49312 Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 

policies of a person other than an 

individual. 

(f) The term ‘‘party in interest’’ means 

a person described in ERISA section 

3(14) and includes a ‘‘disqualified 

person,’’ as defined in Code section 

4975(e)(2). 

(g) The term ‘‘relative’’ means a 

relative as that term is defined in ERISA 

section 3(15), or a brother, a sister, or a 

spouse of a brother or sister. 

(h) A QPAM is ‘‘related’’ to a party in 

interest for purposes of section I(d) of 

this exemption if, as of the last day of 

its most recent calendar quarter: (i) the 

QPAM owns a ten percent or more 

interest in the party in interest; (ii) a 

person controlling, or controlled by, the 

QPAM owns a twenty percent or more 

interest in the party in interest; (iii) the 

party in interest owns a ten percent or 

more interest in the QPAM; or (iv) a 

person controlling, or controlled by, the 

party in interest owns a twenty percent 

or more interest in the QPAM. 

Notwithstanding the foregoing, a party 

in interest is ‘‘related’’ to a QPAM if: (i) 

a person controlling, or controlled by, 

the party in interest has an ownership 

interest that is less than twenty percent 

but greater than ten percent in the 

QPAM and such person exercises 

control over the management or policies 

of the QPAM by reason of its ownership 

interest; (ii) a person controlling, or 

controlled by, the QPAM has an 

ownership interest that is less than 

twenty percent but greater than ten 

percent in the party in interest and such 

person exercises control over the 

management or policies of the party in 

interest by reason of its ownership 

interest. For purposes of this definition: 

(1) The term ‘‘interest’’ means with 

respect to ownership of an entity—

(A) The combined voting power of all 

classes of stock entitled to vote or the 

total value of the shares of all classes of 

stock of the entity if the entity is a 

corporation, 

(B) The capital interest or the profits 

interest of the entity if the entity is a 

partnership, or 

(C) The beneficial interest of the 

entity if the entity is a trust or 

unincorporated enterprise; and 

(2) A person is considered to own an 

interest if, other than in a fiduciary 

capacity, the person has or shares the 

authority—

(A) To exercise any voting rights or to 

direct some other person to exercise the 

voting rights relating to such interest, or 

(B) To dispose or to direct the 

disposition of such interest. 

(i) The time as of which any 

transaction occurs is the date upon 

which the transaction is entered into. In 

addition, in the case of a transaction 

that is continuing, the transaction shall 

be deemed to occur until it is 

terminated. If any transaction is entered 

into on or after December 21, 1982, or 

a renewal that requires the consent of 

the QPAM occurs on or after December 

21, 1982 and the requirements of this 

exemption are satisfied at the time the 

transaction is entered into or renewed, 

respectively, the requirements will 

continue to be satisfied thereafter with 

respect to the transaction. 

Notwithstanding the foregoing, this 

exemption shall cease to apply to a 

transaction exempt by virtue of Part I or 

Part II at such time as the percentage 

requirement contained in section I(e) is 

exceeded, unless no portion of such 

excess results from an increase in the 

assets transferred for discretionary 

management to a QPAM. For this 

purpose, assets transferred do not 

include the reinvestment of earnings 

attributable to those plan assets already 

under the discretionary management of 

the QPAM. Nothing in this paragraph 

shall be construed as exempting a 

transaction entered into by an 

investment fund which becomes a 

transaction described in section 406 of 

ERISA or section 4975 of the Code while 

the transaction is continuing, unless the 

conditions of this exemption were met 

either at the time the transaction was 

entered into or at the time the 

transaction would have become 

prohibited but for this exemption. 

(j) The term ‘‘goods’’ includes all 

things which are movable or which are 

fixtures used by an investment fund but 

does not include securities, 

commodities, commodities futures, 

money, documents, instruments, 

accounts, chattel paper, contract rights 

and any other property, tangible or 

intangible, which, under the relevant 

facts and circumstances, is held 

primarily for investment. 

(k) For purposes of section V(a)(1) and 

(2), the term ‘‘equity capital’’ means 

stock (common and preferred), surplus, 

undivided profits, contingency reserves 

and other capital reserves. 

(l) For purposes of section V(a)(3), the 

term ‘‘net worth’’ means capital, paid-in 

and contributed surplus, unassigned 

surplus, contingency reserves, group 

contingency reserves, and special 

reserves. 

(m) For purposes of section V(a)(4), 

the term ‘‘shareholders’ or partners’

equity’’ means the equity shown in the 

most recent balance sheet prepared 

within the two years immediately 

preceding a transaction undertaken 

pursuant to this exemption, in 

accordance with generally accepted 

accounting principles. 

