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DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2550
[Application No. D–12060]
ZRIN 1210–ZA33

Amendment to Prohibited Transaction
Exemption 84–24
Employee Benefits Security
Administration, U.S. Department of
Labor.
ACTION: Amendment to Prohibited
Transaction Exemption 84–24.
AGENCY:

This document contains a
notice of amendment to Prohibited
Transaction Exemption (PTE) 84–24, an
exemption from certain prohibited
transaction provisions of the Employee
Retirement Income Security Act of 1974
(ERISA) and the Internal Revenue Code
of 1986 (the Code). The amendment
affects participants and beneficiaries of
plans, individual retirement account
(IRA) owners, and certain fiduciaries of
plans and IRAs.
DATES: The amendment is effective
September 23, 2024.
FOR FURTHER INFORMATION CONTACT:
Susan Wilker, (202) 693–8540 (not a
toll-free number), Office of Exemption
Determinations, Employee Benefits
Security Administration, U.S.
Department of Labor.
SUPPLEMENTARY INFORMATION:
SUMMARY:

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Background
The Employee Retirement Income
Security Act of 1974 (ERISA) provides,
in relevant part, that a person is a
fiduciary with respect to a plan to the
extent they render investment advice for
a fee or other compensation, direct or
indirect, with respect to any moneys or
other property of such plan, or has any
authority or responsibility to do so. Title
I of the ERISA (referred to herein as
Title I), which generally applies to
employer-sponsored plans, includes this
provision in ERISA section 3(21)(A)(ii).1
ERISA’s Title II (referred to herein as the
Code), includes a parallel provision in
Code section 4975(e)(3)(B), which
defines a fiduciary of a tax-qualified
plan, including individual retirement
accounts (IRAs).
In addition to fiduciary obligations,
ERISA and the Code ‘‘categorically
1 Section 3(21)(A)(ii) of the Act is codified at 29
U.S.C. 1002(3)(21)(A)(ii). As noted above, Title I of
the Act was codified in Title 29 of the U.S. Code.
As a matter of practice, this preamble refers to the
codified provisions in Title I by reference to the
sections of ERISA, as amended, and not by its
numbering in the U.S. Code.

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bar[]’’ plan fiduciaries from engaging in
transactions deemed ‘‘likely to injure
the pension plan.’’ 2 These prohibitions
broadly forbid a fiduciary from
‘‘deal[ing] with the assets of the plan in
his own interest or for his own
account,’’ and ‘‘receiv[ing] any
consideration for his own personal
account from any party dealing with
such plan in connection with a
transaction involving the assets of the
plan.’’ 3 Congress also gave the
Department of Labor (the Department)
authority to grant conditional
administrative exemptions from the
prohibited transaction provisions, but
only if the Department finds that the
exemption is (1) administratively
feasible for the Department, (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.4
On October 31, 2023, the Department
released the proposed Retirement
Security Rule: Definition of an
Investment Advice Fiduciary, along
with proposed amendments to PTE
2020–02 and other administrative
prohibited transaction exemptions
available to investment advice
fiduciaries.5 The proposed rule was
designed to ensure that the protections
established by Titles I and II of ERISA
would uniformly apply to all advice that
Retirement Investors (receive
concerning investment of their
retirement assets in a way that ensures
that Retirement Investors’ reasonable
expectations are honored when they
receive advice from financial
professionals who hold themselves out
as trusted advice providers (Retirement
Investors are defined to include Plans,
Plan participants and beneficiaries,
IRAs, IRA owners and beneficiaries,
Plan fiduciaries within the meaning of
ERISA section (3)(21)(A)(i) or (iii) and
Code section 4975(e)(3)(A) or (C) with
respect to the Plan, or IRA fiduciaries
within the meaning of Code section
2 Harris Trust Sav. Bank v. Salomon Smith
Barney Inc., 530 U.S. 238, 241–42 (2000) (citation
and quotation marks omitted).
3 ERISA section 406(b)(1), (3), 29 U.S.C.
1106(b)(1), (3).
4 ERISA section 408(a), 29 U.S.C. 1108(a). Under
the Reorganization Plan No. 4 of 1978, which
Congress subsequently ratified in 1984, Sec. 1,
Public Law 98–532, 98 Stat. 2705 (Oct. 19, 1984),
Congress generally granted the Department
authority to interpret the fiduciary definition and
issue administrative exemptions from the
prohibited transaction provisions in Code section
4975. 5 U.S.C. App. (2018).
5 The proposals were released on the
Department’s website on October 31, 2023. They
were published in the Federal Register on
November 3, 2023, at 88 FR 75890, 88 FR 75979,
88 FR 76004, and 88 FR 76032.

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4975(e)(3)(A) or (C) with respect to the
IRA).
At the same time, the Department
released the proposed amendment to
PTE 84–24 (the Proposed Amendment)
and invited all interested persons to
submit written comments.6 The
Department also proposed amendments
to PTEs 75–1, 77–4, 80–83, 83–1, 86–
128, and 2020–02.
The Department received written
comments on the Proposed
Amendment, and on December 12 and
13, 2023, held a virtual public hearing
at which witnesses provided
commentary on the Proposed
Amendment. After carefully considering
the comments it received and the
testimony presented at the hearing,
including representations Insurers have
made to the Department regarding
impediments they have confronted in
complying with the current conditions
of PTE 2020–02 when distributing
annuities through independent agents
(Independent Producers), the
Department is granting this amendment
to PTE 84–24 as provided herein (the
‘‘Final Amendment’’) on its own motion
pursuant to its authority under ERISA
section 408(a) and Code section
4975(c)(2) and in accordance with its
exemption procedures set forth in 29
CFR part 2570, subpart B (76 FR 66637
(October 27, 2011)).7 Elsewhere in this
edition of the Federal Register, the
Department is finalizing (1) its proposed
rule defining when a person renders
‘‘investment advice for a fee or other
compensation, direct or indirect’’ with
respect to any moneys or other property
of an employee benefit plan for
purposes of the definition of a
‘‘fiduciary’’ in ERISA section
3(21)(A)(ii) and Code section
4975(e)(3)(B) (the ‘‘Regulation’’), and (2)
amendments to several existing
prohibited transaction exemptions
(PTEs)—namely PTEs 75–1, 77–4, 80–
83, 83–1, 86–128, and 2020–02—that
apply to the provision of fiduciary
investment advice.
PTE 2020–02
As described elsewhere in this edition
of the Federal Register, the Department
is also adopting amendments to PTE
2020–02. That exemption remains
6 The Proposed Amendment was released on
October 31, 2023, and was published in the Federal
Register on November 3, 2023. 88 FR 75979.
7 Reorganization Plan No. 4 of 1978 (5 U.S.C.
App. 1 (2018)) generally transferred the authority of
the Secretary of the Treasury to grant administrative
exemptions under Code section 4975 to the
Secretary of Labor. Procedures Governing the Filing
and Processing of Prohibited Transaction
Exemption Applications were amended effective
April 8, 2024 (29 CFR part 2570, subpart B (89 FR
4662 (January 24, 2024)).

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Federal Register / Vol. 89, No. 81 / Thursday, April 25, 2024 / Rules and Regulations
generally available for all investment
advice, including recommendations of
insurance products. The Department
maintains its long-held position that
insurance companies can effectively
exercise fiduciary oversight with respect
to Independent Producers’
recommendations of the insurance
company’s own products under PTE
2020–02. PTE 2020–02 offers a broad,
flexible, and principles-based approach
that applies across different financial
sectors and business models and
provides relief for multiple categories of
financial institutions and investment
professionals, including insurance
companies selling their products
through Independent Producers. As
fully discussed below, however, the
Department is amending PTE 84–24 to
provide a specially tailored, alternative
exemption allowing an Independent
Producer to receive commissions from
an insurance company with respect to
annuity recommendations of the
insurance company’s products.

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Comments and Overview of the
Amendment to PTE 84–24
Overview of Amended Exemption
The Department is amending PTE 84–
24 to exclude sales and compensation
received as a result of providing
investment advice within the meaning
of ERISA section 3(21)(A)(ii) and Code
section 4975(e)(3)(B) and regulations
thereunder from the existing relief
provided in Section II, which the
Department has redesignated as Section
II(a). The amendment adds new Section
II(b), which provides relief from the
restrictions of ERISA sections
406(a)(1)(A), (D) and 406(b) and the
taxes imposed by Code section 4975(a)
and (b) by reason of Code sections
4975(c)(1)(A), (D), (E) and (F) for
Independent Producers that provide
fiduciary investment advice and engage
in the following transactions, including
as part of a rollover, as a result of
providing investment advice within the
meaning of ERISA section 3(21)(A)(ii)
and Code section 4975(e)(3)(B) and
regulations thereunder:
(1) The receipt, directly or indirectly,
by an Independent Producer of
reasonable compensation; and
(2) the sale of a non-security annuity
contract or other insurance product that
does not meet the definition of
‘‘security’’ under Federal securities
laws.
The exemption is subject to certain
conditions. These conditions are similar
to the conditions contained in amended
PTE 2020–02, but the Department has
tailored the conditions to protect
Retirement Investors from the specific

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conflicts that can arise when
Independent Producers that are
compensated through commissions and
other compensation provide investment
advice to Retirement Investors regarding
the purchase of an annuity. The
amended exemption includes an
eligibility provision in Section VIII for
investment advice transactions and a
new recordkeeping condition in Section
IX that is similar to the recordkeeping
provision in PTE 2020–02.
The Department’s Role Related to the
Sale of Insurance Products to
Retirement Investors
Several commenters raised concerns
with the Department’s approach to
amending PTE 84–24 and insurance
recommendations more generally. Some
commenters argued that the Federal
Government should not be regulating
the sales of insurance products. They
argued that the McCarran-Ferguson Act
assigns to the States, not the Federal
Government, primary authority to
regulate the business of insurance.
Furthermore, several commenters
pointed out that many States have
adopted the 2020 National Association
of Insurance Commissioners (NAIC)
Suitability In Annuity Transactions
Model Regulation 275 (the NAIC Model
Regulation), which imposes a ‘‘best
interest’’ standard on insurance
producers. Some commenters argued
that the Department should rely entirely
on the NAIC Model Regulation instead
of relying on the specific standards in
ERISA and the Code.
However, many of these same
commenters also noted that Insurers
have long relied on the relief provided
in PTE 84–24, thereby implicitly
acknowledging that the Department has
long regulated the business of insurance
with respect to the sale of insurance
products to Retirement Investors. ERISA
and the Code broadly regulate Plan and
IRA investments, including investments
in insurance. As the Supreme Court
held in Hancock v. Harris Trust,8
Congress enacted ERISA with the broad
purpose of protecting retirement
benefits, including benefits supported
by insurance contracts. During the more
than 45 years that has passed since the
Department issued PTE 77–9, the
predecessor to PTE 84–24, it has
consistently imposed conditions on
insurance companies and agents
receiving commissions and other
compensation that would otherwise be
8 See John Hancock Mut. Life Ins. Co. v. Harris
Trust & Sav. Bank, 510 U.S. 86, 96 (1993) (noting
ERISA’s ‘‘broadly protective purposes’’ regarding
retirement benefits and that fiduciary status applies
to ‘‘persons whose actions affect the amount of
benefits retirement plan participants will receive’’).

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prohibited under ERISA. Indeed, the
interaction between the NAIC Model
Regulation and the fiduciary protections
under Title I and Title II of ERISA is
explicitly recognized in the NAIC Model
Regulation’s safe harbor, which
provides that recommendations and
sales of annuities in compliance with
comparable standards to the NAIC
Model Regulation satisfy its
requirements, including those
applicable to fiduciaries under ERISA
section 3(21) and Code section
4975(e)(3).9
In recent years, many States have
increased investor protections with
respect to recommendations to purchase
annuities. These increased protections
reflect a recognition by the States of the
increased importance of ensuring that
investors receive sound investment
advice, as insurance products have
grown in complexity and individuals
have increasingly become dependent
upon receiving sound advice from
investment professionals, including
insurance agents. The amendments to
this exemption and related amendments
to PTE 2020–02 supplement those Statelaw protections by ensuring that trusted
professionals’ recommendations of
insurance products to Retirement
Investors are subject to the same
stringent standards of conduct that
apply to recommendations of other
investment products.
Titles I and II of ERISA reflect a strong
Federal interest in the regulation and
protection of retirement investments
and Retirement Investors. Critical to this
Federal regulatory system are the
prohibited transaction provisions,
which preclude fiduciaries from
engaging in a wide range of conflicted
transactions with Retirement Investors,
unless there is an applicable statutory
exemption or the Department grants an
administrative exemption with
protective conditions carefully designed
to protect Retirement Investors from
injury associated with unregulated
conflicts of interest. As compared to
State insurance law, ERISA and the
Code place greater emphasis on the
stringent regulation of conflicts of
interest and impose fiduciary
obligations on persons who engage in
important activities related to
investment management or advice. PTE
84–24, together with PTE 2020–02,
reflects the Department’s independent
statutory authority and obligation under
ERISA section 408(a) and Code section
4975(c)(2) to ensure that it only grants
exemptive relief for prohibited
transactions that is protective of the
rights of plan participants and
9 NAIC

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beneficiaries and in their interests. The
Department is finalizing this
amendment consistent with its statutory
obligation.
Taken together, amended PTE 84–24
and PTE 2020–02 ensure that when
trusted advisers,10 including
Independent Producers, recommend
insurance products to Retirement
Investors, they will adhere to
fundamental standards of fiduciary
conduct subject to supervision by a
responsible financial institution. Under
the core standards of both amended
exemptions investment professionals
advice must:
• acknowledge their fiduciary
status 11 in writing to the Retirement
Investor;
• disclose their services and material
conflicts of interest to the Retirement
Investor;
• adhere to Impartial Conduct
Standards requiring them to:
Æ investigate and evaluate
investments, provide advice, and
exercise sound judgment in the same
way that knowledgeable and impartial
professionals would in similar
circumstances (the ‘‘Care Obligation’’);
Æ never place their own interests
ahead of the Retirement Investor’s
interest or subordinate the Retirement
Investor’s interests to their own (the
‘‘Loyalty Obligation’’);
Æ charge no more than reasonable
compensation and, if applicable,
comply with Federal securities laws
regarding ‘‘best execution’’; and
Æ avoid making misleading statements
about investment transactions and other
relevant matters;
• adopt firm-level policies and
procedures prudently designed to
ensure compliance with the Impartial
Conduct Standards and mitigate
conflicts of interest that could otherwise
cause violations of those standards;
• document and disclose the specific
reasons for any rollover
recommendations; and
10 When using the term ‘‘adviser,’’ the Department
does not refer only to investment advisers registered
under the Investment Advisers Act of 1940 or under
state law, but rather to any person rendering
fiduciary investment advice under the Regulation.
For example, as used herein, an adviser can be an
individual who is, among other things, a
representative of a registered investment adviser, a
bank or similar financial institution, an insurance
company, or a broker-dealer.
11 For purposes of this disclosure, and throughout
the exemption, the term ‘‘fiduciary status’’ is
limited to fiduciary status under Title I of ERISA,
the Code, or both. While this exemption uses some
of the same terms that are used in the SEC’s
Regulation Best Interest and/or in the Investment
Advisers Act of 1940 and related interpretive
materials issued by the SEC or its staff, the
Department retains interpretive authority with
respect to satisfaction of this exemption.

