INVESTMENT COMPANY and any subsequent interim period up (4) The relative rank of the ACT OF 1940 to the date of the filing; preliminary rating within the h. All material scope limitations of preliminary credit rating agency’s 13. The authority citation for part 274 the credit rating; overall classification system; continues to read in part as follows: i. How any contingencies related to (5) Any material scope limitations of Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, the securities are or are not reflected in the preliminary rating; and 78c(b), 78l, 78m, 78n, 78o(d), 80a–8, 80a–24, the credit rating; (6) Any material differences between 80a–26, and 80a–29, unless otherwise noted. j. Any published designation the terms of the securities on which the * * * * * reflecting the results of any other preliminary rating was determined and 14. Amend Form N–2 (referenced in evaluation done by the credit rating the terms of the securities on which the §§ 239.14 and 274.11a–1), Item 10 by agency in connection with the credit final rating was determined. revising paragraph 6 and Instructions to rating, along with an explanation of the Instructions: 1. Disclosure is not required by read as follows: designation’s meaning and the relative paragraph 6 of this item if the only rank of the designation; Note: The text of Form N–2 does not, and disclosure of a credit rating in a filing k. Any material differences between these amendments will not, appear in the with the Commission relates to changes Code of Federal Regulations. the terms of the securities as assumed or to a credit rating, liquidity of the considered by the credit rating agency Registrant, the cost of funds of a FORM N–2 in rating the securities and (1) the Registrant or the terms of agreements minimum obligations of the security as * * * * * that refer to credit ratings, and the credit specified in the governing instruments rating is not otherwise used in Item 10. Capital Stock, Long-Term Debt, of the security; and (2) the terms of the and Other Securities connection with a registered offering. securities as used in any marketing or 2. If a Registrant includes information * * * * * selling efforts; about credit ratings in a prospectus 6. Credit ratings: If the Registrant, any l. A statement informing investors pursuant to paragraph 6 of this item and selling security holder, any underwriter, that a credit rating is not a the rating has not yet been issued in or any member of a selling group in a recommendation to buy, sell, or hold final form, the Registrant shall update registered offering uses a credit rating, securities; that it may be subject to the description of each rating as set as that term is defined in section revision or withdrawal at any time by forth below: 3(a)(60) of the Exchange Act [15 U.S.C. the assigning credit rating agency; that a. If a change in a rating, including the 78c(a)(60)], from a credit rating agency, each credit rating is applicable only to assignment of a final rating, already as that term is defined in section the specific security to which it applies; included in the prospectus is available 3(a)(61) of the Exchange Act [15 U.S.C. and that investors should make their subsequent to the filing of the 78c(a)(61)], with respect to the registrant own evaluation as to whether an registration statement, but prior to its or a class of securities issued by the investment in the security is effectiveness, the Registrant shall Registrant, in connection with a appropriate; convey to the purchaser the rating registered offering, the Registrant shall m. A description of a final rating change. disclose the following information for obtained by the registrant but not used b. If an additional rating, including a each rating used: in connection with the offering, final rating, that the Registrant is a. The identity of the credit rating including the information set forth in required to disclose, or if a material agency assigning the credit rating and paragraphs (a)–(l) of this item; and change in a rating already included, whether such organization is a n. A description of any preliminary becomes available during any period in nationally recognized statistical rating rating of the class of securities that which offers or sales are being made, the organization as that term is defined in received the rating being disclosed Registrant shall disclose such additional section 3(a)(62) of the Exchange Act [15 pursuant to this paragraph 6 if such rating or rating change by means of a U.S.C. 78c(a)(62)]; preliminary rating was obtained by or post-effective amendment, or b. The credit rating assigned; on behalf of the Registrant and received supplement to the prospectus pursuant c. The relative rank of the credit rating from a credit rating agency other than to Rule 497 under the 1933 Act [17 CFR within the assigning credit rating the credit rating agency that provided 230.497]. agency’s overall classification system; the credit rating disclosed pursuant to 3. For purposes of paragraph 6 of this d. The date the credit rating was this paragraph 6. Such description shall item, a credit rating is ‘‘used in assigned; include: connection with a registered offering of e. The credit rating agency’s (1) The identity of the credit rating securities’’ in circumstances, including definition or description of the category agency that determined or indicated the but limited to, when such rating is used in which the credit rating agency rated rating and an indication of whether in connection with an unregistered the class of securities; such organization is a nationally offering of securities, and the securities f. The identity of the party who is recognized statistical rating organization offered privately are subsequently compensating the credit rating agency as that term is defined in section exchanged for substantially similar for providing the credit rating; 3(a)(62) of the Exchange Act [15 U.S.C. registered securities even if the credit g. A description of any other non- 78c(a)(62)]; rating was not used in connection with rating services provided by the credit (2) The preliminary rating determined the registered exchange offering. rating agency or its affiliates to the or indicated or a description of the 4. A preliminary rating includes any Registrant or its affiliates, and if such category or range of categories in which rating that is not published, any range other services have been provided, the preliminary credit rating agency of ratings, any oral or other indications separate disclosure of the fee paid for placed the class of securities; of a potential rating or range of ratings

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and all other preliminary indications of to be a sufficient basis to exempt Exchange Act and the Investment a rating. A preliminary rating includes nationally recognized statistical rating Company Act of 1940 5 to require ratings on a particular structure of a organizations from Section 7 and 11 of disclosure by registrants regarding security even if not tied to a specific the Securities Act. credit ratings in their registration registrant or group of assets. Disclosure DATES: Comments should be received on statements under the Securities Act and of a preliminary rating is required even or before December 14, 2009. the Exchange Act, and by closed-end if there have been changes to the ADDRESSES: Comments may be management investment companies in security for which a final rating is submitted by any of the following registration statements under the disclosed pursuant to this paragraph 6. methods: Securities Act and the Investment 5. For purposes of determining Company Act, if the registrant uses the whether disclosure of any preliminary Electronic Comments rating in connection with a registered rating or unused final rating is required, • Use the Commission’s Internet offering. In connection with the a credit rating is obtained from a credit comment form (http://www.sec.gov/ proposed amendments, we are soliciting rating agency if it is solicited by or on rules/concept.shtml); or comment on whether the Commission behalf of a Registrant from a credit • Send an e-mail to rule- should rescind Rule 436(g) under the rating agency. [email protected]. Please include File Securities Act.6 6. If the prospectus relates to Number S7–21–09 on the subject line; I. Introduction securities other than senior securities of or the Registrant that have been assigned a • Use the Federal eRulemaking Portal We are considering whether we credit rating by a credit rating agency, (http://www.regulations.gov). Follow the should propose rescinding Rule 436(g) the information required by this instructions for submitting comments. under the Securities Act. Rule 436(g) provides an exemption for credit ratings paragraph may be provided in the Paper Comments Statement of Additional Information provided by nationally recognized • unless the rating criteria will materially Send paper comments in triplicate statistical rating organizations affect the investment policies of the to Elizabeth M. Murphy, Secretary, (‘‘NRSROs’’) from being considered a Registrant (e.g., if the rating agency Securities and Exchange Commission, part of the registration statement establishes criteria for selection of the 100 F Street, NE., Washington, DC prepared or certified by a person within Registrant’s portfolio securities with 20549–1090. the meaning of Sections 7 7 and 11 8 of which the Registrant intends to All submissions should refer to File the Securities Act. The exemption comply), in which case it should be Number S7–21–09. This file number currently does not apply to credit rating included in the prospectus. should be included on the subject line agencies that are not NRSROs. We are * * * * * if e-mail is used. To help us process and concerned that there is no longer a review your comments more efficiently, sufficient basis to exempt NRSROs and By the Commission. please use only one method. The to distinguish between NRSROs and Dated: October 7, 2009. Commission will post all comments on credit rating agencies that are not Elizabeth M. Murphy, the Commission’s Web site (http:// NRSROs for purposes of liability under Secretary. www.sec.gov/rules/concept.shtml). Section 11 of the Securities Act. [FR Doc. E9–24546 Filed 10–14–09; 8:45 am] Comments are also available for public Rescinding the exemption would cause BILLING CODE 8011–01–P inspection and copying in the NRSROs to be included in the liability Commission’s Public Reference Room, scheme for experts set forth in Section 100 F Street, NE., Washington, DC 11, as is currently the case for credit SECURITIES AND EXCHANGE 20549, on official business days rating agencies that are not NRSROs. COMMISSION between the hours of 10 a.m. and 3 p.m.. We solicit comment on what impact All comments received will be posted removing the rule would have on 17 CFR Part 220 without change; we do not edit personal markets and their participants. Scrutiny [Release Nos. 33–9071; 34–60798; IC– identifying information from of credit ratings and the process of 28943; File No. S7–21–09] submissions. You should submit only obtaining a credit rating appears to have increased as a result of the turmoil in RIN 3235–AK45 information that you wish to make available publicly. the credit markets over the past few Concept Release on Possible FOR FURTHER INFORMATION CONTACT: years. As discussed below and in the Rescission of Rule 436(g) Under The Blair F. Petrillo, Special Counsel in the companion release proposing to require Securities Act of 1933 Office of Rulemaking, Division of disclosure regarding credit ratings, as Corporation Finance, at (202) 551–3430, credit ratings have become more AGENCY: Securities and Exchange 100 F Street, NE., Washington, DC significant, we have sought to protect Commission. 20549. investors while recognizing the role ACTION: Concept release; request for credit ratings play in the offer and sale SUPPLEMENTARY INFORMATION: In a comments. 1 of securities. In that regard, we are now companion release, the Commission is exploring whether Rule 436(g) is still SUMMARY: As part of the Commission’s proposing amendments to rules under 2 appropriate in light of the growth and review of the role of credit rating the Securities Exchange Act of 1934 development of the credit rating agencies in the operation of the and Regulation S–K,3 and forms under 4 industry and investors’ use of credit securities markets, and in light of the Securities Act of 1933, the ratings. We are mindful of the potential disclosure regarding credit ratings that significant impact that rescinding Rule 1 is being proposed in a companion See the proposing release considered by the 436(g) could have on registrants, release, the Commission is seeking Commission on September 17, 2009 regarding proposed disclosure regarding credit ratings in comment on whether Rule 436(g) under registration statements. 5 15 U.S.C. 80a–1 et seq. the Securities Act of 1933 should be 2 15 U.S.C. 78a et seq. 6 17 CFR 220.436(g). rescinded. In particular, we would like 3 17 CFR 229.10 through 1123. 7 15 U.S.C. 77g. to understand whether there continues 4 15 U.S.C. 77a et seq. 8 15 U.S.C. 77k.

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NRSROs and other credit rating misleading, unless he can establish that required to file the credit rating agency’s agencies, investors and the financial he had, after reasonable investigation, consent with its registration statement, markets in general, and we seek reasonable grounds to believe and did and the experts’ defense may be comment on any burdens or benefits believe at the time such part of the available. that may result. Therefore, we are registration statement became effective, In 1977, the Commission published a requesting input on the possible that the statements in the registration concept release announcing that it was elimination of Rule 436(g) from all statement were true and that there was considering a change in policy to permit market participants and other members no omission to state a material fact of the public. necessary to make the statements disclosure of credit ratings in therein not misleading.12 Under Section documents filed with the A. Section 7 and Section 11 of the 15 11, persons other than the issuer may be Commission. In that release the Securities Act able to assert as a defense to Section 11 Commission solicited comment on Section 7 of the Securities Act liability that they relied upon an expert whether an NRSRO is the type of person provides that ‘‘[i]f any accountant, that consented to be named in the from whom a consent would be required engineer, or appraiser, or any person registration statement (the ‘‘experts’ under Section 7 of the Securities Act whose profession gives authority to a defense’’).13 (thereby also subjecting it to liability statement made by him, is named as under Section 11). That release having prepared or certified any part of B. Background of Rule 436(g) contained a list of questions regarding the registration statement, or is named Securities Act Rule 436(g) provides the Commission’s then-current policy of as having prepared or certified a report that a credit rating assigned by an discouraging the disclosure of credit or valuation for use in connection with NRSRO to a class of debt securities, a ratings and whether the Commission the registration statement, the written class of convertible debt securities, or a should change that policy or retain it.16 consent of such person shall be filed class of preferred stock is not a part of According to the 1981 release ultimately with the registration statement.’’ 9 These a registration statement prepared or announcing the Commission’s change in persons are referred to as experts for certified by a person within the meaning position, commenters on the 1977 purposes of the securities laws. of Sections 7 and 11 of the Securities release generally were opposed to Registrants are required to file the Act. With one limited exception arising subjecting NRSROs to liability under consents of experts as exhibits to their in connection with our Section 11 and argued, among other registration statements. Multijurisdictional Disclosure System things, that it would interfere with the Section 11 of the Securities Act with Canada, there is no similar substance and timing of the registration imposes liability on various parties who provision for credit rating agencies that process, that it would result in changes are involved in the preparation of are not NRSROs.14 As a result, to the way credit ratings were issued, registration statements filed under the disclosure of credit ratings in a and that it would result in increased Securities Act. Section 11 was enacted registration statement currently results so that those persons with a direct role costs and uncertainty over the scope of in different treatment for NRSROs and 17 in a registered offering would be subject for credit rating agencies that are not liability. The NRSROs in existence in to a rigorous standard of liability to NRSROs. By virtue of Rule 436(g), an 1977 indicated that they would not assure that disclosure regarding NRSRO is not subject to liability under provide consents to be named in the 18 securities is accurate.10 It was also Section 11 even if its rating is disclosed registration statement. The 1981 designed to give investors additional in a registration statement. A registrant release also indicated that commenters protection not available under common is not required to file consent of an were concerned that requiring consent law due to the barriers to recovery NRSRO with its registration statement, and subjecting NRSROs to Section 11 presented by the common law fraud and the experts’ defense is not available liability would affect their requirements of scienter, reliance and to other persons involved in the independence if they were causation. Liability under Section 11 registration statement, regardless of ‘‘participants’’ in the offering and would extends to the issuer, officers and whether they relied on the expertized lessen the quality of ratings because directors who sign the registration portion of the registration statement. By NRSROs likely would rely only on statement, underwriters, and persons contrast, if a credit rating assigned by a who prepare or certify any part of the credit rating agency that is not an 15 See Disclosure of Security Ratings, Release No. registration statement or who are named NRSRO is disclosed in a registration 33–5882 (Nov. 9, 1977) [42 FR 58414]. as having prepared or certified a report statement, the credit rating agency 16 The Commission sought comment on two questions regarding NRSROs and liability under or valuation for use in connection with would be subject to potential liability Section 11 of the Securities Act: the registration statement.11 Section 11 under Section 11. The registrant is A. (5) Is an entity issuing a security rating the provides that an expert may be held type of person referred to in Section 7 of the liable if, when the registration statement 12 See Section 11(b) of the Securities Act [15 Securities Act of 1933 whose consent is required to U.S.C. 77k(b)]. be filed by the issuer of the security? If so, what became effective, the part of the costs or other burdens may be associated with the registration statement purporting to be 13 See Section 11(b)(3)(C) of the Securities Act [15 U.S.C. 77k(b)(3)(C)]. issuer obtaining a consent from the rating agency or, in the case of multiple ratings, from all the rating made on his or her authority contained 14 Rule 436(g) applies to ratings disclosed in Form agencies involved? Assuming, arguendo, that such an untrue statement of material fact or F–9 [17 CFR 239.39.] registration statements by consents may be waived by the Commission under ratings organizations specified in the Instruction to omitted to state a material fact necessary Section 7, should waivers be granted and, if so, paragraph (a)(2) of General Instruction I of that to make the statements therein not under what circumstances? form. Form F–9 is the Multijurisdictional Disclosure System (‘‘MJDS’’) form used to register A. (6) What impact may result, directly or 9 See Section 7 of the Securities Act in note 7 investment grade debt or preferred securities under indirectly, from a rating entity being subject to above. the Securities Act by eligible Canadian issuers. Section 11 under the Securities Act of 1933, with 10 See William O. Douglas and George E. Bates, Under Form F–9, securities are deemed to be respect to its rating being disclosed in a prospectus? The Federal Securities Act of 1933, 43 Yale L.J. 171 investment grade if, at the time of sale, at least one See the 1977 Release in note 15 above. (1933); Herman & Maclean v. Huddleston, 459 U.S. NRSRO or Approved Rating Organization, as 17 See Disclosure of Ratings in Registration 375 (1983). specified in the above-referenced Instruction, has Statements, Release No. 33–6336 (Aug. 6, 1981) [46 11 See Section 11 of the Securities Act in note 8 rated the securities in a category signifying FR 42024]. above. investment grade. 18 Id.

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objective, quantifiable information.19 money market funds.26 In proposing the violate the NRSROs’ First Amendment The commenters in favor of subjecting rule, the Commission stated ‘‘because rights; 32 and Section 11 liability could NRSROs to liability under Section 11 money market fund shares are equity eliminate the disclosure of security cited the incentive that NRSROs would securities, a money market fund which ratings in prospectuses.33 The take more care in determining ratings.20 has received an NRSRO rating must Commission did not act on the proposals in the 1994 release. As noted above, in 1981, the obtain the consent of the NRSRO or seek a waiver of consent under Rule 437 [17 In July 2008, the Commission Commission announced the shift in proposed to amend Rule 436(g) to policy to permit, but not require, CFR 230.437] before using the rating in its registration statement.’’ 27 The extend the exemption to ratings disclosure of credit ratings in Commission did not act on this provided by any ‘‘credit rating agency,’’ registration statements. In addition, the proposal, and Rule 436(g) was not as defined in 15 U.S.C. 78c(a)(61),34 Commission proposed Securities Act amended. rather than only to ratings provided by Rule 436(g) to provide that a security In 1994, the Commission proposed to NRSROs. The Commission cited its rating assigned to a class of debt require disclosure about credit ratings in belief that, among other things, securities, a class of convertible debt registration statements.28 In the 1994 amending Rule 436(g) would foster securities, or a class of preferred stock release, the Commission noted that the competition between credit rating by an NRSRO would not be considered policy announced in 1981 created a agencies. Only three commenters a part of the registration statement distinction between NRSROs and credit addressed the proposed amendment to prepared or certified by a person within rating agencies that were not NRSROs. Rule 436(g). One commenter opposed it the meaning of Section 7 and Section 11 The Commission noted that the because credit rating agencies that are 21 of the Securities Act. In proposing distinction was most significant in the not NRSROs are not subject to Rule 436(g), the Commission noted that context of Rule 436(g). While an NRSRO Commission oversight.35 Another if NRSROs refused to provide consents, would not be required to provide a commenter supported extending the then disclosure of credit ratings would consent if its rating was disclosed in a exemption in Rule 436(g) to credit rating 36 not be provided even if permitted by the registration statement pursuant to Rule agencies that are not NRSROs. That Commission. As a result, the 436(g), ‘‘[a]ny non-NRSRO rating commenter did not believe references to Commission proposed Rule 436(g) in organization must furnish a consent and ratings should be considered order to make its new policy position on take on expert liability under the ‘‘expertized.’’ The commenter also cited the disclosure of credit ratings Securities Act if its rating is included in the costs that registrants have to incur meaningful.22 The Commission also the registration statement and absent the amendment of Rule 436(g) to cited the fact that NRSROs already were prospectus.’’ 29 obtain a consent from a credit rating subject to substantial liability under the The 1994 release did not propose any agency that was not an NRSRO. In antifraud provisions of the securities change to Rule 436(g), but it did solicit addition, the commenter discussed the laws and to regulation by the comment on whether there should possibility that a rating obtained from a Commission under the Investment continue to be a distinction between credit rating agency that was not an Advisers Act of 1940.23 The NRSROs and credit rating agencies that NRSRO would be omitted, thus offering Commission then expected that, because are not NRSROs for purposes of Rule investors an incomplete view of the ratings for a particular security. A third of antifraud liability, NRSROs would be 436(g). The release also sought comment commenter objected to requiring required ‘‘to adhere to the highest on whether Rule 436(g) should be disclosure of credit rating agency professional standards in determining expanded to include credit rating information without the consent of the security ratings.’’ 24 agencies that are not NRSROs or When Rule 436(g) relevant credit rating agency but did not whether the rule should be rescinded. was adopted in 1982, the Commission cite any concerns about liability.37 The Commenters generally were opposed to stated its belief that exempting NRSROs Commission did not adopt the proposal. from liability under Section 11 of the subjecting NRSROs and other credit rating agencies to liability under Section Securities Act was appropriate and cited 32 NRSROs have taken the position that they the rationale provided in the proposing 11 of the Securities Act. In particular, ‘‘publish’’ their ratings and that their ratings are release that practical problems would one commenter provided several protected under the First Amendment. Cases in arise in obtaining the consents and that arguments as to why Section 11 liability which NRSROs have asserted this position include: 30 Compuware Corp. v. Moody’s Inv. Servs., Inc., 499 NRSROs were subject to the antifraud was not appropriate for NRSROs. F.3d 520 (6th Cir. 2007); Jefferson County Sch. Dist. provisions of the securities laws.25 Among other things, the commenter No. R–1 v. Moody’s Inv. Servs., Inc., 175 F.3d 848 argued that: Ratings published by (10th Cir. 1999); First Equity Corp. v. Standard & In 1986, the Commission proposed to NRSROs ‘‘are expressions of opinion Poor’s Corp., 690 F.Supp. 256 (S.D.N.Y. 1988); and expand the Rule 436(g) exemption to about risk, not statements,’’ and even if Abu Dhabi Commer. Bank v. Morgan Stanley & Co. include ratings assigned by NRSROs to et al., 2009 U.S. Dist. Lexis 79607 (S.D.N.Y. 2009). the security defaults in an individual 33 See note 30 above. case, it would not necessarily be an 34 19 See Security Ratings Release No. 33–8940 (July Id. indication that the opinion was 1, 2008) [73 FR 40106]. 20 Id. wrong; 31 Section 11 liability would 35 See letter regarding File No. S7–17–08 of 21 Id. American Securitization Forum (Sept. 5, 2008), at 22 Id. http://www.sec.gov/comments/s7-18-08/ 26 23 15 U.S.C. 80b–1 et seq. At the time Rule 436(g) See Disclosure of Security Ratings by Money s71808.shtml. Market Funds, Release No. 33–6630 (March 21, was proposed, NRSROs generally were required to 36 See letter regarding File No. S7–17–08 of the 1986) [51 FR 9838]. register as investment advisers. Congress provided American Bar Association (Oct. 10, 2008), 27 an exclusion from the Advisers Act for NRSROs Id. at http://www.sec.gov/comments/s7-18-08/ when it passed the Credit Rating Agency Reform 28 See Disclosure of Security Ratings, Release No. s71808.shtml. Act of 2006, Public Law. 109–291, 120 Stat. 1327 33–7086 (Aug. 31, 1994) [59 FR 46304]. 37 See letter regarding File No. S7–17–08 of (Sept. 29, 2006). See Section 202(a)(11)(F) of the 29 Id. Realpoint LLC (Sept. 8, 2008), at http:// Advisers Act [15 U.S.C. 80b–202(a)(11)(F)]. 30 See letter regarding File No. S7–24–94 of www.sec.gov/comments/s7-18-08/s71808.shtml. 24 See Disclosure of Ratings in Registration Moody’s Investor Service, Inc. (Dec. 5, 1994). See The commenter appears to be concerned with the Statements in note 17 above. also letter regarding File No. S7–24–94 of Fitch potential negative ramifications for subscriber-paid 25 See Adoption of Integrated Disclosure System, Investors Service Inc. (Dec. 6, 1994). credit rating agencies whose ratings are disclosed Release No. 33–6383 (Mar. 3, 1982) [47 FR 11380]. 31 Id. publicly in a registration statement.

