The Labor Department on Jan. 23 finalized amendments that will change the procedures for filing and processing prohibited transaction exemptions, which are filed by plan sponsors and others seeking allowance for ERISA-banned transactions.
"The amended exemption procedure will create more clarity, certainty and transparency around the exemption application process," said Lisa M. Gomez, assistant secretary for the department's Employee Benefits Security Administration, in a Jan. 23 news release. "Ensuring consistent and transparent procedures for the department to process exemption requests will benefit applicants and the public at large."
Examples of prohibited transactions include transactions that carry a high risk to plan assets, self-dealing by fiduciaries and contracts that transfer responsibilities reserved for fiduciaries to third parties, according to a primer from the American Institute of Certified Public Accountants' Employee Benefit Plan Audit Quality Center.
The amendments, originally proposed in March 2022, will clarify the types of documentation and information required for an application; clarify the content of specific reports and documents that applicants must submit to the department for an exemption; and expand opportunities for applicants to submit information electronically, according to the news release.
The updated procedure will also revise the definitions of a qualified independent fiduciary and qualified independent appraiser; update assorted timing requirements in the application review process; and specify applicant items that are included in the administrative record, as well as when the administrative record is available for public inspection, the news release said.
Under the Employee Retirement Income Security Act of 1974, the labor secretary can grant exemptions on a class or individual basis for transactions that are otherwise banned, if certain conditions are met.
"Specifically, DOL must determine that the exemption is administratively feasible, in the interests of participants and beneficiaries, and protective of the rights of participants and beneficiaries," according to a publication from Groom Law Group, analyzing the DOL's March proposal.
The department extended the comment period for that proposal to a total of 75 days, allowing comments to be accepted until May 29, 2022.
The new amendments will take effect 75 days after the final rule is published in the Federal Register.