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• conduct an annual retrospective
compliance review.
As discussed in greater detail below,
the Department has concluded that
amended PTEs 84–24 and 2020–02
flexible and workable exemptions that
provide a sound and uniform framework
for financial institutions and investment
professionals to provide fiduciary
investment advice to Retirement
Investors. Taken together, these
amended exemptions are broadly
available for fiduciary investment
advice, without regard to business
model, fee structure, or type of product
recommended, subject to financial
institutions’ and investment
professionals’ compliance with the
fundamental standards for the
protection of Retirement Investors set
forth above. To the extent the terms of
the exemptions are honored, Retirement
Investors will benefit from the
application of a common standard,
applicable to all fiduciary
recommendations to Retirement
Investors, that ensures prudent and
loyal investment recommendations from
fiduciary investment advice providers
competing on a level playing field that
is protective of Retirement Investors.
The chief difference between amended
PTEs 2020–02 and 84–24, as discussed
below, is that the Department amended
PTE 84–24 to provide a pathway to
compliance with the prohibited
transaction rules for Independent
Producers who recommend the products
of multiple Insurers to Retirement
Investors, without requiring those
Insurers to assume or acknowledge their
fiduciary status under ERISA and the
Code.
Applicability Date
This Final Amendment is applicable
to transactions pursuant to investment
advice provided on or after September
23, 2024 (the ‘‘Applicability Date’’). For
transactions pursuant to investment
advice provided before the Applicability
Date, the prior version of PTE 84–24
will remain available for all insurance
agents and insurance companies that
currently rely on the exemption.12 Also,
no party would be held to the amended
conditions in Sections VII, VIII, IX or XI
for a transaction that occurred before the
Applicability Date of the amended
exemption.
Several commenters stated that the
Proposed Amendment’s Applicability
12 To the extent a party receives ongoing
compensation for a recommendation that was made
before the Applicability Date, including through a
systematic purchase payment or trailing
commission, the amended PTE 84–24 would not
apply unless and until new investment advice is
provided.

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Date, which was set for 60 days after
publication, did not provide sufficient
time for parties to fully comply with the
new conditions for receipt of reasonable
compensation for investment advice. In
response to these comments, the
Department is adding a new Section XI,
which provides a phase-in period for
the one-year period beginning
September 23, 2024. Thus, an
Independent Producer may receive
compensation under Section II(b) during
the phase-in period if it complies with
the Impartial Conduct Standards
condition in Section VII(a) and the
fiduciary acknowledgment condition
under Section VII(b)(1). This one-year
phase-in period is the same as the oneyear compliance period the Department
provided when it originally granted PTE
2020–02.
Excluding Investment Advice
The amended PTE 84–24 excludes
sales and compensation received as a
result of the provision of investment
advice from relief for the transactions
described in Section III(a) through (f) of
the exemption. However, relief remains
available under those provisions for
non-advice transactions. Investment
advice fiduciaries must comply with the
conditions in Sections VI–VIII that are
tailored specifically for investment
advice transactions. For clarity, the
Department has included this limitation
in each subsection of Section III(a)
through (f) by adding the phrase ‘‘if the
sales commission is not received as a
result of the provision of investment
advice within the meaning of ERISA
section 3(21)(A)(ii) and Code section
4975(e)(3)(B) (and the regulations issued
thereunder)’’ to the end of each
subsection in Section III(a) through (f).
The Department also is revising the
disclosure conditions in Section V to
reflect that these sections are not
available for the receipt of
compensation as a result of the
provision of fiduciary investment
advice.
The Department notes that many
types of fiduciaries are already excluded
from the transactions in Sections III(a)–
(d) of PTE 84–24. After the Applicability
Date of the Final Amendment, the relief
provided in these sections would
remain available for non-fiduciaries and
nondiscretionary trustees.13
13 Nondiscretionary trustees were added in 1984,
in response to a request from the Investment
Company Institute listing typical nondiscretionary
or trustee services. In an April 21, 1980 letter, ‘‘ICI
states nondiscretionary trustees and custodians:
(a) Open and maintain plan accounts and, in the
case of defined contribution plans, individual
participant accounts, pursuant to the employer’s
instructions that those providing investment advice

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The relief for the transaction
described in Section III(e) remains
available for any insurance company
that is a fiduciary or service provider (or
both) with respect to the plan solely by
reason of the sponsorship of a PreApproved Plan, if the purchase is not as
a result of the provision of investment
advice within the meaning of ERISA
section 3(21)(A)(ii) and Code section
4975(e)(3)(B) and regulations
thereunder. The relief for the
transactions described in Section III(f)
remains available for any insurance
company, Principal Underwriter, or
investment company adviser that is a
fiduciary or service provider (or both)
with respect to the plan solely by reason
of: (1) the sponsorship of a PreApproved Plan; or (2) the provision of
nondiscretionary trust services to the
plan; or (3) both (1) and (2), if the
purchase is not as a result of the
provision of investment advice within
the meaning of ERISA section
3(21)(A)(ii) and Code section
4975(e)(3)(B) and regulations
thereunder.14
within the meaning of ERISA section 3(21)(A)(ii)
and Code section 4975(e)(3)(B) would be excluded
under Section II(a).
(b) Receive contributions from the employer and
credit them to individual participant accounts in
accordance with the employer’s instructions;
(c) Invest contributions and other plan assets in
shares of a mutual fund or funds or other products
such as insurance or annuity contracts designated
by the employer, plan trustee, or participants, and
reinvest dividends and other distributions in such
investments;
(d) Redeem, transfer, or exchange mutual fund
shares or surrender insurance or annuity contracts
as instructed by the employer, plan trustee, or
participant;
(e) Provide or maintain ‘‘designation of
beneficiary’’ forms and make distributions from the
trust or custodial account to participants or
beneficiaries in accordance with the instructions of
the employer, plan trustee, participants, or
beneficiaries;
(f) Deliver to participants or their employer all
notices, prospectuses, and proxy statements, and
vote proxies in accordance with the participants’
instructions.
(g) Maintain records of all contributions,
investments, distributions, and other transactions
and report them to the employer and participants;
(h) Make necessary filings with the Internal
Revenue Service and other government agencies;
(i) Keep custody of the plan’s assets;
(j) Reply to and prepare correspondence, either
directly or through the mutual fund distributor or
adviser, regarding the investment account and the
operation and interpretation of a master or
prototype plan sponsored by the complex to which
the nondiscretionary trustee or custodian belongs.
In some situations, the trustee or custodian is
empowered to amend the master or prototype plan;
in others, this power resides in the sponsor of the
master or prototype plan. ICI further describes the
duties of the nondiscretionary trustees as
‘‘ministerial’’ and indicates that such trustees
possess no decisional authority with respect to a
plan’s funding medium or subsequent purchases or
sales.’’
14 The Department is not amending Section III(f)
to remove the phrase ‘‘investment company

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Description of Changes to Existing PTE
84–24
Section II of existing PTE 84–24
provides exemptive relief for the
covered transactions described in
Section III(a) through (f), which, as
amended, does not include relief for the
receipt of otherwise prohibited
compensation in connection with the
provision of investment advice. In the
Proposed Amendment, the Department
requested comments on whether parties
will continue to use the relief in
proposed section II(a) for the
transactions outlined in Section III(a)–(f)
and whether parties are currently
relying on Section III(f) for PreApproved Plans. The Department
received some comments indicating that
Section III(f) is still relied on in the
marketplace. Commenters described this
relief as important for Pre-Approved
Plan providers in connection with the
purchase of mutual fund shares with
plan assets when the principal
underwriter of the mutual fund acts as
the sponsor of the ‘‘Pre-Approved Plan’’
document that is utilized by the plan, or
the pre-approved provider plan
provides nondiscretionary trustee
services to the plan. These commenters
claim that the loss of Section III(f) relief
would make it difficult to continue to
offer these products to the marketplace
and urge the Department to retain the
provision. After consideration of these
comments, the Department is retaining
Section III(f) in the Final Amendment
with a revision that changes references
to a ‘‘master or prototype plan’’ to a
‘‘Pre-Approved Plan,’’ which is
consistent with a change in terminology
the IRS adopted in IRS Rev. Proc. 2017–
41.
The Department also received several
comments on the terms Mutual Fund
Commission and Insurance Sales
Commission that the Department used
in the Proposed Amendment. These
commenters generally asserted that the
proposed definition of Insurance Sales
Commission was unduly narrow and
should have included a broader range of
compensation, as permitted under State
insurance laws and, they argued, the
Department’s prior interpretations of
PTE 84–24. These commenters argued
that other forms of compensation were
commonplace, and could be reasonable,
beneficial to Retirement Investors, and
fully disclosed.
Some commenters asserted that the
Proposed Amendment’s definition of
adviser,’’ but notes that this relief is not available
if the purchase is a result of the provision of
investment advice within the meaning of ERISA
section 3(21)(A)(ii) and Code section 4975(e)(3)(B)
and regulations thereunder.

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Insurance Sales Commission would
prohibit the use of services provided by
independent marketing organizations in
connection with annuity sales
marketing support, lead generation,
technological assistance, back office and
compliance support, and practice
building and that, in the absence of
these services, many Independent
Producers would not survive. Some
other commenters claimed that various
benefits subject to continuing
production and service requirements,
such as health and retirement plan
coverage and contributions, office
allowances, travel expense
reimbursements, and other benefits
customary in the industry may not be
allowed given the narrowness of these
definitions.
After consideration of the comments,
the Department has removed the terms
‘‘Mutual Fund Commission’’ and
‘‘Insurance Sales Commission’’ from the
exemption. To achieve consistency with
existing PTE 84–24, the Department has
reverted to using the term ‘‘sales
commission’’ in Section III(a) through (f)
of the Final Amendment, which is the
same term that the Department used in
PTE 84–24 before this amendment.
Additionally, the Department clarifies
the disclosures required by Section
V(b)(1) for transactions under Section
III(a) through (f) involving IRAs may be
provided to the IRA owner instead of an
unrelated fiduciary.
Finally, the Department is making
minor editorial changes by capitalizing
defined terms where they are used in
the existing sections of PTE 84–24, and
moving the definitions from existing
Section VI to new Section X. As
amended, Section III(a)–(f) reads:
(a) The receipt, directly or indirectly, by an
insurance agent or broker or a pension
consultant of a sales commission from an
insurance company in connection with the
purchase, with plan assets, of an insurance
or annuity contract, if the sales commission
is not received as a result of the provision of
investment advice within the meaning of
ERISA section 3(21)(A)(ii) and Code section
4975(e)(3)(B) and regulations thereunder.
(b) The receipt of a sales commission by a
Principal Underwriter for an investment
company registered under the Investment
Company Act of 1940 (hereinafter referred to
as an investment company) in connection
with the purchase, with plan assets, of
securities issued by an investment company
if the sales commission is not received as a
result of the provision of investment advice
within the meaning of ERISA section
3(21)(A)(ii) and Code section 4975(e)(3)(B)
and regulations thereunder.
(c) The effecting by an insurance agent or
broker, pension consultant or investment
company Principal Underwriter of a
transaction for the purchase, with plan
assets, of an insurance or annuity contract or

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securities issued by an investment company
if the purchase is not as a result of the
provision of investment advice within the
meaning of ERISA section 3(21)(A)(ii) and
Code section 4975(e)(3)(B) and regulations
thereunder.
(d) The purchase, with plan assets, of an
insurance or annuity contract from an
insurance company if the purchase is not as
a result of the provision of investment advice
within the meaning of ERISA section
3(21)(A)(ii) and Code section 4975(e)(3)(B)
and regulations thereunder.
(e) The purchase, with plan assets, of an
insurance or annuity contract from an
insurance company which is a fiduciary or a
service provider (or both) with respect to the
plan solely by reason of the sponsorship of
a Pre-Approved Plan if the purchase is not
as a result of the provision of investment
advice within the meaning of ERISA section
3(21)(A)(ii) and Code section 4975(e)(3)(B)
and regulations thereunder.
(f) The purchase, with plan assets, of
securities issued by an investment company
from, or the sale of such securities to, an
investment company or an investment
company Principal Underwriter, when such
investment company, Principal Underwriter,
or the investment company investment
adviser is a fiduciary or a service provider (or
both) with respect to the plan solely by
reason of: (1) the sponsorship of a PreApproved Plan; or (2) the provision of
Nondiscretionary Trust Services to the plan;
or (3) both (1) and (2); and the purchase is
not as a result of the provision of investment
advice within the meaning of ERISA section
3(21)(A)(ii) and Code section 4975(e)(3)(B)
and regulations thereunder.