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In April 2009, the Commission hosted to rescind Rule 436(g), then a registrant credit rating in connection with a a roundtable regarding the oversight of who uses a credit rating assigned by an registered offering. In addition, when credit rating agencies. In connection NRSRO or a credit rating agency that is Rule 436(g) was adopted, the with the roundtable, the Commission not an NRSRO in connection with a Commission believed that the liability also solicited comment on the topics to registered offering would be required to that was already applicable to NRSROs be covered at the roundtable, including file the consent of the rating agency as was sufficient for the protection of the appropriate oversight and liability an exhibit to its registration statement. investors.44 At the time, the for NRSROs and credit rating agencies As a result, both NRSROs and credit Commission noted that NRSROs were that are not NRSROs.38 One commenter rating agencies that are not NRSROs subject to liability under both Section suggested that the Commission would be subject to potential liability 10(b) of the Exchange Act and the reconsider the exemption from liability under Section 11 of the Securities Act. Investment Advisers Act.45 As noted for NRSROs.39 That commenter also We believe that it may be appropriate above, NRSROs are no longer required expressed skepticism regarding the First to rescind Rule 436(g) for four primary to register under the Investment Amendment arguments asserted by reasons. First, we believe that the Advisers Act.46 NRSROs remain subject NRSROs against being held liable for original reasons supporting adoption of to liability under Section 10(b) of the their credit ratings because credit rating Rule 436(g) may no longer provide a Exchange Act, but they are held liable agencies have become involved in the sufficient basis to continue to provide infrequently.47 In addition, questions structuring of complex securities and no the exemption to NRSROs. If this is the could be raised about whether NRSROs’ longer rate most or all securities, case, then we believe it is appropriate to performance has ‘‘adhere[d] to the regardless of whether or not they have reconsider whether NRSROs should highest professional standards in been hired to do so.40 In addition, continue to be insulated from liability determining security ratings’’ that the another commenter commissioned a under Section 11. In the nearly 30 years Commission expected when Rule 436(g) white paper in connection with the that Rule 436(g) has been in place, the was adopted.48 roundtable discussion.41 The paper credit ratings industry has grown Second, we believe that when credit argues that in order to make NRSROs dramatically in terms of the number of ratings are used to sell securities, more accountable, they must be subject ratings issued and the types of securities investors rely on NRSROs and other 43 to a credible threat of liability. Some being rated. We believe that it is now credit rating agencies as experts and that commenters expressed concern appropriate to revisit the purposes it may be appropriate for our liability regarding any liability that would allow underlying the adoption of Rule 436(g), scheme for experts to apply to them. In for second-guessing of judgments made particularly in light of the disclosure our view, NRSROs represent themselves 42 by credit rating agencies. regarding credit ratings that we are to registrants and investors as experts at proposing in a companion release. The analyzing credit and risk.49 Investors II. Solicitation of Comment on Commission, in proposing Rule 436(g), Rescinding Rule 436(g) rely on the information provided by stated that the rule was necessary to credit rating agencies for a key part of In light of market developments and make its policy of permitting voluntary their investment decision. NRSROs our proposal to require disclosure of disclosure about security ratings describe the credit ratings that they credit ratings and information about meaningful. Without the exemption provide as opinions with respect to the credit ratings, we are considering provided by Rule 436(g), the registrant or security of the registrant, proposing to rescind Rule 436(g) under Commission was concerned that and the Commission notes that other the Securities Act, and we solicit registrants would not voluntarily professionals provide opinions upon comment on what impact removing the disclose security ratings in their which investors rely, such as legal rule would have on market participants. registration statements because of the opinions, valuation opinions, fairness If we were to rescind Rule 436(g), then liability concerns of the NRSROs who opinions and audit reports, and we treat NRSROs and credit rating agencies that provided the ratings. If we adopt the these opinions as subject to the are not NRSROs would be treated in the proposal to require disclosure regarding Securities Act’s provisions for experts, same manner for purposes of liability credit ratings if they are used in including our requirements that under Section 11 of the Securities Act connection with a registered offering of registrants include the consents of such if their credit ratings are disclosed in securities, then we believe the rationale professionals if their reports are registration statements. If we adopt the cited by the Commission in 1981 is no referenced in registration statements. It amendments to require certain longer applicable because we would no appears to us that NRSROs and other disclosure regarding credit ratings in longer need to provide a means to credit rating agencies are experts similar registration statements, and if we were encourage disclosure about credit to other parties subject to liability under ratings. Registrants would be required to Section 11 and that it may no longer be 38 See Roundtable on Oversight of Credit Rating provide such disclosure if they use a Agencies, Release No. 34–59753 (Apr. 13, 2009) [74 FR 17698]. 44 See note 17 above. 43 See Roger Lowenstein, Triple-A Failure, N.Y. 39 45 See note 23 above. See Statement regarding File No. S7–04–09 of Times Magazine, Apr. 27, 2008 (discussing the 46 Investment Company Institute (Apr. 15, 2009), at dramatic growth in revenues of NRSROs). See also Id. http://www.sec.gov/comments/4-579/4-579.shtml. Summary Report of Issues Identified in the 47 See e.g. Partnoy in note 41 above (noting that 40 Id. Commission Staff’s Examinations of Select Credit credit rating agencies ‘‘have been sued relatively 41 See Frank Partnoy, Rethinking Regulation of Rating Agencies (July 2008), at http://www.sec.gov/ infrequently, and rarely have been held liable’’). Credit Rating Agencies: An Institutional Investor news/studies/2008/craexamination070808.pdf 48 See note 24 above and the related discussion. Perspective, April 2009, at http://www.cii.org/ (noting that some rating agencies struggled with the 49 We are aware that NRSROs generally do not UserFiles/file/CRAWhitePaper04-14-09.pdf (white substantial growth of the number of deals to be consider themselves as experts because they believe paper commissioned by Council of Institutional rated beginning in 2002); Marco Pagano and Paolo they are providing opinions on risk. See letter of Investors). Volpin, Credit Ratings Failures: Causes and Policy Moody’s Investor Service, Inc. in note 30 above. We 42 See e.g. statement regarding File No. S7–04–09 Options, Working Paper (Feb. 9, 2009), at http:// do not at this time believe, however, that the nature of Standard & Poor’s (Apr. 15, 2009) at http:// www.italianacademy.columbia.edu/publications/ of the credit rating provided by a credit rating www.sec.gov/comments/4-579/4-579.shtml (noting working_papers/2008_2009/ agency, including an NRSRO, is in and of itself so that some percentage of securities will default and pagano_volpin_seminar_IA.pdf (discussing the role distinct from the parts of registration statements that such a default does not automatically mean the of credit rating agencies in the growth of the market provided by other experts that they should be credit rating was inappropriate). for structured products). subject to a different standard of liability.

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consistent with investor protection to market.51 Distinguishing between We solicit comment below on exempt NRSROs from the provisions of NRSROs and credit rating agencies that whether rescinding Rule 436(g) might the Securities Act applicable to are not NRSROs may create a increase reliance on credit ratings. experts.50 competitive barrier for those credit Preliminarily, we do not believe that Third, we believe that rescinding Rule rating agencies because they are subject requiring registrants to obtain consents 436(g), and therefore potentially to a higher standard of liability under from NRSROs and treating NRSROs as increasing the risk of liability under the the securities laws than NRSROs. For experts under the federal securities laws should increase reliance on credit federal securities laws, could credit ratings disclosed in registration ratings. Rescinding Rule 436(g) would significantly improve investor statements, it may be more time not change the fundamental nature of protection. Enhancing the consuming or costly for a credit rating what a credit rating is. The information accountability of NRSROs may help to agency that is not an NRSRO to provide credit rating agencies provide is already address concerns about the quality of a credit rating to a registrant than it being relied upon by investors. credit ratings. In light of the proposal to would be for an NRSRO to provide a Rescinding Rule 436(g) would require require mandatory disclosure of credit rating because of the potential for that, before such information can be information about credit ratings, liability under Section 11 for the credit used in connection with a registered rescinding Rule 436(g) could encourage rating agency that is not an NRSRO. As discussed above, in 2008 we proposed offering, the registrant would have to both NRSROs and credit rating agencies obtain the NRSROs’ consent to take that are not NRSROs to improve the to amend Rule 436(g) to extend the exemption to cover ratings issued by responsibility for it (in addition to any quality of their ratings and analysis in liability that would be applicable order to reduce the risk of liability credit rating agencies that are not NRSROs in order to foster competition pursuant to Section 10(b) of the under Section 11. An improvement in 52 in the credit rating agency industry. We Exchange Act). the quality of credit ratings should, While we believe that elimination of did not at that time, however, propose consistent with the goals of the federal Rule 436(g) may have important to require disclosure regarding credit securities laws, better protect investors. benefits, as discussed above, we also ratings. In light of the proposal to Of course, we are mindful of the recognize that NRSROs have in the past require disclosure regarding credit possibility that a risk of greater NRSRO expressed an unwillingness to be ratings used in connection with liability as a result of subjecting subject to Section 11 liability. However, registered offerings, we believe that the NRSROs to Section 11 may undermine we are also aware that providing credit rationale for extending the exemption to competition if credit rating agencies ratings for registrants is the key credit rating agencies that are not decide that they are unable to bear the component of revenues for NRSROs. As NRSROs may be achieved by risk of liability and thus exit the ratings a result, we seek comment on how eliminating Rule 436(g) and subjecting business. Similarly, firms considering NRSROs would adapt if Rule 436(g) both NRSROs and credit rating agencies entering the ratings business may were rescinded and whether they that are not NRSROs to potential reconsider in the face of an increased would, in fact, stop issuing credit liability under Section 11 of the risk of legal liability. The threat of ratings permanently. liability may particularly affect smaller, Securities Act. We now believe this If we were to propose the elimination less-established rating agencies that may approach to fostering competition may of Rule 436(g) and require disclosure find it more difficult to negotiate for be preferable in order to protect regarding credit ratings as proposed, we indemnification or bear the risk of investors by including the proposed recognize that obtaining and filing additional liability. It also is possible disclosure of the credit rating within the consents of all credit rating agencies that, in response to the rescission of liability scheme of Section 11 of the may raise some practical and timing Rule 436(g), registrants would begin to Securities Act to which similar concerns. Assuming NRSROs are take greater advantage of private disclosure is subject. At the same time, willing to grant consents, we do not placements instead of public offerings. we are mindful that the increased risk wish to create a process that is unduly of legal liability could undercut Finally, we believe that the costly and burdensome or that competition if certain NRSROs are distinction in Rule 436(g) between unnecessarily delays completion of unable to bear the risk of increased NRSROs and credit rating agencies that offerings. We have outlined below a liability. are not NRSROs may contribute to potential approach to the question of competitive disadvantages. We We are aware that rescinding Rule when consents would be required to be understand that investors rely on credit 436(g) may have significant impact on filed and when a new consent would be ratings issued by NRSROs as much as, the market and on market participants. required to be obtained. We solicit if not more than, credit ratings issued by We want to be cognizant of all the comment on whether this approach credit rating agencies that are not implications of our proposed would be workable, whether there is a NRSROs, particularly because the amendments to require disclosure better approach and what other changes NRSROs dominate the credit rating regarding credit ratings as well as a to our rules may have to be made in possible future proposal to rescind Rule order for this process to work.53 50 In the merger context, for example, if the 436(g). Therefore we are soliciting fairness opinion provided by the investment banker comments on all of the potential 52 In the companion release proposing to require is disclosed in the registration statement, then the implications that a rescission of Rule disclosure regarding credit ratings, we are party preparing the opinion must consent to be 436(g) might have. proposing to require disclosure of preliminary named as an expert in the registration statement. ratings under certain circumstances. At this stage, We note that fairness opinions generally include we preliminarily believe we should not require language that the financial advisor relied upon 51 For ‘‘corporate issuers’’ in 2007, for example, consents regarding disclosure of preliminary ratings information provided by the parties to the business Standard and Poor’s, Moody’s, and Fitch issued or unused final ratings. The preliminary rating may combination. In this regard, see In re Global 39%, 33%, and 21% of outstanding credit ratings, be based on preliminary information and may not Crossing, Ltd. Sec. Litig., 313 F.Supp. 2d 189 respectively, for a total of 93% of outstanding credit have been subject to all of the credit rating agency’s (S.D.N.Y. 2003) and In re AOL Time Warner, Inc. ratings. See Annual Report on Nationally internal processes for determining credit ratings. Sec. and ERISA Litig., 381 F.Supp 2d 192 (S.D.N.Y. Recognized Statistical Rating Organizations (2008), 53 As noted in the companion release proposing 2004). See also Virginia Bankshares, Inc. v. at http://www.sec.gov/divisions/marketreg/ to require disclosure regarding credit ratings, the Sandberg, 501 U.S. 1083 (1991). ratingagency/nrsroannrep0608.pdf. proposed disclosure requirement regarding credit

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The question of when consents need a credit rating that is specific to each these companies have for raising to be filed may turn, in part, on what the issuance of a security.57 capital? What could we do to help limit credit rating relates to and what form is any such impact? Request for Comments being used to register the offering. We • If we propose to rescind Rule believe an offering registered on Form We request comment below on 436(g), should we distinguish among S–1, for example, would require a specific aspects of a possible proposal to issuers of corporate debt, issuers of consent for the offering, and the consent rescind Rule 436(g). While we have structured products and closed-end would need to be filed prior to the grouped comments by how any such management investment company effectiveness of the registration proposal might affect a group of market securities? Are there differences among statement. In the context of registered participants, we encourage all market the markets for corporate debt, offerings made on a delayed or participants to comment on all aspects structured products and closed-end continuous basis in reliance on Rule 415 of this concept release. management investment companies that under the Securities Act,54 prospectus justify treating the same NRSRO as an Impact on Registrants and Access to expert for purposes of Sections 7 and 11 supplements are used rather than stand- Capital alone registration statements. As a of the Securities Act for ratings issued • result, the following different types of If we were to subject all credit on some kinds of securities but not ratings may result in different consent rating agencies to Sections 7 and 11 of others? • filing requirements: (1) A credit rating the Securities Act by rescinding Rule If the proposal to require disclosure that is applicable to the issuer and does 436(g), would registrants be able to regarding credit ratings is adopted, and not necessarily change with each obtain the consent required to use we do not eliminate Rule 436(g), offering; (2) a credit rating that applies ratings in connection with registered officers, directors and underwriters will to a specific program or type of security, offerings of rated securities? What not be able to rely on NRSROs as such as a credit rating assigned to a effects would rescinding Rule 436(g) experts with respect to the disclosure of medium-term note program or one for have on the practice of offering credit ratings. Is this appropriate? Why securities? In particular, would doing so or why not? long-term debt and one for short-term • debt; and (3) credit ratings that are affect the use of credit ratings in Are there circumstances where a specific to each issuance of a security. registered offerings, affect investor credit rating agency issuing a In the first instance, we believe the reliance on credit ratings, affect the cost preliminary rating should be treated as rating would be disclosed in the of obtaining a credit rating, or affect the an expert? • Practically speaking, how would prospectus that is part of a registration decisions of registrants and investors the filing of a consent work in the statement, and the consent would need regarding whether to raise capital in context of a shelf offering if we propose to be filed prior to the time the registered or unregistered offerings? • to rescind Rule 436(g)? Would the registration statement is declared Would access to capital be approach outlined above work? What effective. disrupted if Rule 436(g) were rescinded, other changes to our rules would be Rule 430B 55 and Rule 430C 56 under or would market participants adjust their practices to accommodate the necessary? the Securities Act deem information • change? How long would it take market Do rating agencies view the contained in prospectus supplements to issuance of each security issued by a be part of and included in the participants to adjust their practices? Would a long phase-in period help to company they rate, including each registration statement. The prospectus issuance within a class of securities, as supplement filing does not create a new mitigate any disruptions in access to capital? Why or why not? Would a the issuance of a new rating? Do effective date for experts, and we investors or registrants view the believe it would not require the filing of phase-in period of 12 months be sufficient? How long would the phase- issuance of each security by a company a consent, unless the prospectus as the issuance of a new rating by the supplement (including incorporated in period need to be? • rating agency? For instance, does each Exchange Act reports such as current Would registrants be able to obtain the consent if the rating is not available issuance under a medium-term note reports on Form 8–K) includes a new facility constitute the issuance of a new report or opinion of an expert. Thus, in until after the registration statement goes effective? Are there circumstances rating that should require a consent? the case of an issuer rating or a rating • where the rating would be available In the context of an issuer rating, on a class of securities such as a are there concerns for the rating medium-term note facility, we believe prior to effectiveness? • Would smaller companies be able to agencies with not having to provide a only a new or changed rating issued consent each time the registrant issues after the date of the last consent by the afford any increased costs to obtain a credit rating? What alternatives would a new security? rating agency or change in any other • We believe investors would view a information as to which the rating 57 In the event a new consent is required, we credit rating as current when it is used agency is an expert would require a new anticipate that the consent could be filed by a post- in connection with an offering of consent. We believe a new consent effective amendment to the registration statement or securities off a shelf registration would always be required in the case of by filing an Exchange Act report, such as an annual statement. If that is the case, should we report on Form 10–K or a report on Form 8–K or Form 6–K, which is incorporated by reference into require a new consent for each take- ratings would not be triggered if the only disclosure the registration statement. The consent would need down regardless of the type of rating or of a credit rating in a filing with the Commission to be filed prior to the filing of a prospectus under type of security? If issuing a new is related to changes to a credit rating, the liquidity Rule 424 of the Securities Act. Rule 424 requires a consent each time would be too of the registrant, the cost of funds for a registrant prospectus to be filed not later than the second or the terms of agreements that refer to credit business day following the earlier of the date of the burdensome, should we propose a rule ratings, and the credit rating is not otherwise used determination of the offering price or the date the that would deem the consent filed each in connection with a registered offering. We prospectus is first used after effectiveness in time a take-down is made? preliminarily believe that a consent would not be connection with a public offering or sale of • Should a new consent be required required for such disclosure. securities. We also anticipate that a new consent 54 17 CFR 230.415. would be required for an update pursuant to if the company has been put on a watch 55 17 CFR 230.430B. Section 10(a)(3) of the Securities Act. See 15 U.S.C. list or the company has been given a 56 17 CFR 230.430C. 77j(a)(3). positive outlook or negative outlook

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designation, or there has been some to the MJDS, should we eliminate to contain an untrue statement of a change other than an actual change in completely the Rule 436(g) exemption material fact or fail to state a material the rating? for ratings disclosed in a Form F–9? fact required to be stated in order to • If the proposal to require disclosure make the statements therein not Impact on NRSROs and Credit Rating regarding credit ratings is adopted, misleading? What other information Agencies regardless of whether we rescind Rule would be necessary to make the 436(g), would market practices develop • Are there reasons to continue to disclosure not misleading? Should we in the context of a take-down from a distinguish between NRSROs and credit revise the proposed disclosure in the shelf registration statement where rating agencies that are not NRSROs for companion release to include additional underwriters or other parties would purposes of Section 11 liability? Is the items? require the credit rating agency to re- fact that NRSROs are subject to • What costs would potential liability affirm its rating? Commission oversight, a reasonable under Section 11 impose on NRSROs • In the context of asset-backed basis upon which to distinguish and other credit rating agencies? Would securities, if Rule 436(g) is eliminated, between NRSROs and credit rating those costs be passed on to registrants should we retain our requirement to agencies that are not NRSROs for this or, ultimately, to investors? What steps disclose whether an issuance is purpose? would NRSROs and other credit rating conditioned on the assignment of that • How would the financial markets be agencies take to protect themselves from rating and the minimum rating that affected if NRSROs and other credit potential liability under Section 11? must be assigned? Should we require a rating agencies temporarily or • If we propose to rescind Rule consent related to the expected rating 58 permanently stopped issuing credit 436(g), should we specify that the credit and then require a subsequent consent ratings in registered offerings? rating itself would be considered for the final rating only if that rating • As noted above, NRSROs have prepared or certified by a person, or a changes? Should we instead treat the previously indicated that they would report or valuation prepared or certified consent similar to pricing information not provide consent. However, because by a person within the meaning of under 430A 59 so that it may be filed as we are proposing to require disclosure Sections 7 and 11 of the Securities Act? part of a pricing supplement but would regarding credit ratings in registration Should it include more than just the relate back to the effective date? statements, we are seeking to actual rating? Are there other parts of • Form F–9 is the MJDS form used by understand the practical implications the registration statement that would be eligible Canadian issuers to register that requiring a consent would have on considered prepared or certified by the investment grade debt or preferred NRSROs. Would NRSROs and other credit rating agency? How would securities. Under the MJDS, Canadian credit rating agencies initially or determining which portions of the MJDS filers are largely permitted to use permanently refuse to provide consent? registration statement would be their Canadian provincial disclosure Would they initially or permanently considered prepared or certified by a documents when registering their stop issuing credit ratings in registered person, or a report or valuation prepared securities with the Commission, offerings? How would NRSROs adapt if or certified by a person impact other although the liability provisions under Rule 436(g) were rescinded? How long potential defendants who might rely on the Securities Act apply whether or not is it likely such adaptation would take? that portion as a defense to liability? the registration statement is filed under Are NRSROs likely to adapt in different • Are there issues related to the the MJDS. If we eliminate Rule 436(g) in ways? liability of other experts, such as its entirety, a Form F–9 filer would need • Would rescinding Rule 436(g) lawyers, investment bankers and to obtain the consent of an NRSRO or reduce or eliminate the incentive for a accountants, that we should consider in Approved Rating Organization in the credit rating agency to become an deciding whether to rescind Rule same circumstances as a similarly NRSRO? 436(g)? Are credit rating agencies situated U.S. issuer, notwithstanding • How would rescission of Rule different from other types of experts that the Canadian filer may not be 436(g) affect the process of issuing a from whom we require consent? If so, required to do so under Canadian credit rating? Would the process take how? What steps could we take to provincial law or regulation. How longer? Would the NRSROs and credit account for those differences? How would the elimination of Rule 436(g) rating agencies that are not NRSROs would the elimination of Rule 436(g) affect Form F–9 filers, and why? Should change their procedures? If so, how? change the standard of liability to which the Rule 436(g) exemption be retained Would credit rating agencies seek more, NRSROs are currently subject for the in connection with an NRSRO or less or different information from use of credit ratings in connection with Approved Rating Organization rating registrants in order to provide a credit a registered offering? Is there any reason disclosed in a Form F–9 to maintain rating? How would requiring consents to believe the liability standards consistency of consent requirements from both NRSROs and credit rating applicable to other experts may be with Canadian provincial law or agencies that are not NRSROs affect applied differently to NRSROs and regulation? Should the exemption be their interactions with registrants and credit rating agencies that are not retained for an Approved Rating underwriters? Would there be any NRSROs? Organization rating only, and inflation or deflation of ratings? Why or • Is Section 11 liability appropriate eliminated for an NRSRO rating, why not? for NRSROs and credit rating agencies disclosed in a Form F–9 registration • Would rescinding Rule 436(g) affect that are not NRSROs? What is the statement? Or, insofar as Rule 436(g) the types of products that credit rating expected standard of liability for a concerns the allocation of liability for agencies are willing to rate? How? credit rating to be actionable under portions of a registrations statement, Would they be less likely to rate lower Section 11, and how does it compare to and liability under the Securities Act grade products or products issued by the standard of liability under Section applies without regard to whether a smaller or less well-established 10(b) of the Exchange Act? If Section 11 registration statement is filed pursuant registrants? were applicable, what is the practical • Would any additional disclosure be impact of the different pleading 58 See Item 1120 of Regulation AB. necessary in order for the rating and standards under Section 10(b) of the 59 17 CFR 220.430A. other statements regarding the rating not Exchange Act and Section 11 of the