(n) The terms ‘‘employee benefit 

plan’’ and ‘‘plan’’ refer to an employee 

benefit plan described in section 3(3) of 

ERISA and/or a plan described in 

section 4975(e)(1) of the Code. 

(o) For purposes of section V(a), the 

term ‘‘independent fiduciary’’ means a 

fiduciary managing the assets of a plan 

in an investment fund that is 

independent of and unrelated to the 

employer sponsoring such plan. For 

purposes of this exemption, the 

independent fiduciary will not be 

deemed to be independent of and 

unrelated to the employer sponsoring 

the plan if such fiduciary directly or 

indirectly controls, is controlled by, or 

is under common control with the 

employer sponsoring the plan. 

Notwithstanding the foregoing, for the 

period from December 21, 1982, through 

the date on which the Department 

grants a final amendment which 

addresses relief for financial institutions 

that serve as investment managers for 

their own plans, a QPAM managing the 

assets of a plan in an investment fund 

will not fail to satisfy the requirements 

of section V(a) solely because such 

fiduciary is the employer sponsoring the 

plan or directly or indirectly controls, is 

controlled by, or is under common 

control with the employer sponsoring 

the plan. 

Signed at Washington, DC, this 11th day of 

August, 2005. 

Ivan L. Strasfeld, 

Director, Office of Exemption, 

Determinations, Employee Benefits Security 

Administration, Department of Labor. 

[FR Doc. 05–16702 Filed 8–22–05; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application Number D–11270] 

Proposed Amendment to Prohibited 

Transaction Exemption (PTE) 84–14 for 

Plan Asset Transactions Determined 

by Independent Qualified Professional 

Asset Managers 

AGENCY: Employee Benefits Security 

Administration, DOL. 

ACTION: Notice of proposed amendment 

to PTE 84–14. 

SUMMARY: This document contains a 

notice of pendency before the 

Department of Labor (the Department) of 

a proposed amendment to PTE 84–14. 

The exemption permits various parties 

that are related to employee benefit 

plans to engage in transactions 

involving plan assets if, among other 

Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 49313 

1Section 102 of the Reorganization Plan No. 4 of 

1978, 5 U.S.C. App. 1 (1996), generally transferred 

the authority of the Secretary of Treasury to issue 

administrative exemptions under section 4975(c)(2) 

of the Code to the Secretary of Labor. 

For purposes of this exemption, references to 

specific provisions of Title I of the Act, unless 

otherwise specified, refer also to the corresponding 

provisions of the Code. 

conditions, the assets are managed by 

‘‘qualified professional asset managers’’

(QPAMs), which are independent of the 

parties in interest and which meet 

specified financial standards. 

Additional exemptive relief is provided 

for employers to furnish limited 

amounts of goods and services to a 

managed fund in the ordinary course of 

business. Limited relief is also provided 

for leases of office or commercial space 

between managed funds and QPAMs or 

contributing employers. Finally, relief is 

provided for transactions involving 

places of public accommodation owned 

by a managed fund. 

Currently, PTE 84–14 requires the 

QPAM managing the assets of a plan in 

an investment fund to be independent 

of, and unrelated to, the employer 

sponsoring such plan. However, as 

described in the notice of final 

amendment to PTE 84–14 contained in 

this issue of the Federal Register, 

limited retroactive and transitional 

relief is provided for financial service 

entities to act as QPAMS for their own 

plans. If this proposed amendment is 

granted, a QPAM may prospectively 

manage an investment fund containing 

the assets of its own plan or the plan of 

an affiliate, to the extent the conditions 

of the proposal are met. 

The proposed amendment would 

affect participants and beneficiaries of 

employee benefit plans, the sponsoring 

employers of such plans, and other 

persons engaging in the described 

transactions. 

DATES: Written comments must be 

received by the Department on or before 

October 7, 2005. 

ADDRESSES: All written comments 

(preferably three copies) should be 

addressed to the U.S. Department of 

Labor, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, Room N–5649, 

200 Constitution Avenue, NW., 

Washington, DC 20210 (attention: PTE 

84–14 Amendment). Interested persons 

are also invited to submit comments to 

EBSA via e-mail or fax. Any such 

comments should be sent either by email to motta.christopher@dol.gov or by 

fax to (202) 219–0204 by the end of the 

scheduled comment period. All 

comments received will be available for 

public inspection at the Public 

Documents Room, Employee Benefits 

Security Administration, Room N–1513, 

200 Constitution Avenue, NW., 

Washington, DC 20210. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Motta, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, Room N–5649, 

200 Constitution Avenue, NW., 

Washington DC 20210, (202) 693–8540 

(not a toll-free number). 

