DOL’s Power Grab Throws Workers and Retirees Out in the Cold

DOL's Power Grab Throws Workers and Retirees Out in the Cold

Education and Labor Committee Republican Leader Virginia Foxx (R-NC) and Health, Employment, Labor, and Pensions Subcommittee Republican Leader Rick Allen (R-GA) submitted a comment letter yesterday to Labor Department Secretary Marty Walsh regarding a proposed rule which would make the prohibited transaction exemption for qualified professional asset managers (QPAMs) virtually unusable and, in turn, harm workers, retirees, and plan sponsors.

In the letter, Foxx and Allen write: "[The Proposed Amendment to Prohibited Transaction Class Exemption 84-14 (the QPAM Exemption)] has far-reaching, negative implications for workers, retirees, and plan sponsors which the Department of Labor (DOL) has not fully recognized. We urge you to withdraw this proposal."

The letter continues:"DOL is attempting to appease the far left by punishing financial institutions and completely redefining when the QPAM Exemption could apply. … Under the proposed amendment, many routine investment arrangements and interactions would be deemed impermissible."

The letter concludes: "Finally, under the proposed amendment, DOL may unilaterally remove an investment manager's QPAM Exemption, leaving plan participants without an active investment manager overseeing their investments. If DOL decides the investment manager provided incorrect information, the investment manager can be disqualified from the exemption almost immediately. The proposed amendment lacks an appeals process, providing DOL unchecked power. This is a disappointing departure from current law, which requires any change to an exemption, including any revocation of an exemption, to be completed through public notice and comment. Public notice and comment is fundamental to our regulatory process. DOL's proposal to avoid a transparent and fair process is concerning. The use of such unilateral power will ultimately leave workers and retirees without the benefit of experts overseeing their hard-earned savings."

Background: DOL has long interpreted the Employee Retirement Income Security Act of 1974 in such a way that beneficial, benign transactions between sponsoring employers, fiduciaries, and service providers require an exemption from DOL to avoid being considered as violating the law's prohibited transactions and incurring associated penalties. In 1984, DOL provided a workable prohibited transaction exemption to allow QPAMs to engage in many routine transactions, better known as the QPAM Exemption. Investment managers routinely use the QPAM Exemption to help plans and participants navigate the market.

Read the full comment letter here.

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