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Securities Act? How would any claims Would investors with guidelines that reduced competition have on investor of First Amendment protection require them to invest in rated securities protection? applicable to NRSROs be impacted by be able to continue to invest? Would • Would rescinding Rule 436(g) have potential Section 11 liability? such investors change their investing negative consequences for smaller • To reduce the risk of legal liability, guidelines? How long would it take for NRSROs? Would it increase their costs would NRSROs issue more ‘‘defensive’’ any such changes to be implemented? ratings than are warranted? If so, how • What effect would rescinding Rule of doing business? Would it make would this affect the cost of capital for 436(g) have on investors’ reliance on registrants more likely to seek ratings registrants? credit ratings? Would any investors rely from the larger NRSROs? Would it make more or less on credit ratings? Would smaller NRSROs unable to issue ratings Impact on Investors investors view credit ratings as more in connection with registered offerings? • Would eliminating the exemption reliable? Would smaller NRSROs be able to adapt in Rule 436(g) so that NRSROs are to the changes that might occur? Are subject to potential liability under Impact on Competition there ways to mitigate negative Section 11 be beneficial to investors? • How would rescinding Rule 436(g) competitive consequences if Rule 436(g) What effects would there be for affect competition among credit rating were eliminated? investors if we eliminate the exemption agencies? Would treating NRSROs and for NRSROs in Rule 436(g)? Would the credit rating agencies that are not III. General Request for Comments protections afforded by potential NRSROs the same for purposes of We request and encourage any Section 11 liability for NRSROs be offset liability under Section 11 of the interested person to submit comments by any changes in the credit rating Securities Act lower competitive regarding: process, such as possible increases in barriers for credit rating agencies that the use of unregistered offerings or are not NRSROs? Would it have any • The concepts that are the subject of potential disruptions to registrants’ impact on the number of companies this release; access to capital? seeking to be an NRSRO? • additional or different changes; or • • To what extent do the concerns If NRSROs are unable to absorb the • expressed regarding possible undue litigation costs and risks of Section 11 other matters that may have an reliance by investors on credit ratings liability, and competition is reduced as effect on the concepts contained in this suggest that investors actually do a result, what impact, if any, would that release. consider NRSROs to be persons whose We request comment from the point profession gives authority to statements 7] under the Investment Company Act may, for of view of companies, investors, and they make, as contemplated by Sections example, be affected to the extent the rule requires other market participants, including certain securities in which they invest to be rated 7 and 11 of the Securities Act? NRSROs and other credit rating • by an NRSRO. See Rule 2a–7(a)(10)(ii)(A) (long- How would the elimination of Rule term security with a remaining maturity of less than agencies. With regard to any comments, 436(g) affect the quality of credit 397 days that does not have a short-term rating is we note that such comments are of ratings? Would potential liability under not an ‘‘eligible security’’ unless it has at least one greater assistance to us if accompanied Section 11 provide an incentive for long-term rating from an NRSRO); Rule 2a– 7(a)(10)(ii) (asset backed security must be rated by by supporting data and analysis of the NRSROs to provide higher-quality an NRSRO to be an ‘‘eligible security’’); and Rules issues addressed in those comments. ratings? Would quality decline? Why? 2a–7(c)(3)(iii) and (a)(10)(iii)(A) (together permitting • If credit rating agencies, including funds to substitute the credit quality of a guarantor By the Commission. NRSROs, initially refuse to provide for the credit quality of the issuer only if the Dated: October 7, 2009. guarantee (or guarantor) is rated by an NRSRO). The consent or stop issuing credit ratings, Elizabeth M. Murphy, 60 Commission has requested comment on whether how would investors be affected? use of these ratings requirements ought to be Secretary. removed from Rule 2a–7. See Money Market Fund [FR Doc. E9–24547 Filed 10–14–09; 8:45 am] 60 Should NRSROs refuse to issue ratings, money Reform, Release No. IC–28807 (June 30, 2009) [74 market funds subject to Rule 2a–7 [17 CFR 270.2a– FR 32688]. BILLING CODE 8011–01–P

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Part IV

Federal Trade Commission 16 CFR 255 Guides Concerning the Use of Endorsements and Testimonials in Advertising Federal Acquisition Regulation; Final Rule

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FEDERAL TRADE COMMISSION generally representative of what advertisers and the interest of consumer consumers can expect. Twenty-two protection.4 As discussed below, others 16 CFR Part 255 comments were filed in response to this argued that the evidence in the record notice. did not support the proposed changes,5 Guides Concerning the Use of In November 2008, the Commission that the proposed revisions to the Endorsements and Testimonials in published a FEDERAL REGISTER notice, 73 Guides could have a negative affect on Advertising FR 72374 (Nov. 28, 2008), that emerging media channels and impede AGENCY: Federal Trade Commission. discussed the comments it had received the ability of businesses to communicate in 2007, proposed certain revisions to ACTION: Final Rule; Notice of adoption with consumers through legitimate of revised Guides. the Guides, and requested comment on testimonials and endorsements,6 and those revisions. Seventeen comments that the Commission should look to were filed.1 After reviewing those SUMMARY: The Federal Trade industry to address any problems in the comments, the Commission is now Commission (‘‘FTC’’ or ‘‘Commission’’) marketplace and, where appropriate, to is adopting revised Guides Concerning making additional changes to the revise existing self-regulatory the Use of Endorsements and Guides, and adopting the resulting frameworks to address the evolving Testimonials in Advertising (‘‘the revised Guides as final.2The revised concerns posed by emerging digital Guides’’). Guides include additional changes not advertising channels.7 As discussed DATES: Effective December 1, 2009. incorporated in the proposed revisions published for public comment in below, the application of the Guides to FOR FURTHER INFORMATION CONTACT: November 2008. See 73 FR 72374 (Nov. new media and the Commission’s Shira Modell, Attorney, Division of 28, 2008). proposed elimination of the ‘‘safe Advertising Practices, Bureau of harbor’’ afforded by the 1980 Guides to Consumer Protection, Federal Trade II. REVIEW OF COMMENTS ON non-typical testimonials accompanied Commission, Washington, D.C., 20580; PROPOSED REVISIONS TO THE by disclaimers of typicality were issues (202) 326-3116. GUIDES addressed in a number of the comments. SUPPLEMENTARY INFORMATION: Nearly all of the comments received A. Analysis of Comments Concerning by the Commission took issue with, or Table of Contents What Communications Should Be raised questions about, one or more of I. OVERVIEW OF THE COMMISSION’S the changes included in the proposed Considered ‘‘Endorsements’’ Under REVIEW OF THE GUIDES revised Guides.3 Several argued that § Section 255.0 of the Guides II. REVIEW OF COMMENTS ON there was no need for the Guides to be 1. General Issues PROPOSED REVISIONS TO THE revised at all, and that the 1980 Guides, GUIDES combined with continued industry self- As proposed by the Commission in its regulation and the Commission’s case- November 2008 FEDERAL REGISTER III. SECTION-BY-SECTION by-case law enforcement, would notice, Section 255.0(b) of the Guides DESCRIPTION OF ADDITIONAL adequately balance the needs of would state in part that: CHANGES TO PROPOSED GUIDES PUBLISHED IN NOVEMBER 2008 1Comments were submitted by the American [A]n endorsement means any IV. REVISED ENDORSEMENT AND Association of Advertising Agencies (‘‘AAAA’’), the advertising message (including verbal TESTIMONIAL GUIDES American Advertising Federation (‘‘AAF’’), the statements, demonstrations, or Council for Responsible Nutrition (‘‘CRN’’), the depictions of the name, signature, I. OVERVIEW OF THE COMMISSION’S Direct Marketing Association (‘‘DMA’’), the Direct likeness or other identifying personal REVIEW OF THE GUIDES Selling Association (‘‘DSA’’), the Electronic Retailing Association (‘‘ERA’’), the Interactive characteristics of an individual or the The Commission began a review of Advertising Bureau, Inc. (‘‘IAB’’), the Promotion name or seal of an organization) that the Guides pursuant to the agency’s Marketing Association, Inc. (‘‘PMA’’), the U.S. Chamber of Commerce (‘‘C of C’’), the Association consumers are likely to believe ongoing regulatory review of all current of National Advertisers (‘‘ANA’’), the Public reflects the opinions, beliefs, findings, rules and guides. In January 2007, the Relations Society of America (‘‘PRSA’’), Higher or experiences of a party other than Commission published a FEDERAL Power Marketing (‘‘HPM’’), the Natural Products the sponsoring advertiser, even if the REGISTER notice seeking comment on the Association (‘‘NPA’’), the National Association of Realtors (‘‘NAR’’), the Word of Mouth Marketing views expressed by that party are overall costs, benefits, and regulatory Association (‘‘WOMMA’’), BzzAgent, Inc. identical to those of the sponsoring and economic impact of the Guides. 72 (‘‘BzzAgent’’), the Personal Care Products Council advertiser. FR 2214 (Jan. 18, 2007). The (‘‘PCPC), Kelley Drye & Warren, LLP, Monyei- Commission also requested comment on Hinson, and Heath-McLeod. In some cases, a One commenter stated that defining consumer research it commissioned comment was submitted by more than one party. Citations to these joint comments identify the endorsements based on a subjective regarding the messages conveyed by individual commenters (e.g., AAAA/AAF). In measure of consumer understanding – consumer endorsements and on several addition, several commenters signed on to more other specific issues, the most than one comment. that is, by the sole criterion of whether significant of which was the use of so- 2The Guides represent administrative consumers are likely to believe the interpretations concerning the application of statement reflects the views of the called ‘‘disclaimers of typicality’’ Section 5 of the FTC Act (15 U.S.C. 45) to the use accompanying testimonials that do not of endorsements and testimonials in advertising. 4AAAA/AAF, at 8, 10, 18; PRSA, at 2; ANA, at represent experiences that consumers They are advisory in nature, and intended to give 2; DMA, at 3 (stating that the current approach can generally achieve with the guidance to the public in conducting its affairs in should be continued ‘‘[u]ntil there is a conformity with Section 5. advertised product or service. demonstrated market failure across all media 3The exceptions were the comments filed by channels’’). Specifically, the Commission asked Monyei-Hinson (calling for stringent regulation of 5PMA, at 3; DMA, at 3 (stating that there is an about the potential effect on advertisers endorsements and new media, and specific rules ‘‘insufficient basis to support a conclusion that the regarding holding celebrities accountable and and consumers if the Guides required current regulatory and market safeguards disclosing celebrity pay); and Heath-McLeod clear and conspicuous disclosure of the (agreeing overall with the proposed changes but inadequately protect consumers’’). generally expected performance calling for, among other things, minimum standards 6DMA, at 1. whenever the testimonial is not for the size and clarity of disclosures). 7IAB, at 3.

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endorser, rather than that of advertiser some suggesting that the future growth is intended by the former and the – creates inherent uncertainty.8 of these new media wouldbe adversely Guides should not apply.17 The Guides have always defined affected if they were subject to the Similarly, the other commenter noted ‘‘endorsements’’ by focusing on the Guides because advertisers would be that the Guides should not message consumers take from the deterred from using them.14 These ‘‘inadvertently regulate everyday word- speech at issue.9 Indeed, this focus on commenters opined that the of-mouth communications among actual consumer takeaway is completely Commission should, instead, defer to consumers regardless of whether such consistent with the approach the industry self-regulation, as it has done communications take place in person, Commission uses to determine whether in the past when industry has proven via e-mail or in new mediums such as a practice is deceptive, and thus in itself capable of protecting consumers.15 blogs or social networking Web sites.’’18 violation of the FTC Act.10 Accordingly, One commenter observed that the This commenter stated that even if the Commission concludes that no proposed Guides could leave the consumers participate in advertising additional changes to the proposed impression that any blog that speaks sampling programs, their online revised definition of ‘‘endorsement’’ are positively about a product would comments about a particular product warranted. necessarily be covered by the Guides, should not be considered commercial speech and these consumers should not 2. New Media – Consumer-Generated and thus by Section 5, and that such an be deemed ‘‘endorsers’’ when they are Content as an ‘‘Endorsement’’ Within outcome would be wrong for a blog: free to say whatever they want about the the Meaning of the Guides that functions similarly to traditional product (or not say anything at all) media . . . if (1) the blog provides The Commission’s November 2008 without the advertiser having any content that is editorially proposal included several examples control over their statements.19 By independent of any sponsor or applying various Guide provisions to extension, this commenter contended marketer of a product or service, and new forms of consumer-generated that neither the advertiser nor the (2) there is no material connection media, such as the use of blogs in word publisher should be liable for any false with the marketer of a product or of mouth marketing campaigns, and or unsubstantiated statements made by service that is discussed in the blog several commenters focused specifically these consumer reviewers.20 on these examples.11 Some of the that would call into question the The comments correctly point out that 16 comments questioned whether editorial independence of the blog. the recent development of a variety of statements in certain of these new Two commenters with particular consumer-generated media poses new media qualify as ‘‘endorsements’’ under interest in word of mouth marketing questions about how to distinguish the Guides, given, among other things, also addressed the application of the between communications that are the advertiser’s limited control over the Guides to these new consumer- considered ‘‘endorsements’’ within the messages disseminated to the public.12 generated media. One noted the meaning of the Guides and those that Other commenters argued that it was distinction between blogs that are just are not. The Commission disagrees, premature for the Commission to apply personal communication spaces, and however, with those who suggest that the Guides to these new media without those that are essentially commercial there is not yet an adequate basis to the opportunity for further discussion communication spaces, asserting that provide guidance in this area. As set about these media and guidance on the although an ‘‘advertising message’’ is forth below, after considering the scope of the liability that the Guides intended by the latter – making it observations provided by various would create for advertisers,13 with subject to the Guides – no such message commenters, the Commission is setting forth a construct for analyzing whether 8PRSA, at 3. 1980 Guides, so it can give appropriate or not consumer-generated content falls consideration to the unique characteristics of this 9The proposed revised definition reflects only within the definition of an endorsement one change from the definition adopted in 1980: the particular medium of communication). addition of the phrase ‘‘even if the views expressed 14IAB, at 3 (‘‘If the Commission were to adopt in Section 255.0(b) of the Guides. The by that party are identical to those of the sponsoring guidelines addressing new media without a Commission will, of course, consider advertiser.’’ sufficient understanding of how such new each use of these new media on a case- 10FTC Policy Statement on Deception, appended technologies are being harnessed or may be used in the future, the Commission might risk dissuading by-case basis for purposes of law to Cliffdale Associates, Inc., 103 F.T.C. 110, 174, enforcement, as it does with all 175 (1984) (citation omitted) (hereafter ‘‘Deception the development of novel means of advertising that Policy Statement’’) (stating that in determining effectively serve the interests of consumers in ways advertising. whether a representation, omission, or practice is not yet imagined.’’); AAAA/AAF, at 17 The Commission does not believe that deceptive, ‘‘we examine the practice from the (‘‘[R]egulating these developing media too soon may all uses of new consumer-generated perspective of a consumer acting reasonably in the have a chilling effect on blogs and other forms of circumstances’’). viral marketing, as bloggers and other viral marketers will be discouraged from publishing 17WOMMA, at 6. 11WOMMA defines ‘‘word of mouth marketing’’ content for fear of being held liable for any 18BzzAgent, at 1; see also id. at 4-5 (FTC should as ‘‘Giving people a reason to talk about your potentially misleading claim.’’); DMA, at 5 (noting ‘‘distinguish between honest word of mouth shared products and services, and making it easier for that a potential ‘‘chilling effect on the use of the Internet among actual consumers from marketing messages conversation to take place. It is the art and science as a communication channel’’). spread by controlled consumer endorsers ’’; of building active, mutually beneficial consumer-to- 15 consumers who participate in BzzAgent network consumer and consumer-to-marketer E.g., IAB, at 3; C of C, at 5 (the industry has already successfully self-regulated). marketing program are the former). communications.’’ http://womma.org/womm101 19BzzAgent, at 6-8 (if mere provision of samples (last visited Oct. 1, 2009). 16PCPC, at 1-2 (asserting that ‘‘a magazine article to honest reviewers is considered proxy for control, 12 E.g., BzzAgent, at 4-5. or newspaper article that reviews a product is not reviewers would inadvertently qualify as endorsers, 13ERA/CRN, at 33; PMA, at 17 (citing the ‘‘near- an ‘endorsement’ for purposes of advertising law, so even though their views are their own, not those of endless’’ variety of possible relationships between too is a blog that performs this same function,’’ and the company that provided the free product). bloggers and the companies about whose products that receipt by the blogger of a free product sample 20 Id. at 6-8 (noting that modern companies that they blog); see also DMA, at 4-5 (stating that the for review purposes does not change this analysis, distribute product samples to facilitate honest word Commission should not apply the same principles ‘‘provided that the product itself does not have such of mouth communications are analogous to ‘‘addressing narrow concerns associated with a high value that would make its receipt material distributor who offers free samples to grocery endorsements made through a print medium to (e.g., a car), since the resulting editorial content – shoppers, that participants in these network dynamic channels such as the Internet’’; rather than good or bad – is not controlled by the marketer’’); marketing program are analogous to supermarket apply the Guides to these new media, the see also IAB, at 4 (stating that bloggers, like movie shoppers who try the free sample and perhaps tell Commission should address the issue by means of critics, are provided free product because the their friends about it, and that neither of these case-by-case law enforcement actions under the marketer wants unbiased feedback). scenarios should be encompassed by the Guides).