SUPPLEMENTARY INFORMATION: Notice is 

hereby given of the pendency before the 

Department of a proposed amendment 

to PTE 84–14 (49 FR 9494, March 13, 

1984, as corrected at 50 FR 41430, 

October 10, 1985, and amended 

elsewhere in this issue of the Federal 

Register). PTE 84–14 provides an 

exemption from certain of the 

restrictions of section 406 of ERISA, and 

from certain taxes imposed by section 

4975(a) and (b) of the Code, by reason 

of section 4975(c)(1) of the Code. The 

Department is proposing this 

amendment to PTE 84–14 on its own 

motion, pursuant to section 408(a) of 

ERISA and section 4975(c)(2) of the 

Code, and in accordance with the 

procedures set forth in 29 CFR part 

2570, subpart B (55 FR 32836, 32847, 

August 10, 1990).1

Economic Analysis 

Executive Order 12866 Statement 

Under Executive Order 12866, the 

Department must determine whether the 

regulatory action is ‘‘significant’’ and 

therefore subject to the requirements of 

the Executive Order and subject to 

review by the Office of Management and 

Budget (OMB). Under section 3(f), the 

order defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) Having an annual 

effect on the economy of $100 million 

or more, or adversely and materially 

affecting a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or tribal governments or 

communities (also referred to as 

‘‘economically significant’’); (2) creating 

serious inconsistency or otherwise 

interfering with an action taken or 

planned by another agency; (3) 

materially altering the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. 

Pursuant to the terms of the Executive 

Order, it has been determined that this 

action is a ‘‘significant regulatory 

action.’’ Accordingly, this action has 

been reviewed by OMB. 

Paperwork Reduction Act 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department of Labor 

conducts a preclearance consultation 

program to provide the general public 

and Federal agencies with an 

opportunity to comment on proposed 

and continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 (PRA 

95) (44 U.S.C. 3506(c)(2)(A)). This helps 

to ensure that requested data can be 

provided in the desired format, 

reporting burden (time and financial 

resources) is minimized, collection 

instruments are clearly understood, and 

the impact of collection requirements on 

respondents can be properly assessed. 

Currently, the Department is soliciting 

comments concerning the information 

collection request (ICR) included in PTE 

84–14 and this Notice of Proposed 

Amendment to Prohibited Transaction 

Exemption (PTE) 84–14 for Plan Asset 

Transactions Determined by 

Independent Qualified Professional 

Asset Managers. A copy of the ICR may 

be obtained by contacting Gerald B. 

Lindrew, Office of Policy and Research, 

U.S. Department of Labor, Employee 

Benefits Security Administration, 200 

Constitution Avenue, NW., Room N–

5647, Washington, DC 20210. 

Telephone (202) 693–8410; Fax: (202) 

219–4745. These are not toll-free 

numbers. 

The Department has submitted a copy 

of the proposed information collection 

to OMB in accordance with 44 U.S.C. 

3507(d) for review of its information 

collections. The Department and OMB 

are particularly interested in comments 

that: 

• Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriated automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

49314 Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 

e.g., permitting electronic submission of 

responses. 

Comments should be sent to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 20503; 

Attention: Desk Officer for the 

Employee Benefits Security 

Administration. Although comments 

may be submitted through October 24, 

2005. OMB requests that comments be 

received within 30 days of publication 

of the Notice of Proposed Amendment 

to ensure their consideration. 

The provisions for compliance with 

PTE 84–14 (49 FR 9494, March 13, 1984, 

as corrected at 50 FR 41430, October 10, 

1985), a final amendment to PTE 84–14 

published in this issue of the Federal 

Register, and this proposed amendment 

have been discussed in greater detail 

earlier in the preamble. Briefly, PTE 84–

14 permits various parties in interest to 

employee benefit plans to engage in 

transactions involving plan assets if, 

among other requirements, the assets are 

managed by a QPAM. Such transactions 

include, for example, the leasing of 

office space by an investment fund to a 

QPAM or the furnishing of services and 

facilities by a place of public 

accommodation owned by an 

investment fund managed by a QPAM. 

The final amendment, among other 

things, provides limited retroactive and 

transitional relief from the sanctions of 

certain sections of ERISA and the Code 

for financial institutions such as banks, 

insurance companies, or registered 

investment advisers, that act as QPAMs 

for their own plans. The proposed 

amendment, if granted, would provide 

prospective relief for financial 

institutions to act as QPAMS for their 

own plans. 

