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QPAM Primer

The QPAM Exemption Explained

Section 408 of ERISA provides for certain statutory and administrative exemptions to the party in interest prohibited transaction provisions. The statutory exemptions are narrowly drafted and provide little protection for the typical party in interest transactions that arise in a real estate investment program.

ERISA also allows the Secretary of Labor to grant administrative exemptions from prohibited transactions provided that the exemption is:

  • administratively feasible;
  • in the interest of the plan, its participants and beneficiaries; and
  • protective of the rights of the participants and beneficiaries of the plan.

Administrative exemptions can be granted on both an individual basis to a particular applicant requesting exemptive relief and on a "class" basis applicable to all transactions within a defined class of exempted transactions. Unfortunately, the time and expense required to process an individual exemption application with the Department of Labor make this process impractical for most party-in-interest transactions that would arise in a typical pension plan real estate investment program.

On March 13, 1984, the Secretary of Labor approved Prohibited Transaction Class Exemption 84-14, also known as the QPAM Exemption. The QPAM exemption provides a practical way for pension plans and their trustees to avoid liability for engaging in certain party-in-interest prohibited transactions in their real estate investment programs.

The QPAM exemption allows a pension plan to enter into certain real estate purchase or sale transactions or leases with, or obtain the benefit of services from, the employer sponsoring the plan or affiliates of the employer without the risk of violating the prohibited transaction provisions of ERISA.

A QPAM can pass upon the fairness of transactions involving such relationships. The conditions for relief under this part of the QPAM exemption vary depending on whether the transaction involves the transfer of goods and services or the leasing of office or commercial space. Trustees are encouraged to seek the guidance of qualified legal counsel, as well as a qualified QPAM, when considering these types of transactions.

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