29 Usc 1108

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29 U.S. Code § 1108 - Exemptions from prohibited transactions | U.S. Code | US Law | LII / Legal Information Institute

29 U.S. Code § 1108. Exemptions from prohibited
transactions
U.S. Code

Notes

(a) G
The Secretary shall establish an exemption
procedure for purposes of this subsection. Pursuant to such procedure, he
may grant a conditional or unconditional exemption of any fiduciary or
transaction, or class of fiduciaries or transactions, from all or part of the
restrictions imposed by sections 1106 and 1107(a) of this title. Action
under this subsection may be taken only after consultation and
coordination with the Secretary of the Treasury. An exemption granted
under this section shall not relieve a fiduciary from any other applicable
provision of this chapter. The Secretary may not grant an exemption under
this subsection unless he finds that such exemption is—
(1) administratively feasible,
(2) in the interests of the plan and of its participants and beneficiaries,
and
(3) protective of the rights of participants and beneficiaries of such
plan.
Before granting an exemption under this subsection from section
1106(a) or 1107(a) of this title, the Secretary shall publish notice in
the Federal Register of the pendency of the exemption, shall require
that adequate notice be given to interested persons, and shall afford
interested persons opportunity to present views. The Secretary may
not grant an exemption under this subsection from section 1106(b) of
this title unless he affords an opportunity for a hearing and makes a
determination on the record with respect to the findings required by
paragraphs (1), (2), and (3) of this subsection.

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(b) E

1106
The prohibitions provided in section 1106 of this title shall

not apply to any of the following transactions:
(1) Any loans made by the plan to parties in interest who are
participants or beneficiaries of the plan if such loans (A) are available to
all such participants and beneficiaries on a reasonably equivalent basis,
(B) are not made available to highly compensated employees (within
the meaning of section 414(q) of title 26) in an amount greater than
the amount made available to other employees, (C) are made in
accordance with specific provisions regarding such loans set forth in the
plan, (D) bear a reasonable rate of interest, and (E) are adequately
secured. A loan made by a plan shall not fail to meet the requirements
of the preceding sentence by reason of a loan repayment suspension
described under section 414(u)(4) of title 26.
(2) Contracting or making reasonable arrangements with a party in
interest for office space, or legal, accounting, or other services
necessary for the establishment or operation of the plan, if no more
than reasonable compensation is paid therefor.
(3) A loan to an employee stock ownership plan (as defined in section
1107(d)(6) of this title), if—
(A) such loan is primarily for the benefit of participants and
beneficiaries of the plan, and
(B) such loan is at an interest rate which is not in excess of a
reasonable rate.
If the plan gives collateral to a party in interest for such loan, such
collateral may consist only of qualifying employer securities (as
defined in section 1107(d)(5) of this title).
(4) The investment of all or part of a plan’s assets in deposits which
bear a reasonable interest rate in a bank or similar financial institution
supervised by the United States or a State, if such bank or other
institution is a fiduciary of such plan and if—
(A) the plan covers only employees of such bank or other institution
and employees of affiliates of such bank or other institution, or
(B) such investment is expressly authorized by a provision of the
plan or by a fiduciary (other than such bank or institution or affiliate

