<nobr>Aug 30, 2010</nobr>

DOL Proposed Rule Would Consolidate Prohibited Transaction Exemption Process

The Department of Labor's Employee Benefit Security Administration on August 30 published in the Federal Register a proposed rule that would supplant the existing procedure governing the filing and processing of applications for administrative exemptions from the prohibited transaction provisions of ERISA, the Internal Revenue Code, and the Federal Employees' Retirement System Act (FERSA).

DOL said the proposed regulation would update the prohibited transaction exemption procedure to reflect changes in the Department's exemption practices since the current procedure was implemented in 1990. Elements of the exemption policies and guidance currently found in ERISA Technical Release 85-1 and the 1995 Exemption Publication would be consolidated within a comprehensive final regulation to reduce regulatory burdens on applicants for exemptive relief, DOL said.

The proposal would, among other thing, expand the required information in all exemption applications to include:

• A chronology of events leading to the exemption transaction.


• That the independent appraisal report submitted on behalf of the plan be not more than one year old on the date of the transaction (there must be a written update by the qualified independent appraiser reaffirming the accuracy of a prior appraisal as of the date of the transaction). In addition, the appraisal must include the appraiser's rationale, credentials, and a statement regarding the appraiser's independence from the parties involved in the transaction.


• Disclosure from a qualified independent fiduciary of the engagement letter with the plan describing the duties the fiduciary will undertake on behalf of the plan; a detailed explanation of why the proposed transaction is in the interests of the participants and beneficiaries; a statement that the fiduciary agrees to monitor the proposed transaction throughout its duration; what qualifications the fiduciary has to perform these duties; and a representation that the fiduciary understands their ERISA duties in acting on behalf of the plan.


• Statements from other third-party experts that contain a copy of the engagement letter describing the expert's specific duties and summarize the expert's qualifications and describe any relationship with the party in interest engaging in the transaction that may influence the expert's actions.

DOL has requested that written comments on the proposed regulation be received by October 14, 2010. DOL proposes to make the regulation effective 60 days after publication of the final rule in the Federal Register.

Questions or comments on the proposed rule should be submitted to Kathryn Ricard ( kricard@eric.org ).

DOL Proposed Rule on PTE Application Procedures

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