DOL Drafts Rules for IRA Asset Managers With Foreign Criminal Convictions

What You Need to Know

The Trump administration ruled in 2020 that foreign criminal convictions would not keep asset managers from being able to use Prohibited Transaction Class Exemption 84-14.
In 2021, the Biden administration reversed that interpretation.
The new draft PTE 84-14 amendment shows how the 2021 Biden administration interpretation might work.

The U.S. Department of Labor wants to be able to crack down on retirement asset managers that get into trouble outside the United States.

Labor has included provisions for asset managers with “foreign criminal convictions that are substantially equivalent” to a conviction for a U.S. federal or U.S. state crime in a new draft amendment to Prohibited Transaction Class Exemption 84-14.

The exemption, better known as the “qualified professional asset manager” exemption, determines whether asset managers can get enough relief from the usual Employee Retirement Income Security Act conflict-of-interest rules to manage assets for employee benefit plans, individual retirement accounts and individual retirement annuities.

In the new proposed amendment, Labor officials sketch out the process they might use to decide whether they should stop a QPAM from managing benefit plan assets and IRA assets because the QPAM has been convicted of serious foreign crimes.

Contents

What It Means

DOL might end up paying more attention to what the companies managing your clients’ annuity assets and other retirement assets are doing outside the United States.

The Nuts and Bolts

The new draft amendment is in the hands of the Employee Benefits Security Administration, the DOL arm that oversees health plans, pension plans, 401(k) plans and other plans and arrangements governed, at least in part, by ERISA.

DOL is preparing to publish the draft in the Federal Register. At press time, the draft had not yet appeared in the Federal Register.

The department is putting the draft through a public comment period that will end 60 days after the official Federal Register publication date.

The department lists Erin Scott Hesse, an employee in the EBSA Office of Exemption Determinations, as the contact person.