The Department included in the final 

amendment published in this issue of 

the Federal Register and this proposed 

amendment certain requirements 

intended to preserve plan assets and 

protect plan participant benefits with 

respect to transactions between a party 

in interest to a plan and an investment 

fund containing plan assets managed by 

a QPAM. PTE 84–14, as restated and 

amended in the final amendment, 

includes a requirement for a written 

agreement between a plan and the 

QPAM it has retained, and written 

guidelines between a QPAM and a 

property manager that a QPAM has 

retained. Because it is customary 

business practice for agreements related 

to the investment of plan assets or 

transactions relating to the leasing of 

space to be described in writing, no 

burden was estimated for these 

provisions of the final amendment. 

Accordingly, this ICR includes only the 

burden for provisions in the proposed 

amendment. 

In order for a transaction to qualify for 

an exemption under the proposed 

amendment, a QPAM must, among 

other requirements, establish written 

policies and procedures that are 

designed to assure compliance with the 

conditions of the proposed amendment, 

including the steps adopted by the 

QPAM to measure compliance. Based 

on information in the 1999 Form 5500 

Annual Report, the Department 

estimates that approximately 6,500 

banks, savings institutions, insurance 

companies, and investment advisers 

currently acting as QPAMs for employee 

benefit plans might choose to act as 

QPAMs for their own plans. QPAMs are 

assumed to use a service provider, such 

as an attorney, to develop the written 

policies and procedures required under 

the proposed amendment. To meet the 

Department’s requirements regarding 

written policies and procedures, service 

providers will most likely develop 

standardized language that can then be 

modified to include the specific steps 

adopted by a particular QPAM to assure 

compliance. If all 6,500 financial 

institutions choose to act as QPAMs for 

their own plans, the start-up cost, 

assuming one hour of a service 

provider’s time, at $84 per hour, would 

be $546,000. The actual amount of time 

required, and the resulting cost burden, 

may be even lower because the 

Department has described the objective 

requirements of the exemption that are 

to be included in the policies and 

procedures, and because most service 

providers will handle multiple QPAMs, 

thereby reducing per-plan costs. 

Going forward, the Department is not 

aware of a basis for estimating how 

many additional QPAMs will choose to 

handle investments for their own plans, 

but assumes the number to be small. 

Most QPAMs are believed to be large 

institutions that will take advantage of 

the proposed amendment soon after it is 

granted. For purposes of this ICR, the 

Department has assumed that an 

additional 1%, or 65 QPAMs, annually, 

at a cost of approximately $5,500, will 

establish policies and procedures in 

order to manage investments for their 

own plans. 

Finally, under the proposed 

amendment, an independent auditor is 

required to conduct an exemption audit, 

on an annual basis, the results of which 

are presented in a written report to the 

plan. Because it is customary business 

practice for an independent auditor 

engaged by an entity such as a plan to 

provide a written report, the Department 

has not estimated a cost burden for this 

provision of the proposed amendment. 

Type of Collection: New. 

Agency: Department of Labor, 

Employee Benefits Security 

Administration. 

Title: Proposed Amendment to PTE 

84–14 for Plan Asset Transactions 

Determined by Independent Qualified 

Professional Asset Managers. 

OMB Control Number: 1210-NEW. 

Affected Public: Business or other for 

profit; Not-for-profit institutions. 

Respondents: 6,565. 

Responses: 6,565. 

Frequency of Response: One time. 

Estimated Burden Hours: 0. 

Estimated Capital/Startup Costs: 

$546,000. 

Estimated Annual Costs (Operating & 

Maintenance): $5,500. 

Estimated Total Annual Cost: 

$551,500. 

The public is not required to respond 

to a collection of information that does 

not display a currently valid OMB 

control number. 

Background 

PTE 84–14, which was proposed on 

the Department’s own motion on 

December 21, 1982, was granted as part 

of a continuing effort by the Department 

to improve the administration of the 

prohibited transaction rules of ERISA. 

The rules set forth in section 406 of 

ERISA prohibit various transactions 

between a plan and a party in interest 

(including a fiduciary) with respect to 

such plan. Unless a statutory or 

administrative exemption applies to the 

transaction, section 406(a) of ERISA 

prohibits, among other things: Sales, 

leases, loans or the provision of services 

between a party in interest and a plan, 

as well as a use of plan assets by or for 

the benefit of, or a transfer of plan assets 

to, a party in interest. In addition, 

unless exempted, a fiduciary of a plan 

is not permitted to engage in any acts of 

self-dealing or make decisions on behalf 

of a plan if the fiduciary is in a conflict 

of interest situation. 

