DOL Releases Final Rule on QPAM Exemptions

The Department of Labor has issued a final rule “Amendment to Prohibited Transaction Class Exemption 84-14 (PTE 84-14) for Transactions Determined by Independent Qualified Professional Asset Managers (the QPAM Exemption)”.

As previously shared, ERISA generally prohibits a number of transactions between a plan and a “party in interest”—including fiduciaries and those providing services to the plan—unless an exemption is granted. PTE 84-14 is a class exemption regarding certain transactions between a party in interest with respect to an employee benefit plan and an investment fund that is managed by a QPAM. An employee benefit plan includes an employee welfare benefit or pension benefit plan, a trust defined under IRC. Secs. 401(a) or 403(a), IRAs, HSAs, MSAs, and ESAs. QPAMs are independent fiduciaries that are a bank, savings and loan, insurance company, or registered investment advisor meeting certain asset/net worth thresholds.

According to the rule, this amendment modifies Section I(g) of the exemption, a provision under which a QPAM may become ineligible to rely on the QPAM Exemption for a period of 10 years if the QPAM, various affiliates, or certain owners of the QPAM are convicted of certain crimes. The amendment further requires the following.

  • Requires a QPAM to provide a one-time notice to the Department that the QPAM is relying upon the exemption;
  • Updates the list of crimes enumerated in the prior version of Section I(g) to explicitly include foreign crimes that are substantially equivalent to the listed crimes;
  • Expands the circumstances that may lead to ineligibility; and
  • Provides a one-year winding down (transition) period to help plans and IRAs avoid or minimize possible negative impacts of terminating or switching QPAMs or adjusting asset management arrangements when a QPAM becomes ineligible pursuant to Section I(g), and gives QPAMs a reasonable period to seek an individual exemption, if appropriate.

Additionally, the amendment provides clarifying updates to Section I(c) regarding a QPAM’s authority over investment decisions, adjusts the asset management and equity thresholds in the QPAM definition in Section VI(a), and adds a new recordkeeping provision in Section VI(u).

The amendment is effective 75 days after publication in the Federal Register.