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The Department notes that references
to ‘‘plan assets’’ in Section III(a)–(f)
include IRA assets and are not limited
to ‘‘Plans’’ as defined in ERISA section
3(3) and described in Code section
4975(e)(1)(A).
Recordkeeping
The Department proposed revising all
the recordkeeping provisions for PTE
84–24 by adding a new Section IX that
would have required additional parties
to be able to access the records. Many
commenters expressed concern that the
amended recordkeeping provisions
would create unnecessary burden for
Independent Producers. In response to
these comments, the Department has
scaled back the amended recordkeeping
conditions in the exemption in a similar
manner to changes the Department
made to PTE 2020–02. In this Final
Amendment, the Department is
retaining the existing recordkeeping
language in Section V(e) for transactions
that do not involve the provision of
fiduciary investment advice. The
Department also is making minor
editorial changes to this section for
clarity, but generally is keeping the
substantive requirements the same.
In a new Section IX, the Department
is adding recordkeeping language for

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Independent Producers providing
fiduciary investment advice. Under this
provision, the Independent Producer
must maintain for a period of six years
records demonstrating that it has
complied with the conditions of this
exemption and make such records
available, to the extent permitted by
law, to any authorized employee of the
Department or the Department of the
Treasury, which includes the Internal
Revenue Service (IRS). This condition is
consistent with the recordkeeping
requirement in amended PTE 2020–02.
Fiduciary Investment Advice
Exemption
The Department is finalizing its
Proposed Amendment for investment
advice fiduciaries who are independent
insurance agents, with certain changes
discussed below, based on the
comments. The conditions for
investment advice are similar to those in
PTE 2020–02, but take into account the
unique compliance challenges faced in
the independent agent distribution
channel, while promoting a level
playing field for all investment advice
professionals.
Several commenters criticized the
Department’s emphasis on uniformity.
One commenter in particular stated that
the Department was creating
disadvantages for the insurance industry
by amending PTE 84–24. Several
commenters argued that because
insurance companies and producers
have been relying on PTE 84–24 for 40
years, they should be able to continue
doing so. Some of these same
commenters also questioned the
Department’s authority to regulate the
business of insurance in this manner.
The Department disagrees with these
commenters. Retirement Investors are
no less in need of the protective
conditions simply because the
individual who is advising them relies
on a different business model.
Additionally, as discussed above, the
Department has authority to regulate the
business of insurance with respect to
investment advice provided to
Retirement Investors and has carefully
tailored the conditions of this
exemption to address the specific
conflicts that can arise for Independent
Producers that are compensated through
commissions and other compensation
when providing investment advice to
Retirement Investors regarding the
purchase of an annuity. Furthermore,
the Department is providing additional
time for insurance companies and
producers that were relying on PTE 84–
24 to come into compliance with the
new conditions of this exemption or
PTE 2020–02.

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As required by ERISA section 408(a)
and Code section 4975(c)(2), the
Department may only issue an
exemption if it is protective and in the
interests of Retirement Investors. This
Final Amendment ensures that
Retirement Investors receive advice
subject to the same core fiduciary
obligations when the investments are
insurance products recommended by
Independent Producers, as when they
receive advice about other competing
investment alternatives. In the
Department’s view, Retirement Investors
are best protected by a uniform standard
assuring them that recommendations by
fiduciaries are prudent, loyal, and free
from misrepresentations or excessive
compensation. Retirement Investors
equally need these fiduciary protections
and safeguards against dangerous
conflicts of interest, whether the trusted
Investment Professional is
recommending an insurance product or
a security. And there is no reason to
believe that an insurance agent is any
less susceptible to conflicts of interest
than other categories of investment
professionals.
The relief for fiduciary investment
advice in Section II(b) for the covered
transactions described in Section III(g)
is generally similar to the relief
provided in PTE 2020–02. Section VI
provides conditions for transactions
described in Section III(g) and requires
the advice to be provided by an
Independent Producer that is authorized
to sell annuities from two or more
unrelated Insurers. However, while PTE
2020–02 is available for almost any
fiduciary investment advice provider,
the conditions in amended PTE 84–24
Sections VII–IX are tailored for
investment advice that is provided to a
Retirement Investor by an Independent
Producer who works with multiple
insurance companies to sell nonsecurities annuities or other insurance
products that do not meet the definition
of ‘‘security’’ under Federal securities
laws.
Some commenters questioned the
administrative feasibility of the
exemption pursuant to ERISA Section
408(a)(1) and Code section 4975(c)(2),
taking issue with the added or expanded
conditions of proposed PTE 84–24. One
commenter stated that the PTE’s
conditions would force covered entities
to instead seek relief via individual
exemptions and noted that the
Department has been issuing fewer
administrative exemptions in recent
years.
The Department disagrees with these
assertions. The core conditions of PTE
84–24, including all the Impartial
Conduct Standards, reflect core

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fiduciary obligations that have been in
ERISA since its passage nearly fifty
years ago. The Department is confident
that Independent Producers, who satisfy
the fiduciary definition, can recommend
covered insurance products in
accordance with basic standards of care
and loyalty, and without overcharging
or misleading retirement investors.
As described in detail below, the
disclosure and conduct obligations
imposed on Independent Producers are
measured and achievable, and Insurers’
oversight obligations are flexible,
principles-based, and build on existing
oversight responsibilities under State
law. The Department has narrowed the
scope of many of the amended PTE 84–
24’s conditions, also easing
administration. These updates are
discussed in detail in the sections to
follow. The Department does not believe
Independent Producers or Insurers will
be unable to comply with PTE 84–24 or
driven to seek individual exemptions.
The amended PTE is not intended to
push covered entities to apply for
individual exemptions but is instead
intended to require Independent
Producers who provide investment
advice for a fee to abide by a series of
conditions uniquely crafted to mitigate
conflicts of interest and protect
Retirement Investor interests in these
types of transactions.
Moreover, the Department has
accommodated Insurers that rely upon
independent agents by providing that
the supervising Insurer does not have to
assume fiduciary responsibility for
investment recommendations by
Independent Producers. Also, PTE
2020–02 remains available both to
Independent Producers and Insurers for
transactions that fall outside the scope
of PTE 84–24, or to the extent the
Insurer takes on fiduciary responsibility.
Retirement Investors
The Department is revising the
definition of Retirement Investor in
Section X(n) to be consistent with the
definition in the final Regulation
defining fiduciary investment advice.
As revised, both the final Regulation
and Final Amendment define
Retirement Investor to mean a Plan,
Plan participant or beneficiary, IRA, IRA
owner or beneficiary, Plan fiduciary
within the meaning of ERISA section
(3)(21)(A)(i) or (iii) and Code section
4975(e)(3)(A) or (C) with respect to the
Plan, or IRA fiduciary within the
meaning of Code section 4975(e)(3)(A)
or (C) with respect to the IRA. The
preamble to the final Regulation
includes additional discussion of
‘‘Retirement Investor,’’ which is defined
in the same terms in this Final

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Amendment to ensure its broad
availability to investment advice
fiduciaries.
Related Entity
The Department is clarifying the
definition of ‘‘Related Entity’’ in Section
X(m). Related Entity includes two
components: (i) a party that has an
interest in an Investment Professional or
Financial Institution; and (ii) a party in
which an Investment Professional or
Financial Institution has an interest, in
either case when that interest may affect
the fiduciary’s best judgment as a
fiduciary. The Department has also
made ministerial changes, such as
changing ‘‘described’’ to ‘‘defined’’ in
referencing ERISA section 3(21)(A)(ii)
and Code section 4975(e)(3)(B).
Independent Producers
The term ‘‘Independent Producer’’ is
defined in Section X(d) as a person or
entity that is licensed under the laws of
a State to sell, solicit or negotiate
insurance contracts, including
annuities, and that sells to Retirement
Investors products of multiple
unaffiliated insurance companies and
(1) is not an employee of an insurance
company (including a statutory
employee under Code section
3121(d)(3)); or (2) is a statutory
employee of an insurance company that
has no financial interest in the covered
transaction. The Department is revising
the definition of Independent Producer
to clarify that the exemption is available
only when the Independent Producer is
not an employee of an insurance
company (including a statutory
employee under Code section
3121(d)(3)) or the Independent Producer
is a statutory employee of an insurance
company that has no financial interest
in the covered transaction. Accordingly,
the statutory employee would be treated
as an Independent Producer, for
purposes of this exemption, with
respect to the recommended sale of an
insurance product in which the
statutory employer has no financial
interest. To the extent, however, the
statutory employee recommends
products in which the employing
insurance company has a financial
interest, both the insurance company
and the statutory employee would have
to rely on PTE 2020–02 for relief from
any resulting prohibited transactions.
The Proposed Amendment would
have limited the definition to exclude
statutory employees entirely, but the
Department is revising the definition in
response to comments. Many
commenters expressed concern that the
proposed definition was too limited,
and several commenters specifically

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requested that the Department make
PTE 84–24 available for statutory
employees of insurance companies.
Some of these commenters sought broad
relief for all recommendations by
statutory employees, including
recommendations in which their
employing insurance company had a
financial interest. These commenters
described the relationship that an
insurance company has with its
statutory employees as the equivalent of
the relationship between insurance
companies and wholly independent
producers who are not statutory
employees. These commenters argued
that a statutory employer cannot
supervise statutory employees under
PTE 2020–02. The Department also
received comments, however, arguing
for a narrower clarification permitting
statutory employees to rely upon PTE
84–24 as Independent Producers only to
the extent they were recommending the
products of other insurance companies
that did not employ them as statutory
employees.
In response to these comments, the
Department has revised this definition
to permit statutory employees to rely
upon PTE 84–24 when they are
recommending transactions in which
the statutory employer does not have a
financial interest. In such cases, the
statutory employer is similarly situated
to insurance companies that are working
with wholly independent agents. The
Final Amendment does not, however,
allow statutory employees to rely on
PTE 84–24 when they are
recommending transactions with the
insurance company that acts as their
statutory employer. As reflected in the
Treasury’s implementing regulations,15
the statutory employee’s principal
business activity involves the
solicitation of contracts for that one
insurance company which ordinarily
provides facilities and support to the
statutory employee for that purpose, and
these statutory employees often receive
15 26 CFR 31.3121(d)–1(d)(3)(ii) Full-time life
insurance salesman. An individual whose entire or
principal business activity is devoted to the
solicitation of life insurance or annuity contracts, or
both, primarily for one life insurance company is
a full-time life insurance salesman. Such a salesman
ordinarily uses the office space provided by the
company or its general agent, and stenographic
assistance, telephone facilities, forms, rate books,
and advertising materials are usually made
available to him without cost. An individual who
is engaged in the general insurance business under
a contract or contracts of service which do not
contemplate that the individual’s principal business
activity will be the solicitation of life insurance or
annuity contracts, or both, for one company, or any
individual who devotes only part time to the
solicitation of life insurance contracts, including
annuity contracts, and is principally engaged in
other endeavors, is not a full-time life insurance
salesman.