The Department has frequently 

exercised its statutory authority under 

section 408(a) of ERISA to grant both 

individual and class exemptions from 

the prohibited transaction provisions 

where it has been able to find that the 

criteria for granting such exemptions 

have been satisfied. Based on its 

experience considering requests for 

individual and class exemptions, and in 

dealing with instances of abusive 

violations of the fiduciary responsibility 

rules of ERISA, the Department 

determined that as a general matter, 

transactions entered into on behalf of 

plans with parties in interest are most 

Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 49315 

2As described in the notice of final amendment 

to PTE 84–14 that appears elsewhere in this issue 

of the Federal Register. 

3The Department also notes that an adverse 

finding in the auditor’s report would not, in itself, 

render the exemption unavailable for any 

transaction engaged in by the QPAM on behalf of 

the plan. The Department cautions that the failure 

of the QPAM to take appropriate steps to address 

any adverse findings in an unsatisfactory audit 

would raise issues under ERISA’s fiduciary 

responsibility provisions. 

likely to conform to ERISA’s general 

fiduciary standards where the decision 

to enter into the transaction is made by 

an independent fiduciary. As granted, 

PTE 84–14 provides broad relief for 

various party in interest transactions 

that involve plan assets that are 

transferred to a qualified professional 

asset manager (QPAM) for discretionary 

management. 

Description of Existing Relief 

The relief provided by PTE 84–14 is 

described in four separate parts. The 

General Exemption, set forth in Part I, 

permits an investment fund managed by 

a QPAM to engage in a wide variety of 

transactions described in ERISA section 

406(a)(1)(A) through (D) with virtually 

all parties in interest except the QPAM 

which manages the assets involved in 

the transaction and those parties most 

likely to have the power to influence the 

QPAM. 

Part II of the exemption provides 

limited relief under both section 406(a) 

and (b) of ERISA for certain transactions 

involving those employers and certain 

of their affiliates which could not 

qualify for the General Exemption 

provided by Part I. 

Part III of the exemption provides 

limited relief under section 406(a) and 

(b) of ERISA for the leasing of office or 

commercial space by an investment 

fund to the QPAM, an affiliate of the 

QPAM, or a person who could not 

qualify for the General Exemption 

provided by Part I because it held the 

power of appointment described in Part 

I(a). 

Part IV of the exemption provides 

limited relief under sections 406(a) and 

406(b)(1) and (2) of ERISA for the 

furnishing of services and facilities by a 

place of public accommodation owned 

by an investment fund managed by a 

QPAM, to all parties in interest, if the 

services and facilities are furnished on 

a comparable basis to the general public. 

Part V of the exemption contains 

definitions for certain terms used in the 

exemption. In this regard, section V(a) 

defines the term ‘‘QPAM’’ as an 

‘‘independent fiduciary which is a bank, 

savings and loan association, insurance 

company, or registered investment 

adviser, that meets certain financial 

conditions.’’ Section V(o) of PTE 84–14, 

as adopted in the final amendment to 

PTE 84–14 published in this issue of the 

Federal Register, defines the term 

‘‘independent fiduciary’’ to mean a 

fiduciary managing the assets of a plan 

in an investment fund that is 

independent of and unrelated to the 

employer sponsoring such plan. The 

definition additionally provides that a 

fiduciary will not be deemed to be 

independent of and unrelated to the 

employer sponsoring the plan if such 

fiduciary directly or indirectly controls, 

is controlled by, or is under common 

control with the employer sponsoring 

the plan. Lastly, section V(o) provides 

that, for the period from December 21, 

1982, through the date on which the 

Department grants a final amendment 

which addresses relief for financial 

institutions that serve as investment 

managers for their own plans, a QPAM 

managing the assets of a plan in an 

investment fund will not fail to qualify 

as a QPAM solely because such 

fiduciary is the employer sponsoring the 

plan or directly or indirectly controls, is 

controlled by, or is under common 

control with the employer sponsoring 

the plan. 

Description of the Proposed 

Amendment 

The Department is proposing this 

amendment on its own motion in 

connection with its determination that 

the existing QPAM class exemption 

does not permit financial services 

entities to act as QPAMs for their own 

plans.2 The proposed amendment, if 

granted, would provide prospective 

relief for a financial institution to act as 

QPAM for its own plan. This relief is set 

out in a newly designated Part V, which 

specifically provides relief for 

transactions described in Parts I, III and 

IV of PTE 84–14 that involve a QPAMmanaged investment fund containing 

the assets of a plan sponsored by such 

QPAM. For purposes of this proposed 

amendment, the exemption’s 

‘‘Definitions’’ section has been redesignated as Part VI. 

PTE 84–14 was developed and 

granted based on the essential premise 

that broad relief could be afforded for all 

types of transactions in which a plan 

engages only if the commitments and 

the investments of plan assets and the 

negotiations leading thereto are the sole 

responsibility of an independent, 

discretionary, manager. As noted above, 

however, the proposed amendment 

described herein involves the 

investment of the assets of a QPAM’s 

own plan in an investment fund 

managed by such QPAM. In the 

Department’s view, retention of 

discretionary authority by the plan 

sponsor/QPAM would be inconsistent 

with the underlying concept of the 

QPAM exemption as originally adopted. 

