Changes are coming to the way Prohibited Transaction Exemptions are filed and processed.
The U.S. Department of Labor’s Employee Benefits Security Administration today announced that it is amending its procedures governing the filing and processing of PTE applications.
“The amended exemption procedure will create more clarity, certainty and transparency around the exemption application process.”
EBSA’s Lisa Gomez
Section 408(a) of the Employee Retirement Income Security Act of 1974 (ERISA) directs the Secretary of Labor to establish procedures for granting administrative prohibited transaction exemptions. The Exemption Procedure Regulation amends the department’s prohibited transaction exemption procedure that was published in 2011.
The notice, set to be published in the Federal Register on Wednesday, Jan. 24, finalizes the Exemption Procedure Regulation that the department proposed on March 15, 2022, and reflects public input received in response to the proposal in the form of comments and testimony at the public hearing on the proposed rule. The amendments in the 154-page rule will become effective April 8, 2024, which is 75 days after appearing in the Federal Register.
“The amended exemption procedure will create more clarity, certainty and transparency around the exemption application process,” said Assistant Secretary for Employee Benefits Security Lisa M. Gomez. “Ensuring consistent and transparent procedures for the department to process exemption requests will benefit applicants and the public at large.”
The Exemption Procedure Regulation promotes the department’s prompt and efficient consideration of all prohibited transaction exemption applications by, among other things:
- Clarifying the types of information and documentation required for a complete application.
- Revising the definitions of a qualified independent fiduciary and qualified independent appraiser in order to ensure their independence.
- Clarifying the content of specific reports and documents applicants must submit in order to ensure that the department receives sufficient information to make the requisite findings under ERISA Section 408(a) to issue an exemption.
- Updating various timing requirements to ensure clarity in the application review process.
- Specifying items that are included in the administrative record for an application and when the administrative record is available for public inspection.
- Expanding opportunities for applicants to submit information to the department electronically.
Both ERISA and Internal Revenue Code section 4975 contain various statutory exemptions from the prohibited transaction rules. These statutory exemptions were enacted by Congress to prevent the disruption of a number of customary business practices involving employee benefit plans, parties in interest, and fiduciaries.
The statutory exemptions afford relief for transactions such as loans to participants and stock ownership plans, the provision of services necessary for the operation of a plan, certain investment advice transactions involving individual account plan participants and beneficiaries, and the investment of plan assets into deposits in certain financial institutions regulated by state or Federal agencies.
Read the final Exemption Procedure Regulation notice.
SEE ALSO:
• Fiduciary Comments Hit 16k as DOL Releases Hearing Transcripts
• Insurance Industry Questions Next Steps for DOL Fiduciary Rule
• Retirement Security Rule Would Cost 11 Times More than DOL Estimate: Report
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
