The Department of Labor on Tuesday announced it had finalized proposed amendments to prohibited transaction class exemption 84-14, better known as the QPAM exemption. The QPAM exemption permits an investment fund holding retirement assets that is managed by a bank or other institution acting as a QPAM to engage in certain conflict-of-interest transactions otherwise prohibited under ERISA and tax code.
As finalized, the amended QPAM exemption requires QPAMs to register with DOL through a one-time notice that the QPAM is relying on the exemption, updates the list of crimes to expressly include foreign crimes, expands the circumstances that may lead to QPAM ineligibility, and provides a one-year winding down period to help pension plans and IRAs transition to a new asset manager in the event a QPAM becomes ineligible. The amended QPAM exemption also imposes clarifying requirements on QPAM investment authority, adjusts the asset management and equity thresholds for becoming a QPAM, and adds a new recordkeeping requirement.
The American Bankers Association raised a number of concerns with the proposal in a comment letter and public hearing testimony. Among other things, ABA advocated for the elimination of the proposed requirement that would have required every QPAM to amend all of their customer investment management agreements with DOL-crafted indemnification language. ABA said that such a requirement would cost the banking industry nearly $1 billion to comply, far exceeding DOL’s estimate of $135,000. DOL eliminated the proposed requirement.