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media to discuss product attributes or itself or by a third party on behalf of the applied to them did not submit any consumer experiences should be marketer. evidence supporting their concerns. deemed ‘‘endorsements’’ within the Although other situations between Moreover, to the extent that consumers’ meaning of the Guides. Rather, in these two ends of the spectrum will willingness to trust social media analyzing statements made via these depend on the specific facts present, the depends on the ability of those media to new media, the fundamental question is Commission believes that certain fact retain their credibility as reliable whether, viewed objectively, the patterns are sufficiently clear cut to be sources of information, application of relationship between the advertiser and addressed here. For example, a blogger the general principles embodied in the the speaker is such that the speaker’s could receive merchandise from a Guides presumably would have a statement can be considered marketer with a request to review it, but beneficial, not detrimental, effect. And ‘‘sponsored’’ by the advertiser and with no compensation paid other than although industry self-regulation therefore an ‘‘advertising message.’’In the value of the product itself. In this certainly can play an important role in other words, in disseminating positive situation, whether or not any positive protecting consumers as these new statements about a product or service, is statement the blogger posts would be forms of marketing continue to evolve the speaker: (1) acting solely deemed an ‘‘endorsement’’ within the and new ones are developed,24 self- independently, in which case there is meaning of the Guides would depend regulation works best when it is backed no endorsement, or (2) acting on behalf on, among other things, the value of that up by a strong law enforcement of the advertiser or its agent, such that product, and on whether the blogger presence. Thus, for example, the the speaker’s statement is an routinely receives such requests. If that National Advertising Division of the ‘‘endorsement’’ that is part of an overall blogger frequently receives products Council of Better Business Bureaus will marketing campaign? The facts and from manufacturers because he or she is refer matters to the Commission when circumstances that will determine the known to have wide readership within advertisers refuse to participate in, or do answer to this question are extremely a particular demographic group that is not abide by the decisions of, NAD’s varied and cannot be fully enumerated the manufacturers’ target market, the self-regulatory review and dispute here, but would include: whether the blogger’s statements are likely to be resolution process. The Commission speaker is compensated by the deemed to be ‘‘endorsements,’’ as are believes that guidance as to the types of advertiser or its agent; whether the postings by participants in network consumer-generated content that will be product or service in question was marketing programs. Similarly, considered ‘‘endorsements’’ within the provided for free by the advertiser; the consumers who join word of mouth meaning of the Guides, and as to the terms of any agreement; the length of marketing programs that periodically responsibilities of the parties involved, the relationship; the previous receipt of provide them products to review informs both advertisers and endorsers products or services from the same or publicly (as opposed to simply giving of their attendant responsibilities in similar advertisers, or the likelihood of feedback to the advertiser) will also ensuring that advertising is truthful and future receipt of such products or likely be viewed as giving sponsored non-misleading, and reduces potential 22 services; and the value of the items or messages. misunderstanding of their obligations services received. An advertiser’s lack of Finally, the Commission disagrees under Section 5 of the FTC Act.25 with those who suggest that including control over the specific statement made 3. New Example via these new forms of consumer- in the Guides examples based on these generated media would not new media would interfere with the The Commission is adding a new automatically disqualify that statement vibrancy of these new forms of Example 8 to Section 255.0 to provide from being deemed an ‘‘endorsement’’ communication, or that the Commission additional guidance about application of within the meaning of the Guides. should, instead, defer to industry self- the factors set forth in Part II.A.2 above Again, the issue is whether the regulation. Whether or not the Guides to statements made in consumer- consumer-generated statement can be include examples based on these new generated media. This example posits considered ‘‘sponsored.’’ media does not affect the potential three different fact patterns in which a Thus, a consumer who purchases a liability of those who use these media consumer writes a positive blog review product with his or her own money and to market their products and services. about a new product she has tried. In praises it on a personal blog or on an The Guides merely elucidate the the first hypothetical, her statement is electronic message board will not be Commission’s interpretation of Section not deemed to be an endorsement deemed to be providing an 5, but do not expand (or limit) its within the meaning of the Guides application to various forms of because of the lack of any relationship endorsement.21 In contrast, postings by marketing. Furthermore, the whatsoever between the speaker and the a blogger who is paid to speak about an Commission notes that spending on manufacturer. In the second advertiser’s product will be covered by these new social media is projected to hypothetical, a coupon for a free trial of the Guides, regardless of whether the increase,23 the new product is generated by the blogger is paid directly by the marketer and the commenters who expressed concerns about the future of store’s computer, based on her 21Even if that consumer receives a single, these new media if the Guides were purchases; again, given the absence of a unsolicited item from one manufacturer and writes positively about it on a personal blog or on a public 22The fact that the participants technically might 24Indeed, some industry groups have made message board, the review is not likely to be be free not to say anything about any particular established codes of ethics that are very much in deemed an endorsement, given the absence of a product they receive through the program does not line with the approach taken in the Guides. For course of dealing with that advertiser (or others) change the Commission’s view that positive example, WOMMA attached to its comment a copy that would suggest that the consumer is statements would be deemed to be endorsements. of the Word of Mouth Marketing Ethics Code of disseminating a ‘‘sponsored’’ advertising message. The underlying purpose of these word of mouth Conduct. This is not to say that use of a personal blog marketing programs is to generate positive 25The examples involving new media included in means that the statements made therein would discussion about the advertiser’s products. the revised Guides are based on specific fact necessarily be deemed outside the scope of the 23According to WOMMA, $1.35 billion was spent patterns that lend themselves to relatively clear Guides; the Commission would have to consider the on social media marketing in 2007, and that figure answers. The Commission recognizes that many rest of the indicia set forth above to determine if is expected to reach $3.7 billion by 2011. (http:// other hypotheticals could be posited that would be the speaker was essentially ‘‘sponsored’’ by the www.ft.com/cms/s/0/9a58f44c-1fae-11de-a1df- far more difficult to answer; those will have to be advertiser. 00144feabdc0.html) (last visited Oct. 1, 2009). considered on a case-by-case basis.

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relationship between the speaker and 255.1. First, a proposed cross-reference content such that it has established an the manufacturer or other factors to Example 3 in Section 255.3 endorser-sponsor relationship. It is supporting the conclusion that she is (endorsements by experts) is being foreseeable that an endorser may acting on behalf of the manufacturer deleted from Section 255.1(a). Second, a exaggerate the benefits of a free product (i.e., that her statement is ‘‘sponsored’’), cross-reference to the Guide provisions or fail to disclose a material relationship her review would not be deemed to be in Section 255.3 that set forth the where one exists. In employing this an endorsement. In the third fact standards that expert endorsers must means of marketing, the advertiser has pattern, however, there is an ongoing meet is being added to new Example 3 assumed the risk that an endorser may relationship between the consumer and in Section 255.1. fail to disclose a material connection or a network marketing program, and misrepresent a product, and the economic gain by the consumer based C. Comments Concerning the Liability of potential liability that accompanies that on the stream of products, thereby Endorsers and Advertisers for risk. The Commission, however, in the making the blog posting an endorsement Endorsements Disseminated Through exercise of its prosecutorial discretion, within the meaning of the Guides. New Media would consider the advertiser’s efforts Several comments questioned to advise these endorsers of their 4. Other Issues whether the advertiser should be liable responsibilities and to monitor their Another commenter asked the for statements made by endorsers who online behavior in determining what Commission to address several use new media. One suggested that the action, if any, would be warranted. questions. First, would a product review advertiser should be liable for New Example 5 should not be read to written by an employee of an comments of an ‘‘endorser’’ only if the suggest that an advertiser is liable for organization to inform the advertiser had the ability to control the any statement about its product made by organization’s members about the consumer’s statements.28 Thus, if any blogger, regardless of whether there availability, qualities, and features of consumers are free to say what they is any relationship between the two. particular products and services of wish about the product – or, if they However, when the advertiser hires a interest to them be an endorsement by choose, to say nothing about it – the blog advertising agency for the purpose the organization within the meaning of advertiser should not face potential of promoting its products – as posited the Guides?26 Second, assuming such a liability.29 by the specific facts set forth in this review would not be covered by the Several comments specifically example – the Commission believes it is Guides, would the use of that review (or expressed concern about proposed new reasonable to hold the advertiser of quotations from it), in an Example 5 to Section 255.1, with some responsible for communicating advertisement disseminated by the concerned that the example suggests approved claims to the service (which, seller of that product create ‘‘endorser’’ that bloggers potentially would be liable in turn, would be responsible for liability for the organization if the under Section 5 for simply giving their communicating those claims to the organization did not consent to or honest appraisal of a product and how blogger). otherwise participate in the seller’s use it affected them personally.30 The commenters expressing concern of the product review?27 Commenters also focused on the fact that the blogger in new Example 5 The answer to the first question is that that the advertiser could be liable for potentially could be liable for giving her such a review published in the statements made by the blogger.31 honest opinion of the product (that it organization’s own journal would not be The Commission recognizes that cures eczema) and discussing her considered an endorsement because the because the advertiser does not personal experience with it appear to Commission would not consider the disseminate the endorsements made have misread the example. The blogger review to be an advertisement, and there using these new consumer-generated did not either give her opinion about is no sponsoring advertiser. However, if media, it does not have complete subjective product characteristics (e.g., that review was used in an ad control over the contents of those that she liked the fragrance) or relate her disseminated by the manufacturer of a statements. Nonetheless, if the own experience with it (the example product that received a favorable advertiser initiated the process that led does not say that she had eczema). review, the organization’s statements to these endorsements being made –e.g., Rather, she made a blanket claim that would become an ‘‘endorsement’’ by providing products to well-known the product ‘‘cures’’ eczema without within the meaning of Section 255.0(d). bloggers or to endorsers enrolled in having any substantiation for that claim. (See Section 255.0, Example 1.) word of mouth marketing programs – it The Commission is revising new Nonetheless, assuming that the potentially is liable for misleading Example 5, however, to clarify that both organization did not know about the statements made by those consumers. the advertiser and the blogger are manufacturer’s plan to use that review Imposing liability in these subject to liability for misleading or and did not receive any compensation circumstances hinges on the unsubstantiated representations made in for its use, the organization would not determination that the advertiser chose the course of the blogger’s endorsement. be liable for its use, even if the review to sponsor the consumer-generated D. Comments Addressing Celebrity did not comply with the Guide Endorsements provisions concerning endorsements by 28Bzz Agent, at 4-5; see also IAB, at 4 (stating that organizations. (See Section 255.4.) making marketers liable for ‘‘actions of third parties The 1980 Guides did not explicitly over whom they exercise uncertain control’’ could state that endorsers, as well as B. Section 255.1 – General lead to unintended consequences). advertisers, could be liable under the 29 Considerations Bzz Agent, at 4-5. FTC Act for statements they make in an 30WOMMA, at 9; ANA, at 6. Although no commenters addressed 31ANA, at 6 (stating that advertiser would be endorsement. To make that potential the General Considerations section of liable for blogger’s statements and failure to liability more apparent to those who the Guides, the Commission is making disclose material connections); DMA, at 4-5 (stating might be considering making an two additional revisions to Section that advertiser would be liable for statements made endorsement (and to those counseling by blogger over whom it has no control); PMA, at 17 (stating that example appears to create liability prospective endorsers), the 26NAR, at 1. for any company that sells a product that is Commission’s proposed revised Guides 27 Id. at 1-2. reviewed by a blogger). included new language in Section

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255.1(d) stating that ‘‘Endorsers . . . may interpreted as imposing an obligation on Section 255.1(d), this new provision be liable for statements made in the celebrity endorsers to ensure that claims merely ‘‘explicitly recognizes two course of their endorsements.’’The made by the advertiser and principles that the Commission’s law Commission’s proposal also included communicated by the celebrities are enforcement activities have already several new examples featuring independently verified and properly made clear,’’ one of which is ‘‘that celebrities and experts. (See, e.g., substantiated – thereby requiring endorsers may also be subject to liability Section 255.0, Example 6; Section 255.1, celebrities to educate themselves not for their statements.’’73 FR at 72377. Examples 3 and 4.) only on the product at issue, but also on Nor should Example 6 to Section One comment asserted that proposed the relevant industry and competition.38 255.0 be read to suggest that every new Example 6 in Section 255.032 One comment opined that absent suggests that any recognizable figure knowledge and control, celebrity appearance by a well-known personality who speaks about the attributes of a liability based solely on participation in will be deemed an endorsement. As the product or service would be considered an ad would be contrary to existing case Commission previously noted, this an endorser, even if the celebrity’s law.39 Another stated that it was not example was added ‘‘to illustrate that statements are clearly scripted and do necessary to include a celebrity liability the determination of whether a not contain an expression of personal provision in the Guides, but to the speaker’s statement is an endorsement belief.33 This commenter also asserted extent that the FTC determined that depends solely on whether consumers that ‘‘under this new standard, when such a guide is necessary, a narrowly believe that it represents the endorser’s coupled with the proposed changes to tailored provision enumerating the own view.’’Id. Example 6 does not endorser liability, a celebrity with a circumstances under which a celebrity expand the scope of potential endorser well-known voice who provides a may be held liable would accomplish liability but merely ‘‘clarifies that scripted voice-over is just as liable for the Commission’s goals without creating whether the person making the an advertisement’s message as a an unnecessary chilling effect.40 statement is speaking from a script, or celebrity who promotes a product with The commenters also asked the giving the endorsement in his or her direct statements of endorsement, such Commission to reconsider new Example words, is irrelevant to the as ‘‘I use product X every day. It works 4 to revised Section 255.l41 because ‘‘it determination.’’Id. In this example, the for me.’’34 could unfairly expose celebrities to celebrity’s statement that the home Two commenters stated that the liability for claims beyond his/her fitness system being advertised ‘‘is the proposed revisions to the Guides could expertise or control.’’42 They pointed most effective and easy-to-use home unfairly expose celebrities to liability out not only does the celebrity have no exercise machine that she has ever for advertising claims that they lack the control over the final version of the tried’’ would clearly be understood by knowledge to verify or the authority to roasting bag infomercial, but even consumers as an expression of personal change; indeed, they noted, celebrities during filming there could be activities belief. Moreover, new Example 7 to who attempted to deviate from the of which the celebrity was unaware and Section 255.0 presents a situation in script they are given might be subject to thus for which he or she should not be which well-known persons who appear legal action for breach of contract.35 43 held liable. in advertising are not deemed to be Because the proposed revised Guides The addition of new Section 255.1(d) endorsers. provide little guidance about when and the new examples featuring celebrities would be liable for their celebrities does not create new liability The Commission is not persuaded endorsements, according to these for celebrities,44 but serves merely to let that a celebrity endorser’s contractual commenters, celebrities might become them (and their advisors) know about obligation to read the script he or she is concerned about potential liability; and the potential liability associated with given should confer immunity from if so, they could be deterred from their endorsement activities. Indeed, as liability for misrepresentations made in endorsing products, thereby depriving the Commission noted when it proposed the course of that endorsement.45 The advertisers of a long-standing and celebrity has decided to earn money by valuable advertising technique.36 38AAAA/AAF, at 11-12; see also PMA, at 11. providing an endorsement. With that Specifically, the commenters pointed 39AAAA/AAF, at 13. opportunity comes the responsibility for out that celebrities are under contract to 40PMA, at 13. the celebrity or his or her legal read the script that is provided to them, 41In that example, a well-known celebrity appears in an infomercial for an oven roasting bag that representative to ensure in advance that and do not have control over the content purportedly cooks every chicken perfectly in thirty the celebrity does not say something of the final ad, including how their minutes. During the shooting of the infomercial, the that does not ‘‘reflect [his or her] honest endorsements will appear; nor do they celebrity watches five attempts to cook chickens opinions, findings, beliefs, or possess the expertise needed to assess using the bag. In each attempt, the chicken is undercooked after thirty minutes and requires sixty experience.’’See 16 CFR 255.1(a). whether a particular claim violates the minutes of cooking time. In the commercial, the Furthermore, because celebrity FTC Act.37 The proposed Guide celebrity places an uncooked chicken in the endorsers are liable for what they say, revisions, they asserted, could be roasting bag and places the bag in one oven. He then takes a bag from a second oven, removes what not for the rest of the advertisement, appears to be a perfectly cooked chicken, tastes it, their lack of control over the final 32 In that example, an infomercial for a home and says that if you want perfect chicken every version of a commercial does not fitness system is hosted by a well-known time, in just thirty minutes, this is the product you warrant the immunity sought by the entertainer. The entertainer demonstrates the need. machine and states that it is the most effective and 42AAAA/AAF, at 13-14; see also PMA, at 14. commenters. Nor are they required to easy-to-use home exercise machine that she has 43AAAA/AAF, at 13-14; PMA, at 14 (stating that become experts on the product or the ever tried. The example states that even if she is a celebrity cannot keep up with every element of industry, although they may have an reading from a script, this statement would be an production on infomercial set or know how final endorsement, because consumers are likely to obligation to make reasonable inquiries product will be edited). believe it reflects the entertainer’s views. of the advertiser that there is an 44As the Commission noted in its November 2008 33PMA, at 12. FEDERAL REGISTER notice, law enforcement actions 34 Id. have been brought against well-known personalities 45 Cf. FTC v. Publishing Clearing House, Inc., 106 35AAAA/AAF, at 11; PMA, at 13. (i.e., celebrities) who have acted as endorsers. 73 F.3d 407 (9 th Cir. 1997) (affirming liability for 36AAAA/AAF, at 11; PMA, at 12. Fed Reg. at 72377 (citing Cooga Mooga, Inc., 92 restitution of telephone solicitor who read facially 37AAAA/AAF, at 11-13; PMA, at 13. F.T.C. 310 (1978) (consent order)). deceptive script ‘‘word for word’’).

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adequate basis for assertions that the attribute of the advertised product or 1. Comments Arguing That the Proposed script has them making. service: Revisions to Section 255.2 Are Unwarranted and Not Supported by The Commission believes that the will be interpreted as representing Reliable Evidence commenters misread FTC v. Garvey, 383 that the endorser’s experience is F.3d 891 (9 th Cir. 2004). The Ninth representative of what consumers will Several commenters argued that the Circuit noted that it had previously held generally achieve with the advertised Commission lacks an adequate basis for that direct participation in the acts in product in actual, albeit variable, its proposed change to Section 255.2 question or authority to control them conditions of use. Therefore, unless because the staff’s two consumer was sufficient to hold an individual the advertiser possesses and relies research reports46 are flawed and/or too liable for injunctive relief, although upon adequate substantiation for this limited in scope to warrant application more was required to hold that person representation, the advertisement to the entire advertising universe.47 liable for restitution. Id. at 900. The only should either clearly and Others asserted that there is little issue before the court was restitution conspicuously disclose what the evidence consumers are deceived by because, as the court noted, the generally expected performance testimonials. According to these Stipulated Final Order entered by the would be in the depicted comments, consumers understand that district court ‘‘apparently applies to the circumstances or clearly and aspirational testimonials are reflective Garvey defendants and provides the conspicuously disclose the limited of specific consumers’ circumstances,48 FTC all of the injunctive relief it could applicability of the endorser’s and many of the respondents in the get against [them] .... [A]ll the FTC experience to what consumers may Commission’s studies who took away stands to gain from the Garvey generally expect to achieve. messages of typicality from the defendants here is restitution; the issue endorsements tested in those studies of injunctive relief is moot.’’Id. at 900 As revised per the November 2008 did not actually believe them, so the n.10. Although the court ultimately FEDERAL REGISTER notice, Section 255.2 testimonials were not deceptive.49 One concluded, contrary to the would state that an ad featuring commenter submitted the results of new Commission’s view, that the consumer testimonials will likely consumer survey research purporting to ‘‘substantiation [Garvey] had was convey that the testimonialists’ show that changes to Section 255.2 are sufficient – at least for someone in [his] experiences are representative of what not needed because most consumers position’’ to avoid liability for consumers can generally expect from expect their results to differ from the restitution, id. at 902 (footnote omitted), the product or service in actual, albeit featured consumer’s or endorser’s that decision was based solely on the variable, circumstances, and that: results, and that almost all believe that facts of that case and does not foreclose If the advertiser does not have a number of factors influence the results ‘‘participant’’ liability for celebrities. substantiation that the endorser’s that ordinary consumers have when Finally, it should be noted that experience is representative of what using products advertised using proposed new Example 4 sets forth a consumers will generally achieve, the testimonials.50 specific set of facts in which the advertisement should clearly and Two commenters noted that whether celebrity is liable only for statements conspicuously disclose the generally a particular disclaimer of typicality is that he personally made that were expected performance in the depicted sufficient is a determination that must clearly contrary to what he observed circumstances, and the advertiser be made based on the facts of the with his own eyes, not for things out of must possess and rely on adequate particular advertisement.51 One argued his control. That is not to say that a substantiation for that representation. celebrity who participates in the making 46The first report, ‘‘The Effect of Consumer of a claim that he or she should realize 73 FR at 72392 (footnote omitted). Testimonials and Disclosures of Ad Communication is exceptional –e.g., this product causes Thus, the proposed revisions would for a Dietary Supplement’’ (hereafter ‘‘Endorsement eliminate the safe harbor that the 1980 Booklet Study’’), was designed to examine whether you to lose 10 pounds in 7 days – is consumer endorsements communicate product excused from making reasonable Guides extended to non-typical efficacy and typicality, and whether any of several inquiries as to the advertiser’s basis for testimonials accompanied ≥by results prominent disclosures qualify or limit the claims those claims, but Example 4 posits very not typical≥ disclaimers, and require conveyed by the ads. The second report, ‘‘Effects of advertisers to meet the same Consumer Testimonials in Weight Loss, Dietary different circumstances. Accordingly, Supplement and Business Opportunity the Commission has concluded that no substantiation requirements that would Advertisements,’’ was designed to explore the additional changes should be made to apply if they made that performance communication of product efficacy and typicality proposed new Example 4. claim directly, rather than through the by advertisements containing testimonials of means of a testimonial. individuals who claimed to have achieved specific E. Comments Addressing Revisions to (that is, numerically quantified) results with the The comments argued that the Section 255.2 of the Guides – Use of advertised product or system. Commission does not have an adequate 47AAAA/AAF/CRN/DMA/DSA/ERA/IAB/PMA/C Testimonials Reflecting Non-typical basis for changing the Guides in this of C, at 3-4 (hereafter ‘‘C of C’’); AAAA/AAF, at 6- Consumer Experiences 7; PMA, at 10-11; ANA, at 2-3; ERA/CRN, at 3-4, manner; that the change would 25 (stating that it is improper to rely on two studies Many of the comments submitted in impermissibly chill truthful speech in of print ads to develop federal policy for all response to the November 2008 FEDERAL violation of the First Amendment; and advertisements containing testimonials in any type REGISTER notice criticized the proposed that it would simultaneously limit the of media, including media that were not tested in changes to the provisions of Section these studies). use of testimonials – to the detriment of 48 255.2 that address the use of AAAA/AAF, at 6-7. both advertisers and consumers – and 49ERA/CRN, at 17-20; see also PRSA, at 3 testimonials that do not reflect the impose substantial burdens on those (questioning premise that consumers would results consumers can generally expect who continue to use them. For the most naturally assume that endorsement represents to achieve using the advertised product part, these arguments repeat criticisms typical results). or service. made in response to the January 2007 50Kelley Drye, at 9. 51 FEDERAL REGISTER ERA/CRN, at 21-22; C of C, at 4 (stating that The 1980 Guides said that a notice, and thus have each ad containing a testimonial should be testimonial relating a consumer’s already been considered by the analyzed on its own merits); see also ANA, at 3 experience with respect to a key Commission. Continued

