The U.S. Department of Labor announced yesterday that it’s allowing more comment time and holding an online hearing on a proposal that could affect some companies’ and investment managers’ ability to work with retirement plans.
The amendment deals with the legal status of investment managers handling retirement money to perform sometimes necessary transactions with certain parties—dealings that would otherwise be prohibited by the Employee Retirement Income Security Act (or ERISA) because of a perceived conflict of interest. Investment managers who qualify under the law for these exemptions are known as “qualified professional asset managers” or “QPAMs.”
The Labor Department’s amendment, proposed in late July, says certain types of misconduct mean a manager can no longer achieve the important QPAM designation—specifically if the manager or company has engaged in foreign crimes or deferred prosecution agreements (when a successful prosecution would have led to a criminal conviction).
The proposal also says that any firm giving materially misleading information to the Labor Department in connection with the conditions of the exemption would also be barred from using it.
It’s important for the DOL to hold entities entrusted with retirement assets “to a very high standard of conduct," said Ali Khawar, the DOL’s acting assistant secretary for employee benefits security, in a call with reporters.
The department is extending the comment period on the amendment to 15 days, through October 11, 2022.
The Prohibited Transaction Class Exemption 84-14 (also known as the QPAM exemption) allows investment funds holding assets of plans and IRAs to engage in transactions with disqualified persons or “parties in interest” (for example, if a bank or fund manager used the retirement plan’s assets to purchase an interest in a company providing services to the plan).
The DOL first proposed the amendment about creating new exclusions for these investment managers in late July, and it said afterward it received letters from firms and trade groups asking the agency to extend the comment period to provide additional time for them to develop and submit their comments.
“After carefully considering the extension request, the department decided that it is appropriate to extend the public comment period for the proposed amendment and schedule a virtual public hearing,” Khawar said in a press release.
An online public hearing on the proposed amendment will be held November 17, 2022, at 9 a.m. Eastern time. Those interested in testifying at the hearing must submit a request to the department by October 11, 2022. If necessary, the DOL will continue the hearing on November 18 at the same hour. In connection with the hearing, the department will also reopen the comment period for the proposed amendment on November 17.