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thereof) who is expressly empowered by the plan to so instruct the
trustee with respect to such investment.
(5) Any contract for life insurance, health insurance, or annuities with
one or more insurers which are qualified to do business in a State, if
the plan pays no more than adequate consideration, and if each such
insurer or insurers is—
(A) the employer maintaining the plan, or
(B) a party in interest which is wholly owned (directly or indirectly)
by the employer maintaining the plan, or by any person which is a
party in interest with respect to the plan, but only if the total
premiums and annuity considerations written by such insurers for
life insurance, health insurance, or annuities for all plans (and their
employers) with respect to which such insurers are parties in
interest (not including premiums or annuity considerations written
by the employer maintaining the plan) do not exceed 5 percent of
the total premiums and annuity considerations written for all lines of
insurance in that year by such insurers (not including premiums or
annuity considerations written by the employer maintaining the
plan).
(6) The providing of any ancillary service by a bank or similar financial
institution supervised by the United States or a State, if such bank or
other institution is a fiduciary of such plan, and if—
(A) such bank or similar financial institution has adopted adequate
internal safeguards which assure that the providing of such ancillary
service is consistent with sound banking and financial practice, as
determined by Federal or State supervisory authority, and
(B) the extent to which such ancillary service is provided is subject
to specific guidelines issued by such bank or similar financial
institution (as determined by the Secretary after consultation with
Federal and State supervisory authority), and adherence to such
guidelines would reasonably preclude such bank or similar financial
institution from providing such ancillary service (i) in an excessive or
unreasonable manner, and (ii) in a manner that would be
inconsistent with the best interests of participants and beneficiaries
of employee benefit plans.
Such ancillary services shall not be provided at more than
reasonable compensation.
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(7) The exercise of a privilege to convert securities, to the extent
provided in regulations of the Secretary, but only if the plan receives no
less than adequate consideration pursuant to such conversion.
(8) Any transaction between a plan and (i) a common or collective
trust fund or pooled investment fund maintained by a party in interest
which is a bank or trust company supervised by a State or Federal
agency or (ii) a pooled investment fund of an insurance company
qualified to do business in a State, if—
(A) the transaction is a sale or purchase of an interest in the fund,
(B) the bank, trust company, or insurance company receives not
more than reasonable compensation, and
(C) such transaction is expressly permitted by the instrument under
which the plan is maintained, or by a fiduciary (other than the bank,
trust company, or insurance company, or an affiliate thereof) who
has authority to manage and control the assets of the plan.
(9) The making by a fiduciary of a distribution of the assets of the plan
in accordance with the terms of the plan if such assets are distributed
in the same manner as provided under section 1344 of this title
(relating to allocation of assets).
(10) Any transaction required or permitted under part 1 of subtitle E of
subchapter III.
(11) A merger of multiemployer plans, or the transfer of assets or
liabilities between multiemployer plans, determined by the Pension
Benefit Guaranty Corporation to meet the requirements of section 1411
of this title.
(12) The sale by a plan to a party in interest on or after December 18,
1987, of any stock, if—
(A) the requirements of paragraphs (1) and (2) of subsection (e)
are met with respect to such stock,
(B) on the later of the date on which the stock was acquired by the
plan, or January 1, 1975, such stock constituted a qualifying
employer security (as defined in section 1107(d)(5) of this title as
then in effect), and

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(C) such stock does not constitute a qualifying employer security
(as defined in section 1107(d)(5) of this title as in effect at the time
of the sale).
(13) Any transfer made before January 1, 2026, of excess pension
assets from a defined benefit plan to a retiree health account in a
qualified transfer permitted under section 420 of title 26 (as in effect on
July 31, 2015).
(14) Any transaction in connection with the provision of investment
advice described in section 1002(21)(A)(ii) of this title to a participant
or beneficiary of an individual account plan that permits such
participant or beneficiary to direct the investment of assets in their
individual account, if—
(A) the transaction is—
(i) the provision of the investment advice to the participant or
beneficiary of the plan with respect to a security or other
property available as an investment under the plan,
(ii) the acquisition, holding, or sale of a security or other
property available as an investment under the plan pursuant to
the investment advice, or
(iii) the direct or indirect receipt of fees or other compensation
by the fiduciary adviser or an affiliate thereof (or any employee,
agent, or registered representative of the fiduciary adviser or
affiliate) in connection with the provision of the advice or in
connection with an acquisition, holding, or sale of a security or
other property available as an investment under the plan
pursuant to the investment advice; and
(B) the requirements of subsection (g) are met.
(15)
(A) Any transaction involving the purchase or sale of securities, or
other property (as determined by the Secretary), between a plan
and a party in interest (other than a fiduciary described in section
1002(21)(A) of this title) with respect to a plan if—
(i) the transaction involves a block trade,

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(ii) at the time of the transaction, the interest of the plan
(together with the interests of any other plans maintained by the
same plan sponsor), does not exceed 10 percent of the
aggregate size of the block trade,
(iii) the terms of the transaction, including the price, are at least
as favorable to the plan as an arm’s length [1] transaction, and
(iv) the compensation associated with the purchase and sale is
not greater than the compensation associated with an arm’s
length 1 transaction with an unrelated party.
(B) For purposes of this paragraph, the term “block trade” means
any trade of at least 10,000 shares or with a market value of at
least $200,000 which will be allocated across two or more unrelated
client accounts of a fiduciary.
(16) Any transaction involving the purchase or sale of securities, or
other property (as determined by the Secretary), between a plan and a
party in interest if—
(A) the transaction is executed through an electronic
communication network, alternative trading system, or similar
execution system or trading venue subject to regulation and
oversight by—
(i) the applicable Federal regulating entity, or
(ii) such foreign regulatory entity as the Secretary may
determine by regulation,
(B) either—
(i) the transaction is effected pursuant to rules designed to
match purchases and sales at the best price available through
the execution system in accordance with applicable rules of the
Securities and Exchange Commission or other relevant
governmental authority, or
(ii) neither the execution system nor the parties to the
transaction take into account the identity of the parties in the
execution of trades,