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that there was no logical connection The Commission agrees that each ad 2. Argument that the proposed revisions between the Commission’s concern must be evaluated on its own merits to to Section 255.2 will chill truthful about the legibility of disclaimers and determine whether it is misleading. The speech in contravention of First the proposed changes to Section 255.2, proposed revisions to Section 255.2 Amendment and that the appropriate remedy is would not change that fundamental Several commenters argued that the 52 requiring bigger, clearer disclaimers. tenet of the Commission’s approach to proposed changes to the Guides would The staff’s two consumer research law enforcement. Nor would they deter advertisers from using truthful reports were put on the public record in prohibit the use of disclaimers of testimonials – either because they January 2007, and comments criticizing typicality.54 The proposed revisions would be unable to generate adequate those reports were considered by the would eliminate the safe harbor for substantiation that those testimonials Commission when it issued the ‘‘results not typical’’ and similar reflected the results consumers could November 2008 FEDERAL REGISTER disclaimers that developed following generally expect or because they would notice. The Commission concluded that: the issuance of the 1980 Guides, thereby be unwilling to risk a challenge by the After reviewing the staff’s consumer putting advertisers who use testimonials Commission.56 Either way, they research reports (including the new on the same legal footing as those who contend, the advertiser’s First tables), as well as all of the issues convey the same claims to consumers Amendment rights will be infringed. raised by the commenters, the directly (that is, without testimonials). One commenter making this argument Commission believes that the results noted that it might be virtually of the staff’s studies do provide useful The Commission disagrees, however, impossible for an advertiser to empirical evidence concerning the with those who contend that, rather determine generally expected results to messages that testimonials convey to than proceed with the proposed changes the FTC’s satisfaction a priori. Another consumers and the effects of various to Section 255.2 and eliminate that safe contended that as revised, the Guides types of disclaimers on the harbor, it should simply require larger, would either be forcing speech or communication of efficacy and clearer disclaimers.55 Even disclaimers imposing significant costs on truthful typicality claims. substantially larger than those that are speech (that is, the cost of research to 73 FR at 72385 (footnote omitted). typically used by advertisers would test the effectiveness of a disclaimer), The current comments, including the likely not be effective. Specifically, resulting either way in a chilling newly submitted consumer research, do despite the presence of strongly worded, effect.57 One asserted that the proposed not persuade the Commission that its highly prominent disclaimers of change raises First Amendment previous conclusion was incorrect.53 typicality, between 44.1% and 70.5% of concerns because there are less respondents in the Endorsement Booklet restrictive means available to achieve (stating that revisions would put the Commission’s Study indicated that the dietary Commission’s goal of preventing traditional case-by-case law enforcement approach supplement in question would reduce deception –i.e., requiring that the into doubt). breathing problems, increase energy current typicality disclaimer be 52ERA/CRN, at 8. displayed more prominently.58 53Although Kelley Drye’s survey does suggest levels, or relieve pain in at least half of some baseline level of scepticism about the people who try it. Nor would Finally, other commenters suggested testimonials, several other points about this mandating larger disclaimers comport that, notwithstanding the Commission’s research should be noted. First, the survey used a with the Commission’s longstanding statement in the revised Guides that it probability sample to recruit participants. As a could not rule out the possibility that a preference for testimonials that either result, even though participants were asked disclaimer of typicality would not be whether they would expect to do better than, the reflect generally expected results or are deceptive, 73 FR at 72392 n.106, same as, or worse than individuals who gave accompanied by clear and conspicuous testimonials for weight-loss or money-making marketers would not, as a practical programs, the survey did not screen them to disclosures of what the generally matter, be able to proceed with such a determine whether they were actually interested in expected performance would be in the losing weight or in joining a money-making disclaimer, regardless of how clear and depicted circumstances. See 73 FR at 59 program. (For example, 10% of the participants conspicuous it was. Thus, according who said they would lose less weight than the 72379 (reviewing the history of Section to the commenters, by suppressing the testimonialist explained that they were not very 255.2). use of disclaimers of typicality, the overweight.) Consumers who were potentially interested in such programs might have given revised Guides would have the effect of 60 different responses. chilling commercial speech. Second, because it was conducted by telephone, people experience are influenced by a variety of The Commission has previously the survey asked about testimonials in the abstract, factors, including how closely a person follows the addressed arguments that its proposed rather than showing participants ads containing program, a person’s own metabolism, and other elimination of the safe harbor afforded testimonials and actually assessing the messages factors.≥ StrategyOne, Testimonial Advertising by the 1980 Guides to non-typical conveyed by those ads. Consumers may bring pre- Research, at 9 (2009) (attached to Kelley Drye existing beliefs to the ads they encounter, but the testimonials accompanied by comment). relevant issue for determining whether an ad is 54 disclaimers of typicality contravened deceptive under Section 5 is what claims they take See 73 FR at 72392 n.106. the First Amendment. 73 FR at 72385- away from those ads. 55The 1980 Guides did not specify the size of, or Third, even without the persuasive power of an language to be used in, disclaimers of typicality, 56 actual testimonial, 31% of those who were asked calling instead for them to be ‘‘clear and C of C, at 2; see also HPM, at 1 (stating that Commission would be preventing truthful speech); about testimonials for weight loss programs and conspicuous.’’The Commission frequently adopts 24% of those who were asked about testimonials for ERA/CRN, at 4, 6 (stating that advertisers would such a performance standard for disclosures, have ‘‘to accompany facially truthful testimonial money-making programs said they would do as well because it recognizes that giving advertisers or better than the testimonialist. statements with disclosures of information that may flexibility to meet the specific needs of their be unknowable’’). Finally, the questions that purport to address particular message is often preferable to attempting 57 whether consumers believe a variety of factors ANA, at 1, 4. to mandate specific language, font, and other 58 influence the results consumers have when using PMA, at 5. products advertised by testimonials were very requirements applicable across-the-board to all ads. 59ANA, at 3-4 (citing FTC’s reliance on the staff’s leading. For example, one question was ≥I am now Advertisers thus have always been free under the studies); ERA/CRN, at 28, 30 (stating that an going to read you a statement, please tell me if you Guides to make their disclaimers as large and clear advertiser would face difficulty in proving that its personally agree or disagree with that statement: as they deemed appropriate to convey the necessary disclaimer was not deceptive). when using a weight-loss program, the results information to consumers. 60ERA/CRN, at 28.

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87. None of the arguments raised in this message of typicality, no disclosure is testimonial is crafted and used in a new round of comments changes the necessary. particular ad, it might not convey a Commission’s conclusion that its Second, as noted above, the revised typicality claim; thus, the comment proposed change to the Guides Guides would not prohibit the use of correctly points out that advertisers who withstands Constitutional scrutiny. disclaimers of typicality. Although the use testimonials will be responsible for However, the Commission believes that Commission is, admittedly, skeptical knowing what messages consumers take the following points warrant reiteration. that most disclaimers of typicality will away from their ads. But advertisers First, although the literal words of an be effective in preventing deception, already bear this responsibility. individual testimonial may be truthful, Section 255.2 does not rule out the Moreover, the revision actually makes those words cannot be viewed in possibility that a clear, conspicuous, the Guides less restrictive, by allowing isolation. It is well established that ‘‘an and informative disclaimer could for the possibility that a testimonial will ad may be amenable to more than one accomplish this goal. See 16 CFR 255.2 not convey a typicality claim, and thus reasonable interpretation.’’Telebrands n.1 (noting also that this does not affect not require any further qualification. Corp., 140 F.T.C. 278, 290 (2005), aff’d, the Commission’s burden of proof in Most of the commenters who 457 F.3d 354 (4th Cir. 2006); see, e.g., litigation). An advertiser unable to addressed the proposed changes to Kraft, Inc., 114 F.T.C. 40, 120-21 n.8 disclose what consumers can generally Section 255.2, however, asserted that (1991); Thompson Medical Co., 104 expect from its product could conduct those changes are problematic because F.T.C. 648, 787 n.7 (1984). Moreover, consumer research to determine many advertisers – especially those in ‘‘[w]here an ad conveys more than one whether its ad is misleading. weight loss and health-related meaning, only one of which is For the foregoing reasons, the industries – would not be able to misleading, a seller is liable for the Commission concludes that the determine what the generally expected misleading interpretation even if revisions to Section 255.2 will not performance would be in the depicted nonmisleading interpretations are impermissibly chill truthful speech in circumstances, and thus would no possible.’’Telebrands Corp., 140 F.T.C. violation of the First Amendment. longer be able to use aspirational at 290; see, e.g., Bristol-Myers Co., 102 testimonials. Specifically, they contend, 3. The Proposed Revisions to Section determining generally expected results F.T.C. 21, 320 (1983), aff’d, 738 F.2d 255.2 Are Impractical and Burdensome 554 (2d Cir. 1984); National Comm’n on is impractical or extremely difficult for Egg Nutrition v. FTC, 570 F.2d 157, 161 A number of commenters asserted products whose results differ depending n.4 (7th Cir. 1977). A secondary message that the Commission’s revisions to on the individual physiology of understood by reasonable consumers is Section 255.2(b) will be impractical for participants and their commitment to actionable if deceptive, even though the advertisers to implement, and that the the program.64 The hardship imposed primary message is accurate. Deception net effect will be detrimental both to by eliminating the use of disclaimers of Policy Statement, 103 F.T.C. at 178 n.21; consumers and to new businesses that typicality would be especially great, see National Comm’n on Egg Nutrition, have not had enough sales to generate according to the commenters, for those 62 88 F.T.C. 89, 185 (1976), enforced in adequate substantiation. To the extent small businesses and new companies part, 570 F.2d 157 (7th Cir. 1977); Jay that some of these arguments echo those that will not have sufficiently large Norris Corp., 91 F.T.C. 751, 836 (1978), already made in comments submitted in pools of customers from whom aff’d, 598 F.2d 1244 (2d Cir. 1979). response to the Commission’s January generally expected results can be culled, The critical question for determining 2007 FEDERAL REGISTER notice, the and thus they will not be able to use 65 whether an ad is deceptive under Commission has already considered testimonials. Section 5 of the FTC Act – for all them once, but does so now again. Other commenters raised questions One commenter criticized the advertising, whether or not testimonials about the nature and scope of the study Commission’s proposed revision of the are involved – is what is the net that would satisfy the Commission for sentence in the 1980 Guides that stated impression consumers take away from purposes of determining what results that testimonials about the performance the ad as a whole. The revised language consumers can generally expect from of the advertised product ‘‘will’’ convey in Section 255.2 would come into play the advertised product, including typicality claims; as revised, that phrase only if a truthful testimonial: (1) whether results from controlled studies would state that they ‘‘will . . . likely’’ 66 conveys to consumers that the could be used. Two comments convey such claims.63 In the view of testimonialist’s results are this commenter, the new language will 64 E.g., C of C, at 3; AAAA/AAF, at 9; ERA/CRN, ‘‘representative of what consumers will impose a burden on advertisers by at 5-6; see also NPA, at 1-2. generally achieve with the advertised 65 making them responsible for PMA, at 11; ERA/CRN, at 3 (stating that product or service in actual, albeit requiring disclosure of ‘‘generally expected results’’ determining how testimonials will be variable, conditions of use’’; and (2) the supported by the level of substantiation generally interpreted. As a result, many may advertiser does not have adequate required of any other material claim ‘‘will work decide to include generally substantial hardship on many advertisers for many substantiation for that claim. In other representative disclaimers that are not products,’’ especially advertisers of new products). words, the Guides call for a disclosure 66 actually necessary, thereby entailing NPA, at 2 (stating that the Commission’s only if the ad is misleading (and thus assertion in the November 2008 FEDERAL REGISTER expensive research costs to generate the not protected by the First notice that marketers would be able to design needed data. reliable studies of product efficacy did not appear Amendment61 ) without a disclosure. On The revision in question would to be based on anything other than optimism, and the other hand, if the advertisement, recognize that, depending on how a did not address whether data from controlled taken as a whole, does not convey an studies – that might differ from consumers’ unsubstantiated, and thus misleading, experiences in non-controlled settings – would be 62 E.g., DMA, at 2 (stating that revisions would acceptable); PMA, at 7-8 (questioning whether the be a potential barrier to new businesses, or to ‘‘typical consumer’’ includes everyone who signed 61 Central Hudson Gas & Elec. Corp. v. Public introduction of new products); PRSA, at 5-6 (stating up or only those who finished program); C of C, at Service Comm’n of New York, 447 U.S. 557, 566 that removing safe harbor will work against 2 (stating that there is ‘‘no way to be sure how real (1980) (commercial speech that concerns unlawful consumers’ best interests because requiring research consumers will use an exercise device when no one activity or is misleading is not entitled to to determine ‘‘typical results’’ could end up is monitoring them’’; ‘‘it may not be feasible to constitutional protection and may be freely depriving them of important information). generate typicality data that would meet the regulated). 63AAAA/AAF, at 4-5. Continued

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asserted that any disclosure that in the depicted circumstances.’’Thus, disclosures, consumers not only would attempted to explain all the factors that advertisers are provided some have a realistic sense of what they can could affect the results consumers could reasonable leeway to make this expect from a product or service, but generally expect from the advertised disclosure. For example, the term could also take away the message that product could itself be deceptive.67 In ‘‘generally expected results’’ is used if they dedicate themselves as much as the end, the commenters contend, rather than ‘‘average’’ in order to convey the testimonialist did, they might advertisers would either incur that this disclosure would not have to achieve even more.74 substantial costs trying to create be based on an exact mathematical Nevertheless, as the Commission substantiation that will meet the average of users of the product, such as recognized in the November 2008 Commission’s approval or cease using might be developed from a valid survey FEDERAL REGISTER notice, 73 FR at truthful, aspirational testimonials.68 of actual users. For example, 72382, some advertisers may not have Based on these considerations, the substantiation for a ‘‘generally expected the information available to them to be commenters maintain that the FTC results’’ disclosure could be able to disclose the generally expected should continue to allow disclaimers of extrapolated from valid, well-controlled performance of their product or service typicality.69 clinical studies of patients matching the to consumers. In these cases, advertisers At the outset, the Commission notes profile of the persons in the ad, even using testimonials need either to that some of the comments misread the though consumers’ real world results exercise care not to convey a typicality proposed revisions to Section 255.2 as are not likely to match exactly the claim, or to rely on statements of general requiring them to determine with results in the clinical study.71 In some endorsement of the product, e.g., ‘‘I’ve precision what ‘‘the typical consumer’’ instances, advertisers may rely on tried many products and this was the would achieve with the product.70 This generally accepted scientific principles best.’’75 is not what the Commission intends. (e.g., the average individual needs a net Disclosing the results consumers can Advertisers are not required to calorie deficit of 3,500 calories to lose generally expect from the advertised identify a ‘‘typical consumer’’ of their 1 pound) to determine generally product under the circumstances product and then determine what result expected results. depicted in the ad will entail costs that consumer achieved. Rather, the In other cases, the advertiser may be associated with the data collection and required disclosure in this circumstance able to limit the scope of the disclosure analysis. Those costs, however, are no is ‘‘the generally expected performance by limiting the circumstances depicted different from what the advertiser in the advertisement. For example, if all would incur if it made the same Commission’s strict standards for the substantiation of the testimonials used in an performance claim directly, rather than of such claims’’); ERA/CRN, at 4-5 (stating that the advertisement are clearly identified as FTC does not explain the basis for its confidence though a testimonial, and there is no that methodologically sound means of determining persons who have been members of a reason why the substantiation generally expected results can be devised for most weight loss clinic for at least one year, requirements should differ between the products; scientific tests may show nothing about the disclosure can be based on two forms of advertising if the message average results consumers can expect when results performance data from that group.72 In derive from frequency, intensity and commitment conveyed to consumers is the same. Nor with which consumers use the product in question); any event, the disclosure of generally is there any reason why a new company see also AAAA/AAF, at 8 (stating that the expected results should clearly identify that might not yet have data showing determinations required by the Guides would likely the group from which the data were how well its product performs should require costly studies). obtained.73 67 be allowed to convey a performance PRSA, at 6 (stating that disclosure would be The Commission recognizes that confusing because of the amount of information claim through testimonials that it would differences in physiology and advertisers would have to provide); PMA, at 3. not be able to substantiate if it made that 68 commitment will affect the results that ERA/CRN, at 6 (stating that the Commission claim directly. would be setting up a Hobson’s choice for individual consumers will get from a marketers: abstain from using truthful testimonials particular weight loss or fitness product The effect of the revision at issue is because information about typical results is to treat ads that use testimonials the unobtainable, or risk FTC action); ANA, at 1 (stating or program. The proposed revisions to Section 255.2 do not prescribe a same as all other ads. Section 5 of the that ‘‘advertisers fearing FTC enforcement FTC Act requires advertisers to have proceedings may be forced to incur substantial costs uniform one-size-fits-all disclaimer, trying to create quantitative support for the however, and an advertiser could take substantiation for the messages that typicality of a testimonial statement or to refrain these factors into consideration in consumers reasonably take from their from providing truthful information to ads, which means they must first know consumers’’); NPA, at 2 (stating that the fact that crafting a disclosure. With meaningful consumers’ habits vary widely ‘‘creates confusion what messages consumers take away about what constitutes a typical consumer in the 71If such studies are adequate to reasonably from those ads. The Commission sees no first place’’). substantiate the efficacy claim of the product for the 69 E.g., PMA, at 8 (stating that ‘‘Because there is target audience of the ad, there is no reason why 74Even truthful consumer testimonials provide no ‘typical’ or ‘average’ consumer and there are so they could not reasonably be relied on to only marginally useful information to consumers. In many variables impacting weight loss or medical substantiate a ‘‘generally expected results’’ general, it is impossible for consumers to verify the conditions, a typicality disclaimer is in fact the best disclosure, provided that the data generated by the reported experiences. Indeed, even the way to properly disclose the limited applicability studies are relevant to the subjects of the ad at issue testimonialist may incorrectly attribute the of testimonial results.’’). and the disclosure is not otherwise misleading. For performance benefit to the product. The additional 70C of C, at 2 (stating that ‘‘There may be no real example, it would be problematic to extrapolate disclosures will, on the whole, provide more useful doubt that the product is effective for consumers from a study using obese young men to an ad using information to consumers than the ritualistic generally, and there may be no real doubt that the testimonials from older overweight women. ‘‘results not typical’’ disclaimers, even if they are individual testimonials used in the advertisement 72The disclosure should also describe the source not without some flaws. are truthful. Yet, the advertiser would not be able of the data. 75If the advertiser does not yet have sufficient to use such testimonials safely unless it could 73As well as identifying the group for whom those information as to the results consumer can substantiate what the ‘typical’ consumer would data are relevant, the disclosure should set forth generally expect to achieve with its product, it can achieve.’’ (footnote omitted)); PMA, at 7 (stating other information that would be meaningful in still use general testimonials –i.e., testimonials that that it is impossible to capture substantiation for the assessing the study’s results, such as the duration do not make specific performance claims – ‘‘‘typical consumer’ experience’’ because there is no of the study. For example, in an ad showing provided the net takeaway of the ad is not such thing as a typical consumer when it comes to formerly overweight men, a disclosure might state misleading. For example, a testimonialist might weight loss or health care); see also PRSA, at 5-6 ‘‘in an 8-week clinical study, men who were at least praise the taste of a company’s reduced calorie (noting the difficulty in determining ‘‘typical 30 pounds overweight lost an average of 2 pounds foods, or the fact that a particular exercise video results’’). per week.’’ was the ‘‘best ever.’’

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reason why an advertiser should be to convey a typicality message.’’The procedures and standards to be applied exempt from those basic obligations Commission is revising this example to in the review process, including, for simply because it chooses to explain that the reason no typicality example, clear statements concerning communicate its claims through the use message would be conveyed is that the the qualification of the individual(s) of testimonials; yet, that is precisely the patrons’ statements would be conducting the review,78 the criteria effect of the safe harbor afforded by the understood to be the subjective personal against which products are to be judged, 1980 Guides. Accordingly, the opinions of only three people. and any other requirements or Commission concludes that the safe F. Section 255.3 – Expert Endorsements prohibitions management deems harbor for non-typical testimonials appropriate (e.g., prohibitions against accompanied by disclaimers of Although no comments addressed this staff members reviewing products in typicality should be eliminated, and the particular example, the Commission has which they have a financial interest). decided to revise proposed new revisions to Section 255.2 of the Guides The Commission is also deleting an Example 6 to Section 255.3 because it that were proposed in the November unnecessary cross-reference to Section could erroneously be read to suggest 2008 FEDERAL REGISTER notice should be 255.3 that previously appeared at the that a medical doctor or comparably adopted in final form without further end of the example to Section 255.4. revision, except for the addition of the qualified expert could properly make phrase ‘‘or service’’ in Section 255.2(b) performance claims for a cholesterol- H. Comments Addressing Revisions to and the revisions to news Example 4 lowering drug based solely on consumer Section 255.5 of the Guides – Disclosure and 7 discussed below. letters and the results of a study using of Material Connections Between an animal model. As revised, the Advertisers and Endorsers 4. Revisions to Examples 4 and 7 in example states that the doctor’s Section 255.2 endorsement would likely be deceptive The comments filed in response to the The Commission is modifying and because those materials are not what November 2008 FEDERAL REGISTER expanding a new example proposed in others with the same level of expertise notice raise a number of issues November 2008 in which a would consider adequate to support concerning the disclosure of material testimonialist touts the results she those claims. connections between advertisers and achieved using a product called endorsers: (1) whether, in the case of WeightAway under an extreme regimen G. Comments Addressing Section 255.4 new, consumer-generated media, the (exercising 6 hours daily and eating of the Guides – Endorsements by disclosure obligation falls upon the nothing but raw vegetables). Two new Organizations advertiser or the endorser, and to the fact patterns added to the example Although the Commission’s extent that the disclosure obligation demonstrate how the description of the November 2008 FEDERAL REGISTER falls on the endorser, whether the circumstances under which a notice did not propose any changes to advertiser is potentially liable if the testimonialist achieved her results can Section 255.4 of the Guides, one endorser fails to make that disclosure; determine the information that should commenter asked a question about that (2) whether simply receiving a product, be disclosed in the advertisement. provision, which states that ‘‘an without any accompanying monetary Thus, when the ad just features organization’s endorsement must be payment, triggers a disclosure ‘‘before’’ and ‘‘after’’ pictures with the reached by a process sufficient to ensure obligation; and (3) the potential caption ‘‘I lost 50 pounds in 6 months that the endorsement fairly reflects the implications of the Commission’s with WeightAway,’’ the ad is likely to collective judgment of the organization’’ proposed new Example 3 concerning convey that her experience is (emphasis added).76 Specifically, the celebrity endorsements in representative of what consumers will commenter requested confirmation that nontraditional media, and proposed generally achieve. Therefore, if action by an organization’s governing new Examples 7-9, in which the consumers cannot generally expect to body, such as its Board of Directors, is obligation to disclose material achieve such results, the ad should not the kind of ‘‘collective judgment’’ connections is applied to endorsements clearly and conspicuously disclose what required, and that ‘‘an objective made through certain new media. they can expect to lose in the depicted evaluation by a qualified and competent circumstances (e.g., ‘‘most women who 1. Obligation to Disclose Material organization staff person, or group of Connections in Endorsements Conveyed use WeightAway for 6 months lose at staff members, is sufficient.’’77 least 15 pounds’’). Similarly, if the Through New Consumer-Generated The Commission agrees that an Media testimonialist in an ad with those two organization’s governing body need not pictures simply says, ‘‘I lost 50 pounds necessarily participate in the process; When the Commission adopted the with WeightAway’’ without any however, the decision of a single staff Guides in 1980, endorsements were mention of how long it took to achieve person might not be sufficient to ensure disseminated by advertisers – not by the those results, and WeightAway users that the process reflects the endorsers themselves – through such generally do not lose 50 pounds, the ad organization’s ‘‘collective judgment’’ traditional media as television should disclose what results they do and certainly might not be ‘‘generally commercials and print advertisements. generally achieve (e.g., ‘‘most women free of the sort of subjective factors that With such media, the duty to disclose who use WeightAway lose 15 pounds’’). vary from individual to individual.’’ 16 material connections between the In November 2008, the Commission C.F.R § 255.4. advertiser and the endorser naturally also proposed a new Example 7 to The organization should have a fell on the advertiser. Section 255.2, in which theater patrons process in place to ensure that its express their views about a movie they endorsements reflect the ‘‘collective 78Because of the specialized nature of some of the have just seen. The example stated that judgment of the organization.’’ For products that this organization might review, the advertiser ‘‘does not need to have example, the organization’s readers of its membership publication might view substantiation that their views are management could adopt specific it as having expertise in these products. In that case, the organization would have to use an expert (who representative of the opinions that most could be a staff member), or ‘‘standards previously consumers will have about the movie, 76NAR, at 2. adopted by the organization and suitable for judging because this advertisement is not likely 77 Id. the relative merits of such products.’’16 CFR 255.4.

