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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The negotiation of stable value contracts by a qualified professional asset manager (QPAM) does not amount to negotiating terms of an investment management agreement, which is disallowed under section I(a) of Prohibited Transaction Class Exemption 84-14, according to an EBSA advisory opinion based on facts and circumstances represented in the advisory opinion request.
PTE 84-14 provides conditional relief for transactions between an investment fund managed by a QPAM and parties in interest with respect to employee benefit plans invested in the investment fund. Section I(a) of the PTE 84-14 provides that the party in interest engaging in a transaction with the fund may not have the authority to appoint or terminate the QPAM as a manager of the plan assets involved in the transaction, or negotiate on behalf of the plan the terms of the management agreement with the QPAM (including renewals or modifications thereof) with respect to the plan assets involved in the transaction.
An advisory opinion was sought concerning the responsibility of a stable value manager for negotiating stable value wrap contracts with various banks or insurance companies (wrappers). In one scenario, the stable value manager, as the QPAM, is responsible for both negotiating the stable value wrap contracts and managing the fixed income assets subject to the stable value wrap contract. In a second scenario, the plan fiduciary selects the stable value manager to negotiate the stable value wrap contract and manage the stable value program, but does not select the stable value manager to serve as the QPAM to manage the fixed income assets subject to the stable value wrap contract.
EBSA opined that, based on the facts and circumstances represented in the advisory opinion request, neither the wrapper's nor the stable value manager's negotiation of the investment parameters gives them the authority to negotiate on behalf of the plan the terms of the QPAM's investment management agreement with the plan or fund. Instead the wrapper is negotiating the terms of the investment parameters to reduce its own exposure under the wrap contract. While the stable value manager is negotiating on behalf of the plan, in EBSA's opinion, negotiating the investment parameters does not amount to negotiating the terms of the QPAM's investment management agreement, which is disallowed under PTE 84-14. The plan or fund and the QPAM retain broad authority to negotiate these terms.
EBSA cautioned, however, that the exemption would not be available for transactions between the fixed income fund and insurer/wrapper in transactions where an insurance company separate account contract is involved. Also, EBSA noted that its opinion letter does not address the applications of other conditions for the QPAM exemption.
Source: EBSA Advisory Opinion 2011-07A.
For more information, visit http://www.wolterskluwerlb.com/rbcs.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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