EBSA Proposes Rule Amending Prohibited Transaction Exemption Filing and Processing Procedures

The Department of Labor’s Employee Benefits Security Administration (EBSA) has published a proposed rule (pdf) that would update the filing and processing procedures related to the prohibited transaction exemption under the Employee Retirement Income Security Act (ERISA). ERISA contains a number of statutory safeguards to prevent benefit plan fiduciaries from self-dealing or engaging in other types of conduct that would threaten the integrity of the employee benefit plans. It also sets forth certain exemptions to these rules to accommodate customary business practices. As stated in a press release, the proposed rule streamlines the existing procedures related to the exemption process, clarifies the types of information and documentation required to submit a complete filing, expands the methods for transmitting filings to include electronic submissions, and makes the exemptions more understandable for participants and other interested parties.

The proposed rule maintains the current section-by-section structure of the existing regulation, but make certain changes that include the following:

  • Adds the requirement that applicants provide interested persons with a brief objective summary of complex transactions. New subsections would be added to section 2570.43 to require that certain exemption applicants provide notice recipients with a supplementary statement – Summary of Proposed Exemption (SPE) – “that succinctly explains the essential facts and circumstances surrounding the proposed exemption.”
  • Consolidates exemption policies and guidance within a single document.
  • Provides an updated description of the department's authority to propose and issue administrative exemptions on its own motion.
  • Adds a description of the current standards for obtaining retroactive exemption relief. Among other things, this new section 2570.35(d) would reaffirm that the DOL would only consider granting retroactive relief “for transactions already entered into where an applicant can satisfactorily demonstrate that the safeguards necessary for the grant of a prospective exemption were in place at the time of the consummated transaction.”
  • Clarifies the content of specialized statements, as needed, from qualified independent appraisers and other relevant experts. Specifically, a new section 2570.34(c) would replace and clarify the content of section 2570.34(b)(5)(iii) of the existing regulation. Among other requirements, this section mandates that the independent appraisal report submitted by the appraiser on behalf of the plan be current and not more than one year old on the date of the transaction. Moreover, such appraisers retained in connection with the exemption transaction must not receive more than a de minimis amount of compensation from the interested party.

Comments on the proposed rule must contain the identification number: RIN 1210–AA98 and be received by October 14, 2010. Written comments can be sent to: Office of Exemption Determinations, Employee Benefits Security Administration, Room N-5700, U.S. Department of Labor, 200 Constitution Ave. NW, Washington D.C. 20210, Attention: Prohibited Transaction Exemption Procedures Proposed Regulation. Comments may also be sent electronically via email to: e-OED@dol.gov or through the federal eRulemaking portal at http://www.regulations.gov.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.