DOL Slightly Extends Comment Period on QPAM Exemption

The Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA ) on Sept. 6 announced that it is extending the public comment period on a proposed amendment to its Class Prohibited Transaction Exemption 84-14, also known as the Qualified Professional Asset Manager (QPAM) Exemption. 

However, the DOL is extending the comment period by just 15 days. It had been set to expire on Sept. 26, 2022, but now will expire on Oct. 11. 

About the Proposed Amendment

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. 

EBSA has issued the proposed the amendment on July 26. It did so, it said, because since the exemption was created in 1984, substantial changes have occurred in the financial services industry.

 According to EBSA, the amendment would:

• address perceived ambiguity as to whether foreign convictions are included in the scope of the exemption’s ineligibility provision; 
• expand the ineligibility provision to include additional types of serious misconduct; 
• focus on mitigating potential costs and disruption to plans and IRAs when a QPAM becomes ineligible due to a conviction or participates in other serious misconduct; 
• update asset management and equity thresholds in the definition of “Qualified Professional Asset Manager”; 
• add a standard recordkeeping requirement that the exemption currently lacks; and 
• clarify the requisite independence and control that a QPAM must have regarding investment decisions and transactions. 

ARA Weighs in 

The American Retirement Association (ARA) in a Sept. 2 letter to Acting Assistant Secretary of Labor Ali Khawar, who heads EBSA, the ARA had requested that the comment period on the proposed amendment be extended. 

While technically an extension, at 15 days it is a very short one. The ARA had requested that the comment period on the proposed amendment be extended by at least 60 days. 

“The ARA requests additional time to comment on the Proposed Amendment because the modifications under it are significant,” wrote ARA Executive Director and CEO Brian Graff and ARA General Counsel Allison Wielobob, noting that the changes would “largely overhaul the relationship between plan sponsors and their advisors.”

“Plan sponsors and retirement plan service providers alike require additional time to understand the ways in which the Proposed Amendment would impact them,” Graff and Wielobob continue; further, “plan service providers and plan sponsor groups will need to work together to fully understand the impacts of the Proposed Amendment and their potential costs.” 

DOL Reasoning and Further Action

In a press release, Khawar noted that the DOL had received requests for extensions and said that they decided that “it is appropriate to extend the public comment period for the proposed amendment and schedule a virtual public hearing.”

The DOL will hold an online public hearing on the proposed amendment on Nov. 17, 2022.

The DOL says it will reopen the comment period for the proposed amendment on the day of the hearing, and that it will close approximately 14 days after the DOL publishes the hearing transcript on EBSA’s web page. It further expects that there will be at least 30 days more after that on which to comment on the proposed amendment. 

The DOL says that it will publish another notice in the Federal Register announcing when the transcript of the Nov. 17 hearing is posted and when the supplemental comment period will close. 

Khawar contends that extensions the DOL has announced will be sufficient, remarking that “The extended comment period, hearing, and supplemental comment period will provide interested parties with a full opportunity to consider the proposal and provide important input that will inform our next steps.”