The Employee Benefits Security Administration (EBSA) has completed a final amendment that would allow parties related to employee benefit plans and individual retirement accounts (IRAs) to engage in transactions involving plan and IRA assets, the U.S. Department of Labor (DOL) announced today.
The final amendment on the Class Prohibited Transaction Exemption 84-14, otherwise known as the Qualified Professional Asset Manager Exemption (QPAM), responds to changes in the financial services industry since the exemption’s 1984 establishment, EBSA noted in a release. These changes include industry consolidation and the increasing global reach of financial services institutions in their affiliations and investment strategies, including those that manage plan and IRA assets.
“The Qualified Professional Asset Manager exemption is an important tool for plans and asset managers that must be viewed in the context of what is protective of the rights of plans, participants, beneficiaries and individual retirement account owners,” said Assistant Secretary for Employee Benefits Security Lisa M. Gomez. “The final amendment reflects changes to modernize the QPAM exemption, input received from public comments, and the Department of Labor’s experience administering the exemption.”
Those who use the QPAM exemption must ensure an independent QPAM is managing the plan and IRA assets, as well as meeting “specific financial standards,” the federal agency adds.
According to the release, the QPAM exemption tackles the following:
“The final amendment reflects changes to modernize the QPAM exemption, input received from public comments, and the Department of Labor’s experience administering the exemption.”
Lisa M. Gomez, EBSA
- Addressing perceived ambiguity by clarifying that foreign convictions are included in the scope of the exemption’s ineligibility provision.
- Expanding the ineligibility provision to include additional types of serious misconduct.
- Adding a one-year transition period that focuses on mitigating potential costs and disruption to plans and IRA owners when a QPAM becomes ineligible due to a conviction or participates in other serious misconduct.
- Updating asset management and equity thresholds in the QPAM definition.
- Clarifying the requisite independence and control a QPAM must have with respect to investment decisions and transactions.
- Adding a standard recordkeeping requirement.
In response to public comments and testimony at a Nov. 17, 2022, online public hearing, the department made further changes including “additional clarifications of exemption text and adjustments to the scope of foreign judgments and agreements subject to the rule’s ineligibility provisions. For example, the exemption expressly excludes convictions from foreign countries listed as foreign adversaries by the Department of Commerce,” EBSA states in the release.
The Federal Register will publish the final rule on April 3, which takes effect 75 days later. A copy of the final amendment can be found here.
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