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(C) the price and compensation associated with the purchase and
sale are not greater than the price and compensation associated
with an arm’s length 1 transaction with an unrelated party,
(D) if the party in interest has an ownership interest in the system
or venue described in subparagraph (A), the system or venue has
been authorized by the plan sponsor or other independent fiduciary
for transactions described in this paragraph, and
(E) not less than 30 days prior to the initial transaction described in
this paragraph executed through any system or venue described in
subparagraph (A), a plan fiduciary is provided written or electronic
notice of the execution of such transaction through such system or
venue.
(17)
(A) Transactions described in subparagraphs (A), (B), and (D) of
section 1106(a)(1) of this title between a plan and a person that is a
party in interest other than a fiduciary (or an affiliate) who has or
exercises any discretionary authority or control with respect to the
investment of the plan assets involved in the transaction or renders
investment advice (within the meaning of section 1002(21)(A)(ii) of
this title) with respect to those assets, solely by reason of providing
services to the plan or solely by reason of a relationship to such a
service provider described in subparagraph (F), (G), (H), or (I) of
section 1002(14) of this title, or both, but only if in connection with
such transaction the plan receives no less, nor pays no more, than
adequate consideration.
(B) For purposes of this paragraph, the term “adequate
consideration” means—
(i) in the case of a security for which there is a generally
recognized market—
(I) the price of the security prevailing on a national securities
exchange which is registered under section 6 of the Securities
Exchange Act of 1934 [15 U.S.C. 78f], taking into account
factors such as the size of the transaction and marketability
of the security, or
(II) if the security is not traded on such a national securities
exchange, a price not less favorable to the plan than the
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offering price for the security as established by the current
bid and asked prices quoted by persons independent of the
issuer and of the party in interest, taking into account factors
such as the size of the transaction and marketability of the
security, and
(ii) in the case of an asset other than a security for which there
is a generally recognized market, the fair market value of the
asset as determined in good faith by a fiduciary or fiduciaries in
accordance with regulations prescribed by the Secretary.
(18) F

.—Any foreign exchange

transactions, between a bank or broker-dealer (or any affiliate of
either), and a plan (as defined in section 1002(3) of this title) with
respect to which such bank or broker-dealer (or affiliate) is a trustee,
custodian, fiduciary, or other party in interest, if—
(A) the transaction is in connection with the purchase, holding, or
sale of securities or other investment assets (other than a foreign
exchange transaction unrelated to any other investment in securities
or other investment assets),
(B) at the time the foreign exchange transaction is entered into, the
terms of the transaction are not less favorable to the plan than the
terms generally available in comparable arm’s length 1 foreign
exchange transactions between unrelated parties, or the terms
afforded by the bank or broker-dealer (or any affiliate of either) in
comparable arm’s-length foreign exchange transactions involving
unrelated parties,
(C) the exchange rate used by such bank or broker-dealer (or
affiliate) for a particular foreign exchange transaction does not
deviate by more than 3 percent from the interbank bid and asked
rates for transactions of comparable size and maturity at the time of
the transaction as displayed on an independent service that reports
rates of exchange in the foreign currency market for such currency,
and
(D) the bank or broker-dealer (or any affiliate of either) does not
have investment discretion, or provide investment advice, with
respect to the transaction.

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(19) C

.—Any transaction described in sections 1106(a)

