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• Attention Investment Managers: QPAM Matters for Immediate Review
• Merger and Acquisition Considerations for Employee Benefit Plans
• SEC Matters to Consider in the New Year: 2024 Exam Priorities and Off-Channel Enforcement Actions
• SEC Speaks to Importance of Naming Convention
• SEC’s Recent Marketing Rule Risk Alert Identifies Additional Areas of Focus During Compliance Examinations
• SEC Issues New Guidance For Investment Advice Obligations (all with Stephen Wilkes (WLG San Francisco))
• Significant Changes Made to IRS Employee Plans Compliance Resolution System with Barry Salkin (WLG New York) and Dannae Delano (WLG St. Louis)

• If You Cross-Trade Securities, Make Sure Not to Cross ERISA (PDF), in Bloomberg Tax
• If You Buy Pension Risk Transfers, Don’t Buy a Pig in a Poke (PDF), in Bloomberg Tax
• ERISA Allows Plan Fiduciaries to Pursue More Than Just Money, in Bloomberg Tax
• The Future Is Now for ERISA Fiduciary Duties Around Plan Data (PDF) in Bloomberg Law
• DOL Streamlines PTE Application Rule With New Requirements (PDF) with Steve Wilkes (WLG San Francisco) in Bloomberg Law

• Bugielski v. AT&T Case Continues With Appellate Reversal
• IRS Issues Notice Providing Relief to Taxpayers Affected by Recent Terroristic Actions Against Israel
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• Yellow: Pension Plan Unjustly Seeking ‘Free Money’ From Bankruptcy Case
• The Rise of Fiduciary Health Plan Litigation with Steve Wilkes
• Department of Labor’s New Investment Advice Fiduciary Rule and Related Exemption Amendments with Steve Wilkes
• The Retirement Security (Nee Fiduciary) Rule Rides Again, with Drew Oringer, Barry Salkin, John Sohn (WLG New York), and Steve Wilkes

1. The SECURE Act did not expand the bonding requirements under section 412 of ERISA applicable to PEPs to include fiduciaries or other persons who handle “plan assets” of the PEP, but do not “handle funds or other property” of the PEP within the meaning of section 412 of ERISA;
2. The employees of employers who participate in the PEP do not have to be bonded while collecting and transmitting participant contributions from their employers to the PEP; and
3. Independent contractors to a plan or a plan sponsor (such as the PEP’s pooled plan provider) are required to be bonded under section 412 of ERISA if handling funds or other property of the PEP.

1. The SECURE Act did not expand the bonding requirements under section 412 of ERISA applicable to PEPs to include persons who handle plan assets or who are fiduciaries of the PEP, but who do not “handle funds or other property” of the PEP.

2. The employees of employers who participate in the PEP do not have to be bonded while collecting and transmitting participant contributions from their employers to the PEP.

3. The Information Letter further rejected the position that a PEP sponsor would not need to provide section 412 of ERISA bonding coverage to any independent contractor administrator or manager of the PEP or the sponsor organization such as the PEP’s pooled plan provider.

2. Other services an accountant or firm may provide to a plan or plan sponsor.

3. Definition of office for purposes of determining who is a member of a firm for an “independence” analysis.

1. The DOL proposes to require QPAMs to file a one-time email notification with the DOL (unless there is a change to the legal or operating name of the QPAM) of its intent to be a QPAM, to ensure the DOL is aware of entities relying upon the QPAM exemption for prohibited transaction relief. The DOL intends to post a list of entities relying on the QPAM exemption on its website.

2. The DOL proposes changes to the events that will trigger a ten-year disqualification of a QPAM.  Under the DOL proposal, the listed disqualifying crimes would now explicitly include foreign convictions that are substantially equivalent to the listed U.S. federal or state crimes.  In situations where a foreign crime or foreign conduct raises particularly unique issues related to the substantial equivalence test, the QPAM will be able to seek the DOL’s view as to whether the foreign crime or conduct is substantially equivalent.

3. The DOL proposal would add five forms of prohibited misconduct that would result in QPAM ineligibility for the ten-year period:

• • any conduct in the U.S. that forms the basis for a non-prosecution or deferred prosecution agreement that, if successfully prosecuted, would have constituted a listed crime resulting in ineligibility.
  • any conduct that forms the basis for an agreement, regardless of how it is denominated by the laws of the foreign jurisdiction, that is substantially equivalent to a U.S. non-prosecution agreement or deferred prosecution agreement.
  • engaging in a systematic pattern or practice of violating the conditions of this exemption in connection with otherwise non-exempt prohibited transactions.
  • intentionally violating the conditions of the exemption in connection with otherwise non-exempt prohibited transactions.
  • providing materially misleading information to the DOL in connection with the conditions of the exemption.

