Qualified Professional Asset Managers and the QPAM Exemption

By Eric Peng, CIPM, CPA

The Employee Retirement Income Security Act of 1994 (ERISA) is a federal law meant to protect retirement assets by establishing minimum standards for pension plans in private industry. The purpose of the rules are to ensure that plan fiduciaries do not misuse plan assets. As a result, ERISA generally prohibits the fiduciaries of qualified plans from executing various transactions.

ERISA Section 406(a) outlines Party-in-Interest prohibited transactions and Section 406(b) outlines Fiduciary prohibited transactions.

However, ERISA Section 408 allows the Department of Labor (DOL) to grant exemptions, such as the QPAM exemption, from these prohibited transactions.

QPAM stands for Qualified Professional Asset Manager.  In addition to regulated institutions such as banks and insurance companies, a QPAM canalso defined as a registered investment adviser with client assets under management of at least $85 million, and shareholders’ or partners’ equity in excess of $1 million.

The QPAM Exemption is a class exemption (PTE 84-14).  This exemption is widely used by parties who conduct transactions with accounts holding retirement plan funds. Essentially, the QPAM exemption allows an investment fund that is managed by a QPAM to engage in a wide range of transactions (such as sales, exchanges and leases, and the provision of goods and services) that would otherwise be prohibited by ERISA with practically all parties-in-interest such as plan sponsors and fiduciaries. However, such transactions cannot be entered into with the QPAM itself or with those parties that may have the power to influence the QPAM.

Based on the QPAM exemption, the QPAM is required to adopt written policies and procedures around the compliance with the QPAM exemption, and must undergo an annual QPAM audit for compliance with the policies and procedures. The audit must be completed within six months following the period end covered in the report.

If you have any questions or would like additional information on QPAM and a QPAM audit, please don’t hesitate to contact our Client Relations Group at 541.857.8800.

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