(1)(A) and 1106(b)(2) of this title involving the purchase and sale of a
security between a plan and any other account managed by the same
investment manager, if—
(A) the transaction is a purchase or sale, for no consideration other
than cash payment against prompt delivery of a security for which
market quotations are readily available,
(B) the transaction is effected at the independent current market
price of the security (within the meaning of section 270.17a–7(b) of
title 17, Code of Federal Regulations),
(C) no brokerage commission, fee (except for customary transfer
fees, the fact of which is disclosed pursuant to subparagraph (D)),
or other remuneration is paid in connection with the transaction,
(D) a fiduciary (other than the investment manager engaging in the
cross-trades or any affiliate) for each plan participating in the
transaction authorizes in advance of any cross-trades (in a
document that is separate from any other written agreement of the
parties) the investment manager to engage in cross trades at the
investment manager’s discretion, after such fiduciary has received
disclosure regarding the conditions under which cross trades may
take place (but only if such disclosure is separate from any other
agreement or disclosure involving the asset management
relationship), including the written policies and procedures of the
investment manager described in subparagraph (H),
(E) each plan participating in the transaction has assets of at least
$100,000,000, except that if the assets of a plan are invested in a
master trust containing the assets of plans maintained by employers
in the same controlled group (as defined in section 1107(d)(7) of
this title), the master trust has assets of at least $100,000,000,
(F) the investment manager provides to the plan fiduciary who
authorized cross trading under subparagraph (D) a quarterly report
detailing all cross trades executed by the investment manager in
which the plan participated during such quarter, including the
following information, as applicable: (i) the identity of each security
bought or sold; (ii) the number of shares or units traded; (iii) the
parties involved in the cross-trade; and (iv) trade price and the
method used to establish the trade price,
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(G) the investment manager does not base its fee schedule on the
plan’s consent to cross trading, and no other service (other than the
investment opportunities and cost savings available through a cross
trade) is conditioned on the plan’s consent to cross trading,
(H) the investment manager has adopted, and cross-trades are
effected in accordance with, written cross-trading policies and
procedures that are fair and equitable to all accounts participating in
the cross-trading program, and that include a description of the
manager’s pricing policies and procedures, and the manager’s
policies and procedures for allocating cross trades in an objective
manner among accounts participating in the cross-trading program,
and
(I) the investment manager has designated an individual
responsible for periodically reviewing such purchases and sales to
ensure compliance with the written policies and procedures
described in subparagraph (H), and following such review, the
individual shall issue an annual written report no later than 90 days
following the period to which it relates signed under penalty of
perjury to the plan fiduciary who authorized cross trading under
subparagraph (D) describing the steps performed during the course
of the review, the level of compliance, and any specific instances of
non-compliance.
The written report under subparagraph (I) shall also notify the plan
fiduciary of the plan’s right to terminate participation in the
investment manager’s cross-trading program at any time.
(20)
(A) Except as provided in subparagraphs (B) and (C), a transaction
described in section 1106(a) of this title in connection with the
acquisition, holding, or disposition of any security or commodity, if
the transaction is corrected before the end of the correction period.
(B) Subparagraph (A) does not apply to any transaction between a
plan and a plan sponsor or its affiliates that involves the acquisition
or sale of an employer security (as defined in section 1107(d)(1) of
this title) or the acquisition, sale, or lease of employer real property
(as defined in section 1107(d)(2) of this title).
(C) In the case of any fiduciary or other party in interest (or any
other person knowingly participating in such transaction),
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subparagraph (A) does not apply to any transaction if, at the time
the transaction occurs, such fiduciary or party in interest (or other
person) knew (or reasonably should have known) that the
transaction would (without regard to this paragraph) constitute a
violation of section 1106(a) of this title.
(D) For purposes of this paragraph, the term “correction period”
means, in connection with a fiduciary or party in interest (or other
person knowingly participating in the transaction), the 14-day
period beginning on the date on which such fiduciary or party in
interest (or other person) discovers, or reasonably should have
discovered, that the transaction would (without regard to this
paragraph) constitute a violation of section 1106(a) of this title.
(E) For purposes of this paragraph—
(i) The term “security” has the meaning given such term by
section 475(c)(2) of title 26 (without regard to subparagraph (F)
(iii) and the last sentence thereof).
(ii) The term “commodity” has the meaning given such term by
section 475(e)(2) of title 26 (without regard to subparagraph (D)
(iii) thereof).
(iii) The term “correct” means, with respect to a transaction—
(I) to undo the transaction to the extent possible and in any
case to make good to the plan or affected account any losses
resulting from the transaction, and
(II) to restore to the plan or affected account any profits
made through the use of assets of the plan.

(c) F
1106 Nothing in section 1106 of this title shall be construed to
prohibit any fiduciary from—
(1) receiving any benefit to which he may be entitled as a participant
or beneficiary in the plan, so long as the benefit is computed and paid
on a basis which is consistent with the terms of the plan as applied to
all other participants and beneficiaries;
(2) receiving any reasonable compensation for services rendered, or
for the reimbursement of expenses properly and actually incurred, in
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the performance of his duties with the plan; except that no person so
serving who already receives full time pay from an employer or an
association of employers, whose employees are participants in the plan,
or from an employee organization whose members are participants in
such plan shall receive compensation from such plan, except for
reimbursement of expenses properly and actually incurred; or
(3) serving as a fiduciary in addition to being an officer, employee,
agent, or other representative of a party in interest.
(d) O

-

;

;