4. QPAMS would be required to include certain obligations in their written management agreements with a client plan if the QPAM, any of its affiliates, or a 5% or more owner of the QPAM, engage in conduct resulting in a criminal conviction listed in the exemption, or receive a written ineligibility notice from the DOL because of prohibited misconduct. The agreement must provide that:

• • the QPAM will not restrict the ability of its client plans to terminate or withdraw from the investment fund managed by the QPAM.
  • the QPAM will not impose fees, penalties, or charges on any such termination or withdrawal by a plan, except for reasonable fees disclosed in advance that are designed to prevent abusive investment practices or ensure equitable treatment of all investors in a pooled fund, and are applied consistently and in a like manner to all investors.
  • the QPAM will indemnify, hold harmless and promptly restore actual losses to any client plan for any damages resulting from a violation of applicable laws, a breach of contract, or any claim arising out of the failure of the QPAM to remain eligible for relief under the QPAM exemption as a result of conduct that leads to a criminal conviction or a DOL ineligibility notice.
  • the QPAM will not employ or knowingly engage any individual who participated in the conduct that is the subject of the criminal conviction or DOL ineligibility notice.

5. The updated QPAM Exemption would provide for a mandatory one-year winding down period to accommodate a plan winding down its relationship with the QPAM or withdrawing from its investment fund. According to the preamble, this winding down period would provide time for a plan to determine whether it wants to hire another QPAM or continue its relationship with the ineligible QPAM serving as a discretionary asset manager.

6. After the mandatory one-year winding down period, a QPAM cannot rely on the QPAM exemption for any new or existing clients for the ten-year period, but may apply to the DOL for an individual prohibited transaction exemption. The DOL indicated it may condition individual exemptive relief on a certification by a senior executive officer, or comparable person within the now ineligible QPAM, that all of the conditions of the winding down period were met, and that an independent audit reviewing the QPAM’s compliance with the conditions of the one-year winding down period has been completed.

7. Language in the existing QPAM exemption would be clarified and expanded to provide that a QPAM must not permit other parties to make decisions regarding plan investments under the QPAM’s control. The DOL makes clear that using a so-called “QPAM for a day” does not satisfy the requirements of PTE 84-14, since there is no relief under the exemption for any transaction that has been planned, negotiated or initiated, in whole or in part, by a party in interest to the plan, and presented to the QPAM for approval, because the QPAM would not have sole responsibility with respect to the transaction.

8. The DOL proposes to update the QPAM’s eligibility thresholds for assets under management and for equity capital, which have been in place since 1984, and proposes that the threshold determinations will be updated annually. The $1,000,000 threshold for the equity capital of banks, savings and loan associations, and insurance companies has been increased to $2,720,000; the current assets under management threshold for RIAs is increased from $85,000,000 to $135,870,000; and for RIAs’ two additional optional conditions - the shareholders and partners equity threshold and the broker dealer net worth threshold - have been increased from $1,000,000 to $2,040,000.

9. QPAMs would be required to maintain for six years records demonstrating compliance with the QPAM exemption, and the records generally must be available to the federal agencies, plans and plan participants.

• Many provisions go beyond just addressing bad actors, foreign convictions and exemption ineligibility - for instance, the new proposed thresholds for assets under management and for equity capital. These higher thresholds, and the burden of annual required updates, will be difficult to achieve for smaller QPAMs.
• New recordkeeping requirements add significantly to the burden of compliance, without any significant justification. Also, we note that the DOL proposes to require disclosure of most QPAM compliance records to plans and participants – a level of disclosure also proposed, but then not adopted for PTE 2020-02 (class exemption for investment advice)..
• Clarification is needed on the exemption when it is used by a QPAM for hiring service providers – namely, what is an investment transaction versus a non-investment transaction?

* * * * *

• provide information in a timely manner after a reasonable request by the MEP administrator for data, documents, or any other information that the plan administrator reasonably believes is necessary to determine whether a MEP is in compliance with a requirement of the Code as it relates to the participating employer, or
• take action required by a reasonable request of the plan administrator that is necessary for that compliance.

1. 1. 1. The need for additional guidance on the proposed mandatory distribution rules, including the treatment of missing participants;
      2. Whether there are any circumstances in which it would be appropriate for any of the amounts attributable to the employees of an unresponsive participating employer to remain in the MEP after the employer has specifically directed that there be a spinoff, and, if so, what those circumstances are, and for which employees this treatment may be appropriate;
      3. On the impact of this regulation on small business entities; and
      4. What, if any, guidance would be helpful regarding whether employers have a common interest, including how any guidance should be coordinated with guidance issued by the Department of Labor.