In addition, there is no independent 

fiduciary present in this situation that 

would be responsible for monitoring the 

activities of the QPAM with respect to 

its own in-house plan. 

In order to address this lack of 

independence, the proposed 

amendment relies on an ‘‘exemption 

audit,’’ in addition to the other 

safeguards currently contained in the 

exemption. This audit is substantially 

similar to the audit required under PTE 

96–23 (61 FR 15975 (Apr. 10, 1996)), 

which provides relief for various party 

in interest transactions that involve the 

assets of a plan managed by an in-house 

manager (INHAM). The proposed 

amendment requires that an 

independent auditor conduct an annual 

exemption audit to determine whether 

the written procedures adopted by the 

QPAM are designed to assure 

compliance with the conditions of the 

exemption. The Department believes 

that the involvement of an independent 

party in overseeing compliance with the 

exemption would serve as a meaningful 

safeguard without interfering with the 

QPAM’s investment decisions. The 

audit is further intended to protect 

plans by ensuring that an investment 

manager, who may not otherwise have 

experience managing ERISA plan assets, 

complies with the provisions of ERISA 

and the requirements of this exemption. 

Accordingly, section V(c) of the 

proposed amendment requires that the 

independent auditor conduct an 

exemption audit on an annual basis to 

review the written policies and 

procedures adopted by the QPAM. The 

purpose of this review is to ensure that 

such policies and procedures are 

consistent with the exemption’s 

objective requirements. The 

independent auditor must also test a 

representative sample of transactions 

involving the QPAM’s plan in order to 

make findings regarding whether the 

QPAM’s is in operational compliance 

with the written policies and 

procedures adopted by the QPAM and 

the objective requirements of the 

exemption. The exemption further 

requires that the independent auditor 

make a determination as to whether the 

QPAM has satisfied the definition of a 

QPAM under the exemption, and issue 

a written report describing the steps 

performed by the auditor during the 

course of its review and the auditor’s 

findings.3 Although the proposed 

amendment limits the auditor’s 

49316 Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 

responsibilities to make findings on the 

QPAM’s compliance with the objective 

requirements of the proposal, the QPAM 

remains responsible for assuring 

compliance with all of the applicable 

conditions of the exemption. 

Accordingly, the failure of the QPAM to 

comply with a condition of the 

exemption not described in Section 

VI(q) would, with respect to a specific 

transaction, render the exemption 

unavailable for that transaction. 

As noted above, an independent 

auditor must review the written policies 

and procedures adopted by the QPAM 

for consistency with the exemption’s 

objective requirements that apply to 

such transactions. These written 

policies and procedures must describe, 

for example, the requirements to qualify 

as a QPAM and the requirement that, 

with respect to transactions described in 

Part V, the QPAM must have 

discretionary authority or control over 

the plan assets that are involved in the 

transaction. 

In addition, if a QPAM manages an 

investment fund that contains the assets 

of a plan sponsored by such QPAM, and 

the QPAM seeks to engage in a 

transaction described in Part I of the 

exemption on behalf of the fund, the 

QPAM’s written policies and 

procedures must describe the objective 

requirements contained in Part I of the 

exemption. In this regard, the QPAM’s 

written policies and procedures must 

describe the exemption’s requirements 

that: (1) The transaction may not be 

entered into with any party in interest 

that has the power to appoint or 

terminate the QPAM as a manager of the 

plan assets involved in the transaction 

or negotiate the terms of the 

management agreement with such 

QPAM; (2) the transaction may not be 

entered into with the QPAM or a person 

related to the QPAM; and (3) the 

transaction is not described in any of 

the class exemptions listed in section 

I(b). The written policies and 

procedures must also describe the 

exemption’s objective requirements 

regarding the QPAM’s responsibility for: 

(1) Negotiating the terms of the 

transaction; and (2) deciding to enter 

into the transaction on behalf of the 

investment fund. 