(1) Section 1107(b) of this title and subsections (b), (c), and (e) of
this section shall not apply to a transaction in which a plan directly or
indirectly—
(A) lends any part of the corpus or income of the plan to,
(B) pays any compensation for personal services rendered to the
plan to, or
(C) acquires for the plan any property from, or sells any property
to,
any person who is with respect to the plan an owner-employee (as
defined in section 401(c)(3) of title 26), a member of the family
(as defined in section 267(c)(4) of such title) of any such owneremployee, or any corporation in which any such owner-employee
owns, directly or indirectly, 50 percent or more of the total
combined voting power of all classes of stock entitled to vote or 50
percent or more of the total value of shares of all classes of stock
of the corporation.
(2)
(A) For purposes of paragraph (1), the following shall be treated as
owner-employees:
(i) A shareholder-employee.
(ii) A participant or beneficiary of an individual retirement plan
(as defined in section 7701(a)(37) of title 26).
(iii) An employer or association of employees which establishes
such an individual retirement plan under section 408(c) of such
title.
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(B) Paragraph (1)(C) shall not apply to a transaction which consists
of a sale of employer securities to an employee stock ownership
plan (as defined in section 1107(d)(6) of this title) by a
shareholder-employee, a member of the family (as defined in
section 267(c)(4) of such title) of any such owner-employee, or a
corporation in which such a shareholder-employee owns stock
representing a 50 percent or greater interest described in
paragraph (1).
(C) For purposes of paragraph (1)(A), the term “owner-employee”
shall only include a person described in clause (ii) or (iii) of
subparagraph (A).
(3) For purposes of paragraph (2), the term “shareholder-employee”
means an employee or officer of an S corporation (as defined in section
1361(a)(1) of such title) who owns (or is considered as owning within
the meaning of section 318(a)(1) of such title) more than 5 percent of
the outstanding stock of the corporation on any day during the taxable
year of such corporation.
(e) A
;

,

,

Sections 1106 and 1107 of this title shall not
apply to the acquisition or sale by a plan of qualifying employer securities
(as defined in section 1107(d)(5) of this title) or acquisition, sale or lease
by a plan of qualifying employer real property (as defined in section
1107(d)(4) of this title)—
(1) if such acquisition, sale, or lease is for adequate consideration (or
in the case of a marketable obligation, at a price not less favorable to
the plan than the price determined under section 1107(e)(1) of this
title),
(2) if no commission is charged with respect thereto, and
(3) if—
(A) the plan is an eligible individual account plan (as defined in
section 1107(d)(3) of this title), or
(B) in the case of an acquisition or lease of qualifying employer real
property by a plan which is not an eligible individual account plan,
or of an acquisition of qualifying employer securities by such a plan,
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the lease or acquisition is not prohibited by section 1107(a) of this
title.
(f) A
Section 1106(b)(2) of this title shall not apply to any merger or transfer
described in subsection (b)(11).
(g) P
(1) I
The prohibitions provided in section 1106 of this title shall not apply to
transactions described in subsection (b)(14) if the investment advice
provided by a fiduciary adviser is provided under an eligible investment
advice arrangement.
(2) E
For purposes of this
subsection, the term “eligible investment advice arrangement” means
an arrangement—
(A) which either—
(i) provides that any fees (including any commission or other
compensation) received by the fiduciary adviser for investment
advice or with respect to the sale, holding, or acquisition of any
security or other property for purposes of investment of plan
assets do not vary depending on the basis of any investment
option selected, or
(ii) uses a computer model under an investment advice program
meeting the requirements of paragraph (3) in connection with
the provision of investment advice by a fiduciary adviser to a
participant or beneficiary, and
(B) with respect to which the requirements of paragraph (4), (5),
(6), (7), (8), and (9) are met.
(3) I
(A) In general
An investment advice program meets the requirements of this
paragraph if the requirements of subparagraphs (B), (C), and (D)
are met.
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(B) Computer model The requirements of this subparagraph are
met if the investment advice provided under the investment advice
program is provided pursuant to a computer model that—
(i) applies generally accepted investment theories that take into
account the historic returns of different asset classes over
defined periods of time,
(ii) utilizes relevant information about the participant, which
may include age, life expectancy, retirement age, risk tolerance,
other assets or sources of income, and preferences as to certain
types of investments,
(iii) utilizes prescribed objective criteria to provide asset
allocation portfolios comprised of investment options available
under the plan,
(iv) operates in a manner that is not biased in favor of
investments offered by the fiduciary adviser or a person with a
material affiliation or contractual relationship with the fiduciary
adviser, and
(v) takes into account all investment options under the plan in
specifying how a participant’s account balance should be invested
and is not inappropriately weighted with respect to any
investment option.
(C) Certification
(i) In general
The requirements of this subparagraph are met with respect to
any investment advice program if an eligible investment expert
certifies, prior to the utilization of the computer model and in
accordance with rules prescribed by the Secretary, that the
computer model meets the requirements of subparagraph (B).
(ii) Renewal of certifications
If, as determined under regulations prescribed by the Secretary,
there are material modifications to a computer model, the
requirements of this subparagraph are met only if a certification
described in clause (i) is obtained with respect to the computer
model as so modified.

