DOL Modifies PTE Application Process

The changes include more explicit criteria and modified definitions of what it means to be an independent fiduciary and appraiser.

The Department of Labor on Tuesday finalized changes to the process by which prohibited transaction exemption applications are approved. The amendments are based on a proposal from March 15, 2022, but the final version removed many of the elements identified as controversial during a public comment period.

Under the Employee Retirement Income Security Act, plans cannot engage in transactions with “parties in interest,” a category that can include a wide range of actors that have a relationship to the plan. That rule can be bypassed if the plan fiduciary submits and receives an individual or class exemption from the DOL. An individual exemption is given to one party for particular circumstances and cannot be widely relied on, whereas a class exemption is given for a category of actor.

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The process for applying for these exemptions is itself governed by regulation. According to the DOL’s finalizing release, “One concern that the Department shares with many of the commenters is that the process was starting to become more drawn-out and longer than necessary.”

The DOL explained that the main factor in prolonging the PTE application process was the fact that the DOL often had to return applications to applicants requesting more information. “This timeline was frustrating to everyone, and commenters noted it throughout their comments,” the finalizing release stated.

To remedy this, the DOL proposed to have applicants explicitly state the information needed in the application. The DOL wrote in the amendment that “some of the friction associated with the exemption process can be reduced because the Department will have less need to request additional information from applicants.”

Changed Definitions

The initial proposal by the DOL also would have revised the definitions of “qualified independent appraiser” and “qualified independent fiduciary” to be more strict. The final rule scales back most of the revised changes due to pushback from commenters.

According to current rules, an appraiser is automatically considered independent if they receive no more than 2% of their revenue under one particular PTE. The final rule modifies this to a facts-and-circumstances test, whereby an appraiser could be deemed to be not independent even if their total revenue falls below 2%. As an example, the DOL said that an appraiser who expects to be retained by a fiduciary for other appraisal work based on their work under a PTE could lose their independent status.

The DOL made essentially the same change for the definition of “qualified independent fiduciary.”

Proposed changes were, for the most part, dropped, except for an amendment in the final rule stating that a fiduciary that receives less than 2% of their revenue from a transaction is no longer automatically deemed independent, as under previous rules, and is now subject to a facts-and-circumstances test.

The effective date for the rule is 75 days after its entry into the Federal Register.

Public Pension Communications Pros Recognized

The National Conference on Public Employee Retirement Systems announced the inaugural Pension Communicator of the Year prizes for communications professionals.

The National Conference on Public Employee Retirement Systems honored four public pension communication professionals, announcing on January 23 the winners of its inaugural Pension Communicator of the Year award for public professionals in the U.S. and Canada.

Using a scoring criteria, judges selected three winners in categories based on funds’ assets under management and awarded one honorable mention, according to a spokesperson. The awards were presented during NCPERS’ second annual Pension Communications Summit in Washington, D.C.

“With the Public Pension Communicator of the Year Award, we’re thrilled to recognize the impressive communications efforts at our member pension funds and honor the individuals within these organizations who are leading the way and making a real impact,” said Hank Kim, NCPERS’ executive director and counsel, in a statement.

The four honorees were:

  • Communicator of the Year, less than $10 billion in AUM: Alison Taylor-Thévenin, deputy director of member communications for the New York City Board of Education Retirement System;
  • Communicator of the Year, between $10 billion and $50 billion in AUM: Taneda Larios, chief benefits analyst for the Los Angeles City Employees’ Retirement System;
  • Communicator of the Year, more than $50 billion in AUM: Patrick von Keyserling, senior director of communications for the Colorado Public Employees Retirement Association; and
  • Honorable mention for leadership and contributions to stakeholders and the broader community: Michelle Holleman, director of communications and stakeholder relations for the Chicago Teachers’ Pension Fund.

The awards were determined by judges Laurie Mitchell, a senior business consultant for Tegrit; Joe Potischman, a marketing specialist for Linea Solutions; and Margaret Rogers, the director of communications and member relations for the National Institute on Retirement Security.

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Based in Washington, D.C. the National Conference on Public Employee Retirement Systems is a trade association for public sector pension funds, representing approximately 500 plans, plan sponsors and other stakeholders.

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