WASHINGTON — The Labor Department is expected to announce major revisions to an ERISA exemption, making it harder for financial institutions to act as investment managers to their own pension plans.
At issue are proposed revisions to the 1984 "qualified professional asset manager," or QPAM, exemption from the Employee Retirement Income Security Act's prohibited transaction rules. Those rules permit pension plans to engage in many otherwise-banned transactions with related organizations so long as they use qualified "independent" investment advisers or outside fiduciaries as intermediaries to authorize and conduct the transactions.
As part of the changes proposed last September, the Labor Department clarified that "independent" means the QPAMs not only must be unrelated to the parties with which they engage in the transactions on behalf of pension plans, but also cannot be affiliated with the plan sponsors for which they manage money. In other words, banks, insurance companies and investment advisers can no longer act as QPAMS for their own pension plans.
To be sure, financial services firms could always hire competitors to act as independent fiduciaries for their pension plans. But, Rick Matta, a partner in the Washington-based Groom Law Group, which represents several aggrieved insurance companies, said: "It would be particularly silly to hire a competitor to manage your plan while you're managing money for other people."