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(iii) Eligible investment expert The term “eligible investment
expert” means any person—
(I) which meets such requirements as the Secretary may
provide, and
(II) does not bear any material affiliation or contractual
relationship with any investment adviser or a related person
thereof (or any employee, agent, or registered representative
of the investment adviser or related person).
(D) Exclusivity of recommendation The requirements of this
subparagraph are met with respect to any investment advice
program if—
(i) the only investment advice provided under the program is the
advice generated by the computer model described in
subparagraph (B), and
(ii) any transaction described in subsection (b)(14)(A)(ii) occurs
solely at the direction of the participant or beneficiary.
Nothing in the preceding sentence shall preclude the participant
or beneficiary from requesting investment advice other than
that described in subparagraph (A), but only if such request has
not been solicited by any person connected with carrying out
the arrangement.
(4) E
The requirements of this paragraph are met with respect to an
arrangement if the arrangement is expressly authorized by a plan
fiduciary other than the person offering the investment advice program,
any person providing investment options under the plan, or any affiliate
of either.
(5) A

The requirements of this paragraph are met if an

independent auditor, who has appropriate technical training or
experience and proficiency and so represents in writing—
(A) conducts an annual audit of the arrangement for compliance
with the requirements of this subsection, and
(B) following completion of the annual audit, issues a written report
to the fiduciary who authorized use of the arrangement which
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presents its specific findings regarding compliance of the
arrangement with the requirements of this subsection.
For purposes of this paragraph, an auditor is considered
independent if it is not related to the person offering the
arrangement to the plan and is not related to any person providing
investment options under the plan.
(6) D

The requirements of this paragraph are met if—

(A) the fiduciary adviser provides to a participant or a beneficiary
before the initial provision of the investment advice with regard to
any security or other property offered as an investment option, a
written notification (which may consist of notification by means of
electronic communication)—
(i) of the role of any party that has a material affiliation or
contractual relationship with the fiduciary adviser in the
development of the investment advice program and in the
selection of investment options available under the plan,
(ii) of the past performance and historical rates of return of the
investment options available under the plan,
(iii) of all fees or other compensation relating to the advice that
the fiduciary adviser or any affiliate thereof is to receive
(including compensation provided by any third party) in
connection with the provision of the advice or in connection with
the sale, acquisition, or holding of the security or other property,
(iv) of any material affiliation or contractual relationship of the
fiduciary adviser or affiliates thereof in the security or other
property,
(v)  [2] the manner, and under what circumstances, any
participant or beneficiary information provided under the
arrangement will be used or disclosed,
(vi) of the types of services provided by the fiduciary adviser in
connection with the provision of investment advice by the
fiduciary adviser,
(vii) that the adviser is acting as a fiduciary of the plan in
connection with the provision of the advice, and

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(viii) that a recipient of the advice may separately arrange for
the provision of advice by another adviser, that could have no
material affiliation with and receive no fees or other
compensation in connection with the security or other property,
and
(B) at all times during the provision of advisory services to the
participant or beneficiary, the fiduciary adviser—
(i) maintains the information described in subparagraph (A) in
accurate form and in the manner described in paragraph (8),
(ii) provides, without charge, accurate information to the
recipient of the advice no less frequently than annually,
(iii) provides, without charge, accurate information to the
recipient of the advice upon request of the recipient, and
(iv) provides, without charge, accurate information to the
recipient of the advice concerning any material change to the
information required to be provided to the recipient of the advice
at a time reasonably contemporaneous to the change in
information.
(7) O

The requirements of this paragraph are met if

—
(A) the fiduciary adviser provides appropriate disclosure, in
connection with the sale, acquisition, or holding of the security or
other property, in accordance with all applicable securities laws,
(B) the sale, acquisition, or holding occurs solely at the direction of
the recipient of the advice,
(C) the compensation received by the fiduciary adviser and affiliates
thereof in connection with the sale, acquisition, or holding of the
security or other property is reasonable, and
(D) the terms of the sale, acquisition, or holding of the security or
other property are at least as favorable to the plan as an arm’s
length 1 transaction would be.
(8) S
(A) In general
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The requirements of this paragraph are met if the notification
required to be provided to participants and beneficiaries under
paragraph (6)(A) is written in a clear and conspicuous manner and
in a manner calculated to be understood by the average plan
participant and is sufficiently accurate and comprehensive to
reasonably apprise such participants and beneficiaries of the
information required to be provided in the notification.
(B) Model form for disclosure of fees and other compensation
The Secretary shall issue a model form for the disclosure of fees and
other compensation required in paragraph (6)(A)(iii) which meets
the requirements of subparagraph (A).
(9) M

6

The requirements of this paragraph are met if a fiduciary adviser who
has provided advice referred to in paragraph (1) maintains, for a period
of not less than 6 years after the provision of the advice, any records
necessary for determining whether the requirements of the preceding
provisions of this subsection and of subsection (b)(14) have been met.
A transaction prohibited under section 1106 of this title shall not be
considered to have occurred solely because the records are lost or
destroyed prior to the end of the 6-year period due to circumstances
beyond the control of the fiduciary adviser.
(10) E
(A) In general Subject to subparagraph (B), a plan sponsor or
other person who is a fiduciary (other than a fiduciary adviser) shall
not be treated as failing to meet the requirements of this part solely
by reason of the provision of investment advice referred to in
section 1002(21)(A)(ii) of this title (or solely by reason of
contracting for or otherwise arranging for the provision of the
advice), if—
(i) the advice is provided by a fiduciary adviser pursuant to an
eligible investment advice arrangement between the plan
sponsor or other fiduciary and the fiduciary adviser for the
provision by the fiduciary adviser of investment advice referred
to in such section,