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health and other benefits from the
‘‘employing’’ insurance companies.
Accordingly, the employing insurance
company has a degree of potential
control and influence over the conduct
of the statutory employee, and the
statutory employee has a corresponding
commitment to that company that is not
necessarily the same as in a relationship
between a wholly independent agent
and other Insurers.
Given these differences, the
Department has concluded that PTE 84–
24 is insufficiently protective of
Retirement Investors with respect to
recommendations of products in which
the statutory employer has a financial
interest. In such cases, both the
employing insurance company and the
statutory employee must rely on PTE
2020–02 for relief for prohibited
transactions, just as similarly situated
Financial Institutions rely on PTE 2020–
02 with respect to recommendations of
their proprietary products. Accordingly,
statutory employees and the insurance
companies would need to meet all the
protective conditions of PTE 2020–02,
including the requirement that the
insurance company, acting as the
supervising financial institution,
acknowledge its fiduciary status with
respect to the recommendation.
However, when a statutory employee
recommends transactions with an
unrelated and unaffiliated insurance
company, the statutory employee can
rely on PTE 84–24 and make the
fiduciary acknowledgment as an
Independent Producer. Consistent with
the conditions of PTE 84–24, those
transactions would be subject to the
supervision of the unrelated insurance
company. To the extent that statutory
employers or other insurance companies
believe that neither PTE 2020–02 nor
PTE 84–24 is appropriate for their
particular circumstances, they can also
apply to the Department for an
individual or class exemption, which
may be subject to different or additional
protective conditions.
Insurers
The term ‘‘Insurer’’ as defined in
Section X(f) is similar to the term
‘‘Financial Institution’’ defined in PTE
2020–02, except it would be limited to
insurance companies. Even though
amended PTE 84–24 does not require
Insurers to be fiduciaries, an
Independent Producer cannot rely on
the exemption unless it is subject to
oversight by an Insurer that satisfies the
conditions set out in this Final
Amendment. As under the NAIC Model
Regulation and discussed in the policies
and procedures section below, the
Independent Producer must be subject

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to oversight by the Insurer whose
products it recommends to the
Retirement Investor, if the Independent
Producer wants to rely on the
exemption. As stated in Section VI(b),
the Insurer will not necessarily become
a fiduciary under ERISA or the Code
merely by complying with this
exemption’s conditions. However, the
Department cautions that Insurers
selling insurance and annuity products
through Independent Producers could
become investment advice fiduciaries
under ERISA and/or the Code through
other actions they take. If the Insurers
are fiduciaries, they could not rely on
amended PTE 84–24 and would need to
rely on a different prohibited
transaction exemption, such as PTE
2020–02, for relief from ERISA section
406(b) and Code section 4975. The
investment advice provisions of PTE
84–24 are solely available to the
Independent Producer.
To facilitate compliance with the
amended exemption, Independent
Producers and Insurers may rely on
factual representations from each other,
as long as they are reasonable in doing
so. For example, an Independent
Producer may generally rely on an
Insurer’s written report generated as
part of its retrospective review required
by Section VII(d), unless the
Independent Producer knows (or should
know) that the report is inaccurate or
incomplete.
Although the Department is creating a
pathway for compliance for
Independent Producers that permits
insurance companies to oversee the
conduct of Independent Producers
under this Final Amendment without
assuming fiduciary status, the
Department remains concerned that
without fiduciary status, insurance
companies may not take the same
measures to ensure that
recommendations are sound and
untainted by the Insurer’s conflicts of
interest. Accordingly, the Final
Amendment does not provide
prohibited transaction relief for the
Insurer. If the Insurer itself is an
investment advice fiduciary, it would
instead have to rely on PTE 2020–02. In
such a situation, the Independent
Producer would still be able to receive
compensation in connection with
fiduciary investment advice related to
the products of other Insurers, as long
as those other Insurers complied with
all conditions of amended PTE 84–24.
Exclusions
The advice provisions of PTE 84–24
have exclusions that are similar to those
in PTE 2020–02. Under Section VI(c)(1),
relief under PTE 84–24 is not available

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if the Plan is covered by Title I of ERISA
and the Independent Producer, Insurer,
or any Affiliate is (A) the employer of
employees covered by the Plan, or (B)
the Plan’s named fiduciary or
administrator. For example, an
Independent Producer that sponsors a
plan for its employees and provides
investment advice to the Plan can only
receive direct expenses and not
reasonable compensation for the advice.
However, there is an exception from this
restriction in Section VI(c)(1)(B) that
applies when the Plan’s named
fiduciary or administrator is selected by
an independent fiduciary to provide
investment advice to the Plan. Unlike
PTE 2020–02, there is no specific
exclusion for pooled employer plans in
PTE 84–24, because the Department
does not expect that pooled employer
plans will need to rely on the limited
relief provided in this exemption.
Section VI(c)(2) excludes from Section
III(g) transactions when the Independent
Producer is serving in a fiduciary
capacity other than as an investment
advice fiduciary within the meaning of
ERISA section 3(21)(A)(ii) and Code
section 4975(e)(3)(B) (and the
regulations issued thereunder).
Impartial Conduct Standards of
Amended PTE 84–24
Similar to the final amendment to
PTE 2020–02, amended PTE 84–24
requires Independent Producers to
comply with the Impartial Conduct
Standards, which include the Care
Obligation, Loyalty Obligation, and
obligations to receive no more than
reasonable compensation and not make
misleading statements to Retirement
Investors. These standards form the core
protections of both exemptions that are
available to investment advice
fiduciaries.
Care Obligation and Loyalty Obligation
The Department is adopting the
substance of the Proposed Amendment’s
Best Interest standard. However, as in
PTE 2020–02, the Department is
replacing the term ‘‘Best Interest’’ with
its two separate components: the Care
Obligation and the Loyalty Obligation.
Under the amended provision,
investment advice must, at the time it is
provided, satisfy the Care Obligation
and Loyalty Obligation. The Final
Amendment specifically refers to each
obligation separately, although they are
unchanged in substance. Both the Care
Obligation and the Loyalty Obligation
must be satisfied when investment
advice is provided. As defined in
Section X(b), to meet the Care
Obligation, an advice must reflect the
care, skill, prudence, and diligence

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under the circumstances then prevailing
that a prudent person acting in a like
capacity and familiar with such matters
would use in the conduct of an
enterprise of a like character and with
like aims, based on the investment
objectives, risk tolerance, financial
circumstances, and needs of the
Retirement Investor. As defined in
Section X(g), to meet the Loyalty
Obligation, the Independent Producer
must not place the financial or other
interests of the Independent Producer,
Insurer, or any Affiliate, Related Entity,
or another party ahead of the interests
of the Retirement Investor or
subordinate the Retirement Investor’s
interests to those of the Independent
Producer, Insurer, or any Affiliate,
Related Entity, or another party. For
example, in choosing between annuity
products offered by Insurers whose
products the Independent Producer is
authorized to sell, the Independent
Producer may not recommend a product
that is worse for the Retirement Investor
but better or more profitable for the
Independent Producer or Insurer.
As discussed in the preamble to the
final amendment to PTE 2020–02, the
Department is changing the way it refers
to these two obligations in response to
comments that the phrase ‘‘best
interest’’ was used in many contexts
throughout this rulemaking and by
various regulators with possibly
different shades of meaning. For
example, in paragraph (c)(1)(i) of the
Regulation, fiduciary status is based, in
part, on whether a recommendation is
made under circumstances that would
indicate to a reasonable investor in like
circumstances that the recommendation
‘‘may be relied upon by the retirement
investor as intended to advance the
retirement investor’s best interest.’’ In
the context of the Regulation, however,
‘‘best interest’’ is not meant to refer back
to the elements of the precise regulatory
or statutory definitions of prudence or
loyalty, but rather to refer more
colloquially to circumstances in which
a reasonable investor would believe the
advice provider is looking out for them
and working to promote their interests.
Several commenters stated that the
Department does not have the authority
to include the Impartial Conduct
Standards in either PTE 84–24 or PTE
2020–02 because doing so would
improperly expand Title I fiduciary
standards to entities solely covered by
Title II. The Department disagrees with
these commenters. As previously stated
in this grant notice as well as the grant
notice for PTE 2020–02 published
elsewhere in today’s issue of the
Federal Register, Congress expressly
permits the Department to issue

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exemptions to prohibited transactions as
per ERISA Section 408(a) and, pursuant
to the Reorganization Plan No. 4 of
1978, Code section 4975(c)(2).16 For a
more detailed description of the
comments received regarding the
Department’s authority to include the
Impartial Conduct Standards in these
prohibited transaction exemptions,
please see the grant notice for PTE
2020–02 published elsewhere in today’s
issue of the Federal Register.
In addition to the general comments
discussed in the preamble to the final
amendment to PTE 2020–02, some
commenters questioned the specific
ability of Independent Producers to
meet the proposed standards, and thus
argued that the amendments to PTE 84–
24 failed to meet the requirements laid
out in ERISA section 408(a) and Code
section 4975(c)(2). Many of these same
commenters stated that the NAIC
standard was sufficiently protective and
should be relied upon rather than the
standards in PTE 84–24. Some
commenters also raised objections to the
Department imposing these standards
on IRAs. Other commenters expressed
support for the proposed standards, and
one commenter argued that the
Department’s Proposed Amendment
was necessary because the NAIC Model
Regulation imposes a ‘‘best interest’’
standard in name only.
The Department has considered these
comments and determined that it is
essential for Independent Producers to
comply with the Care Obligation and
Loyalty Obligation. The Department
notes that these obligations are similar
to the standard imposed by New York
State in a rule issued by the New York
Department of Financial Services
entitled ‘‘Suitability and Best Interest in
Life Insurance and Annuity
Transactions’’ (referred to as Rule 187).
Section 242.4(b) of Rule 187 provides
that ‘‘[t]he producer, or insurer where
no producer is involved, acts in the best
interest of the consumer when: (1) the
producer’s or insurer’s recommendation
to the consumer is based on an
evaluation of the relevant suitability
information of the consumer and
reflects the care, skill, prudence, and
diligence that a prudent person acting in
a like capacity and familiar with such
matters would use under the
circumstances then prevailing. Only the
interests of the consumer shall be
16 Under the Reorganization Plan No. 4 of 1978,
which Congress subsequently ratified in 1984, Sec.
1, Public Law 98–532, 98 Stat. 2705 (Oct. 19, 1984),
Congress generally granted the Department
authority to interpret the fiduciary definition and
issue administrative exemptions from the
prohibited transaction provisions in Code section
4975. 5 U.S.C. App. (2018).

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considered in making the
recommendation.’’ Although Rule 187
has not been in force for a long time, the
Department has not found any evidence
suggesting that insurance producers,
including Independent Producers,
cannot comply with this standard. Nor
is the Department aware of any evidence
suggesting that this standard has
inappropriately limited or restricted
access to advice or insurance products
in New York.
The Department is confident that
Independent Producers can comply
with the Section VII(a) of amended PTE
84–24 and rejects any suggestion that
Independent Producers cannot compete
under the same framework of Impartial
Conduct Standards that apply to other
investment professionals and financial
institutions under PTE 2020–02,
including commission-based brokerdealers. Certainly, the Department
believes that insurance products and
annuities are often sound and valuable
investments for Retirement Investors.
There is nothing intrinsic to annuities or
inherent in the Independent Producer
distribution channel that suggests that
Independent Producers cannot
recommend annuities consistent with
the Care Obligation and Loyalty
Obligation, or that they cannot comply
with the obligation to avoid
overcharging or misleading Retirement
Investors. To the contrary, Retirement
Investors are best served by having
recommendations governed by a
common standard, applicable to all
fiduciary investment advisers
irrespective of investment product, that
is focused on adherence to these basic
obligations. By ensuring that fiduciary
investment advice providers compete on
a level playing field subject to a uniform
standard, the Regulation and
exemptions ensure that Retirement
Investors’ legitimate expectations of
trust and confidence are honored,
irrespective of the particular type of
product recommended. Fiduciary
recommendations to Retirement
Investors should be uniformly driven by
the investors’ interests, rather than
differences in regulatory stringency that
give one class of investment
professionals the unique ability to
depart from basic standards of care and
loyalty. Reasonable Compensation
The Department is revising the
reasonable compensation standard in
Section VII(a)(2). The Proposed
Amendment would have limited the
compensation that an Independent
Producer could receive to an ‘‘Insurance
Sales Commission,’’ defined to mean a
sales commission paid by the Insurance
Company or an Affiliate to the
Independent Producer for the service of

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recommending and/or effecting the
purchase or sale of an insurance or
annuity contract, including renewal fees
and trailing fees, but excluding revenue
sharing payments, administrative fees or
marketing payments, payments from
parties other than the Insurance
Company or its Affiliates, or any other
similar fees.
The Department received several
comments supporting this proposed
limitation. One commenter noted the
‘‘particularly acute conflicts of interest’’
associated with sales of non-security
annuities and supported not only
limiting the compensation that could be
paid, but also supported enhanced
disclosure so that the Retirement
Investors can understand the amount of
money that the Independent Producer
will make on the transaction. Another
commenter similarly supported the
Department’s tailored approach that
addresses the unique circumstances and
challenges presented by these ‘‘lightly
regulated salespeople’’ when they
provide investment recommendations to
Retirement Investors. The same
commenter noted that limiting PTE 84–
24 in this way would also further ensure
a level playing field because any
producer receiving other types of
compensation would rely on PTE 2020–
02. Yet another commenter criticized
the NAIC Model Regulation’s approach
because it does not require insurers and
producers to mitigate their
compensation-related conflicts of
interest that often lead to consumers
buying annuities that are not suitable for
them.
Many insurance industry commenters
described this definition as overly
narrow, noting that State insurance law
does not limit compensation to
commissions. Some commenters
pointed to the NAIC Model Regulation,
which specifically permits assistance
with marketing, office support,
retirement benefits, or other reasonable
compensation, and other non-cash
compensation. One commenter
described the impact of the proposed
limitation as contrary to the NAIC’s
work to develop a best interest standard,
suggesting that it would reduce the
investor choice that the NAIC had
intended to preserve.
Many commenters also objected to the
limited compensation covered when
compared to the broad relief provided in
PTE 2020–02. These commenters
asserted that it would be arbitrary for
the Department to prohibit Independent
Producers from receiving legal and
disclosed compensation that would be
permissible for a financial institution or
investment professional to receive
under PTE 2020–02. One specifically

