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DOL Reopens Comment Period for QPAM Exemption Proposal

Regulatory Agencies

The Department of Labor’s Employee Benefits Security Administration (EBSA) on March 22 announced that it is reopening the comment period for the proposed amendment to prohibited transaction class exemption 84-14 (the QPAM Exemption). 

The QPAM Exemption

The QPAM exemption permits various parties who are related to plans to engage in transactions involving plan and individual retirement account assets if the assets are managed by QPAMs that are independent of the parties in interest and that meet specified financial standards. 

Since the exemption was created in 1984, substantial changes occurred in the financial services industry. On July 26, 2022, the DOL released the proposed amendment, which it said would protect benefit plans, participants, and beneficiaries, as well as address changes that have taken place in the financial services industry. It includes changes that would expand the types of misconduct that disqualify plan asset managers from using the exemption and would clarify that foreign convictions disqualify firms from utilizing the QPAM.  

ARA Views

American Retirement Association (ARA) General Counsel Allison Wielobob, in Nov. 17, 2022 testimony before EBSA, said the ARA shares the DOL’s objectives. 

However, Wielobob also told the agency that “We are concerned that the proposal would make it harder for many plans and participants to have access to professional asset management. If being a QPAM becomes too onerous, many asset managers may not offer the QPAM services.”

She said that the ARA supports conditions for prohibited transaction relief that provide necessary protections to plans, as well as clarity to the investment selection and management process — without unduly disrupting and interfering with business relationships that otherwise function well. 

The ARA on Oct. 11, 2022 had sent a comment letter to EBSA in which it argued that proposed changes would “needlessly” disrupt plan relationships and increase costs for plan sponsors and participants — with no obvious corresponding benefit. 

The ARA’s concerns centered on the proposal’s impacts on (1) plan sponsors and (2) plan investment options. The ARA’s key recommendations were: 

  • modify the exclusive authority condition of the proposed amendment to Section I(c) of the QPAM Exemption so as to not preclude routine business interactions;
  • modify the conditions of the one-year winding down period of proposed new Section I(j) so as not to preclude new transactions in existing accounts which are required for a prudent winding down process; and
  • provide at least 18 months for QPAMs, plan sponsors and other parties-in-interest to come into compliance with the conditions of an amended QPAM Exemption.

New Comment Period

In the March 22 announcement, EBSA cited two comment letters it received concerning the proposed amendment, one of which was the ARA’s Oct. 11 letter, and noted that it had reopened a comment period which closed on Jan. 6, 2023. 

Still, the DOL says that it understands that at least one interested party may have additional information to provide that was not submitted by Jan. 6, 2023; consequently, it is reopening the comment period to provide an opportunity for all interested parties to submit additional information.

The reopened comment period closes on April 6, 2023.