DOL Proposal May Disrupt Plan Sponsor Investment Arrangements


Summary

The Department of Labor (DOL) recently proposed significant changes to a key ERISA prohibited transaction exemption widely used by asset managers for nearly four decades. The exemption allows qualified professional asset managers (QPAMs) to engage in many routine transactions that ERISA would otherwise prohibit. The proposal's changes to new and existing QPAM relationships might prove disruptive and increase costs for plan sponsors. For example, sponsors would have to take speedy action to maintain their existing QPAM relationships by amending their contracts to add new required provisions within 60 days. These provisions — which include a requirement that QPAMs reimburse plans for certain losses — might increase the cost of asset-management services. A separate provision clarifying that the exemption applies only to investment decisions that are the QPAM's sole responsibility might limit the investment opportunities available to plans. Comments are due by Oct. 11.