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stated that this limitation was contrary
to the Department’s stated intent of
creating a level playing field, arguing
that with similar conditions in both
exemptions, there was no valid reason
for the Department to prohibit legal and
disclosed compensation when received
by independent insurance professionals,
but not when it is received by other
types of financial professionals.
Some commenters argued that the
limited definition was inconsistent with
the Department’s statement in footnote
10 of the Proposed Amendment’s
preamble that third party intermediary
marketing organizations (IMOs) could
compensate Independent Producers,
presumably with compensation other
than insurance commissions, as
narrowly defined. In response to this
comment, the Department confirms that
all compensation under PTE 84–24 may
be paid directly to IMOs or field market
organizations (FMOs) which then
compensate the individual Independent
Producer who has provided investment
advice. The Department also notes that
ERISA section 408(b)(2) and Code
section 4975(d)(2) are available for
intermediaries providing non-fiduciary
services.
Another commenter stated that the
proposed limitations on the types of
compensation available for exemptive
relief under PTE 84–24 would be so
disruptive that it would call the
continued availability of fixed annuity
product distribution channels into
question. This commenter stated that
the compensation limits imposed by the
Proposed Amendment would deprive
investors of access to fixed annuities as
a source of protection against the risks
associated with market volatility and
outliving one’s assets. The commenter
went on to state that, while the
preamble language to the Proposed
Amendment acknowledges the presence
and vital role served by IMOs and FMOs
in the training and support of
Independent Producers, the Proposed
Amendment would have provided no
relief for any compensation received in
connection with the sale of a
recommended product other than socalled ‘‘simple’’ insurance commissions,
directly paid by or on behalf of the
insurance company.
According to this same commenter,
IMOs and FMOs support Independent
Producer success and productivity
through a variety of cash and non-cash
compensation structures, including
revenue sharing and marketing
allowances. This same commenter
stated that non-cash compensation
frequently includes the provision of
value-added support including website
construction and maintenance, sales

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leads, various forms of commercial
advertising and computer software.
According to this commenter, eligibility
to receive such compensation is
calibrated—at least to some extent—on
Independent Producer productivity and
on that basis is likely to be deemed by
the Department under its new fiduciary
definition as compensation received by
an Independent Producer in connection
with covered recommendations,
necessitating prohibited transaction
exemptive relief, but no such relief
would be available under PTE 84–24 as
it was proposed to be amended.
After consideration of the public
comments on limiting covered
compensation to Insurance Sales
Commissions, the Department has
removed the proposed limitation to
Insurance Sales Commissions and
expanded the scope of the exemption to
cover compensation as broadly as PTE
2020–02, including cash and non-cash
compensation. In the Department’s
view, the Impartial Conduct Standards
and other conditions of the exemption
should adequately safeguard Retirement
Investors from abuse, irrespective of the
specific type of compensation. At the
same time, the Department emphasizes
that all compensation the Independent
Producer receives in connection with a
transaction pursuant to PTE 84–24 must
be reasonable within the meaning of
ERISA section 408(b)(2) and Code
section 4975(d)(2), and consistent with
stringent policies and procedures
designed to ensure Insurance Producers
make recommendations to Retirement
Investors that are consistent with the
exemption’s Care Obligation and
Loyalty Obligation.
No Materially Misleading Statements
Section VII(a)(3) provides the same
prohibition on misleading statements
that is part of PTE 2020–02. The
Department is also clarifying that the
prohibition against misleading
statements applies to both written and
oral statements. This provision requires
that an Independent Producer’s
statements to the Retirement Investor
(whether written or oral) about the
recommended transaction and other
relevant matters must not be materially
misleading at the time the statements
are made. For purposes of this
condition, the term ‘‘materially
misleading’’ includes the omission of
information that is needed to prevent
the statement from being misleading to
the Retirement Investors under the
circumstances.
To the extent the Independent
Producer provides materials, including
marketing materials that are prepared
and provided by the Insurer, this

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condition also would require such
materials not to be materially
misleading to the Independent
Producer’s knowledge.
Disclosure
The Department is generally finalizing
the disclosure conditions with some
modifications to the Proposed
Amendment that are discussed below.
As discussed in the preamble to the
final amendment to PTE 2020–02, while
many commenters raised concerns
about the burden imposed on financial
institutions if the Department required
additional disclosure, others expressed
support for the Department imposing
additional disclosure obligations. It is
important that Retirement Investors
have a clear understanding of the
compensation, services, and conflicts of
interest associated with
recommendations so that they have
sufficient information to make fully
informed investment decisions.
Additionally, clear and accurate
disclosures can deter fiduciary
investment advice providers from
engaging in otherwise abusive practices
that they would prefer not to expose to
the light of day. Likewise, requiring a
clear disclosure of otherwise hidden
fees and conflicts involved in the sale of
insurance products may serve to
dissuade certain Insurers and
Independent Producers from engaging
in abusive sales practices, resulting in
lower overall costs to consumers.17
In the preamble to the Proposed
Amendment, the Department requested
comments regarding whether Insurers or
Independent Producers should be
required to provide additional
disclosures on third-party compensation
to Retirement Investors on a publicly
available website. One potential benefit
of such disclosure would be to provide
information about conflicts of interest
that could be used, not only by
Retirement Investors, but by consultants
and intermediaries who could, in turn,
use the information to rate and evaluate
various advice providers in ways that
would assist Retirement Investors.
Industry commenters generally opposed
the condition, stating that it would
impose significant costs to continuously
maintain such a website without a
commensurate benefit to the Retirement
Investors.
After review of these comments, the
Department has determined not to
include a website disclosure
17 See, e.g., Santosh Anagol, Shawn Cole &
Shayak Sarkar, Understanding the Advice of
Commissions-Motivated Agents: Evidence from the
Indian Life Insurance Market, 99(1) The Review of
Economics and Statistics 1–15, (2015), https://
doi.org/10.1162/REST_a_00625.

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requirement as an exemption condition
at this time. While the Department may
reconsider this decision at some future
date based on its experience with the
Regulation and related exemptions, any
such future amendments would be
subject to public notice and comment
through a rulemaking process.
Consistent with the Recordkeeping
conditions in Section IX, the
Department intends, however, to
regularly request that Independent
Producers provide their investor
disclosures to the Department to ensure
that they are providing sufficient
information in a manner that the
Retirement Investor can understand,
and that the disclosures are serving their
intended purpose.
Fiduciary Acknowledgment
The disclosures in PTE 84–24 are
similar to those in PTE 2020–02. This
ensures that all Retirement Investors
receiving fiduciary investment advice
have the same information before
engaging in a transaction, irrespective of
product type. PTE 84–24 requires
Independent Producers to provide
certain disclosures at or before the time
an investment advice transaction
occurs. Section VII(b)(1) requires a
fiduciary acknowledgement, but unlike
PTE 2020–02, only the Independent
Producer (and not the Insurer) must
acknowledge in writing that it is a
fiduciary providing investment advice
to the Retirement Investor under Title I
or II of ERISA or both.18 Section
VII(b)(2) requires the Independent
Producer to provide the Retirement
Investor with a written statement of the
Care Obligation and Loyalty Obligation
that the Independent Producer owes to
the Retirement Investor. For purposes of
the disclosures required by Section
II(b)(1)–(4), the Independent Producer is
deemed to engage in a covered
transaction on the later of (A) the date
the recommendation is made or (B) the
date the Independent Producer becomes
entitled to compensation (whether now
or in the future) by reason of making the
recommendation.
The fiduciary acknowledgment
requirement is intended to make it
unambiguously clear that the
Independent Producer is making a
recommendation to the Retirement
Investor in a fiduciary capacity under
ERISA or the Code. It would not be
sufficient, for example, to have an
acknowledgement say that ‘‘I
acknowledge fiduciary status under
18 The Department cautions that an Insurer cannot
insulate itself from fiduciary status merely by not
making this acknowledgment. As noted above, an
Insurer may become a fiduciary based on its
actions.

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ERISA with respect the
recommendation to the extent the
recommendation is treated by ERISA or
Department of Labor regulations as a
fiduciary recommendation,’’ because
that statement does not inform the
investor whether the Independent
Producer is making the recommendation
as a fiduciary. The point of the
acknowledgment is to ensure that both
the fiduciary and the Retirement
Investor are clear that the particular
recommendation is in fact made in a
fiduciary capacity under ERISA or the
Code, so that there is no doubt as to the
nature of the relationship or the
associated compliance obligations.
Anything short of definitive fiduciary
acknowledgment would fail the
exemption condition. It is not enough to
alert the Retirement Investor to the fact
that there may or may not be fiduciary
obligations in connection with a
particular recommendation, without
stating that, in fact, the Independent
Producer is making the recommendation
in the requisite fiduciary capacity.
As described in the preamble to PTE
2020–02, many commenters argued that
the fiduciary acknowledgment
requirement imposes contractual or
warranty requirement on Independent
Producers. Several other commenters
noted, however, that neither PTE 84–24
nor PTE 2020–02 impose any contract or
warranty requirements on fiduciary
investment advice providers. Instead,
the requirement simply ensures up-front
clarity about the nature of the
relationship and services being
provided. The Department agrees with
these commenters that this up-front
clarity is important and does not impose
any contract or warranty requirement.
The fiduciary acknowledgment
condition stands in marked contrast to
the Department’s 2016 rulemaking on
fiduciary advice; the Department has
imposed no obligation on fiduciary
advice providers to enter into
enforceable contracts with or to provide
enforceable warranties to their
customers. The only remedies for
violations of the exemption’s
conditions, and engaging in a nonexempt prohibited transaction, are those
provided by Title I of ERISA, which
specifically provides a cause of action
for fiduciary violations with respect to
ERISA-covered Plans, and Title II of
ERISA, which provides for imposition
of the excise tax. Nothing in the
exemption compels Independent
Producers to make contractually
enforceable commitments, and as far as
the exemption provides, they could
expressly disclaim any enforcement
rights other than those specifically

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provided by Title I of ERISA or the
Code, without violating any of the
exemption’s conditions.
For that reason, arguments that the
fiduciary acknowledgment requirement
is inconsistent with the Fifth Circuit’s
opinion in Chamber of Commerce v.
United States Department of Labor, 885
F.3d 360, 384–85 (5th Cir. 2018)
(Chamber) are unsupported. In that
case, the Fifth Circuit faulted the
Department for having effectively
created a private cause of action that
Congress had not provided for
violations of the exemptions’ terms.
Under this Final Amendment, the
Department does not create new causes
of actions, mandate enforceable
contractual commitments, or expand
upon the remedial provisions of ERISA
or the Code. Requiring clarity as to the
nature of the services and relationship
between Independent Producers and
Retirement Investors is a far cry from
the creation of a whole new cause of
action or remedial scheme.
Rather than compel fiduciary status or
create new causes of action, the
Department merely conditions the
availability of the exemption, which is
only necessary for plan fiduciaries to
receive otherwise prohibited
compensation, on clarity that the
transaction involves a fiduciary
relationship. In addition, the
Department does not purport to bind
State or other Federal regulators in any
way or to condition relief on the
availability of remedies under other
laws. It no more creates a new cause of
action than any other exemption
condition or regulatory requirement that
requires full and fair disclosures of
services and fees. Moreover, the
requirement promotes and supports
Retirement Investor choice by requiring
clarity as to the precise nature of the
relationship that the firm or advice
professional is undertaking.
The Department additionally notes
that conditions requiring entities to
acknowledge their fiduciary status have
become commonplace in recent
exemptions the Department has granted
over the past two years. For example, in
2022 and 2023, the Department granted
over a dozen exemptions to private
parties in which an entity was required
to acknowledge its fiduciary status in
writing as a requirement for exemptive
relief.19 Written acknowledgement of
19 See, e.g., PTE 2023–03, Blue Cross and Blue
Shield Association Located in Chicago, Illinois (88
FR 11676, Feb. 23, 2023); PTE 2023–04, Blue Cross
and Blue Shield of Arizona, Inc., Located in
Phoenix, Arizona (88 FR 11679, Feb. 23, 2023); PTE
2023–05, Blue Cross and Blue Shield of Vermont
Located in Berlin, Vermont (88 FR 11681, Feb. 23,
2023); PTE 2023–06, Hawaii Medical Service

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fiduciary status was first required by the
Department as early as 1984, when the
Department published PTE 84–14,
requiring an entity acting as a ‘‘qualified
professional asset manager’’ (a QPAM)
to have ‘‘acknowledged in a written
management agreement that it is a
fiduciary with respect to each plan that
has retained the QPAM.’’ 20
One commenter additionally opined
that the fiduciary acknowledgement
condition constitutes ‘‘compelled’’ and
‘‘viewpoint-based’’ speech in violation
of the First Amendment and warrants
application of a ‘strict scrutiny’ standard
of review. As discussed in greater detail
in the preamble to the Regulation
published elsewhere in today’s Federal
Register, neither the Regulation nor the
final PTE amendments prohibit speech
based on content or viewpoint in any
capacity. Instead, the Regulation and
PTEs simply impose fiduciary duties on
covered parties, and insist on adherence
to Impartial Conduct Standards.
Model Disclosure
To assist Independent Producers in
complying with these conditions of the
exemption, the Department confirms
that the following model language will
satisfy Section VII(b)(1) and (2).
We are making investment
recommendations to you regarding your
retirement plan account or individual
retirement account as fiduciaries within
the meaning of Title I of the Employee
Retirement Income Security Act and/or
the Internal Revenue Code, as
applicable, which are laws governing
retirement accounts. The way we make
money or otherwise are compensated
creates some conflicts with your
financial interests, so we operate under
a special rule that requires us to act in
your best interest and not put our
interest ahead of yours.
Association Located in Honolulu, Hawaii (FR 88
11684, Feb. 23, 2023); PTE 2023–07, BCS Financial
Corporation Located in Oakbrook Terrace, Illinois
(88 FR 11686, Feb. 23, 2023); PTE 2023–08, Blue
Cross and Blue Shield of Mississippi, A Mutual
Insurance Company Located in Flowood,
Mississippi (88 FR 11689, Feb. 23, 2023); PTE
2023–09, Blue Cross and Blue Shield of Nebraska,
Inc. Located in Omaha, Nebraska (88 FR 11691, Feb.
23, 2023); PTE 2023–10, BlueCross BlueShield of
Tennessee, Inc. Located in Chattanooga, Tennessee
(88 FR 11694, Feb. 23, 2023); PTE 2023–11,
Midlands Management Corporation 401(k) Plan
Oklahoma City, OK (88 FR 11696, Feb. 23, 2023);
PTE 2023–16, Unit Corporation Employees’ Thrift
Plan, Located in Tulsa, Oklahoma (88 FR 45928,
July 18, 2023); PTE 2022–02, Phillips 66 Company
Located in Houston, TX (87 FR 23245, Apr. 19,
2022); PTE 2022–03, Comcast Corporation Located
in Philadelphia, PA (87 FR 54264, Sept. 2, 2022);
PTE 2022–04, Children’s Hospital of Philadelphia
Pension Plan for Union-Represented Employees
Located in Philadelphia, PA. (87 FR 71358, Nov. 22,
2022).
20 PTE 84–14, Part V, Section (a), (49 FR 9494,
March 13, 1984).