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The recent creation of consumer- 2. Does Receipt of a Product, Without between an advertiser and a generated media means that in many Monetary Compensation, Constitute a ‘‘sponsored’’ endorser. instances, endorsements are now Material Connection That Must Be Participants in network marketing disseminated by the endorser, rather Disclosed? programs are also likely to be deemed to than by the sponsoring advertiser. In Several commenters asked whether an have material connections that warrant these contexts, the Commission believes advertiser’s provision of a free sample to disclosure. The Commission disagrees that the endorser is the party primarily a consumer in and of itself was a with the assertion that modern network responsible for disclosing material material connection that would have to marketing programs are just updated connections with the advertiser. be disclosed by that consumer and, if so, versions of traditional supermarket However, advertisers who sponsor these whether there was a monetary value sampling programs. The primary goal of those programs was to have the shopper endorsers (either by providing free associated with that item below which 82 who tasted the advertiser’s product products – directly or through a that obligation would not be triggered. One commenter asserted that modern continue down the grocery store aisle middleman – or otherwise) in order to and purchase the product. The primary generate positive word of mouth and companies that distribute product samples to promote word of mouth are goal of the new viral marketing spur sales should establish procedures programs is to have these individuals to advise endorsers that they should analogous to companies that distribute 83 ‘‘spread the word’’ about the product, so make the necessary disclosures and to free samples in grocery stores. That commenter further asserted that the that other consumers will buy it. monitor the conduct of those Guides, as written, might cover both The Commission recognizes that, as a endorsers.79 situations, even though neither practical matter, if a consumer’s review The Commission notes in this regard distributor controls what is said about of a product disseminated via one of that the Word of Mouth Marketing the products being distributed and the these new forms of consumer-generated Association’s (‘‘WOMMA’’) code of consumers are not compensated in media qualifies as an ‘‘endorsement’’ ethics says that word of mouth either case.84 under the construct articulated above, advocates should disclose their The threshold issue is whether the that consumer will likely also be relationship with marketers in their speaker’s statement qualifies as an deemed to have material connections communications with other consumers; ‘‘endorsement,’’ under the Guides. If with the sponsoring advertiser that should be disclosed. That outcome is and that marketers should effectively not, no disclosure need be made. simply a function of the fact that if the monitor disclosure of their word of However, if the statement does qualify relationship between the advertiser and mouth advocates.80 The WOMMA Code as an ‘‘endorsement’’ under the the speaker is such that the speaker’s also requires advocates to disclose the construct set forth above for determining when statements in statement, viewed objectively, can be source of product samples or incentives considered ‘‘sponsored,’’ there received from marketers.81 consumer-generated media will be deemed ‘‘sponsored’’ (see Section II.A.2 inevitably exists a relationship that The development of these new media of this notice), disclosure of the should be disclosed, and would not has, however, highlighted the need for connection between the speaker and the otherwise be apparent, because the additional revisions to Section 255.5, to advertiser will likely be warranted endorsement is not contained in a clarify that one factor in determining regardless of the monetary value of the traditional ad bearing the name of the whether the connection between an free product provided by the advertiser.86 advertiser and its endorsers should be advertiser.85 For example, an individual 3. New Examples Applying Guide disclosed is the type of vehicle being who regularly receives free samples of Principles Concerning Disclosure of used to disseminate that endorsement – products for families with young Material Connection specifically, whether or not the nature children and discusses those products a. New Example 3 – Celebrity of that medium is such that consumers on his or her blog would likely have to Endorsements in Nontraditional are likely to recognize the statement as disclose that he or she received for free the items being recommended. Contexts an advertisement (that is, as sponsored Several comments addressed Although the monetary value of any speech). Thus, although disclosure of proposed new Example 3, which particular product might not be compensation may not be required applied the principles set forth in exorbitant, knowledge of the blogger’s when a celebrity or expert appears in a Section 255.5 to the situation in which receipt of a stream of free merchandise conventional television advertisement, a celebrity who has entered into a could affect the weight or credibility of endorsements by these individuals in contract with a surgical clinic that calls his or her endorsement – the standard other media might warrant such for her to speak publicly about her own for disclosure in Section 255.5 – if that disclosure. surgical experience praises that clinic connection is not reasonably expected during a television interview. The by readers of the blog. Similarly, receipt commenters stated that an advertiser of a single high-priced item could also cannot control what a celebrity says in 79The Commission’s view that these endorsers constitute a material connection have an obligation to disclose material connections 86Letter from Mary K. Engle, Associate Director 82 with their sponsoring advertisers should not be BzzAgent, at 9 (stating that if consumers are for Advertising Practices, to Gary Ruskin, seen as reflecting a desire on the part of the under no obligation to say anything about the Commercial Alert, at 4 (Dec. 7, 2006) (‘‘[I]n some Commission either to deter consumers from sharing products they have received, the provision of those word of mouth marketing contexts, it would appear their views about products they like with others or free samples might not be material to other that consumers may reasonably give more weight to consumers in evaluating that person’s opinion); as an indication the Commission intends to target statements that sponsored consumers make about PCPC, at 2 (acknowledging that receipt of product their opinions or experiences with a product based consumer endorsers who use these new forms of with high value, such as a car, would be material). consumer-generated media. As with traditional on their assumed independence from the marketer,’’ 83BzzAgent, at 7. and that in those circumstances, ‘‘it would appear media, the Commission’s law enforcement activities 84 Id. at 7-8. that the failure to disclose the relationship between will continue to focus on advertisers. 85If the blogger is actually paid by the advertiser the marketer and the consumer would be deceptive 80WOMMA, at 7. or a third party acting on its behalf, disclosure unless the relationship were otherwise clear from 81 Id. at 8. certainly will be warranted. the context.’’) (footnote omitted).

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a given interview, or whether the exercise of the Commission’s statement that it would determine on a celebrity (or the interviewer) will make prosecutorial discretion in the event the case-by-case basis whether law the necessary disclosure; therefore, they celebrity failed to disclose his or her enforcement investigations of ‘‘buzz argue, the advertiser should not be relationship with the advertiser or made marketing’’ were appropriate.95 All liable either for misstatements made by unauthorized claims about the Commission law enforcement decisions the celebrity or for the failure of the advertiser’s product,90 or if the celebrity are, and will continue to be, made on a relationship between the endorser and properly disclosed the relationship but case-by-case basis, evaluating the the advertiser to be disclosed.87 One that disclosure was ultimately edited specific facts at hand. Moreover, as commenter also noted that the out of the program. Because the noted above, the Guides do not expand disclosure of the connection between Commission considers each the scope of liability under Section 5; the advertiser and the celebrity is advertisement on a case-by-case basis, they simply provide guidance as to how unnecessary because ‘‘if most people the particular facts of each situation the Commission intends to apply understand that celebrities are paid for would be considered in determining governing law to various facts. In other touting products in advertisements, it whether law enforcement action would words, the Commission could challenge stands to reason they also understand be appropriate. the dissemination of deceptive the nature of a paid spokesperson’s b. Examples 7-9 – New Media representations made via these media relationship with advertisers.’’88 regardless of whether the Guides Commenters also noted that even if the Several commenters raised questions contain these examples; thus, not celebrity disclosed his or her about, or suggested revisions to, including the new examples would relationship with the advertiser, the proposed new Examples 7-9 in Section simply deprive advertisers of guidance show’s producers could edit that 255.5, in which the obligation to they otherwise could use in planning disclosure out of the final version of the disclose material connections is applied their marketing activities.96 program that was ultimately aired. to endorsements made through certain 91 The Commission is not restating here Imposing liability on the advertiser in new media. Two commenters argued all of the individual questions and such a situation, they contend, would be that application of the principles of the criticisms raised by the commenters unfair.89 Guides to new media would be with respect to these three examples. As The Commission disagrees with the inconsistent with the Commission’s noted above, a marketer presumably contention that disclosure in new prior commitment to address word of would not have initiated the process Example 3 of the relationship between mouth marketing issues on a case-by- that led to endorsements being made in case basis.92 Others urged that they be the celebrity and the clinic is these new media had it not concluded deleted in their entirety from the final unnecessary. Disclosure is appropriate that a financial benefit would accrue Guides, either because it is premature because given the medium in which the from doing so. Therefore, it is for the Commission to add them, or celebrity praises the clinic – a talk responsible for taking the appropriate because of the potential adverse effect show, not a conventional advertisement measures to prevent those endorsements on the growth of these (and other) new – consumers might not realize that the from deceiving consumers. The media.93 Two commenters said that celebrity was a paid endorser, rather Commission is revising Example 7, industry self-regulation is sufficient.94 than just a satisfied customer. however, to clarify two points. First, the The Commission’s inclusion of The commenters are correct, however, reason this endorser should disclose examples using these new media is not that an advertiser does not have control that he received the video game system inconsistent with the staff’s 2006 over what a celebrity says in an for free – even though he is known as interview. Nor can the advertiser an expert in the video gaming prevent the producers of that program 90The celebrity, however, could still be liable for any misleading statements she made, or for her community – is that his consumer- from editing out of the final version of failure to disclose her relationship with the generated endorsement appears in a the interview a disclosure that would advertiser. medium that does not make his have been sufficient to inform viewers 91DMA, at 5; ANA, at 6-8; C of C, at 4-6; AAA/ association with the advertiser apparent of the celebrity’s contractual AAF, at 16 (stating that it is unfair to put the burden of potential liability on bloggers and other viral to consumers. Second, as revised, relationship with the advertiser. marketers); ERA/CRN, at 36-38. Example 7 states more clearly that However, if the advertiser has decided 92ANA, at 2; ERA/ERN, at 33-34. although the blogger has primary that it is advantageous to have the 93IAB, at 2 (stating that the FTC should not adopt responsibility for disclosing that he celebrity speak publicly about its them, in light of ‘‘the evolving nature of the received the video game system for free, product or service, the Commission marketing industry and the need for further inquiry’’; ‘‘[e]stablishing new legal liabilities for the manufacturer has an obligation to believes that the advertiser has the marketers, publishers, and platform providers could advise the blogger at the time it provides concomitant responsibility to advise the restrict the supply of advertising revenue that is just the gaming system that he should make celebrity in advance about what he or beginning to flow into this nascent marketplace’’); the disclosure in any positive reviews of she should (and should not) say about C of C, at 5 (stating that new Examples 7, 8, and 9 ‘‘raise significant issues regarding the scope of the system. The manufacturer also that product or service, and about the advertiser liability for third party activity in the need to disclose their relationship in the context of new media and word-of-mouth 95Letter from Mary K. Engle, Associate Director course of the interview. marketing.’’); ERA/CRN, at 33 (stating that more for Advertising Practices, to Gary Ruskin, Evidence that the advertiser did so discussion of these issues is needed first); see also Commercial Alert, at 5 (Dec. 7, 2006)(noting that would provide a strong argument for the ANA, at 5 (stating that the examples increase petitioners define ‘‘buzz marketing’’ as that in uncertainty by raising more questions than they which marketers compensate consumers for answer); PMA, at 19 (stating that the Commission disseminating messages to other consumers, 87PMA, at 15 (stating that celebrity may make should not adopt them); BzzAgent, at 11-12 without disclosing the marketer’s relationship with statement that is unsubstantiated or unauthorized (suggesting revisions); DMA, at 5 (stating that new the consumer). Indeed, the references to the Guides by contract). media channels should be considered in separate in the staff’s letter suggested that the Guides’ 88PMA, at 16; see also AAAA/AAF, at 14-15 proceeding that takes into account their unique principles are applicable to these new marketing (stating that it is inexplicable and unfair to impose characteristics); ERA/CRN, at 33, 35. tools. a different disclosure requirement on celebrities in 94AAAA/AAF, at 18 (citing WOMMA guidelines); 96The Commission’s views as to the vibrancy of a non-traditional context than in traditional ERA/CRN, at 34 (same); see also ANA, at 1, 5 these new media and the importance of having law advertising context). (stating that the new examples interfere with self- enforcement to support industry self-regulation are 89PMA, at 15; AAAA/AAF, at 15-16. regulation in this area). discussed in Part II.A.2 above.

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should have procedures in place to site of an online retailer of electronic that was sponsored by the advertiser attempt to monitor the blogger’s products) qualifies as an ‘‘endorsement’’ itself, the ad should clearly disclose this statements about the system to ensure –i.e., as a sponsored message – due to information. 73 FR at 72390. The that the proper disclosures are being the blogger’s relationship with the Attorneys General also pointed out that made and take appropriate steps if they advertiser or the value of the although the Guides require disclosure are not (e.g., cease providing free merchandise he has received and has of material connections between product to that individual). been asked to review by that advertiser, endorsers and advertisers, Example 1 to One commenter asked whether, if the knowing these facts might affect the Section 255.5 stated that an advertiser’s blogger in Example 7 should disclose weight consumers give to his review. payment of expenses to an outside that he received the video game system With respect to Example 8, one entity that conducted a study for free, must every critic disclose that commenter asserted that if the employer subsequently touted by the advertiser as a reviewed item was provided for free?97 has instituted policies and practices the findings of a research organization According to the commenter, reviewers concerning ‘‘social media participation’’ need not be disclosed, an outcome the in traditional media do not have to by its employees, and the employee fails Attorneys General thought was disclose this information, and reviewers to comply with such policies and inconsistent with the general principles in nontraditional media platforms such practices, the employer should not be of Section 255.5. as blogs, online discussion boards, and subject to liability.102 The Commission Although the Commission did not street teams should not be treated any agrees that the establishment of propose substantive changes to Example differently.98 This commenter also appropriate procedures would warrant 1 in November 2008, it now has noted that given marketers’ lack of consideration in its decision as to reconsidered its previous conclusion control over ‘‘what employees say on whether law enforcement action would that knowledge of the advertiser’s online discussion boards, or what street be an appropriate use of agency sponsorship of the research would not team members say to their friends,’’ it resources given the facts set forth in materially affect the weight consumers would be impracticable for them to Example 8. Indeed, although the would place on the reported results. ensure that material connections are Commission has brought law Consumers reasonably can be more disclosed in endorsements made using enforcement actions against companies skeptical about research conducted by these media, and unclear what steps whose failure to establish or maintain outside entities but funded by the marketers would have to take to prevent appropriate internal procedures resulted advertiser than about studies that are endorsers from failing to disclose in consumer injury, it is not aware of both conducted and funded material connections with the any instance in which an enforcement independently, because financial marketer.99 action was brought against a company interest can create bias (intentional or The Commission acknowledges that for the actions of a single ‘‘rogue’’ unintentional) in the design of a bloggers may be subject to different employee who violated established study.104 Accordingly, the Commission disclosure requirements than reviewers company policy that adequately covered now is revising Example 1 to call for 103 in traditional media. In general, under the conduct in question. disclosure of the relationship between usual circumstances, the Commission The Commission does not believe, the advertiser and the research does not consider reviews published in however, that it needs to spell out the organization. traditional media (i.e., where a procedures that companies should put newspaper, magazine, or television or in place to monitor compliance with the III. SECTION-BY-SECTION REVIEW radio station with independent editorial principles set forth in the Guides; these OF ADDITIONAL CHANGES TO responsibility assigns an employee to are appropriate subjects for advertisers PROPOSED GUIDES PUBLISHED IN review various products or services as to determine for themselves, because NOVEMBER 2008 they have the best knowledge of their part of his or her official duties, and A. Section 255.0 then publishes those reviews) to be business practices, and thus of the The Commission is adding the sponsored advertising messages. processes that would best fulfill their following new Example 8 to Section Accordingly, such reviews are not responsibilities. 255.0: ‘‘endorsements’’ within the meaning of 4. Example 1 (sponsorship of clinical 100 Example 8: A consumer who regularly the Guides. Under these trials) purchases a particular brand of dog food circumstances, the Commission In response to the Commission’s decides one day to purchase a new, believes, knowing whether the media January 2007 FEDERAL REGISTER notice more expensive brand made by the same entity that published the review paid for seeking comment on the overall costs, manufacturer. She writes in her the item in question would not affect benefits, and regulatory and economic personal blog that the change in diet has the weight consumers give to the 101 impact of the Guides, 72 FR 2214 (Jan. made her dog’s fur noticeably softer and reviewer’s statements. Of course, this 18, 2007), the Attorneys General of 33 shinier, and that in her opinion, the new view could be different if the reviewer States and Territories and Hawaii’s food definitely is worth the extra were receiving a benefit directly from Office of Consumer Protection money. This posting would not be the manufacturer (or its agent). (collectively, the ‘‘Attorneys General’’) deemed an endorsement under the In contrast, if a blogger’s statement on suggested that a new provision be added Guides. his personal blog or elsewhere (e.g., the stating that when an ad relies on a study 104 See John Abramson & Barbara Starfield, ‘‘The 97C of C, at 6. 102 Effect of Conflict of Interest on Biomedical Research 98 WOMMA, at 9-10. Id. 103 and Clinical Practice Guidelines: Can We Trust the 99 Cf. Eli Lilly, 133 F.T.C. 763, 767 (2002) Id. (consent order) (although the disclosure of Evidence in Evidence-Based Medicine?,’’ J. Amer. 100 See Example 1 to Section 255.0 (movie review consumers’ personal information resulted from the Bd. Fam. Pract., Vol. 18 No. 5, 414-18 (Sept.-Oct. becomes an endorsement only when it is used by actions of one employee, the Commission’s 2005); see also Cary P. Gross, Yale Univ. Sch. Med., the motion picture studio in its own advertisement). complaint makes it clear that the underlying cause ‘‘Conflict of Interest and Clinical Re$earch: Ethical 101The Commission’s view would be the same if was ‘‘[Lilly’s] failure to maintain or implement and Regulatory Aspects of Clinical Research’’ the employee worked for an Internet news website internal measures appropriate under the (2009), (http://www.bioethics.nih.gov/hsrc/slides/ with independent editorial responsibility, rather circumstances to protect sensitive consumer Gross%20NIH%20COI%202009%20draft%201.pdf) than a traditional brick-and mortar periodical. information.’’). (last visited Oct. 1, 2009).

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Assume that rather than purchase the says that the endorser lost 110 pounds The Commission is revising the dog food with her own money, the in six months using WeightAway proposed new Example 3 by replacing consumer gets it for free because the together with diet and exercise, the phrase ‘‘Consumers would not store routinely tracks her purchases and however, this description would not expect’’ with ‘‘Consumers might not its computer has generated a coupon for adequately alert consumers to the truly realize,’’ and by adding a new a free trial bag of this new brand. Again, remarkable circumstances leading to her hypothetical, in which the tennis player her posting would not be deemed an weight loss.) The advertiser must have endorses the clinic via a posting on a endorsement under the Guides. substantiation, however, for any social networking service. Assume now that the consumer joins performance claims conveyed by the The Commission is also revising the a network marketing program under endorsement (e.g., that WeightAway is proposed new Example 7, first to clarify which she periodically receives various an effective weight loss product). products about which she can write If, in the alternative, the that in the case of endorsements reviews if she wants to do so. If she advertisement simply features ‘‘before’’ disseminated via consumer-generated receives a free bag of the new dog food and ‘‘after’’ pictures of a woman who media, the relationship between the through this program, her positive says ‘‘I lost 50 pounds in 6 months with advertiser and the endorser may not be review would be considered an WeightAway,’’ the ad is likely to convey apparent, thereby requiring disclosure endorsement under the Guides. that her experience is representative of by experts that might not otherwise be necessary, and second to make the B. Section 255.1 what consumers will generally achieve. Therefore, if consumers cannot advertiser’s obligations more apparent. The Commission is deleting from generally expect to achieve such results, Example 7: A college student who has Section 255.1(a) the proposed cross- the ad should clearly and conspicuously earned a reputation as a video game reference to the proposed new Example disclose what they can expect to lose in expert maintains a personal weblog or 3 in Section 255.3. The Commission is the depicted circumstances (e.g., ‘‘most ‘‘blog’’ where he posts entries about his also revising the proposed new Example women who use WeightAway for six gaming experiences. Readers of his blog 3 in Section 255.1 by adding the months lose at least 15 pounds’’). frequently seek his opinions about video following cross-reference: ‘‘[See Section If the ad features the same pictures game hardware and software. As it has 255.3 regarding the product evaluation but the testimonialist simply says, ‘‘I done in the past, the manufacturer of a that an expert endorser must conduct.]’’ lost 50 pounds with WeightAway,’’ and The Commission is revising the fifth newly released video game system WeightAway users generally do not lose sends the student a free copy of the and sixth sentences in proposed new 50 pounds, the ad should disclose what Example 5 to clarify that the advertiser system and asks him to write about it on results they do generally achieve (e.g., his blog. He tests the new gaming and the blogger both are subject to ‘‘most women who use WeightAway liability for misleading or system and writes a favorable review. lose 15 pounds’’). Because his review is disseminated via unsubstantiated representations made in The Commission is also revising the a form of consumer-generated media in the course of the blogger’s endorsement. third sentence of the first paragraph of which his relationship to the advertiser the proposed new Example 7 in Section C. Section 255.2 is not inherently obvious, readers are 255.2 to read as follows: ‘‘The advertiser unlikely to know that he has received The Commission is adding the phrase does not need to have substantiation ‘‘or service’’ before the phrase ‘‘in that their views are representative of the the video game system free of charge in actual, albeit variable, conditions of opinions that most consumers will have exchange for his review of the product, use’’ in the first sentence of Section about the movie. Because the consumers and given the value of the video game 255.2(b). ’ statements would be understood to be system, this fact likely would materially The Commission also is replacing the the subjective opinions of only three affect the credibility they attach to his proposed new Example 4 with the people, this advertisement is not likely endorsement. Accordingly, the blogger following: to convey a typicality message.’’ should clearly and conspicuously Example 4: An advertisement for a disclose that he received the gaming weight-loss product features a formerly C. Section 255.3 system free of charge. The manufacturer obese woman. She says in the ad, In the second sentence of the should advise him at the time it ‘‘Every day, I drank 2 WeightAway proposed new Example 6, the provides the gaming system that this shakes, ate only raw vegetables, and Commission is revising the phrase ‘‘the connection should be disclosed, and it exercised vigorously for six hours at the endorsement would be deceptive should have procedures in place to try gym. By the end of six months, I had assuming those materials are not’’ to to monitor his postings for compliance. gone from 250 pounds to 140 ‘‘the endorsement would likely be pounds.’’The advertisement accurately Finally, the Commission is revising deceptive because those materials are the last two sentences of Example 1 to describes the woman’s experience, and not. . . .’’ such a result is within the range that provide that an advertiser should would be generally experienced by an D. Section 255.4 disclose its payment of expenses to an extremely overweight individual who The Commission is deleting the cross- outside entity that conducts a study consumed WeightAway shakes, only ate reference to Section 255.3 that subsequently touted by the advertiser: raw vegetables, and exercised as the previously appeared at the end of the ‘‘Although the design and conduct of endorser did. Because the endorser example to Section 255.4. the research project are controlled by clearly describes the limited and truly the outside research organization, the exceptional circumstances under which E. Section 255.5 weight consumers place on the reported she achieved her results, the ad is not The Commission is revising Section results could be materially affected by likely to convey that consumers who 255.5 to make it clear that the duty to knowing that the advertiser had funded weigh substantially less or use disclose material connections between the project. Therefore, the advertiser’s WeightAway under less extreme advertisers and endorsers may depend payment of expenses to the research circumstances will lose 110 pounds in on the particular medium used to organization should be disclosed in this six months. (If the advertisement simply disseminate that endorsement. advertisement.’’