The class exemption contains certain 

other objective requirements that are 

applicable to transactions described in 

Part III of PTE 84–14, relating to the 

leasing of office or commercial space by 

an investment fund managed by a 

QPAM to the QPAM or other specified 

persons. Accordingly, the objective 

requirements applicable to Part III 

transactions include: (1) that the amount 

of space that may be covered by the 

lease does not exceed the limitation 

described in section III(a); and (2) that 

no commission or other fee may be paid 

by the investment fund to the QPAM or 

the persons specified in section III(d). 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of ERISA and section 4975(c)(2) 

of the Code does not relieve a fiduciary 

or other party in interest or disqualified 

person with respect to a plan from 

certain other provisions of ERISA and 

the Code, including any prohibited 

transaction provisions to which the 

exemption does not apply and the 

general fiduciary responsibility 

provisions of section 404 of ERISA 

which require, among other things, that 

a fiduciary discharge his or her duties 

respecting the plan solely in the 

interests of the participants and 

beneficiaries of the plan. Additionally, 

the fact that a transaction is the subject 

of an exemption does not affect the 

requirement of section 401(a) of the 

Code that the plan must operate for the 

exclusive benefit of the employees of 

the employer maintaining the plan and 

their beneficiaries; 

(2) Before an exemption may be 

granted under section 408(a) of ERISA 

and 4975(c)(2) of the Code, the 

Department must find that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(3) If granted, the proposed 

amendment is applicable to a particular 

transaction only if the transaction 

satisfies the conditions specified in the 

amendment; and 

(4) The proposed amendment, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of ERISA and the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction. 

Written Comments 

The Department invites all interested 

persons to submit written comments on 

the proposed amendment to the address 

and within the time period set forth 

above. All comments received will be 

made a part of the record. Comments 

should state the reasons for the writer’s 

interest in the proposed exemption. 

Comments received will be available for 

public inspection at the above address. 

Proposed Amendment 

Under section 408(a) of the Act and 

section 4975(c)(2) of the Code and in 

accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990), the 

Department proposes to amend PTE 84–

14 as set forth below: 

Part V—Specific Exemption Involving 

QPAM-Sponsored Plan 

Effective as of the date of publication 

of the final amendment to PTE 84–14 in 

the Federal Register, the relief provided 

by Parts I, III or IV of PTE 84–14 from 

the applicable restrictions of section 

406(a), section 406(b)(1) and (2), and 

section 407(a) of ERISA and the taxes 

imposed by Code section 4975(a) and 

(b), by reason of Code section 

4975(c)(1)(A) through (E), shall apply to 

a transaction involving the assets of a 

plan sponsored by the QPAM if: 

(a) The QPAM has discretionary 

authority or control with respect to the 

plan assets involved in the transaction; 

(b) The QPAM adopts written policies 

and procedures that are designed to 

assure compliance with the conditions 

of the exemption; 

(c) An independent auditor, who has 

appropriate technical training or 

experience and proficiency with 

ERISA’s fiduciary responsibility 

provisions and so represents in writing, 

conducts an exemption audit (as 

defined in section VI(p)) on an annual 

basis. Following completion of the 

exemption audit, the auditor shall issue 

a written report to the plan presenting 

its specific findings regarding the level 

of compliance with the policies and 

procedures adopted by QPAM in 

accordance with section V(b); 

(d) The transaction meets the 

applicable requirements set forth in 

Parts I, III, or IV of the exemption. 

Section VI. Definitions 

(o) For purposes of section V(a), the 

term ‘‘independent fiduciary’’ means a 

fiduciary managing the assets of a plan 

in an investment fund that is 

independent of and unrelated to the 

employer sponsoring such plan. For 

purposes of this exemption, the 

independent fiduciary will not be 

deemed to be independent of and 

unrelated to the employer sponsoring 

the plan if such fiduciary directly or 

indirectly controls, is controlled by, or 

is under common control with the 

employer sponsoring the plan. 

Notwithstanding the foregoing, a QPAM 

acting as a manager for its own plan or 

the plan of an affiliate (as defined in 

Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 49317 

section VI(c)(1)) will be deemed to 

satisfy the requirements of this section 

VI(o) if the requirements of Part V are 

met. 

(p) Exemption Audit. An ‘‘exemption 

audit’’ of a plan must consist of the 

following: 

(1) A review of the written policies 

and procedures adopted by the QPAM 

pursuant to section V(b) for consistency 

with each of the objective requirements 

of this proposed exemption (as 

described in section VI(q)). 

(2) A test of a representative sample 

of the plan’s transactions in order to 

make findings regarding whether the 

QPAM is in compliance with (i) the 

written policies and procedures adopted 

by the QPAM pursuant to section VI(q) 

of the exemption and (ii) the objective 

requirements of the exemption. 

(3) A determination as to whether the 

QPAM has satisfied the definition of an 

QPAM under the exemption; and 

(4) Issuance of a written report 

describing the steps performed by the 

auditor during the course of its review 

and the auditor’s findings. 

(q) For purposes of section VI(p), the 

written policies and procedures must 

describe the following objective 

requirements of the exemption and the 

steps adopted by the QPAM to assure 

compliance with each of these 

requirements: 

(1) The definition of a QPAM in 

section V(a). 