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Under this special rule’s provisions,
we must:
• Meet a professional standard of care
when making investment
recommendations (give prudent advice)
to you;
• Never put our financial interests
ahead of yours when making
recommendations (give loyal advice);
• Avoid misleading statements to you
about conflicts of interest, fees, and
investments;
• Follow policies and procedures
designed to ensure that we give advice
that is in your best interest;
• Charge you no more than what is
reasonable for our services; and
• Give you basic information about
our conflicts of interest.
This model language generally applies
to the Independent Producer’s
recommendations, however, the
Independent Producer could also tailor
the acknowledgment to limit it to an
individual recommendation or subset of
recommendations for which the
Independent Producer is seeking
prohibited transaction relief. However,
Independent Producers can only rely on
this exemption with respect to
particular recommendations to the
extent they have acknowledged their
fiduciary status to Retirement Investors
with respect to those recommendations.
While some commenters requested
additional model language, the
Department is not providing model
language for the specific material facts
relating to the scope and terms of the
relationship, conflict of interest, and
basis for determination to recommend
the annuity disclosures in Section
VII(b)(3), (4), and (5), because those
disclosures will need to be tailored to
the specific business model.
Relationship and Conflict of Interest
Disclosure
Under Section VII(b)(3), the
Independent Producer must disclose in
writing all material facts relating to the
scope and terms of the relationship with
the Retirement Investor. This includes
the material fees and costs that apply to
the Retirement Investor’s transactions,
holdings, and accounts. The
Independent Producer must also
disclose the type and scope of services
provided to the Retirement Investor,
including any material limitations on
the recommendations that may be made
to the Retirement Investor. This
description must include the products
the Independent Producer is licensed
and authorized to sell, inform the
Retirement Investor in writing of any
limits on the range of insurance
products recommended, and identify
the specific Insurers and specific

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insurance products available to the
Independent Producer for
recommendation to the Retirement
Investor. Further, under Section
VII(b)(4), the Independent Producer
must also disclose all material facts
relating to Conflicts of Interest that are
associated with the recommendation.
One difference from PTE 2020–02 is
that Independent Producers must also
provide a notice describing the
Retirement Investor’s right to request
additional information regarding cash
compensation. If the Retirement
Investor makes that request, the
Independent Producer must give the
investor a reasonable estimate of the
amount of cash compensation to be
received by the Independent Producer,
which may be stated as a range of
amounts or percentages; and whether
the cash compensation will be provided
through a one-time payment or through
multiple payments, the frequency and
amount of the payments, which may
also be stated as a range of amounts or
percentages. Although this is an
additional obligation in PTE 84–24 that
is not in PTE 2020–02, the Department
notes this disclosure requirement
closely parallels the obligations of an
Independent Producer under Section
6.A.2.a.v and 6.A.2.b of the NAIC Model
Regulation 21 and is similar to, but more
limited than, the standard imposed by
New York State in Section 30.3 of a rule
issued by the New York Department of
Financial Services entitled ‘‘Producer
Compensation Transparency’’ (referred
to as Rule 194).22
21 NAIC Model Regulation Section 6.A.2.a.v.
provides that ‘‘[p]rior to the recommendation or
sale of an annuity, the producer shall prominently
disclose to the consumer . . . (v) A notice of the
consumer’s right to request additional information
regarding cash compensation described in
Subparagraph (b) of this paragraph.’’ Section
6.A.2.b states that ‘‘[u]pon request of the consumer
or the consumer’s designated representative, the
producer shall disclose: (i) A reasonable estimate of
the amount of cash compensation to be received by
the producer, which may be stated as a range of
amounts or percentages; and (ii) Whether the cash
compensation is a one-time or multiple occurrence
amount, and if a multiple occurrence amount, the
frequency and amount of the occurrence, which
may be stated as a range of amounts or
percentages.’’
22 Section 30.3(a)(4) of Rule 194 provides that ‘‘an
insurance producer selling an insurance contract
shall disclose the following information to the
purchaser: . . . (4) that the purchaser may obtain
information about the compensation expected to be
received by the producer based in whole or in part
on the sale, and the compensation expected to be
received based in whole or in part on any
alternative quotes presented by the producer, by
requesting such information from the producer.’’ If
such a request is made, Section 30.3(b) requires the
producer to provide the following information: ‘‘(1)
a description of the nature, amount, and source of
any compensation to be received . . . ; (2) a
description of any alternative quotes presented by
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The Department thinks that this
additional transparency is especially
important in the context of PTE 84–24
because, in contrast to PTE 2020–02, the
Insurer has not assumed fiduciary
responsibility with respect to the
recommendation or its compensation
and incentive practices, and because of
the importance of these financial
incentives in driving investment
recommendations. As noted above, it is
important that Retirement Investors
have a clear understanding of the
compensation, services, and conflicts of
interest associated with
recommendations so that they have
sufficient information to make fully
informed investment decisions.
Additionally, clear and accurate
disclosures can deter Independent
Producers and Insurers from engaging in
otherwise abusive practices that they
would prefer not to expose to the light
of day. Likewise, requiring a clear
disclosure of otherwise hidden fees and
conflicts involved in the sale of
insurance products may serve to
dissuade Insurers and Independent
Producers from making imprudent
recommendations that are driven by
outsized financial incentives, rather
than the Retirement Investor’s best
interests, resulting in lower overall costs
to consumers.23
Best Interest Documentation and
Rollover Disclosure
Section VII(b)(5) additionally requires
Independent Producers to consider and
document their basis for the
determination to recommend an annuity
product to the Retirement Investor
before the recommended annuity is
sold. The Independent Producer must
also provide this documentation to both
the Retirement Investor and to the
Insurer. The Department notes that the
NAIC Model Regulation also requires
producers to make a written record of
any recommendation and document the
basis for the recommendation.24
Consistent with the changes the
Department is making to PTE 2020–02,
Section VII(b)(6) of the Final
Amendment requires that, before
ownership interest the insurance producer . . . has
in the insurer . . . ; (4) a description of any
material ownership interest the insurer . . . has in
the insurance producer . . . ; and (5) a statement
whether the insurance producer is prohibited by
law from altering the amount of compensation
received from the insurer based in whole or in part
on the sale.’’
23 See, e.g., Santosh Anagol, Shawn Cole &
Shayak Sarkar, Understanding the Advice of
Commissions-Motivated Agents: Evidence from the
Indian Life Insurance Market, 99(1) The Review of
Economics and Statistics 1–15, (2015), https://
doi.org/10.1162/REST_a_00625.
24 Section 6.A.4.

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engaging in or recommending that a
Retirement Investor engage in a rollover
from a Plan that is covered by Title I of
ERISA or making a recommendation to
a Plan participant or beneficiary as to
the post-rollover investment of assets
currently held in a Plan that is covered
by Title I of ERISA the Independent
Producer must consider and document
the bases for its recommendation that
the Retirement Investor engage in the
rollover transaction and must provide
that documentation to both the
Retirement Investor and the Insurer.
Relevant factors the Independent
Producer must consider include, to the
extent applicable but not limited to (A)
the alternatives to a rollover, including
leaving the money in the Plan, if
applicable; (B) the fees and expenses
associated with the Plan and the
recommended investment; (C) whether
an employer or other party pays for
some or all of the Plan’s administrative
expenses under the Plan; and (D) the
different levels of fiduciary protection,
services, and investments available.
The Department received many
comments on this condition. As
discussed in the preamble to the final
amendment to PTE 2020–02, the
Department received support for the
rollover disclosure provision. For
example, one commenter highlighted
the significance of a rollover decision
and said that a ‘‘careful analysis’’ is
needed, along with information about
fees, expenses, and other investment
options, in order to provide Retirement
Investors with a ‘‘well-supported’’
recommendation. Some commenters
supporting the condition noted the
conflicts of interest inherent with
respect to many annuity sales and that
annuity transactions can be extremely
difficult and costly to reverse. The
written documentation requirement
ensures that Independent Producers
undertake a careful analysis and
document their reasoning for
recommending these transactions,
which will help ensure that their
recommendations are well-supported
and comply with the Impartial Conduct
Standards.
Other commenters expressed concern
with the required rollover disclosure.
For example, one commenter stated that
it is unclear how an Independent
Producer could compare fees and
expenses of employer plans without an
annuity option with a recommended
annuity. According to this commenter,
comparing annuities to other investment
options are ‘‘an apples-to-oranges
comparison that would likely confuse a
participant more than help.’’ Another
commenter characterized the condition
as potentially requiring Independent

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Producers to violate the law, because as
described by the commenter Federal
securities laws prohibit individuals
from recommending or providing
detailed information or advice about
securities unless they have a securities
license. Thus, according to the
commenter, Independent Producers
who do not have a securities license (as
most do not) would be forced to either
break the law to comply with this
condition or undertake the expense and
burden of obtaining the appropriate
securities licenses.
The Department disagrees with this
characterization of the exemption
condition. While Independent
Producers are required to consider
alternatives to the rollover from the
Title I Plan into an annuity, they are not
required to recommend or provide
detailed information or advice about
securities. Nothing in the exemption
requires or suggests that Independent
Producers are obligated to make advice
recommendations as to investment
products they are not qualified or
legally permitted to recommend. The
Department notes that nothing in the
exemption or the Impartial Conduct
Standards prohibits investment advice
by ‘‘insurance-only’’ agents or requires
such insurance specialists to render
advice with respect to other categories
of assets outside their specialty or
expertise. There may be circumstances
when the best advice an Independent
Producer can give an investor is to bring
in or work with another Investment
Professional who can make a
recommendation that is consistent with
the Impartial Conduct Standards. A
rollover recommendation should not be
based solely on the Retirement
Investor’s existing investment allocation
without any consideration of other
investment options in the Retirement
Investor’s Title I Plan. The Independent
Producer must carefully consider the
options available to the investor,
including options other than the
Retirement Investor’s existing Plan
investments, before recommending that
the participant roll assets out of the
Title I Plan. Similarly, if an Independent
Producer limits its recommendations to
annuities or to a limited menu of
annuities provided by specific insurers,
it could not justify a recommendation
that was imprudent on the basis that it
was the most appropriate alternative
from the Independent Producer’s range
of available investment alternatives. If
none of the available annuity options
could be recommended, without
violating the Independent Producer’s
Care Obligation or Loyalty Obligation, it
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recommending any of the offerings,
even though it would mean turning
away business.
Other commenters expressed concern
about the level of detail required and
suggested that when enforcing this
condition, the Department should take
into account that fact that many
Independent Producers are small
businesses with minimal resources.
Another commenter suggested that the
Department should rely instead on
language from the NAIC Model
Regulation or the SEC’s Regulation Best
Interest.
While the Department acknowledges
these comments, it has determined to
retain the rollover disclosure in
amended PTE 84–24. As identified by
some commenters, this disclosure
provides important protections and
information to Retirement Investors.
This condition, which also matches
Section II(b)(5) of the final amendment
to PTE 2020–02, reflects the clear
importance of sound advice with
respect to rollovers. Recommendations
to roll assets out of an ERISA-covered
Plan often involve a Retirement
Investor’s lifetime savings and are
critical to the investor’s retirement
security. For many Retirement Investors,
the recommendation to roll their savings
out of the Plan and invest those savings
in an annuity expected to provide
income for the rest of their life is the
single most important recommendation
they will ever receive.
The importance of the rollover
documentation and disclosure
requirement is proportional to the
importance of the advice, and rightly
focuses the Independent Producer’s
attention on reasonable alternatives to
the rollover and annuity purchase,
comparative fees and expenses, and
different levels of fiduciary protections,
services, and investments available
before and after the roll-over.
Documenting the bases for the
recommendations also enables the
Insurer to verify compliance with its
policies and procedures, and ensure
they are adequate.
As discussed in the preamble to
amended PTE 2020–02, the Department
is making a significant change to the
disclosure provisions in the final
amendments to both PTE 2020–02 and
PTE 84–24 in response to comments.
The Proposed Amendment specified
that the rollover documentation and
disclosure requirement would have
extended to recommended rollovers
from a Plan to another Plan or IRA as
defined in Code section 4975(e)(1)(B) or
(C), from an IRA as defined in Code
section 4975(e)(1)(B) or (C) to a Plan,
from an IRA to another IRA, or from one