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IV. REVISED ENDORSEMENT AND the views expressed by that party are expressly declared to be the personal TESTIMONIAL GUIDES identical to those of the sponsoring opinion of the driver, it may advertiser. The party whose opinions, nevertheless constitute an endorsement List of Subjects in 16 CFR Part 255 beliefs, findings, or experience the of the tires. Many consumers will Advertising, Consumer protection, message appears to reflect will be called recognize this individual as being Trade practices. the endorser and may be an individual, primarily a racing driver and not merely ■ Accordingly, for the reasons set forth group, or institution. a spokesperson or announcer for the in the preamble, the Federal Trade (c) The Commission intends to treat advertiser. Accordingly, they may well Commission revises 16 CFR part 255 of endorsements and testimonials believe the driver would not speak for the Code of Federal Regulations to read identically in the context of its an automotive product unless he as follows: enforcement of the Federal Trade actually believed in what he was saying Commission Act and for purposes of and had personal knowledge sufficient Part 255 – Guides Concerning Use of this part. The term endorsements is to form that belief. Hence, they would Endorsements and Testimonials in therefore generally used hereinafter to think that the advertising message Advertising cover both terms and situations. reflects the driver’s personal views. This (d) For purposes of this part, the term Sec. attribution of the underlying views to 255.0 Purpose and definitions. product includes any product, service, the driver brings the advertisement 255.1 General considerations. company or industry. within the definition of an endorsement 255.2 Consumer endorsements. (e) For purposes of this part, an expert for purposes of this part. 255.3 Expert endorsements. is an individual, group, or institution Example 5: A television 255.4 Endorsements by organizations. possessing, as a result of experience, advertisement for a particular brand of 255.5 Disclosure of material connections. study, or training, knowledge of a golf balls shows a prominent and well- Authority: 38 Stat. 717, as amended; 15 particular subject, which knowledge is recognized professional golfer practicing U.S.C. 41 - 58. superior to what ordinary individuals numerous drives off the tee. This would generally acquire. be an endorsement by the golfer even § 255.0 Purpose and definitions. Example 1: A film critic’s review of a though she makes no verbal statement (a) The Guides in this part represent movie is excerpted in an advertisement. in the advertisement. administrative interpretations of laws When so used, the review meets the Example 6: An infomercial for a home enforced by the Federal Trade definition of an endorsement because it fitness system is hosted by a well- Commission for the guidance of the is viewed by readers as a statement of known entertainer. During the public in conducting its affairs in the critic’s own opinions and not those infomercial, the entertainer conformity with legal requirements. of the film producer, distributor, or demonstrates the machine and states Specifically, the Guides address the exhibitor. Any alteration in or quotation that it is the most effective and easy-to- application of Section 5 of the FTC Act from the text of the review that does not use home exercise machine that she has (15 U.S.C. 45) to the use of fairly reflect its substance would be a ever tried. Even if she is reading from endorsements and testimonials in violation of the standards set by this a script, this statement would be an advertising. The Guides provide the part because it would distort the endorsement, because consumers are basis for voluntary compliance with the endorser’s opinion. [See § 255.1(b).] likely to believe it reflects the law by advertisers and endorsers. Example 2: A TV commercial depicts entertainer’s views. Practices inconsistent with these Guides two women in a supermarket buying a Example 7: A television may result in corrective action by the laundry detergent. The women are not advertisement for a housewares store Commission under Section 5 if, after identified outside the context of the features a well-known female comedian investigation, the Commission has advertisement. One comments to the and a well-known male baseball player reason to believe that the practices fall other how clean her brand makes her engaging in light-hearted banter about within the scope of conduct declared family’s clothes, and the other then products each one intends to purchase unlawful by the statute. The Guides set comments that she will try it because for the other. The comedian says that forth the general principles that the she has not been fully satisfied with her she will buy him a Brand X, portable, Commission will use in evaluating own brand. This obvious fictional high-definition television so he can endorsements and testimonials, together dramatization of a real life situation finally see the strike zone. He says that with examples illustrating the would not be an endorsement. he will get her a Brand Y juicer so she application of those principles. The Example 3: In an advertisement for a can make juice with all the fruit and Guides do not purport to cover every pain remedy, an announcer who is not vegetables thrown at her during her possible use of endorsements in familiar to consumers except as a performances. The comedian and advertising. Whether a particular spokesman for the advertising drug baseball player are not likely to be endorsement or testimonial is deceptive company praises the drug’s ability to deemed endorsers because consumers will depend on the specific factual deliver fast and lasting pain relief. He will likely realize that the individuals circumstances of the advertisement at purports to speak, not on the basis of his are not expressing their own views. issue. own opinions, but rather in the place of Example 8: A consumer who regularly (b) For purposes of this part, an and on behalf of the drug company. The purchases a particular brand of dog food endorsement means any advertising announcer’s statements would not be decides one day to purchase a new, message (including verbal statements, considered an endorsement. more expensive brand made by the same demonstrations, or depictions of the Example 4: A manufacturer of manufacturer. She writes in her name, signature, likeness or other automobile tires hires a well-known personal blog that the change in diet has identifying personal characteristics of professional automobile racing driver to made her dog’s fur noticeably softer and an individual or the name or seal of an deliver its advertising message in shinier, and that in her opinion, the new organization) that consumers are likely television commercials. In these food definitely is worth the extra to believe reflects the opinions, beliefs, commercials, the driver speaks of the money. This posting would not be findings, or experiences of a party other smooth ride, strength, and long life of deemed an endorsement under the than the sponsoring advertiser, even if the tires. Even though the message is not Guides.

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Assume that rather than purchase the also may be liable for statements made the bag what appears to be a perfectly dog food with her own money, the in the course of their endorsements. cooked chicken, tastes the chicken, and consumer gets it for free because the Example 1: A building contractor says that if you want perfect chicken store routinely tracks her purchases and states in an advertisement that he uses every time, in just thirty minutes, this its computer has generated a coupon for the advertiser’s exterior house paint is the product you need. A significant a free trial bag of this new brand. Again, because of its remarkable quick drying percentage of consumers are likely to her posting would not be deemed an properties and durability. This believe the celebrity’s statements endorsement under the Guides. endorsement must comply with the represent his own views even though he Assume now that the consumer joins pertinent requirements of Section 255.3 is reading from a script. The celebrity is a network marketing program under (Expert Endorsements). Subsequently, subject to liability for his statement which she periodically receives various the advertiser reformulates its paint to about the product. The advertiser is also products about which she can write enable it to cover exterior surfaces with liable for misrepresentations made reviews if she wants to do so. If she only one coat. Prior to continued use of through the endorsement. receives a free bag of the new dog food the contractor’s endorsement, the Example 5: A skin care products through this program, her positive advertiser must contact the contractor in advertiser participates in a blog review would be considered an order to determine whether the advertising service. The service matches endorsement under the Guides. contractor would continue to specify the up advertisers with bloggers who will paint and to subscribe to the views promote the advertiser’s products on § 255.1 General considerations. presented previously. their personal blogs. The advertiser (a) Endorsements must reflect the Example 2: A television requests that a blogger try a new body honest opinions, findings, beliefs, or advertisement portrays a woman seated lotion and write a review of the product experience of the endorser. at a desk on which rest five unmarked on her blog. Although the advertiser Furthermore, an endorsement may not computer keyboards. An announcer does not make any specific claims about convey any express or implied says, ‘‘We asked X, an administrative the lotion’s ability to cure skin representation that would be deceptive assistant for over ten years, to try these conditions and the blogger does not ask if made directly by the advertiser. [See five unmarked keyboards and tell us the advertiser whether there is §§ 255.2(a) and (b) regarding which one she liked best.’’The substantiation for the claim, in her substantiation of representations advertisement portrays X typing on each review the blogger writes that the lotion conveyed by consumer endorsements. keyboard and then picking the cures eczema and recommends the (b) The endorsement message need advertiser’s brand. The announcer asks product to her blog readers who suffer not be phrased in the exact words of the her why, and X gives her reasons. This from this condition. The advertiser is endorser, unless the advertisement endorsement would probably not subject to liability for misleading or affirmatively so represents. However, represent that X actually uses the unsubstantiated representations made the endorsement may not be presented advertiser’s keyboard at work. In through the blogger’s endorsement. The out of context or reworded so as to addition, the endorsement also may be blogger also is subject to liability for distort in any way the endorser’s required to meet the standards of misleading or unsubstantiated opinion or experience with the product. Section 255.3 (expert endorsements). representations made in the course of An advertiser may use an endorsement Example 3: An ad for an acne her endorsement. The blogger is also of an expert or celebrity only so long as treatment features a dermatologist who liable if she fails to disclose clearly and it has good reason to believe that the claims that the product is ‘‘clinically conspicuously that she is being paid for endorser continues to subscribe to the proven’’ to work. Before giving the her services. [See § 255.5.] views presented. An advertiser may endorsement, she received a write-up of In order to limit its potential liability, satisfy this obligation by securing the the clinical study in question, which the advertiser should ensure that the endorser’s views at reasonable intervals indicates flaws in the design and advertising service provides guidance where reasonableness will be conduct of the study that are so serious and training to its bloggers concerning determined by such factors as new that they preclude any conclusions the need to ensure that statements they information on the performance or about the efficacy of the product. The make are truthful and substantiated. The effectiveness of the product, a material dermatologist is subject to liability for advertiser should also monitor bloggers alteration in the product, changes in the the false statements she made in the who are being paid to promote its performance of competitors’ products, advertisement. The advertiser is also products and take steps necessary to and the advertiser’s contract liable for misrepresentations made halt the continued publication of commitments. through the endorsement. [See Section deceptive representations when they are (c) When the advertisement represents 255.3 regarding the product evaluation discovered. that the endorser uses the endorsed that an expert endorser must conduct.] product, the endorser must have been a Example 4: A well-known celebrity § 255.2 Consumer endorsements. bona fide user of it at the time the appears in an infomercial for an oven (a) An advertisement employing endorsement was given. Additionally, roasting bag that purportedly cooks endorsements by one or more the advertiser may continue to run the every chicken perfectly in thirty consumers about the performance of an advertisement only so long as it has minutes. During the shooting of the advertised product or service will be good reason to believe that the endorser infomercial, the celebrity watches five interpreted as representing that the remains a bona fide user of the product. attempts to cook chickens using the bag. product or service is effective for the [See § 255.1(b) regarding the ‘‘good In each attempt, the chicken is purpose depicted in the advertisement. reason to believe’’ undercooked after thirty minutes and Therefore, the advertiser must possess requirement.](d)Advertisers are subject requires sixty minutes of cooking time. and rely upon adequate substantiation, to liability for false or unsubstantiated In the commercial, the celebrity places including, when appropriate, competent statements made through endorsements, an uncooked chicken in the oven and reliable scientific evidence, to or for failing to disclose material roasting bag and places the bag in one support such claims made through connections between themselves and oven. He then takes a chicken roasting endorsements in the same manner the their endorsers [see § 255.5]. Endorsers bag from a second oven, removes from advertiser would be required to do if it

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had made the representation directly, The ad will also likely communicate serum cholesterol without any lifestyle i.e., without using endorsements. that the endorsers’ experiences are changes). Consumer endorsements themselves are representative of what new users of the Example 4: An advertisement for a not competent and reliable scientific product can generally expect. Therefore, weight-loss product features a formerly evidence. even if the advertiser includes a obese woman. She says in the ad, (b) An advertisement containing an disclaimer such as, ‘‘Notice: These ‘‘Every day, I drank 2 WeightAway endorsement relating the experience of testimonials do not prove our product shakes, ate only raw vegetables, and one or more consumers on a central or works. You should not expect to have exercised vigorously for six hours at the key attribute of the product or service similar results,’’ the ad is likely to be gym. By the end of six months, I had also will likely be interpreted as deceptive unless the advertiser has gone from 250 pounds to 140 representing that the endorser’s adequate substantiation that new users pounds.’’The advertisement accurately experience is representative of what typically will experience results similar describes the woman’s experience, and consumers will generally achieve with to those experienced by the such a result is within the range that the advertised product or service in testimonialists. would be generally experienced by an actual, albeit variable, conditions of use. Example 2: An advertisement extremely overweight individual who Therefore, an advertiser should possess disseminated by a company that sells consumed WeightAway shakes, only ate and rely upon adequate substantiation heat pumps presents endorsements from raw vegetables, and exercised as the for this representation. If the advertiser three individuals who state that after endorser did. Because the endorser does not have substantiation that the installing the company’s heat pump in clearly describes the limited and truly endorser’s experience is their homes, their monthly utility bills exceptional circumstances under which representative of what consumers will went down by $100, $125, and $150, she achieved her results, the ad is not generally achieve, the advertisement respectively. The ad will likely be likely to convey that consumers who should clearly and conspicuously interpreted as conveying that such weigh substantially less or use disclose the generally expected savings are representative of what WeightAway under less extreme performance in the depicted consumers who buy the company’s heat circumstances will lose 110 pounds in circumstances, and the advertiser must pump can generally expect. The six months. (If the advertisement simply possess and rely on adequate advertiser does not have substantiation says that the endorser lost 110 pounds substantiation for that representation.105 for that representation because, in fact, in six months using WeightAway (c) Advertisements presenting less than 20% of purchasers will save together with diet and exercise, endorsements by what are represented, $100 or more. A disclosure such as, however, this description would not directly or by implication, to be ‘‘actual ‘‘Results not typical’’ or, ‘‘These adequately alert consumers to the truly consumers’’ should utilize actual testimonials are based on the remarkable circumstances leading to her consumers in both the audio and video, experiences of a few people and you are weight loss.)The advertiser must have or clearly and conspicuously disclose not likely to have similar results’’ is substantiation, however, for any that the persons in such advertisements insufficient to prevent this ad from performance claims conveyed by the are not actual consumers of the being deceptive because consumers will endorsement (e.g., that WeightAway is advertised product. still interpret the ad as conveying that an effective weight loss product). Example 1: A brochure for a baldness the specified savings are representative If, in the alternative, the treatment consists entirely of of what consumers can generally expect. advertisement simply features ‘‘before’’ testimonials from satisfied customers The ad is less likely to be deceptive if and ‘‘after’’ pictures of a woman who who say that after using the product, it clearly and conspicuously discloses says ‘‘I lost 50 pounds in 6 months with they had amazing hair growth and their the generally expected savings and the WeightAway,’’ the ad is likely to convey hair is as thick and strong as it was advertiser has adequate substantiation that her experience is representative of when they were teenagers. The that homeowners can achieve those what consumers will generally achieve. advertiser must have competent and results. There are multiple ways that Therefore, if consumers cannot reliable scientific evidence that its such a disclosure could be phrased, e.g., generally expect to achieve such results, product is effective in producing new ‘‘the average homeowner saves $35 per the ad should clearly and conspicuously hair growth. month,’’ ‘‘the typical family saves $50 disclose what they can expect to lose in per month during cold months and $20 the depicted circumstances (e.g., ‘‘most 105The Commission tested the communication of per month in warm months,’’ or ‘‘most women who use WeightAway for six advertisements containing testimonials that clearly families save 10% on their utility bills.’’ months lose at least 15 pounds’’). and prominently disclosed either ‘‘Results not Example 3: An advertisement for a If the ad features the same pictures typical’’ or the stronger ‘‘These testimonials are cholesterol-lowering product features an but the testimonialist simply says, ‘‘I based on the experiences of a few people and you lost 50 pounds with WeightAway,’’ and are not likely to have similar results.’’Neither individual who claims that his serum disclosure adequately reduced the communication cholesterol went down by 120 points WeightAway users generally do not lose that the experiences depicted are generally and does not mention having made any 50 pounds, the ad should disclose what representative. Based upon this research, the lifestyle changes. A well-conducted results they do generally achieve (e.g., Commission believes that similar disclaimers clinical study shows that the product ‘‘most women who use WeightAway regarding the limited applicability of an endorser’s experience to what consumers may generally expect reduces the cholesterol levels of lose 15 pounds’’). to achieve are unlikely to be effective. individuals with elevated cholesterol by Example 5: An advertisement Nonetheless, the Commission cannot rule out the an average of 15% and the presents the results of a poll of possibility that a strong disclaimer of typicality advertisement clearly and consumers who have used the could be effective in the context of a particular advertisement. Although the Commission would conspicuously discloses this fact. advertiser’s cake mixes as well as their have the burden of proof in a law enforcement Despite the presence of this disclosure, own recipes. The results purport to action, the Commission notes that an advertiser the advertisement would be deceptive if show that the majority believed that possessing reliable empirical testing demonstrating the advertiser does not have adequate their families could not tell the that the net impression of its advertisement with such a disclaimer is non-deceptive will avoid the substantiation that the product can difference between the advertised mix risk of the initiation of such an action in the first produce the specific results claimed by and their own cakes baked from scratch. instance. the endorser (i.e., a 120-point drop in Many of the consumers are actually

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pictured in the advertisement along to an ordinary consumer’s use of or means of valid scientific methods. If the with relevant, quoted portions of their experience with the product and are American Institute of Science is not statements endorsing the product. This available to the ordinary consumer. This such a bona fide independent testing use of the results of a poll or survey of evaluation must have included an organization (e.g., if it was established consumers represents that this is the examination or testing of the product at and operated by an automotive parts typical result that ordinary consumers least as extensive as someone with the manufacturer), the endorsement would can expect from the advertiser’s cake same degree of expertise would be deceptive. Even if the American mix. normally need to conduct in order to Institute of Science is an independent Example 6: An advertisement support the conclusions presented in bona fide expert testing organization, purports to portray a ‘‘hidden camera’’ the endorsement. To the extent that the the endorsement may nevertheless be situation in a crowded cafeteria at advertisement implies that the deceptive unless the Institute has breakfast time. A spokesperson for the endorsement was based upon a conducted valid scientific tests of the advertiser asks a series of actual patrons comparison, such comparison must advertised products and the test results of the cafeteria for their spontaneous, have been included in the expert’s support the endorsement message. honest opinions of the advertiser’s evaluation; and as a result of such Example 4: A manufacturer of a non- recently introduced breakfast cereal. comparison, the expert must have prescription drug product represents Even though the words ‘‘hidden concluded that, with respect to those that its product has been selected over camera’’ are not displayed on the features on which he or she is expert competing products by a large screen, and even though none of the and which are relevant and available to metropolitan hospital. The hospital has actual patrons is specifically identified an ordinary consumer, the endorsed selected the product because the during the advertisement, the net product is at least equal overall to the manufacturer, unlike its competitors, impression conveyed to consumers may competitors’ products. Moreover, where has packaged each dose of the product well be that these are actual customers, the net impression created by the separately. This package form is not and not actors. If actors have been endorsement is that the advertised generally available to the public. Under employed, this fact should be clearly product is superior to other products the circumstances, the endorsement and conspicuously disclosed. with respect to any such feature or would be deceptive because the basis Example 7: An advertisement for a features, then the expert must in fact for the hospital’s choice – convenience recently released motion picture shows have found such superiority. [See of packaging –is neither relevant nor three individuals coming out of a § 255.1(d) regarding the liability of available to consumers, and the basis for theater, each of whom gives a positive endorsers.] the hospital’s decision is not disclosed statement about the movie. These Example 1: An endorsement of a to consumers. individuals are actual consumers particular automobile by one described Example 5: A woman who is expressing their personal views about as an ‘‘engineer’’ implies that the identified as the president of a the movie. The advertiser does not need endorser’s professional training and commercial ‘‘home cleaning service’’ to have substantiation that their views experience are such that he is well states in a television advertisement that are representative of the opinions that acquainted with the design and the service uses a particular brand of most consumers will have about the performance of automobiles. If the cleanser, instead of leading competitors movie. Because the consumers’ endorser’s field is, for example, it has tried, because of this brand’s statements would be understood to be chemical engineering, the endorsement performance. Because cleaning services the subjective opinions of only three would be deceptive. extensively use cleansers in the course people, this advertisement is not likely Example 2: An endorser of a hearing of their business, the ad likely conveys to convey a typicality message. aid is simply referred to as ‘‘Doctor’’ that the president has knowledge If the motion picture studio had during the course of an advertisement. superior to that of ordinary consumers. approached these individuals outside The ad likely implies that the endorser Accordingly, the president’s statement the theater and offered them free tickets is a medical doctor with substantial will be deemed to be an expert if they would talk about the movie on experience in the area of hearing. If the endorsement. The service must, of camera afterwards, that arrangement endorser is not a medical doctor with course, actually use the endorsed should be clearly and conspicuously substantial experience in audiology, the cleanser. In addition, because the disclosed. [See § 255.5.] endorsement would likely be deceptive. advertisement implies that the cleaning A non-medical ‘‘doctor’’ (e.g., an service has experience with a reasonable § 255.3 Expert endorsements. individual with a Ph.D. in exercise number of leading competitors to the (a) Whenever an advertisement physiology) or a physician without advertised cleanser, the service must, in represents, directly or by implication, substantial experience in the area of fact, have such experience, and, on the that the endorser is an expert with hearing can endorse the product, but if basis of its expertise, it must have respect to the endorsement message, the endorser is referred to as ‘‘doctor,’’ determined that the cleaning ability of then the endorser’s qualifications must the advertisement must make clear the the endorsed cleanser is at least equal in fact give the endorser the expertise nature and limits of the endorser’s (or superior, if such is the net that he or she is represented as expertise. impression conveyed by the possessing with respect to the Example 3: A manufacturer of advertisement) to that of leading endorsement. automobile parts advertises that its competitors’ products with which the (b) Although the expert may, in products are approved by the service has had experience and which endorsing a product, take into account ‘‘American Institute of Science.’’From remain reasonably available to it. factors not within his or her expertise its name, consumers would infer that Because in this example the cleaning (e.g., matters of taste or price), the the ‘‘American Institute of Science’’ is a service’s president makes no mention endorsement must be supported by an bona fide independent testing that the endorsed cleanser was actual exercise of that expertise in organization with expertise in judging ‘‘chosen,’’ ‘‘selected,’’ or otherwise evaluating product features or automobile parts and that, as such, it evaluated in side-by-side comparisons characteristics with respect to which he would not approve any automobile part against its competitors, it is sufficient if or she is expert and which are relevant without first testing its efficacy by the service has relied solely upon its

