DOL Opines on QPAM Issue in Stable Value Context


For the second time in 2011, the U.S. Department of Labor (DOL) has issued an ERISA advisory opinion that considers the PTE 84-14 qualified professional asset manager (QPAM) exemption, this time in the stable value context.

PTE 84-14 provides helpful and widely utilized relief for transactions between an “investment fund” (including a portfolio) managed by a QPAM and a party in interest to employee benefit plans invested in that fund. One of the conditions of PTE 84-14 is that the transaction is not with a party in interest that has, with respect to the assets involved in the transaction, the authority to appoint or terminate the QPAM as a manager for the plan or to negotiate on behalf of the plan the terms of the management agreement with the QPAM.

Advisory Opinion 2011-07A (April 25, 2011) considers the import of that requirement in the context of a conventional stable value structure, where (i) a fixed income manager intended to be a QPAM manages the fixed income fund in the structure and (ii) a stable value manager, which may or may not be the fixed income manager, negotiates the stable value “wrap” agreements with banks or insurance companies. In this structure, the plan engages, and negotiates management agreements with, the fixed income and stable value managers. At issue, however, was whether negotiation of the wrap agreement by the wrap provider and stable value manager, which includes investment parameters for the fixed income fund wrapped by the agreement, was effectively authority to negotiate the terms of the management agreement for the fixed income manager, with the result that PTE 84-14 would be unavailable for securities or other transactions between the fixed income fund and the wrap provider or stable value manager. DOL properly concluded, however, that those parties did not have such authority within the meaning of the exemption, because:

*The plan and the fixed income manager retain broad authority to negotiate the terms for the management of the fixed income fund, including the specific terms on which the assets will be managed within the investment parameters agreed with the wrap provider; and

*As to the wrap provider only, it is acting in the wrap agreement negotiations not on behalf of the plan, but on its own behalf to fix its exposure under the wrap agreement.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Eversheds Sutherland (US) LLP | Attorney Advertising

Written by:


Eversheds Sutherland (US) LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.