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type of account to another (e.g., from a
commission-based account to a feebased account). In response to
comments, the Department is narrowing
the required rollover disclosure in the
Final Amendment so that it only applies
to rollovers from Title I Plans. Under
amended PTE 84–24, Independent
Producers are not required to document
and disclose recommendations to roll
assets over from one Title I Plan to
another Title I Plan, from one IRA to
another IRA or to change account types.
Of course, these types of transactions
may require Independent Producers’
special attention, and as discussed
further below, Insurers may wish to
specify in their policies and procedures
how they will manage these types of
transactions.
Good Faith and Exception for
Disclosures Prohibited by Law
The Department is adding
clarifications in Section VII(b)(7) of the
Final Amendment that an Independent
Producer will not fail to satisfy the
disclosure conditions in Section VII(b)
solely because they make an error or
omission in disclosing the required
information while acting in good faith
and with reasonable diligence, provided
that the Independent Producer discloses
the correct information as soon as
practicable, but not later than 30 days
after the date on which it discovers or
reasonably should have discovered the
error or omission. Similarly, Section
VII(b)(8) allows Independent Producers
to rely in good faith on information and
assurances from each other and from
other entities that are not Affiliates as
long as they do not know or have reason
to know that such information is
incomplete or inaccurate. Additionally,
under Section VII(b)(9), the Independent
Producer is not required to disclose
information pursuant to Section VII(b) if
such disclosure is otherwise prohibited
by law. These provisions are consistent
with PTE 2020–02. The Department did
not receive substantive comments on
these provisions and is finalizing them
as proposed.
Policies and Procedures
While Independent Producers are free
to recommend a variety of Insurers’
products, they do not operate outside
the control and influence of the Insurers
whose products they recommend. To
the contrary, these Insurers set the
Independent Producers’ compensation
and incentives, provide training,
oversee compliance with State law
obligations and the Insurer’s policies
and procedures, and substantially
determine how and whether an
Independent Producer will be able to

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recommend the Insurers’ products.
Because of their authority over the sale
of their products and over the conduct
of Independent Producers, the Insurers’
actions and the financial incentives they
create can promote or undermine
participant interests.
Despite the central and obvious
importance of the Insurers themselves to
the Independent Producer distribution
channel, the Department has decided
not to condition relief under this
exemption on Insurers’
acknowledgment of fiduciary status
with respect to Independent Producers’
recommendations. This decision takes
into account many Insurers’ strong
concerns about being held accountable
as fiduciaries for the actions of
Independent Producers who are not
subject to their control in the same way
that, for example, common law
employees are subject to their
employer’s control. However, the
Department’s ability to structure the
exemption to cover Independent
Producers and protect the interests of
Retirement Investors importantly
depends on the Independent Producers’
ability to make recommendations that
are subject to careful complianceoriented institutional oversight by
Insurers that is focused on Retirement
Investors’ best interests, and on the
mitigation and avoidance of conflicts of
interest.
It is critically important to the success
of this exemption that the Insurers,
whose products Independent Producers
recommend as fiduciaries, pay careful
attention to any conflicts associated
with Independent Producers’
recommendations of their products,
appropriately manage those conflicts of
interest, and adopt and implement
appropriate supervisory oversight
mechanisms, as set forth below. Without
these protections, the Department
would be unable to conclude that this
exemption is sufficiently protective of
Retirement Investors and their interests
and would have to consider imposing
more stringent protective conditions or
simply require Independent Producers
and Insurers to rely on PTE 2020–02,
which is broadly available to them even
in the absence of this exemption.25
25 While this exemption does not require Insurers
to acknowledge fiduciary status, Insurers can.by
their own conduct, effectively make
recommendations and assume fiduciary
responsibility for those recommendations. When
they do so, they should rely upon PTE 2020–02 for
relief, inasmuch as this exemption provides relief
only to the Independent Producers. The Department
believes that the relief provided by this exemption
is appropriately tailored to the Independent
Producer distribution channel, but it will monitor
performance under the exemption closely to ensure
that it meets its protective purposes.

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Accordingly, Section VII(c)(1)
conditions relief on the actions of the
Insurer to establish, maintain, and
enforce written policies and procedures
for the review of each recommendation
made by an Independent Producer
before an annuity is issued to a
Retirement Investor pursuant to an
Independent Producer’s
recommendation. The policies and
procedures must be prudently designed
to ensure compliance with the Impartial
Conduct Standards and other exemption
conditions. The Insurer must prudently
review the Independent Producer’s
recommendations of its products, and
this review must be made without
regard to the Insurer’s own interests.
Section VII(c)(2) further conditions
relief on a requirement that the Insurer’s
policies and procedures mitigate
Conflicts of Interest to the extent that a
reasonable person reviewing the
policies and procedures and incentive
practices as a whole would conclude
that they do not create an incentive for
the Independent Producer to place its
interests, or those of the Insurer, or any
Affiliate or Related Entity, ahead of the
Retirement Investor’s interest. In this
regard, the Insurer must not use quotas,
appraisals, performance or personnel
actions, bonuses, contests, special
awards, differential compensation, or
other similar actions or incentives in a
manner that is intended, or that a
reasonable person would conclude are
likely, to result in recommendations
that do not meet the Care Obligation or
Loyalty Obligation to the Retirement
Investor.
As further explained below, this
condition applies an objective standard
focused on whether a reasonable person
would conclude that the Insurer’s
actions or incentives were likely to
result in recommendations that do not
meet the Care Obligation or Loyalty
Obligation. Insurers and Independent
Producers must avoid and mitigate
conflicts of interest to the extent
possible and rely on oversight structures
that prevent those conflicts of interest
from driving investment
recommendations, rather than the
financial interests of Retirement
Investors.
Under Section VII(c)(3), the Insurer’s
policies and procedures must also
include a prudent process for
determining whether to authorize an
Independent Producer to sell the
Insurer’s annuity contracts to
Retirement Investors. Specifically, the
Insurer must have a prudent process for
identifying Independent Producers who
have failed to adhere to the Impartial
Conduct Standards, or who lack the
necessary education, training, or skill to

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provide investment advice to
Retirement Investors. A prudent process
includes careful review of objective
material, such as customer complaints,
disciplinary history, and regulatory
actions concerning the Independent
Producer, as well as the Insurer’s review
of the Independent Producer’s training,
education, and conduct with respect to
the Insurer’s own products. The Insurer
must document the basis for its initial
determination that it can rely on the
Independent Producer to adhere to the
Impartial Conduct Standards and must
review that determination at least
annually as part of the retrospective
review set forth in subsection (d) below.
Discussion of Comments
The Department has made minor edits
to the Policies and Procedures
requirement in Section II(c) in response
to commenters. To ensure Retirement
Investors receive the same protections,
whether they receive advice under PTE
2020–02 or PTE 84–24, the Department
has made the policies and procedures
conditions substantively identical, with
a few specific obligations tailored to the
insurance industry.
Obligation on Insurers
Many commenters expressed concern
that the Policies and Procedures
requirement would be too difficult to
meet for Insurers, who are not
fiduciaries under the exemption. Some
commenters argued the Policies and
Procedures requirement was in conflict
with State law. One commenter
contrasted the Department’s conditions
with the NAIC requirements, which the
commenter described as specific,
actionable, and proportional to the
relationship between insurer and agent.
Another commenter described the
proposed policies and procedures
conditions as unworkable and objected
to their departure from less demanding
State laws, which the commenter said
would not require the insurer to directly
supervise each Independent Producer. A
few commenters urged the Department
to adopt the NAIC Model Regulation as
a safe harbor.
Other comments focused on practical
challenges associated with some
interpretations of the exemption’s
requirements. For example, one
commenter argued that use of the term
‘‘ensure’’ was unacceptable because
Insurers do not control Independent
Producers and therefore cannot
guarantee their compliance. Another
commenter stated that requiring an
insurer to review the recommendations
of third-party products is an impossible
task because they do not know those
products and the products are not and

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cannot be in their system for review.
This commenter further questioned how
an insurer can determine whether the
recommendation is in the best interest
of the Retirement Investor as compared
to other products the Independent
Producer is authorized to sell, if the
Insurer is not required to supervise an
Independent Producer’s
recommendations of other Insurers’
products. This same commenter urged
the Department to specify in the
operative text that supervision does not
include an obligation to consider and
compare other companies’ products.
Another commenter also characterized
the exemption as requiring Insurers to
review all conduct of Independent
Producers and stressed the fact that
Insurers are not able to control all the
actions of Independent Producers to the
same degree as, for example, brokerdealers can regulate the conduct of their
registered representatives.
Other commenters supported the
obligation imposed on Insurers. One
commenter pointed to the greater risk
that a recommendation in the
independent channel will be tainted by
conflicts of interest because there is no
single institution overseeing each
recommendation. To address these
conflicts without imposing fiduciary
status on all Insurers, each Insurer must
exercise oversight over Independent
Producers to the extent the Independent
Producer is selling the Insurer’s own
products. To do this, the Insurer must
have reasonably designed policies and
procedures and must not encourage or
reward producers for violating the
Impartial Conduct Standards. Another
commenter expressed significant
concerns with the NAIC Model
Regulation. Under the NAIC Model
Regulation, insurers and producers are
not required to mitigate the
compensation-related conflicts of
interest that are often responsible when
consumers are given bad advice and end
up buying annuities that are not suitable
for them.
The Department has considered these
comments and continues to believe that
the policies and procedures requirement
is essential to the exemption. The
Department is similarly not adopting the
NAIC Model Regulation as a safe harbor.
If trusted Independent Producers are to
recommend insurance products to
Retirement Investors, it is important that
they are subject to proper oversight by
the Insurer whose products they are
recommending, and that those Insurers
pay careful attention to financial
incentives they create or administer that
are misaligned with Retirement
Investors’ interests. Insurers choosing to
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distribution of their products should be
able to comply with the protective and
workable oversight obligations set out in
Section VII(c). Moreover, while there are
important differences between the
requirements in Section VII(c) and the
NAIC Model Regulation, as discussed
below, the NAIC Model Regulation itself
requires a significant level of
supervision demonstrating that Insurers
can (and already must) supervise
producers. The NAIC Model Regulation
specifically says, ‘‘An insurer shall
establish and maintain a supervision
system that is reasonably designed to
achieve the insurer’s and its producers’
compliance with this regulation.’’ 26
Even if Insurers were not already
required to supervise Independent
Producers under State law, the
conditions in Section VII(c) do not place
an excessive burden on Insurers.
Section VII(c)(1) specifies that the
policies and procedures must be
prudently designed to ensure
compliance with the Impartial Conduct
Standards and other exemption
conditions. The ‘‘prudently designed’’
standard does not require perfection
with respect to every recommendation
by every Independent Producer
overseen by the Insurer. The
Department recognizes that, even
prudent oversight structures will not
prevent every instance of inappropriate
advice, and use of the word ‘‘ensure’’
was not intended to suggest otherwise.
When an Independent Producer violates
the terms of this exemption,
notwithstanding the Insurer’s adoption
and implementation of a prudent
oversight structure, the consequence is
that the Independent Producer is
responsible for the resulting prohibited
transaction, not that the Insurer is
disqualified from continuing to act as a
supervisory Insurer under the
exemption. On the other hand, if the
Insurer fails to implement policies and
procedures and conflict-management
measures consistent with this
exemption, Independent Producers
could not rely on this exemption for
relief from ERISA’s prohibited
transaction rules.
In response to comments, the
Department also confirms that Insurers
26 Section 6.C(2). Similarly, Rule 187 Section
224.6 requires ‘‘An insurer shall establish,
maintain, and audit a system of supervision that is
reasonably designed to achieve the insurer’s and
producers’ compliance.’’ While Rule 187 imposes a
higher standard of care than the NAIC Model
Regulation and contains other provisions that are
more protective of consumers than the NAIC Model
Regulation, the Department has not identified
statements from industry participants or other
publicly available information indicating that
carriers or distributors are withdrawing from the
New York annuity market as a result of Rule 187.

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are not required to police Independent
Producers’ recommendations of
competitors’ products. As specified in
Section VII(c)(1), ‘‘[a]n Insurer is not
required to supervise an Independent
Producer’s recommendations to
Retirement Investors of products other
than annuities offered by the Insurer.’’
Furthermore, Insurers could choose to
comply with the policies and
procedures requirement by creating
oversight and compliance systems
through contracts with insurance
intermediaries such as IMOs, FMOs or
brokerage general agencies (BGAs). Such
intermediaries, for example, could
eliminate compensation incentives
across all the Insurers that work with
the intermediary, review Independent
Producers’ documentations, and/or use
of third-party industry comparisons
available in the marketplace to help
independent insurance agents
recommend products that are prudent
for their Retirement Investor customers.
The Department acknowledges,
however, that this exemption’s policies
and procedures requirement is
significantly more stringent than the
standards imposed by the NAIC Model
Regulation. This reflects the difference
in ERISA’s regulatory structure, which
is profoundly concerned about the
dangers posed by conflicts of interest as
expressed in the prohibited transaction
provisions of Title I and Title II of
ERISA. Under ERISA Section 408(a) and
Code section 4975(c)(2), the Department
can grant an exemption only if the
exemption is in the interest of plans and
their participants and beneficiaries and
protective of the rights of participants
and beneficiaries. The more stringent
requirements of this exemption’s
policies and procedures are necessary
for the Department to make these
findings, and to ensure uniform
protection of Retirement Investors.
In contrast to ERISA’s stringent
approach to conflicts of interest, the
NAIC Model Regulation’s requirements
regarding mitigation of material
conflicts of interest is not as protective
as either the Department’s approach
under ERISA or the SEC’s approach
under Regulation Best Interest. This is
made clear in the NAIC Model
Regulation’s definition of a ‘‘material
conflict of interest’’ which expressly
carves out all ‘‘cash compensation or
non-cash compensation’’ from treatment
as sources of conflicts of interest.27
‘‘Cash compensation’’ that is excluded
from the definition of a material conflict
of interest is broadly defined to include
‘‘any discount, concession, fee, service
fee, commission, sales charge, loan,
27 NAIC

