The ERISA Industry Committee (ERIC) today responded to the Department of Labor Employee Benefits Security Administration’s Notice of Proposed Rulemaking (NPRM) on the “Procedures Governing the Filing and Processing of Prohibited Transaction Exemption Applications” (RIN 1210-AC05).
In its letter to Acting Assistant Secretary Ali Khawar, ERIC recommends that DOL reconsider several provisions of its proposed regulation, writing that the Department’s approach could deter transactions that otherwise would meet the statute’s requirements.
“The Department’s NPRM includes provisions that would make it less likely for parties to these transactions to seek exemptive relief, and therefore, would make these transactions less likely to occur,” writes Andrew Banducci, senior vice president of Retirement and Compensation Policy at ERIC. “Additionally, we are concerned that under the NPRM, the Department would no longer rely on precedent, introducing instability to both the law and the benefit plan system.”
In the letter, ERIC states:
- The proposal includes several provisions that would have a chilling effect on the exemption process –The Department proposes a number of changes that will make it more difficult for applicants to begin a pre-submission conversation to determine the appropriateness of seeking an exemption. These conversations can help potential applicants avoid the expensive cost of an application that is unlikely to succeed and can also save the Department resources. Similarly, pre-submission conversations can help applicants take necessary preparatory steps such as hiring vendors (such as independent fiduciaries) the Department will require for the application.
- The Department should reconsider its step away from using precedent – If the Department does not clarify a provision indicating that previously issued exemptions are not “determinative” of whether it will propose future exemptions, the Department will not appropriately weigh precedent and past practices when issuing determinations.
“Instead of introducing new complexity and uncertainty in situations that are not novel or especially controversial, the Department should recommit to relying on precedent and administrative efficiency. To do otherwise would ultimately harm plans and participants,” Banducci writes.
To read the full comments issued today by ERIC visit its website at https://www.eric.org/wp-content/uploads/2022/05/ERIC-PTE-Process-Comment-FINAL-05312022.pdf