DOL Publishes 1st List of Firms Using Qualified Plan Exemptions

The U.S. Department of Labor last week published a list of nearly 900 companies that have used or planned to use the qualified professional asset manager exemption, as of September 30.

The initial public list comes after the DOL published in April a new amendment to the rule governing the QPAM exemption, which regulates transactions between an investment manager and a qualified plan. The prohibited transaction exemption, or PTE 84-14, provides relief for those employee benefit plan and individual retirement account transactions that would otherwise not be allowed by the Employee Retirement Income Security Act.

Under the amended PTE 84-14, any firm that relies on the exemption must notify the DOL. The regulator’s list, published Wednesday, lists firms that have used the exemption and includes many of the biggest names in asset management, insurance and recordkeeping. According to the DOL, the list will be updated periodically.

The publication and maintenance of the list is required by the amendment that both broadened the types of misconduct that would require an investment manager exemption and made it easier for a retirement plan sponsor to exit a QPAM relationship. The amendment was first proposed in July 2022 and received industry pushback and comment over the subsequent years before it was finalized.

Ruth Delaney, a partner in the asset management and investment funds practice group of K&L Gates, says the DOL had indicated it would maintain a public list of firms relying on the QPAM exemption on its website and that the lengthy list makes sense, given the circumstances.

“Given that the QPAM exemption is one of the broadest and most commonly relied on exemptions in the financial services industry, the long list of entities, including many major players in the industry, does not come as a surprise,” she says.

The DOL noted in Wednesday’s release that it had not directly verified whether any of the listed entities met the exemption’s requirements and that inclusion on the list should “not be taken as the Department’s endorsement of the use of the entity as a service provider or fiduciary.” Plan fiduciaries, it noted, should consult with legal counsel regarding working with a QPAM.

David Kaleda, a principal in Groom Law Group, Chartered, says it is important that plan fiduciaries do not see this list of disclosures as a “blessing” by the DOL.

“The DOL makes clear on the webpage that disclosure on the page does not … mean that the entity is in fact a ‘qualified professional asset manager’ or that an entity that is otherwise a QPAM in fact complies with the conditions of the QPAM Exemption,” he says. “That is, the DOL does not independently verify QPAM status or exemption compliance, and it is the responsibility of plan fiduciaries to make that determination.” 

Kaleda also notes that many organizations have multiple affiliates listed, showing that “each discretionary manager” within a firm that wants to use the exemption must independently meet its requirements.

The DOL stated in April that the amendment to PTE 84-14 was designed to modernize the rule from its initial 1984 creation. It included changes such as:

• Clarifying that foreign convictions are included in the scope of the exemption’s ineligibility provision;
• Adding a one-year transition period intended to mitigate potential costs and disruptions to plans and individual retirement account owners when a QPAM becomes ineligible;
• Updating asset management and equity thresholds in the QPAM definition;
• Clarifying the requisite independence and control a QPAM must have with respect to investment decisions and transactions; and
• Adding a standard recordkeeping requirement.

Kaleda believes the public disclosure requirement and web page will serve as an enforcement tool for the DOL. For example, if the regulator sees that a financial services firm is being convicted of certain crimes or has entered into a settlement related to certain crimes, “it may look to see if such entity or its affiliates are listed on the website. Then, it could use its investigation and enforcement authority to assure that the entity and its affiliates no longer rely on the QPAM exemption or get an individual exemption.”

In addition, he notes, the web page is the “only centralized, comprehensive list of which I am aware available to the DOL of asset managers who likely manage ERISA-covered assets. These are managers over which DOL has enforcement authority, regardless of whether they rely on the QPAM exemption.”