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Portfolio > Asset Managers

EBSA Amends Prohibited Transaction Exemption

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The U.S Department of Labor’s Employee Benefits Security Administration has unveiled a final amendment to a prohibited transaction exemption that broadens the transactions allowed for employee benefit plans whose assets are managed by in-house asset managers.

PTE 96-23, a class exemption under the Employee Retirement Income Security Act, also imposes conditions to protect plans and their assets. The exemption allows in-house managers of large employee benefit plans to engage in a wide range of transactions with related parties.

The final amendment to PTE 96-23 includes four parts:

–The general exemption that allows the portion of a plan that is managed by an INHAM to engage in transactions with virtually all party in interest service providers except the INHAM or a person related to the INHAM.

–Limited relief for certain transactions involving employers and their affiliates who cannot qualify for the general exemption, including relief for the lease of office or commercial space between the plan and the sponsoring employer.

–Definition of certain terms used in the exemption.

–The effective date of the changes adopted under the amendment.

The final amendment expands the general exemption to include relief for joint venturers in a company that is majority owned by the employer. The amendment also expands relief for the leasing of office or commercial space to an employer.

The exemption imposes conditions to protect plans and their assets, including:

–a limitation on the types of parties that may engage in transactions with an in-house asset manager (INHAM);

–the adoption by the INHAM of policies and procedures designed to assure compliance with the conditions of the exemption;

–the engagement of an independent auditor to annually conduct an exemption audit;

–the issuance by the auditor of a written report with findings regarding the INHAM’s compliance with the class exemption.

The final amendment to PTE 96-23 was published in the April 1, 2011 issue of the Federal Register.

–Warren S. Hersch


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