DOL makes major changes to QPAM exemption through final amendment

On April 3, 2024, the US Department of Labor (DOL) published its final amendment to the qualified professional asset manager (QPAM) prohibited transaction class exemption 84-14 (QPAM Exemption). Asset managers who meet certain requirements to qualify as a QPAM rely on the QPAM Exemption for relief from the prohibited transaction rules of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and the Internal Revenue Code of 1986, as amended (Code), in managing assets of employee benefit plans, funds, and individual retirement accounts governed by Title I of ERISA or Section 4975 of the Code (collectively, Plan Assets).

The final amendment, which will become effective on June 17, 2024, includes the following key changes to the QPAM Exemption:

Incremental increases to financial thresholds: The final amendment increases, incrementally over the next six years, the financial thresholds that an asset manager must satisfy to qualify as a QPAM, as shown below.[1] According to the DOL, these financial thresholds are designed to ensure that QPAMs are large enough to manage Plan Assets independently and free from improper influence from other plan fiduciaries.

Subsequently, the DOL will publish a notice in the Federal Register adjusting these thresholds for inflation on an annual basis, no later than January 31 of each year.

Registration with the DOL: Any asset manager relying or anticipating relying on the QPAM Exemption must notify the DOL by email at QPAM@dol.gov of its intent to do so, within 90 days of the QPAM’s reliance on the QPAM Exemption, and include the name of each entity relying on the exemption. The entity must renotify the DOL by email of any change to the QPAM’s name within 90 days of the change. Failure to provide timely notice to the DOL may be cured during the 90-day period that follows the initial 90-day registration period, together with an explanation for the failure to comply with the notice requirement during the initial 90-day period. Asset managers that are relying on the QPAM Exemption now or at any time before June 17, 2024 will have until September 15, 2024, to notify the DOL and confirm their status as a QPAM. The DOL will publish on its website a list of QPAMs who have provided such notification to the DOL. If a QPAM is no longer relying on the exemption, it may notify the DOL and have its name removed from the list of QPAMs on the DOL’s website.

Recordkeeping requirement: A QPAM must maintain records necessary to demonstrate compliance with the conditions of the QPAM Exemption for six years from the date of the applicable transaction, “in a manner that is reasonably accessible for examination.” A QPAM must provide to government agents, plan fiduciaries, contributing employers and employee organizations and participants access to such records within 30 days after a request. Non-governmental individuals may request only information applicable to their own transactions and not a QPAM’s privileged trade secrets, privileged commercial or financial information, or confidential information regarding other individuals.

To the extent the information is privileged or includes confidential information regarding other individuals, the QPAM must notify the requestor, in writing, of the reasons for refusal, and that the DOL may request such information by the close of the 30-day period following the request. Failure to maintain the necessary records will result in the loss of the QPAM Exemption relief only for the transactions for which such records are missing or have not been kept.

Exclusive authority requirement: The final amendment clarifies the requirement that the QPAM Exemption is not satisfied with respect to a specific transaction if the QPAM is appointed or relied upon merely to “rubber stamp” a transaction and does not have “sole responsibility” with respect to the planning, negotiating, and initiating of the transaction. The DOL noted, however, that this requirement does not preclude a QPAM from using or delegating certain investment-related responsibilities to sub-advisers, provided that the QPAM retains sole authority with respect to the applicable transaction.

Ineligibility due to criminal or prohibited misconduct: The final amendment clarifies and expands the list of crimes and other specified misconduct that would render a QPAM ineligible to use the QPAM Exemption due to of the actions of the QPAM itself, or those of an affiliate of the QPAM. Notably, non-US criminal convictions (other than those of “foreign adversaries” of the US) that are based on substantially equivalent non-US laws would also result in disqualification of the QPAM from the use of the QPAM Exemption.

In addition, the amendment adds a new category of “prohibited misconduct” that includes, among others, (a) entering into a non-prosecution agreement (NPA) or deferred prosecution agreement (DPA) with a US federal or state prosecutor’s office or regulatory agency, which, if successfully prosecuted, would have constituted a criminal conviction disqualifying the QPAM from the use of the QPAM Exemption, and (b) engaging in certain systematic pattern of violating the conditions of the QPAM Exemption. This new category of prohibited misconduct leading to ineligibility will apply only on a prospective basis (ie, on or after June 17, 2024).

One-year transition period: If a QPAM becomes ineligible to rely on the QPAM Exemption due to a crime or prohibited misconduct in which the QPAM, any of its affiliates, or any owner, direct, or indirect, of a 5 percent or more interest in the QPAM, engaged, the QPAM must send a detailed notice of its disqualification to its Plan Assets clients and to the DOL (by email at QPAM@dol.gov), within 30 days of the date of its disqualification. The final amendment provides a disqualified QPAM with a one-year transition period, during which the QPAM may rely on the QPAM Exemption only for transactions on behalf of clients with a pre-existing, written management agreement. At the end of the transition period, the QPAM may no longer use the QPAM Exemption unless it receives an individual prohibited transaction exemption from the DOL. In addition, the amendment requires the QPAM to indemnify its Plan Assets clients for any losses incurred by them due to the QPAM’s disqualification.

Next steps

As described above, the final amendment to the QPAM Exemption includes several new requirements for QPAMs and will likely impact large QPAMs and plan fiduciaries responsible for hiring and monitoring QPAMs.

Current QPAMs and asset managers who anticipate relying on the QPAM Exemption in the future are advised to review their existing compliance procedures to determine whether they will continue to satisfy the QPAM Exemption’s requirements (including the updated financial thresholds and notice requirement), create or revisit their existing recordkeeping policy to align with the six-year required maintenance of records and accessibility for examination, prepare to notify the DOL of their intent to continue to act as a QPAM, and confer with their legal counsel to navigate the practical implications of these changes and/or evaluate potential alternatives to the QPAM Exemption.

For more information, please contact the authors.


[1] Asset managers that may qualify to be QPAMs include registered investment advisors, banks, savings and loan associations, and insurance companies.