The Department of Labor (DOL) announced on January 12, 2026, in the Federal Register that it is submitting an information collection request (ICR) sponsored by its Employee Benefits Security Administration (EBSA) to the Office of Management and Budget (OMB) for review and approval. This ICR pertains to the Statutory Exemption for Cross-Trading of Securities, a regulatory framework designed to ensure transparency and compliance in certain investment transactions involving pension plan assets. The notice invites public comments until February 11, 2026, highlighting the ongoing effort to balance regulatory oversight with administrative efficiency under the Paperwork Reduction Act of 1995 (PRA). This development underscores the federal government's commitment to refining rules that protect employee retirement benefits while minimizing unnecessary burdens on financial entities.
Background on the Statutory Exemption
The roots of this exemption trace back to the Pension Protection Act of 2006 (PPA), enacted as Public Law 109-280. Section 611(g) of the PPA amended the Employee Retirement Income Security Act of 1974 (ERISA) by adding subsection 408(b)(19). This provision creates a statutory exemption from certain prohibitions in ERISA sections 406(a)(1)(A) and 406(b)(2), which generally bar fiduciary self-dealing and conflicts of interest. Specifically, it allows cross-trading – the purchase and sale of securities between a pension plan account and another account managed by the same investment manager – under defined conditions.
The DOL finalized regulations implementing this exemption on October 7, 2008, published in the Federal Register (73 FR 58450). These rules, codified at 29 CFR 2550.408b-19, outline the content requirements for written policies and procedures that investment managers must adopt. The exemption aims to facilitate efficient portfolio management while safeguarding plan participants from potential abuses. Prior to the PPA, cross-trading was often restricted, leading to higher transaction costs for plans. The 2006 reforms responded to industry calls for flexibility, influenced by broader pension reform debates during the George W. Bush administration, which emphasized strengthening retirement security amid corporate scandals like Enron.
Key Requirements of the Cross-Trading Policies and Procedures
Under the statutory exemption, investment managers must develop and disclose written policies and procedures for cross-trading. These must be provided in advance to the fiduciary of any pension plan considering participation in the manager's cross-trading program. The policies ensure that transactions are fair, transparent, and in the best interest of plan participants.
A critical component is the designation of a compliance officer. This individual is tasked with periodically reviewing the cross-trading program to verify adherence to the established policies. The exemption mandates that the compliance officer issue an annual report to each participating plan's fiduciary. This report must detail the review process, assess the level of compliance, and highlight any instances of noncompliance. Notably, the exemption does not require filings with the federal government, focusing instead on private disclosures between managers and plan fiduciaries.
The DOL's regulations specify that these policies must meet certain content standards to qualify for exemptive relief. For instance, they should address how cross-trades are authorized, priced, and documented to prevent fiduciary breaches. This framework draws from ERISA's overarching fiduciary duties, which require acting solely in the interest of plan participants and beneficiaries, as emphasized in cases like Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc. (1985), where the Supreme Court underscored the strict standards for ERISA fiduciaries.
Details of the Information Collection Request
The current ICR seeks OMB approval for a three-year period, as required by the PRA, which mandates federal agencies to justify the necessity and practicality of information collections. The DOL estimates that 265 respondents – primarily investment managers – will be affected annually, generating 2,385 responses. The total annual time burden is projected at 2,769 hours, with other costs amounting to $21,632. These figures reflect the time and resources needed for developing policies, conducting reviews, and preparing reports.
Public comments are solicited on aspects such as the necessity of the collection for DOL functions, the accuracy of burden estimates, ways to improve clarity and utility, and methods to reduce respondent burden, including through technology. This process aligns with PRA goals to minimize paperwork while ensuring information serves public interests. A related notice was published on July 11, 2025 (90 FR 30984), providing additional context on the ICR.
The OMB Control Number for this collection is 1210-0130, and it applies to the private sector. During review, existing ICRs receive month-to-month extensions, ensuring continuity.
Perspectives and Implications
Stakeholders view this exemption through varied lenses. Investment managers often praise it for reducing costs and enhancing liquidity in managing large portfolios, arguing that cross-trading can benefit plans by avoiding market impact fees. Plan fiduciaries and participant advocates, however, emphasize the need for robust safeguards to prevent self-dealing, drawing on historical concerns from ERISA's enactment in 1974 amid pension failures.
Short-term implications include potential adjustments to the ICR based on public feedback, which could refine burden estimates or procedural requirements. Long-term, this could influence how ERISA evolves in response to financial innovation, such as algorithmic trading or ESG investments. Political forces, including congressional oversight of DOL regulations, may shape future amendments, especially if economic conditions prompt pension reform debates.
Different perspectives highlight tensions: industry groups like the Investment Company Institute may advocate for streamlined rules to foster efficiency, while labor unions and consumer protection organizations stress transparency to protect workers' retirement savings. Legal precedents, such as those from the DOL's enforcement actions under ERISA section 502, underscore the importance of compliance in avoiding litigation.
In conclusion, this ICR submission represents a routine yet essential step in maintaining the integrity of ERISA's cross-trading exemption. Key takeaways include the emphasis on transparent policies and independent reviews to uphold fiduciary standards. Looking ahead, potential next steps involve OMB's decision on approval, which could incorporate public comments to enhance efficiency. Ongoing debates may center on balancing regulatory burdens with protections for pension plans, particularly as financial markets evolve. Challenges include adapting to technological advancements in compliance reporting, while ensuring the framework remains responsive to emerging risks in investment management.
