Compliance July 6, 2010

DoL Announces Prohibited Transaction Exemption Amendment

July 6, 2010 (PLANSPONSOR.com) – Financial institutions are now allowed to act as qualified professional asset managers (QPAM) for their plans, as a result of a recently announced change to a 2005 rule. 
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The U.S. Department of Labor (DoL) said it had amended prohibited transaction exemption PTE 84-14 to allow certain parties-in-interest to engage in limited transactions with plan assets, as well as giving additional relief. The amendment allows transactions such as leasing office space or other ordinary business deals between contributing employers or QPAMs and plan assets. 

The DoL change also allows a QPAM to own an investment fund containing the assets of his or her own plan or an affiliate’s plan.  A QPAM can be a bank, savings and loan association, insurance company, or investment adviser acting as an independent fiduciary, according to the amendment. 

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The class exemption will apply only if the qualified professional asset manager:  

  • has discretionary control of the plan assets involved in the exempted transactions, 
  • adopts written policies and procedures that will ensure compliance with the terms of the exemption, and 
  • obtains a qualified independent auditor to conduct an exemption audit. 

The changed rule exempts employers and QPAMs from penalties under Section 406 of the Employee Retirement Income Security Act and from certain taxes under Sections 4975(a) and (b). 

The amendment is available in the Federal Register here.

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