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accumulated experience in evaluating an endorser who appears in a television talking about the ease of the procedure, cleansers without having performed commercial is neither represented in the the kindness of the clinic’s doctors, her side-by-side or scientific comparisons. advertisement as an expert nor is known speedy recovery, and how she can now Example 6: A medical doctor states in to a significant portion of the viewing engage in a variety of activities without an advertisement for a drug that the public, then the advertiser should glasses, including driving at night. The product will safely allow consumers to clearly and conspicuously disclose athlete does not disclose that, even lower their cholesterol by 50 points. If either the payment or promise of though she does not appear in the materials the doctor reviewed were compensation prior to and in exchange commercials for the clinic, she has a merely letters from satisfied consumers for the endorsement or the fact that the contractual relationship with it, and her or the results of a rodent study, the endorser knew or had reason to know or contract pays her for speaking publicly endorsement would likely be deceptive to believe that if the endorsement about her surgery when she can do so. because those materials are not what favored the advertised product some Consumers might not realize that a others with the same degree of expertise benefit, such as an appearance on celebrity discussing a medical would consider adequate to support this television, would be extended to the procedure in a television interview has conclusion about the product’s safety endorser. Additional guidance, been paid for doing so, and knowledge and efficacy. including guidance concerning of such payments would likely affect the endorsements made through other weight or credibility consumers give to § 255.4 Endorsements by organizations. media, is provided by the examples the celebrity’s endorsement. Without a Endorsements by organizations, below. clear and conspicuous disclosure that especially expert ones, are viewed as Example 1: A drug company the athlete has been engaged as a representing the judgment of a group commissions research on its product by spokesperson for the clinic, this whose collective experience exceeds an outside organization. The drug endorsement is likely to be deceptive. that of any individual member, and company determines the overall subject Furthermore, if consumers are likely to whose judgments are generally free of of the research (e.g., to test the efficacy take away from her story that her the sort of subjective factors that vary of a newly developed product) and pays experience was typical of those who from individual to individual. a substantial share of the expenses of undergo the same procedure at the Therefore, an organization’s the research project, but the research clinic, the advertiser must have endorsement must be reached by a organization determines the protocol for substantiation for that claim. process sufficient to ensure that the the study and is responsible for Assume that instead of speaking about endorsement fairly reflects the conducting it. A subsequent the clinic in a television interview, the collective judgment of the organization. advertisement by the drug company tennis player touts the results of her Moreover, if an organization is mentions the research results as the surgery – mentioning the clinic by name represented as being expert, then, in ‘‘findings’’ of that research organization. – on a social networking site that allows conjunction with a proper exercise of its Although the design and conduct of the her fans to read in real time what is expertise in evaluating the product research project are controlled by the happening in her life. Given the nature under § 255.3 (expert endorsements), it outside research organization, the of the medium in which her must utilize an expert or experts weight consumers place on the reported endorsement is disseminated, recognized as such by the organization results could be materially affected by consumers might not realize that she is or standards previously adopted by the knowing that the advertiser had funded a paid endorser. Because that organization and suitable for judging the the project. Therefore, the advertiser’s information might affect the weight relevant merits of such products. [See payment of expenses to the research consumers give to her endorsement, her § 255.1(d) regarding the liability of organization should be disclosed in this relationship with the clinic should be endorsers.] advertisement. disclosed. Example: A mattress seller advertises Example 2: A film star endorses a Assume that during that same that its product is endorsed by a particular food product. The television interview, the tennis player is chiropractic association. Because the endorsement regards only points of taste wearing clothes bearing the insignia of association would be regarded as expert and individual preference. This an athletic wear company with whom with respect to judging mattresses, its endorsement must, of course, comply she also has an endorsement contract. endorsement must be supported by an with § 255.1; but regardless of whether Although this contract requires that she evaluation by an expert or experts the star’s compensation for the wear the company’s clothes not only on recognized as such by the organization, commercial is a $1 million cash the court but also in public appearances, or by compliance with standards payment or a royalty for each product when possible, she does not mention previously adopted by the organization sold by the advertiser during the next them or the company during her and aimed at measuring the year, no disclosure is required because appearance on the show. No disclosure performance of mattresses in general such payments likely are ordinarily is required because no representation is and not designed with the unique expected by viewers. being made about the clothes in this features of the advertised mattress in Example 3: During an appearance by context. mind. a well-known professional tennis player Example 4: An ad for an anti-snoring on a television talk show, the host product features a physician who says § 255.5 Disclosure of material comments that the past few months that he has seen dozens of products connections. have been the best of her career and come on the market over the years and, When there exists a connection during this time she has risen to her in his opinion, this is the best ever. between the endorser and the seller of highest level ever in the rankings. She Consumers would expect the physician the advertised product that might responds by attributing the to be reasonably compensated for his materially affect the weight or improvement in her game to the fact appearance in the ad. Consumers are credibility of the endorsement (i.e., the that she is seeing the ball better than she unlikely, however, to expect that the connection is not reasonably expected used to, ever since having laser vision physician receives a percentage of gross by the audience), such connection must correction surgery at a clinic that she product sales or that he owns part of the be fully disclosed. For example, when identifies by name. She continues company, and either of these facts

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would likely materially affect the consumer users. The producer’s staff provides the gaming system that this credibility that consumers attach to the reviews the profiles of individuals connection should be disclosed, and it endorsement. Accordingly, the interested in working as ‘‘extras’’ in should have procedures in place to try advertisement should clearly and commercials and identifies several who to monitor his postings for compliance. conspicuously disclose such a are interested in automobiles. The extras Example 8: An online message board connection between the company and are asked to use the product for several designated for discussions of new music the physician. weeks and then report back to the download technology is frequented by Example 5: An actual patron of a producer. They are told that if they are MP3 player enthusiasts. They exchange restaurant, who is neither known to the selected to endorse the product in the information about new products, public nor presented as an expert, is producer’s infomercial, they will receive utilities, and the functionality of shown seated at the counter. He is asked a small payment. Viewers would not numerous playback devices. for his ‘‘spontaneous’’ opinion of a new expect that these ‘‘consumer endorsers’’ Unbeknownst to the message board food product served in the restaurant. are actors who were asked to use the community, an employee of a leading Assume, first, that the advertiser had product so that they could appear in the playback device manufacturer has been posted a sign on the door of the commercial or that they were posting messages on the discussion restaurant informing all who entered compensated. Because the board promoting the manufacturer’s that day that patrons would be advertisement fails to disclose these product. Knowledge of this poster’s interviewed by the advertiser as part of facts, it is deceptive. employment likely would affect the its TV promotion of its new soy protein Example 7: A college student who has weight or credibility of her ‘‘steak.’’ This notification would earned a reputation as a video game endorsement. Therefore, the poster materially affect the weight or expert maintains a personal weblog or should clearly and conspicuously credibility of the patron’s endorsement, ‘‘blog’’ where he posts entries about his disclose her relationship to the and, therefore, viewers of the gaming experiences. Readers of his blog manufacturer to members and readers of advertisement should be clearly and frequently seek his opinions about video the message board. conspicuously informed of the game hardware and software. As it has circumstances under which the done in the past, the manufacturer of a Example 9: A young man signs up to endorsement was obtained. newly released video game system be part of a ‘‘street team’’ program in Assume, in the alternative, that the sends the student a free copy of the which points are awarded each time a advertiser had not posted a sign on the system and asks him to write about it on team member talks to his or her friends door of the restaurant, but had informed his blog. He tests the new gaming about a particular advertiser’s products. all interviewed customers of the system and writes a favorable review. Team members can then exchange their ‘‘hidden camera’’ only after interviews Because his review is disseminated via points for prizes, such as concert tickets were completed and the customers had a form of consumer-generated media in or electronics. These incentives would no reason to know or believe that their which his relationship to the advertiser materially affect the weight or response was being recorded for use in is not inherently obvious, readers are credibility of the team member’s an advertisement. Even if patrons were unlikely to know that he has received endorsements. They should be clearly also told that they would be paid for the video game system free of charge in and conspicuously disclosed, and the allowing the use of their opinions in exchange for his review of the product, advertiser should take steps to ensure advertising, these facts need not be and given the value of the video game that these disclosures are being disclosed. system, this fact likely would materially provided. Example 6: An infomercial producer affect the credibility they attach to his By direction of the Commission. wants to include consumer endorsement. Accordingly, the blogger endorsements for an automotive should clearly and conspicuously Donald S. Clark additive product featured in her disclose that he received the gaming Secretary commercial, but because the product system free of charge. The manufacturer [FR Doc. E9–24646 Filed 10–14–09: 1:26 pm] has not yet been sold, there are no should advise him at the time it Billing Code: 6750–01–S

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Reader Aids Federal Register Vol. 74, No. 198 Thursday, October 15, 2009

CUSTOMER SERVICE AND INFORMATION CFR PARTS AFFECTED DURING OCTOBER

Federal Register/Code of Federal Regulations At the end of each month, the Office of the Federal Register General Information, indexes and other finding 202–741–6000 publishes separately a List of CFR Sections Affected (LSA), which aids lists parts and sections affected by documents published since Laws 741–6000 the revision date of each title. Presidential Documents 3 CFR 590...... 51800 592...... 51800 Executive orders and proclamations 741–6000 Proclamations: The United States Government Manual 741–6000 8424...... 50671 10 CFR Other Services 8425...... 51221 72...... 52387 8426...... 51223 73...... 52667 Electronic and on-line services (voice) 741–6020 8427...... 51441 Privacy Act Compilation 741–6064 452...... 52867 8428...... 51443 1021...... 52129 Public Laws Update Service (numbers, dates, etc.) 741–6043 8429...... 51445 Proposed Rules: TTY for the deaf-and-hard-of-hearing 741–6086 8430...... 51733 51...... 51522 8431...... 51735 72...... 52430 ELECTRONIC RESEARCH 8432...... 51737 8433...... 51739 World Wide Web 12 CFR 8434...... 52383 Full text of the daily Federal Register, CFR and other publications 8435...... 52863 204...... 52873 229...... 52875 is located at: http://www.gpoaccess.gov/nara/index.html Executive Orders: 915...... 51452 Federal Register information and research tools, including Public 13511...... 50909 1212...... 51073 Inspection List, indexes, and links to GPO Access are located at: 13512...... 50911 1261...... 51452 http://www.archives.gov/federallregister 13513...... 51225 13514...... 52117 Proposed Rules: E-mail 201...... 51806 Administrative Orders: 327 ...... 51062, 51063, 52697 FEDREGTOC-L (Federal Register Table of Contents LISTSERV) is Presidential 985...... 50926 an open e-mail service that provides subscribers with a digital Determinations: 989...... 50926 form of the Federal Register Table of Contents. The digital form No. 2010–01 of 1273...... 50926 of the Federal Register Table of Contents includes HTML and October 8, 2009 ...... 52865 1274...... 50926 PDF links to the full text of each document. Presidential To join or leave, go to http://listserv.access.gpo.gov and select Determinations: 13 CFR Online mailing list archives, FEDREGTOC-L, Join or leave the list No. 2009–31 of (or change settings); then follow the instructions. September 29, 120...... 51229 124...... 51229 PENS (Public Law Electronic Notification Service) is an e-mail 2009 ...... 50913 service that notifies subscribers of recently enacted laws. No. 2009–32 of 14 CFR September 30, To subscribe, go to http://listserv.gsa.gov/archives/publaws-l.html 2009 ...... 52385 25...... 51759 and select Join or leave the list (or change settings); then follow 39 ...... 50683, 50686, 50688, the instructions. 5 CFR 50690, 50692, 51464, 52391, FEDREGTOC-L and PENS are mailing lists only. We cannot 2411...... 50673 52393, 52395, 52877 respond to specific inquiries. 2415...... 51741 71 ...... 52130, 52131, 52398, 2416...... 51741 52399 Reference questions. Send questions and comments about the 2424...... 51741 73...... 51076 Federal Register system to: [email protected] 2429...... 51741 93...... 52132, 52134 The Federal Register staff cannot interpret specific documents or 95...... 50920 regulations. 6 CFR 97...... 50696, 50698 Reminders. Effective January 1, 2009, the Reminders, including 5...... 50902 Proposed Rules: 25 ...... 50926, 51813, 52698 Rules Going Into Effect and Comments Due Next Week, no longer 7 CFR appear in the Reader Aids section of the Federal Register. This 39...... 52156, 52431 information can be found online at http://www.regulations.gov. 246...... 51745 71 ...... 50928, 51098, 51523, 354...... 50915 51524, 52702, 52703, 52704, CFR Checklist. Effective January 1, 2009, the CFR Checklist no 927...... 52665 52705 longer appears in the Federal Register. This information can be 981...... 50681 found online at http://bookstore.gpo.gov/. 1205...... 51069 15 CFR 1209...... 50915 730...... 52880 FEDERAL REGISTER PAGES AND DATE, OCTOBER Proposed Rules: 734...... 52880 984...... 52154 736...... 52880 50671–50910...... 1 1205...... 51094 738...... 52880 50911–51068...... 2 4280...... 51714 740...... 52880 51069–51220...... 5 742...... 52880 51221–51440...... 6 8 CFR 744...... 52880 51441–51732...... 7 274a...... 51447 772...... 52880 51733–52128...... 8 774...... 52880 52129–52382...... 9 9 CFR 902...... 50699 52383–52664...... 13 Proposed Rules: Proposed Rules: 52665–52862...... 14 2...... 50738 90...... 51526 52863–53144...... 15 391...... 51800 922...... 50740

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16 CFR Proposed Rules: 51249, 51535, 51823, 51824, 225...... 52895 255...... 53124 28...... 52937 52441, 52716, 52717, 52942 241...... 52895 44...... 52937 55...... 50939 244...... 52895 Proposed Rules: 60...... 52723 503...... 51510 310...... 52914 29 CFR 61...... 52723 552...... 51510 610...... 52915 403...... 52401 63...... 52723 Proposed Rules: 17 CFR 408...... 52401 86...... 51252 9...... 51112 2590...... 51664 97...... 52717 12...... 51112 240...... 52358 4022...... 52886 242...... 52358 271...... 52161 52...... 51112 249...... 52358 Proposed Rules: 600...... 51252 Ch. 13 ...... 52542 270...... 52358 501...... 50929 780...... 50929 42 CFR 49 CFR Proposed Rules: 788...... 50929 412...... 50712, 51496 172...... 52896 1...... 52434 413...... 51496 665...... 51083 220...... 53114 30 CFR 415...... 51496 1001...... 52900 229...... 52374, 53086 950...... 52677 485...... 51496 1002...... 52900 230...... 52374 Proposed Rules: 489...... 51496 1003...... 52900 239...... 52374, 53086 1007...... 52900 240...... 52374, 53086 70...... 52708 44 CFR 1011...... 52900 242...... 52374 71...... 52708 64...... 51082 1012...... 52900 249...... 52374, 53086 90...... 52708 1016...... 52900 270...... 52374 31 CFR 45 CFR 1100...... 52900 274...... 53086 144...... 51664 1102...... 52900 275...... 52374 1...... 51777 146...... 51664 1103...... 52900 19 CFR 33 CFR 148...... 51664 1104...... 52900 4...... 52675 100...... 51778, 52139 Proposed Rules: 1105...... 52900 111...... 52400 110...... 51779 160...... 51698 1109...... 52900 122...... 52675 117 ...... 50706, 51077, 52139, 164...... 51698 1110...... 52900 52143, 52887, 52888, 52890 1113...... 52900 123...... 52675 46 CFR 192...... 52675 147...... 52139 1114...... 52900 155...... 52413 1116...... 52900 Proposed Rules: 162...... 52413 157...... 52413 1118...... 52900 113...... 52928 501...... 50713 1132...... 52900 191...... 52928 165 ...... 50706, 50922, 51465, 502...... 50713 52139, 52686 503...... 50713 1139...... 52900 20 CFR Proposed Rules: 504...... 50713 1150...... 52900 Proposed Rules: 100...... 51243 506...... 50713 1152...... 52900 404...... 51229, 52706 117...... 52158 508...... 50713 1177...... 52900 416...... 52706 151...... 51245, 52941 515...... 50713 1180...... 52900 655...... 50929 155...... 51245 520...... 50713 1240...... 52900 160...... 51245 525...... 50713 1241...... 52900 21 CFR 530...... 50713 1242...... 52900 36 CFR 558...... 52885 531...... 50713 1243...... 52900 866...... 52136 7...... 51237 535...... 50713 1245...... 52900 1308...... 51234 Ch. XII...... 51004 540...... 50713 1246...... 52900 1248...... 52900 Proposed Rules: Proposed Rules: 545...... 50713 4...... 50744, 51099 7...... 51099 550...... 50713 1253...... 52900 242...... 52712 551...... 50713 1260...... 52900 22 CFR 555...... 50713 1261...... 52900 37 CFR 41...... 51236 560...... 50713 1262...... 52900 226...... 51762 1...... 52686 565...... 50713 1263...... 52900 370...... 52418 Proposed Rules: 1264...... 52900 23 CFR 162...... 52941 1265...... 52900 38 CFR 950...... 51762 1266...... 52900 Proposed Rules: 47 CFR 1267...... 52900 24 CFR 36...... 51103 73...... 50735, 52151 1268...... 52900 1269...... 52900 Proposed Rules: 39 CFR 5...... 52931 48 CFR Proposed Rules: 200...... 52354 20...... 52144 Ch. 1...... 52846, 52861 531...... 51252 908...... 52931 111...... 52147 2...... 52847 533...... 51252 3020 ...... 50708, 51078, 51467 4...... 52847 537...... 51252 25 CFR Proposed Rules: 5...... 52860 538...... 51252 542...... 52138 3001...... 51815 6...... 52849 50 CFR 543...... 52138 3005...... 51815 7...... 52847 3050...... 52942 10...... 52847 17...... 51988, 52014 26 CFR 12...... 52851 32...... 50736 1...... 50705, 53004 40 CFR 13...... 52847 226...... 52300 54...... 51237, 51664 52 ...... 51240, 51783, 51792, 15...... 52852, 52853 622...... 50699 301...... 52677 51795, 52427, 52691, 52693, 16...... 52856 635...... 51241 602...... 50705, 53004 52891, 52894 18...... 52847, 52859 648...... 51092, 51512 Proposed Rules: 60...... 51368, 51950 26...... 52847 679 ...... 50737, 51242, 51512, 1...... 50758 70...... 51418 31...... 52853 51514, 51515, 51798, 52152, 54...... 51710 71...... 51418 52 ...... 52847, 52851, 52853, 52912 301...... 51527, 52708 180 ...... 51470, 51474, 51481, 52860 680...... 51515 51485, 51490, 52148 204...... 52895 Proposed Rules: 27 CFR Proposed Rules: 205...... 52895 17 ...... 51825, 52066, 52612 9...... 51772 52 ...... 50930, 50936, 51246, 209...... 52895 36...... 52110

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100...... 52712 The text of laws is not the date on which the subscribe, go to http:// 648...... 50759 published in the Federal accreditation requirement listserv.gsa.gov/archives/ 665...... 50944 Register but may be ordered under the Medicare Program publaws-l.html in ‘‘slip law’’ (individual applies to suppliers of durable pamphlet) form from the medical equipment that are Note: This service is strictly LIST OF PUBLIC LAWS Superintendent of Documents, pharmacies. (Oct. 13, 2009; U.S. Government Printing 123 Stat. 2059) for E-mail notification of new Office, Washington, DC 20402 laws. The text of laws is not This is a continuing list of Last List October 14, 2009 (phone, 202–512–1808). The available through this service. public bills from the current text will also be made PENS cannot respond to session of Congress which available on the Internet from have become Federal laws. It Public Laws Electronic specific inquiries sent to this GPO Access at http:// address. may be used in conjunction www.gpoaccess.gov/plaws/ Notification Service with ‘‘P L U S’’ (Public Laws index.html. Some laws may (PENS) Update Service) on 202–741– not yet be available. 6043. This list is also available online at http:// H.R. 3663/P.L. 111–72 PENS is a free electronic mail www.archives.gov/federal- To amend title XVIII of the notification service of newly register/laws.html. Social Security Act to delay enacted public laws. To

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