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(ii) the terms of the eligible investment advice arrangement
require compliance by the fiduciary adviser with the
requirements of this subsection, and
(iii) the terms of the eligible investment advice arrangement
include a written acknowledgment by the fiduciary adviser that
the fiduciary adviser is a fiduciary of the plan with respect to the
provision of the advice.
(B) Continued duty of prudent selection of adviser and
periodic review
Nothing in subparagraph (A) shall be construed to exempt a plan
sponsor or other person who is a fiduciary from any requirement of
this part for the prudent selection and periodic review of a fiduciary
adviser with whom the plan sponsor or other person enters into an
eligible investment advice arrangement for the provision of
investment advice referred to in section 1002(21)(A)(ii) of this title.
The plan sponsor or other person who is a fiduciary has no duty
under this part to monitor the specific investment advice given by
the fiduciary adviser to any particular recipient of the advice.
(C) Availability of plan assets for payment for advice
Nothing in this part shall be construed to preclude the use of plan
assets to pay for reasonable expenses in providing investment
advice referred to in section 1002(21)(A)(ii) of this title.
(11) D

For purposes of this subsection and subsection (b)

(14)—
(A) Fiduciary adviser The term “fiduciary adviser” means, with
respect to a plan, a person who is a fiduciary of the plan by reason
of the provision of investment advice referred to in section 1002(21)
(A)(ii) of this title by the person to a participant or beneficiary of the
plan and who is—
(i) registered as an investment adviser under the Investment
Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) or under the laws
of the State in which the fiduciary maintains its principal office
and place of business,
(ii) a bank or similar financial institution referred to in
subsection (b)(4) or a savings association (as defined in section
1813(b)(1) of title 12), but only if the advice is provided through
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a trust department of the bank or similar financial institution or
savings association which is subject to periodic examination and
review by Federal or State banking authorities,
(iii) an insurance company qualified to do business under the
laws of a State,
(iv) a person registered as a broker or dealer under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
(v) an affiliate of a person described in any of clauses (i)
through (iv), or
(vi) an employee, agent, or registered representative of a
person described in clauses (i) through (v) who satisfies the
requirements of applicable insurance, banking, and securities
laws relating to the provision of the advice.
For purposes of this part, a person who develops the computer
model described in paragraph (3)(B) or markets the investment
advice program or computer model shall be treated as a person
who is a fiduciary of the plan by reason of the provision of
investment advice referred to in section 1002(21)(A)(ii) of this
title to a participant or beneficiary and shall be treated as a
fiduciary adviser for purposes of this subsection and subsection
(b)(14), except that the Secretary may prescribe rules under
which only 1 fiduciary adviser may elect to be treated as a
fiduciary with respect to the plan.
(B) Affiliate
The term “affiliate” of another entity means an affiliated person of
the entity (as defined in section 80a–2(a)(3) of title 15).
(C) Registered representative
The term “registered representative” of another entity means a
person described in section 3(a)(18) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)(18)) (substituting the entity for the
broker or dealer referred to in such section) or a person described in
section 202(a)(17) of the Investment Advisers Act of 1940 (15
U.S.C. 80b–2(a)(17)) (substituting the entity for the investment
adviser referred to in such section).

(h) P
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(1) I
Provided that all of the conditions described in
paragraph (2) are met, the restrictions imposed by subsections (a), (b)
(1), and (b)(2) of section 1106 of this title shall not apply to—
(A) the offering of pharmacy benefit services to a group health plan
that is sponsored by an entity described in section 1002(37)(G)(vi)
of this title or to any other group health plan that is sponsored by a
regional council, local union, or other labor organization affiliated
with such entity;
(B) the purchase of pharmacy benefit services by plan participants
and beneficiaries of a group health plan that is sponsored by an
entity described in section 1002(37)(G)(vi) of this title or of any
other group health plan that is sponsored by a regional council, local
union, or other labor organization affiliated with such entity; or
(C) the operation or implementation of pharmacy benefit services
by an entity described in section 1002(37)(G)(vi) of this title or by
any other group health plan that is sponsored by a regional council,
local union, or other labor organization affiliated with such entity,
in any arrangement where such entity described in section
1002(37)(G)(vi) of this title or any related organization or
subsidiary of such entity provides pharmacy benefit services that
include prior authorization and appeals, a retail pharmacy network,
pharmacy benefit administration, mail order fulfillment, formulary
support, manufacturer payments, audits, and specialty pharmacy
and goods, to any such group health plan.
(2) C