(2) The requirement of sections V(a) 

and I(c) regarding the discretionary 

authority or control of the QPAM with 

respect to the plan assets involved in 

the transaction, in negotiating the terms 

of the transaction and with respect to 

the decision on behalf of the investment 

fund to enter into the transaction. 

(3) For a transaction described in Part 

I: 

(A) That the transaction is not entered 

into with any person who is excluded 

from relief under section I(a), section 

I(d), or section I(e), 

(B) That the transaction is not 

described in any of the class exemptions 

listed in section I(b), 

(4) If the transaction is described in 

section III, 

(i) That the amount of space covered 

by the lease does not exceed the 

limitations described in section III(a); 

and 

(ii) That no commission or other fee 

is paid by the investment fund as 

described in section III(d). 

Signed at Washington, DC, this 11th day of 

August, 2005. 

Ivan L. Strasfeld, 

Director, Office of Exemption Determinations, 

Employee Benefits Security Administration, 

Department of Labor. 

[FR Doc. 05–16681 Filed 8–22–05; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employment and Training 

Administration 

Proposed Information Collection 

Request Submitted for Public 

Comment and Recommendations; 

Labor Condition Application for 

Nonimmigrant Workers 

ACTION: Notice. 

SUMMARY: The Department of Labor, as 

part of its continuing effort to reduce 

paperwork and respondent burden, 

conducts a preclearance consultation 

program to provide the general public 

and Federal agencies with an 

opportunity to comment on proposed 

and/or continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 

(PRA95) (44 U.S.C. 3506(c)(A)). This 

program helps to ensure that requested 

data can be provided in the desired 

format, reporting burden (time and 

financial resources) is minimized, 

collection instruments are clearly 

understood, and the impact of collection 

requirements on respondents can be 

properly assessed. Currently, the 

Employment and Training 

Administration (ETA), Office of 

National Programs is soliciting 

comments concerning the proposed 

extension of the collection for ETA form 

9035—Labor Condition Application for 

Nonimmigrant Workers. A copy of the 

proposed Information Collection 

Request (ICR) can be obtained by 

contacting the office listed below in the 

addressee section of this notice. 

DATES: Written comments must be 

submitted to the office listed in the 

addressee’s section below on or before 

October 24, 2005. 

ADDRESSES: William L. Carlson, Chief, 

Division of Foreign Labor Certification, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Room C–

4312, Washington, DC 20210. Mr. 

Carlson may be reached at (202) 693–

3010; this is not a toll-free number. 

FOR FURTHER INFORMATION CONTACT: 

Gregory Wilson, Program Analyst, 

Division of Foreign Labor Certification, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Room C–

4312, Washington, DC 20210. Mr. 

Wilson may also be reached at (202) 

693–3010; this is not a toll-free number. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Immigration and Naturalization 

Act (INA) requires that before any 

foreign worker may be admitted or 

otherwise provided status as an H–1B, 

H–1B1, or E–3 nonimmigrant the 

prospective employer must have filed 

with the Department of Labor 

(Department) a Labor Condition 

Application (LCA). Employers must 

state on the LCA that they will offer 

prevailing wages and working 

conditions, that there is not a strike or 

lockout in the course of a labor dispute 

in the occupational classification at the 

place of employment, and that they 

have provided notice of filing in 

conspicuous locations at the place of 

employment. Further, the employer 

must make certain documentation 

available for public examination. The 

Department’s review of each LCA filed 

is limited by law solely to a review for 

completeness or ‘‘obvious 

inaccuracies.’’ Complaints may be filed 

with the Department alleging a violation 

of the LCA process. If reasonable cause 

is found to believe a violation has been 

committed, the Department will 

conduct an investigation and, if 

appropriate, assess penalties. The INA 

places a limit on the number of foreign 

workers who can be admitted to the 

United States on H–1B, H–1B1, or E–3 

visas. The INA generally limits H–1B 

workers to a maximum of a six-year 

duration of stay under H–1B status, 

although extensions are permitted for 

certain foreign workers on whose behalf 

a labor certification or employmentbased immigrant petition has been 

pending for 365 days or more. The INA 

requires that the Department make 

available for public examination in 

Washington, DC, a list of employers 

which have filed LCAs. 

II. Review Focus 

Currently, the Department is soliciting 

comments concerning the proposed 

extension of the collection for ETA form 

9035—Labor Condition Application for 

Nonimmigrant Workers. The 

Department is particularly interested in 

comments which: 

• Evaluate whether the proposed 

information collection is necessary for 

the proper performance of the functions 

of the agency, including whether the 

information will have practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information