"After carefully considering the extension requests, the department decided that it is appropriate to extend the public comment period to a total of 75 days," said Ali Khawar, acting assistant secretary for the department's Employee Benefits Security Administration, in a news release. "The extended comment period will provide interested parties with a full opportunity to consider the proposal and provide important input that will inform future policy."
The proposed amendments would, among other things, clarify the types of information and documentation required to complete an application. If enacted, it would require more information, like a description of the material benefits to non-plan parties as a result of the transactions the exemption would permit, and a description of each conflict of interest or potential instance of self-dealing that would be permitted if the exemption is granted.
The proposal would also revise the definitions of a qualified independent fiduciary and qualified independent appraiser and stipulate that communications with the Labor Department before an exemption application is filed is part of the administrative record subject to public review.
"The proposal's language sets forth the department's longstanding position that the administrative record is always available for public review, because the exemption process is open, transparent and subject to public scrutiny at all times," the Labor Department said in the proposal.
Currently, The Labor secretary is able grant exemptions on a class or individual basis on transactions that are otherwise banned under the Employee Retirement Income Security Act of 1974 and Internal Revenue Code if the transaction is administratively feasible, in the interests of participants and beneficiaries and protective of the rights of participants and beneficiaries.
Plan sponsors and financial institutions have applied for, and been granted, hundreds of prohibited transaction exemptions over the years, a brief from Groom Law Group noted.
But in recent years, the department has granted fewer prohibited transaction exemptions. In the five-year period from 1997 to 2001, the Labor Department issued an average of about 90 exemptions per year, but over the last five-year period through 2021 it granted fewer than 10 exemptions per year, Groom highlighted.
"The proposed amendments to the exemption procedures would undoubtedly make it more difficult to apply for, and receive, a prohibited transaction exemption," the Groom brief said. "This result is reflective of a shift in DOL's relationship with the regulated community that has been underway for some time."