The conditions described in this paragraph are the

following:
(A) The terms of the arrangement are at least as favorable to the
group health plan as such group health plan could obtain in a similar
arm’s length arrangement with an unrelated third party.
(B) At least 50 percent of the providers participating in the
pharmacy benefit services offered by the arrangement are unrelated
to the contributing employers or any other party in interest with
respect to the group health plan.
(C) The group health plan retains an independent fiduciary who will
be responsible for monitoring the group health plan’s consultants,
contractors, subcontractors, and other service providers for
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purposes of pharmacy benefit services described in paragraph (1)
offered by such entity or any of its related organizations or
subsidiaries and monitors the transactions of such entity and any of
its related organizations or subsidiaries to ensure that all conditions
of this exemption are satisfied during each plan year.
(D) Any decisions regarding the provision of pharmacy benefit
services described in paragraph (1) are made by the group health
plan’s independent fiduciary, based on objective standards
developed by the independent fiduciary in reliance on information
provided by the arrangement.
(E) The independent fiduciary of the group health plan provides an
annual report to the Secretary and the congressional committees of
jurisdiction attesting that the conditions described in subparagraphs
(C) and (D) have been met for the applicable plan year, together
with a statement that use of the arrangement’s services are in the
best interest of the participants and beneficiaries in the aggregate
for that plan year compared to other similar arrangements the
group health plan could have obtained in transactions with an
unrelated third party.
(F) The arrangement is not designed to benefit any party in interest
with respect to the group health plan.
(3) V
In the event an entity described in section 1002(37)(G)(vi) of this title
or any affiliate of such entity violates any of the conditions of such
exemption, such exemption shall not apply with respect to such entity
or affiliate and all enforcement and claims available under this chapter
shall apply with respect to such entity or affiliate.
(4) R
Nothing in this subsection shall be construed to modify any obligation of
a group health plan otherwise set forth in this chapter.
(5) G
In this subsection, the term “group health plan” has the meaning given
such term in section 1191b(a) of this title.
(Pub. L. 93–406, title I, § 408, Sept. 2, 1974, 88 Stat. 883; Pub. L. 96–364,
title III, § 308, Sept. 26, 1980, 94 Stat. 1295; Pub. L. 97–354, § 5(a)(43),
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Oct. 19, 1982, 96 Stat. 1697; Pub. L. 99–514, title XI, § 1114(b)(15)(B), title
XVIII, § 1898(i)(1), Oct. 22, 1986, 100 Stat. 2452, 2957; Pub. L. 101–239,
title VII, §§ 7881(l)(5), 7891(a), 7894(e)(4)(A), Dec. 19, 1989, 103 Stat.
2443, 2445, 2450; Pub. L. 101–508, title XII, § 12012(b), Nov. 5, 1990, 104
Stat. 1388–571; Pub. L. 103–465, title VII, § 731(c)(4)(C), Dec. 8, 1994, 108
Stat. 5004; Pub. L. 104–188, title I, § 1704(n)(2), Aug. 20, 1996, 110 Stat.
1886; Pub. L. 105–34, title XV, § 1506(b)(2), Aug. 5, 1997, 111 Stat. 1066;
Pub. L. 106–170, title V, § 535(a)(2)(C), Dec. 17, 1999, 113 Stat. 1934; Pub.
L. 107–16, title VI, § 612(b), June 7, 2001, 115 Stat. 100; Pub. L. 108–218,
title II, § 204(b)(3), Apr. 10, 2004, 118 Stat. 609; Pub. L. 108–357, title VII,
§ 709(a)(3), Oct. 22, 2004, 118 Stat. 1551; Pub. L. 109–280, title I, § 108(a)
(11), formerly § 107(a)(11), title VI, §§ 601(a)(1), (2), 611(a)(1), (c)(1), (d)
(1), (e)(1), (g)(1), 612(a), Aug. 17, 2006, 120 Stat. 819, 952, 953, 967–969,
971, 972, 975, renumbered Pub. L. 111–192, title II, § 202(a), June 25, 2010,
124 Stat. 1297; Pub. L. 110–458, title I, § 106(a)(1), (b)(1), Dec. 23, 2008,
122 Stat. 5106; Pub. L. 112–141, div. D, title II, § 40241(b), July 6, 2012,
126 Stat. 859; Pub. L. 114–41, title II, § 2007(b), July 31, 2015, 129 Stat.
459; Pub. L. 116–94, div. P, title XIII, § 1302(a), Dec. 20, 2019, 133 Stat.
3204.)

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