QPAM Audit Guidance: How Independent Auditors Can Help Asset Managers Stay ERISA Compliant

Facing a “Qualified Professional Asset Manager” (QPAM) audit can feel overwhelming for asset managers. Whether you’re dealing with a compliance issue from an affiliate’s criminal conviction or navigating a deferred prosecution agreement, the process of reinstating your QPAM status requires careful preparation and expert guidance. The good news? You don’t have to navigate this complex QPAM audit journey alone.

The QPAM audit, set forth under prohibited transaction exemptions issued and reviewed by the U.S. Department of Labor (DOL), is crucial for ensuring transparency and accountability in the administration of employee benefit plans, such as pensions and 401(k) plans. QPAM audits verify that an asset manager’s practices align with the fiduciary standards required under ERISA (Employee Retirement Income Security Act of 1974, as amended).

In this guide, we’ll explain what a QPAM audit is, detail the essential role of independent auditors in verifying ERISA compliance, and provide actionable recommendations for successfully navigating the audit process.

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Key Points:

• ERISA asset managers risk losing QPAM status if an affiliate faces criminal conviction or deferred prosecution, including foreign affiliates.
• To reinstate QPAM status, asset managers must request a prohibited transaction exemption from the DOL and hire an independent auditor.
• Engaging a skilled independent auditor to review ERISA-related policies and produce a report for the DOL is crucial for a successful audit.

What Is a QPAM Audit and Why Does It Matter? 

A QPAM audit is typically required for asset managers seeking to maintain or reinstate their QPAM exemption. The designation is granted to asset managers who meet specific qualifications, such as a reputable record of managing assets and the demonstrated ability to uphold ERISA fiduciary duties.

The primary objective of a QPAM audit is to confirm that an asset manager complies with ERISA fiduciary and prohibited transaction requirements, and the firm’s ERISA policies and procedures, all with the intent of ensuring that QPAMs act in the best interests of plan participants.

Key Compliance Points for QPAM Audits

• QPAM status may be lost if an affiliate (fund or fund manager) is criminally convicted or enters into a deferred prosecution agreement, even for foreign affiliates.
• To regain QPAM status, the asset manager must request reinstatement from the DOL through an individual prohibited transaction exemption, which typically includes a requirement that an independent auditor review the firm’s ERISA policies and procedures, QPAM requirements, and selected transaction testing.
• An independent auditor, with ERISA and financial services expertise, is essential to properly review the QPAM’s documentation, reviewing ERISA policies, procedures and employee training, and write a comprehensive report that withstands DOL scrutiny.

QPAM Audit: Key Steps and Areas of Focus

Preparing for a QPAM audit requires a clear understanding of the process and a proactive approach to compliance. Whether you're initiating your first audit or seeking reinstatement, having a structured plan in place is essential. Below is a practical checklist to help asset managers get audit-ready, followed by a deeper dive into the key areas that fiduciary consultants focus on during the audit process.

QPAM Audit Preparation Checklist 

Use this checklist to ensure your firm is ready for a QPAM audit:

    Review investment strategies for ERISA compliance.
    Assess internal controls and procedures.
    Conduct transaction reviews to identify prohibited transactions.
    Organize documentation and reporting systems.
    Prepare application for DOL prohibited transaction exemption with your ERISA counsel.
    Develop a corrective action plan for potential audit findings.
    Develop and schedule ongoing ERISA compliance training.

Once your initial preparations are complete, expect that your auditor will address the core components of a QPAM audit. These typically include:

• Internal Controls and Procedures: Assessment of compliance frameworks and internal safeguards for proper plan asset handling.
• Transaction Reviews: Analysis to ensure adherence to ERISA’s prohibited transaction rules, preventing self-dealing, excessive fees, or conflicts of interest.
• Documentation and Reporting: Scrutiny of records and reports, confirming accuracy and ongoing maintenance for all plan activities.

See: Special Fiduciary Services

Why Choose Newport Trust as Your QPAM Audit Partner

Newport Trust Company, LLC, an Ascensus company, provides independent fiduciary services and QPAM independent audit services to asset. Our expertise in ERISA compliance, DOL requirements, financial services and prohibited transaction exemptions minimizes your risk and streamlines the QPAM audit process.

Other fiduciary services offered by Newport Trust include:

• Asset transfer transactions
• Proxy voting and shareholder services
• Pension risk transfer oversight
• Sunset management for employee stock plans
• Litigation settlement review and conflict resolution

For more on how Newport Trust can serve as your QPAM auditor, as well as serve as an independent fiduciary for complicated situations, please contact our team.

Conclusion: Navigating QPAM Audits with Confidence

A successful QPAM audit is essential for protecting your firm’s reputation and maintaining ERISA compliance. With the support of an experienced independent auditor like Newport Trust, asset managers can successfully navigate the DOL audit requirements.

If you’re facing a QPAM audit or want to ensure your firm’s ongoing ERISA compliance, contact Newport Trust today for a confidential consultation.

Newport Trust Company is a New Hampshire state-chartered trust company and wholly owned subsidiary of Newport Group, Inc., an Ascensus company. Newport Trust Company provides independent fiduciary and trustee services for employee benefit plans.