NEW Online Form Helps with PTE 84-24 Compliance

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As a result of Department of Labor (DOL) updates to the Fiduciary Rule, effective January 31, 2022, producers who are considered ERISA fiduciaries cannot receive compensation related to certain qualified account recommendations unless they comply with the requirements of a prohibited transaction exemption (PTE). To assist with meeting the requirements, we’ve made available an online form and disclosure template (to aid producer’s compliance with PTE 84-24), for producers to receive compensation for investment advice.

Are You an ERISA Fiduciary?

The DOL Fiduciary Rule updates expanded the interpretation of the existing 5-part test to determine when an individual is an ERISA fiduciary:

  1. You render advice about plan assets (401(k), 403(b), IRA, etc.);
  2. On a regular basis;
  3. Pursuant to a mutual agreement;
  4. The advice serves as a primary basis for investment decisions; and
  5. The advice is individualized.

The DOL’s new interpretation makes fiduciary status more likely, especially for rollover recommendations. The new interpretation includes:

  1. Providing a rollover recommendation meets the “render advice” prong (#1 above);
  2. Statements disclaiming a mutual agreement do not control;
  3. Statements forbidding reliance will not control; and
  4. All facts and circumstances will be considered, and marketing materials that indicate that you are a trusted adviser or want an ongoing relationship with clients will be viewed as more likely to meet the 5-part test.

If a producer is an ERISA fiduciary, he/she cannot receive compensation related to that investment advice unless he/she complies with the requirements of a PTE. Notably, an existing PTE – PTE 84-24 – is available for producer use to receive compensation for investment advice. The general conditions of PTE 84-24 include:

  1. That a recommendation is made in the ordinary cause of business and is as favorable as an arm’s length transaction with an unrelated party would be;
  2. The combined total of all fees, commissions, etc. received by the producer must not be in excess of “reasonable compensation”; and
  3. The producer may not have certain relationships with the plan or IRA including acting as a trustee, or administrator to the plan or employer.

PTE 84-24 also requires that a producer disclose:

  1. The nature of any affiliation or relationship with the insurance company whose contract is being recommended, and any limitations on the products that can be recommended;
  2. The sales commission, expressed as a percentage of gross annual premium payments; and
  3. Any charges, fees, discounts, penalties or adjustments under the annuity contract.
DOL Product Disclosure