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On Aug. 22, 2005, the U.S. Department of Labor’s Employee Benefits Security Administration amended Prohibited Transaction Class Exemption 84-14 (PTCE 84-14) to expand the exemptive relief available to a qualified plan asset manager (QPAM). Unless a statutory or administrative exemption is available under Employee Retirement Income Security Act (ERISA) �408, ERISA �406(a)(1) through (D) prohibits (i) the sale or exchange or leasing of property, the lending of money or other extension of credit or the furnishing of goods, services or facilities between an ERISA covered employee benefit plan and a party in interest as defined in ERISA �3(14) and (ii) the transfer to or use by or for the benefit of a party in interest of any plan assets, and �406(b)(1) and (2) prohibit a plan fiduciary from (i) dealing with plan assets in his own interest or for his own account or (ii) acting in his individual or any other capacity in any transaction involving the plan on behalf of or representing a party whose interests are adverse to those of the plan or its participants or beneficiaries. PTCE 84-14 permits various parties that are related to employee benefit plans to engage in transactions involving plan assets that would otherwise be prohibited, if among other conditions the plan assets are managed by QPAMs that are independent of the parties in interest and that meet specified financial standards. The amendments to PTCE 84-14 follow on proposed amendments issued in 2003 and are intended to increase investment opportunities available to plans as well as allow greater efficiencies and lower costs. The final amendments eliminate the one-year look-back rule, modify the application of the exemption in the case of a commingled investment fund, clarify the definition of a QPAM, change the rules on when a QPAM is treated as related to a party in interest and redefine what is an affiliate. THE ORIGINAL ISSUE As originally issued, �I(a) of PTCE 84-14 provided an exemption for a transaction between a party in interest and an investment fund managed by a QPAM only if the party in interest or its affiliate did not have at the time of the transaction and did not during the immediately preceding one-year period exercise the authority to appoint or terminate the QPAM as a manager of any of the plan’s assets or to negotiate the terms of the management agreement with the QPAM on behalf of the plan. The amendments eliminate the one-year look-back rule. In addition, PTCE 84-14 now clarifies that the power of appointment specified in �I(a) refers only to the power to appoint the QPAM as manager of the assets involved in the transaction, as opposed to any of the plan’s assets. Prior to amendment, PTCE 84-14 was silent on the question of whether the exemption applied in the case of commingled investment funds. Now it is made available to a party in interest with respect to a plan investing in a commingled investment fund, even if the party in interest has the authority to redeem or acquire units of the funds on behalf of the plan, so long as the plan’s interest in the funds represents less than 10 percent of the total assets of the investment fund. Before amendment, �V(a)(4) of PTCE 84-14 provided that the definition of a QPAM included among other entities a registered investment adviser that as of the last day of its most recent fiscal year had total client assets under its management and control in excess of $50 million and had either shareholders’ or partners’ equity in excess of $750,000 or the unconditional guarantee of the payment of all of its liabilities by, among other entities, an affiliate controlling, controlled by or under common control with the investment adviser with shareholders’ or partners’ equity which, when combined with that of the investment adviser exceeds $750,000. The amendment clarifies that the reference to the last day of the fiscal year applies only to the assets under management and not to the shareholders’ or partners’ equity of the QPAM or its affiliate guarantor. In addition, in order to reflect the change in the Consumer Price Index the amendment increases the assets under management requirement from $50 million to $85 million and the shareholders’ or partners’ equity requirement from $750,000 to $1 million. Finally, the amendment clarifies that to qualify for the exemption the QPAM must be independent of an employer with respect to a plan whose assets are managed by the QPAM. Section I(d) of PCTE 84-14 provides among other requirements that the exemption applies only if the party in interest dealing with the investment funds is neither the QPAM nor a person “related” to the QPAM within the meaning of �V(h). Before the amendment, �V(h) provided that a QPAM was “related” to a party in interest only if the party in interest (or a person controlling or controlled by the party in interest) owns a 5 percent or more interest in the QPAM, or if the QPAM (or a person controlling or controlled by the QPAM) owned a 5 percent or more interest in the party in interest. A QPAM UNDER THE AMENDMENT Under the amendment, a QPAM is related to party in interest for purposes of �I(d) if as of the last day of the most recent calendar quarter, (i) the QPAM or the party in interest owns a 10 percent or more interest in the other entity, (ii) a person controlling or controlled by the QPAM or the party in interest owns a 20 percent or more interest in the other entity or (iii) a person controlling or controlled by the QPAM or the party in interest owns less than a 20 percent interest in the other entity but nevertheless exercises control over the management or policies of the other party by reason of its ownership interest. However, shares held in a fiduciary capacity are not considered in applying the percentage limitations. Before amendment, �V(c) defined an “affiliate” of a QPAM as, among other entities, any corporation, partnership, trust or unincorporated enterprise of which the person is an officer, director, 5 percent or more partner or employee (but only if the employer of the employee is the plan sponsor). The amendment eliminates from the definition of “affiliate” partnerships in which the person has less than a 10 percent interest and only includes employees who are highly compensated within the meaning of Internal Revenue Code �4975(e)(2)(H). FINANCIAL SERVICES AS QPAMs In addition to amending PTCE 84-14, the Department of Labor also commented on whether financial services entities may serve as QPAMs for their own plans. A number of commenters to the proposed amendments, in addressing the requirement that QPAMs be independent of the employer with respect to a plan whose assets are managed by the QPAM, indicated that many employers in the financial services industry believed, based upon advice of counsel, that they were eligible to serve as QPAMs for their own plans. Acknowledging that good faith efforts appeared to have been made by the regulated community to comply with the QPAM independence requirement, the Department of Labor, while not revising the final amendment to PTCE 84-14 to permit financial services entities to act as QPAMs for their own plans, did provide limited retroactive and transitional relief under which the independent fiduciary requirement of the QPAM definition will not apply for the period from Dec. 21, 1982 through the date on which a final amendment to PTCE 84-14 specifically granting relief for a financial institution to act as investment manager for its own in-house plan is adopted. PROSPECTIVE RELIEF In connection with this transitional relief, the Department of Labor has issued a proposed amendment to PTCE 84-14 that would provide prospective relief for a financial institution to act as QPAM for its own plan or the plan of an affiliate if (i) the QPAM has discretionary authority or control with respect to the plan assets involved in the transaction, (ii) the QPAM adopts written policies and procedures designed to assure compliance with the conditions of the exemption, (iii) an independent auditor with appropriate technical training or experience and proficiency with ERISA’s fiduciary responsibility provisions (and so represents in writing) conducts an annual exemption audit with specified requirements and following completion of the audit issues a written report to the plan presenting its specific findings regarding the level of compliance with the policies and procedures adopted by the QPAM and (iv) the plan meets the applicable requirements described in the general exemption provision of Part I of PTCE 84-14, the specific lease exemption for QPAMs provisions of Part III or the provisions for transactions involving places of public accommodation of Part IV. Howard S. Denburg is an attorney practicing in New York City.

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