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override, or cash benefit received by a
producer in connection with the
recommendation or sale of an annuity
from an insurer, intermediary, or
directly from the consumer,’’ and ‘‘noncash compensation’’ is also broadly
defined to include ‘‘any form of
compensation that is not cash
compensation, including, but not
limited to, health insurance, office rent,
office support and retirement
benefits.’’ 28 The NAIC also expressly
disclaimed that its standard creates
fiduciary obligations, and the
obligations in its NAIC Model
Regulation differ in significant respects
from those applicable to broker-dealers
in the SEC’s Regulation Best Interest or
to investment advisers pursuant to the
Advisers Act’s fiduciary duty.29 For
example, in addition to disregarding all
forms of compensation as a source of
material conflicts of interest, the NAIC
Model Regulation’s ‘‘best interest’’
standard is treated as satisfied if four
component obligations are met—the
care, disclosure, conflict of interest, and
documentation obligations—but these
components do not repeat the NAIC
Model Regulation’s best interest
obligation not to put the producer’s or
insurer’s interests before the customer’s
interest. Instead, they include a
requirement ‘‘to have a reasonable basis
to believe the recommended option
effectively addresses the consumer’s
financial situation, insurance needs, and
financial objectives . . . .’’
Obligation on Independent Producers
Other commenters expressed concern
that the obligation for Insurers to
establish, maintain and enforce policies
and procedures is too much of a burden
for the Independent Producers who
must comply with those policies and
procedures. One commenter asserted
that, from a practical perspective, it
would be impossible for an Independent
Producer to set up a system requiring
the producer to follow different policies
and procedures from different insurers,
stating that it would inevitably lead to
the producer’s failure to meet the
requirements of the Proposed
Amendment. Another commenter stated
that the obligation to figure out how to
operate within different policies and
procedures developed by different
Insurers would drive many Independent
Producers to reduce the number of
Insurers for whom they sell and the
number of different products they
28 Id.

at section 5.B. and J.
6.A.(1)(d) of the NAIC Model
Regulation provides, ‘‘[t]he requirements under this
subsection do not create a fiduciary obligation or
relationship and only create a regulatory obligation
as established in this regulation.’’
29 Section

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recommend. The commenter warned
that this reduction could harm
Retirement Investors because it would
be based on the Independent Producer’s
own compliance burden, rather than the
needs of Retirement Investors.
The Department acknowledges that
there may be variations in the
requirements that Insurers impose on
Independent Producers or
intermediaries as a result of the
requirements of this Final Amendment.
However, Independent Producers
already have the obligation to comport
their conduct to the varying contractual
arrangements and policies of different
Insurers. As a practical matter,
Independent Producers, either directly,
or indirectly through their relationship
with an IMO or other intermediary,
must already conform their conduct to
the requirements of the potentially
varying policies and procedures of the
different Insurers whose products they
recommend. Similarly, as Independent
Producers, they necessarily have to
master the intricacies of varying—and
often quite complex—annuity products,
compensation policies and structures,
and contractual requirements provided
by multiple insurance companies. The
additional burden, if any, of complying
with some additional variation in these
same Insurers’ policies and procedures,
all of which are aimed at promoting the
uniform goal of ensuring compliance
with the Impartial Conduct Standards,
is amply justified by Retirement
Investors’ interest in receiving sound
advice from trusted Investment
Professionals that is prudent, loyal, and
free from misleading statements and
excessive compensation.
Incentives
Commenters expressed particular
concern about the requirement that
Insurers may not use quotas, appraisals,
performance or personnel actions,
bonuses, contests, special awards,
differential compensation, or other
similar actions or incentives that are
intended, or that a reasonable person
would conclude are likely, to result in
recommendations that do not meet the
Care Obligation or Loyalty Obligation.
As noted in the preamble to PTE 2020–
02, which contains essentially the same
obligation, some commenters
incorrectly read the Proposed
Amendment as conditioning reliance on
the exemption on elimination of all
differentials in compensation. Other
commenters viewed the exemption as
prohibiting or limiting the use of
Insurer-funded training and educational
conferences and programs. For example,
some commenters expressed concern
that, under the exemption’s terms,

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Insurers would not be able to exclude
Independent Producers from training
conferences even though they did not
make significant sales of the Insurer’s
products. Several commenters
additionally suggested that the
Department’s approach to conflicts of
interest is inconsistent with that of other
regulators. These commenters described
the preamble to the Proposed
Amendment as reflecting a judgment
call by the Department that such
conflicts cannot be sufficiently
mitigated and therefore must be
eliminated, and one challenged the
Department’s authority to impose such
anti-conflict policies on Insurers who
had not acknowledged fiduciary status
or undertaken to act in a fiduciary
capacity to the extent the policies
exceeded the requirements of State law.
One commenter described the
Department’s requirements as
conflicting with the NAIC Model
Regulation, which the commenter said
only prohibits incentives that are based
on sales of specific annuities within a
limited period of time.30
However, as noted in the preamble to
the final amendment to PTE 2020–02,
which contains essentially the same
requirement as this exemption, the
exemption provision neither
categorically bans differential
compensation, nor prohibits Insurers
from funding educational meetings. The
exemption merely requires reasonable
guardrails for conferences, especially if
they involve travel. The exemption
applies an objective standard focused on
whether a reasonable person would
conclude that the Insurer’s actions or
incentives were likely to result in
recommendations that do not meet the
Care Obligation or Loyalty Obligation.
The Department recognizes that it is
impossible to eliminate all conflicts of
interest with respect to the commissionbased sale of insurance products, and
the Department is not demanding the
impossible. Instead, the Department is
requiring Insurers and Independent
Producers to avoid and mitigate
conflicts of interest to the extent
possible and to rely on oversight
structures that prevent those conflicts of
interest from driving investment
recommendations, rather than the
financial interests of Retirement
Investors. The Department further
confirms that an Independent Producer
may receive reasonable and customary
deferred compensation or subsidized
health or pension benefit arrangements
such as typically provided to a statutory
‘‘employee’’ as defined in Code section
3121(d)(3) without, in and of itself,
30 NAIC

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violating the conditions of this
exemption. However, Insurers working
with these statutory employees must
ensure that their policies and
procedures and incentive practices are
reasonably and prudently designed as
required by Section VII(c).
While the Department acknowledges
that the exemption imposes more
stringent standards on Independent
Producers than many State laws and the
NAIC Model Rule, the exemption is
fully consistent with the Department’s
authority and responsibilities under
ERISA. The Department has conditioned
relief from ERISA’s prohibited
transaction provisions on compliance
with the exemption conditions based on
its separate authority under Federal law,
which governs Plan and IRA
investments and fiduciary investment
recommendations, irrespective of the
type of investment product
recommended, including insurance
products and non-insurance products
alike.
ERISA imposes an obligation on the
Department to safeguard Retirement
Investors from conflicts of interest.
Under ERISA, in contrast to most State
insurance laws, fiduciary advice
providers are categorically prohibited
from making investment
recommendations that result in their
receipt of variable compensation, unless
permitted by a special exemption
granted by statute or the Department.
The Department can only grant
exemptions that it finds are in the
interest of and protective of Retirement
Investors.31
Moreover, the conflicts of interest that
give rise to prohibited transactions
under Titles I and II of ERISA, include
conflicts of interest associated with
compensation, such as commissions and
fees that the NAIC Model Regulation
expressly excludes from treatment as
material conflicts of interest.
Specifically, the NAIC Model
Regulation’s definition of a ‘‘material
conflict of interest’’ expressly carves out
all ‘‘cash compensation or non-cash
compensation’’ from treatment as
sources of material conflicts of
interest.32 This ‘‘cash compensation,’’
which is excluded from the definition of
a material conflict of interest, is broadly
defined to include ‘‘any discount,
concession, fee, service fee,
commission, sales charge, loan,
override, or cash benefit received by a
producer in connection with the
recommendation or sale of an annuity
from an insurer, intermediary, or
31 ERISA section 408(a)(2), (3); 29 U.S.C.
1108(a)(2), (3); Code section 4975(c)(2)(B), (C).
32 NAIC Model Regulation at section 5.I.

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directly from the consumer.33 ‘‘Noncash compensation’’ is also broadly
defined to include ‘‘any form of
compensation that is not cash
compensation, including but not limited
to, health insurance, office rent, office
support and retirement benefits.’’ 34
In contrast, the SEC, like the
Department of Labor, recognizes that
such compensation creates significant
conflicts of interest, as recognized in its
Regulation Best Interest and under the
fiduciary duty of the Investment
Advisers Act of 1940. In an FAQ
regarding this regulation, SEC staff
provided examples of common sources
of conflicts of interest for broker-dealers,
investment advisers, or financial
professionals, and specifically included
‘‘compensation, revenue or other
benefits (financial or otherwise).’’ 35
This Final Amendment appropriately
follows Federal law, as expressed in
ERISA, to protect Plan and IRA
investors. The more stringent Federal
protections adopted here with respect to
Federally regulated retirement
investments fully accord with ERISA’s
requirements and the authority
conferred by Congress to the
Department in ERISA section 408(a) and
Code section 4975(c)(2) to protect
Retirement Investors from harmful
conflicts of interest.
The Department has specifically
granted this Final Amendment to permit
Independent Producers to receive
compensation that may vary based on
their specific investment
recommendations, such as sales
commissions, that otherwise would be
prohibited by ERISA’s broad categorical
prohibitions on the receipt of such
conflicted compensation by fiduciaries.
However, in order to receive such
compensation when acting as
fiduciaries, Independent Producers
must recommend products only from
Insurers that pay attention to the
conflicts that are inherent in their
compensation models and take special
care to avoid creating or implementing
compensation practices that are
intended, or that a reasonable person
would conclude are likely, to result in
recommendations that do not meet the
Care Obligation or Loyalty Obligation of
this Final Amendment.
However, as discussed above, because
of Insurer concerns about being held
responsible as fiduciaries for the
conduct of Independent Producers
whom they do not hire or control as
33 NAIC

Model Regulation at section 5.B.
Model Regulation at section 5.J.
35 See Staff Bulletin: Standards of Conduct for
Broker-Dealers and Investment Advisers Conflicts
of Interest, Q2, available at https://www.sec.gov/tm/
iabd-staff-bulletin-conflicts-interest.
34 NAIC

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common law employees, the
Department has not conditioned relief
on the Insurer’s acknowledgement of
fiduciary status with respect to the
Independent Producer’s
recommendation of its insurance
products. Instead, it simply requires that
Independent Producers that receive
otherwise prohibited compensation
subject to appropriate oversight and
incentive structures. Under the Final
Amendment, the oversight is conducted
by the same Insurers who create the
incentive structures for the products in
the first place and generally already
have oversight responsibility over
Independent Producers under State law.
The Department understands that
Insurers significantly rely on
educational conferences for
Independent Producers, as commenters
indicated, and that such conferences
and training can promote Retirement
Investors’ interests. Accordingly, the
Department stresses that it is not
prohibiting such conferences. However,
participation in and reimbursement for
these conferences must be structured in
a manner to ensure they are not likely
to cause Independent Producers to make
recommendations that violate this
exemption’s Care Obligation or Loyalty
Obligation. In addition, the Department
notes that properly designed incentives
that are simply aimed at increasing the
overall amount of retirement saving and
investing, without promoting specific
products, would not violate the policies
and procedures requirement.
As noted in the preamble to the Final
Amendment to PTE 2020–02, the
Department also recognizes that it can
be proper to tie attendance at
conferences to appropriate sales
thresholds in certain circumstances (for
example, insurance companies could
not reasonably be expected to provide
training for independent agents who are
not recommending their products). On
the other hand, parties must take special
care to ensure that training conferences
held in vacation destinations are not
designed to incentivize
recommendations that run counter to
Retirement Investor interests. Firms
should structure training events to
ensure that they are consistent with the
Care and Loyalty Obligations.
Recommendations to Retirement
Investors should be driven by the
interests of the investor in a secure
retirement. Certainly, parties should
avoid creating situations where the
training is merely incidental to the
event, and an imprudent
recommendation to a Retirement
Investor is the only thing standing
between an Investment Professional and
a luxury getaway vacation.

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Reviewing Independent Producers
Some commenters raised specific
concerns with the requirement in
Section VII(c)(3), which provides that
the Insurer whose product is
recommended has a prudent process for
determining whether to authorize an
Independent Producer to sell the
Insurer’s annuity contracts and to
protect the Retirement Investor from
Independent Producers who have failed
to adhere to the Impartial Conduct
Standards or who lack the necessary
education, training, or skill. A prudent
process would include review of such
objective materials as customer
complaints, disciplinary history, and
regulatory actions concerning the
Independent Producer, as well as the
Insurer’s review of the Independent
Producer’s training, education, and
conduct with respect to the Insurer’s
own products. Section VII(d)(1)
specifies that Insurers may rely in part
on sampling to conduct their
retrospective reviews, as long as any
sampling or other method is designed to
identify potential violations, problems,
and deficiencies that need to be
addressed.
Some commenters objected to
provisions in this proposed requirement
that would have required a prudent
process ‘‘for taking action to protect
Retirement Investors from Independent
Producers who are likely to fail to
adhere to the Impartial Conduct
Standards,’’ and several commenters
said they do not know how to predict
in advance the likelihood that a
producer is ‘‘likely to fail’’ in the future.
One commenter additionally asked the
Department to state that these
requirements could be limited to
objective criteria such as a criminal
background check, license verification,
credit history check, and similar data
readily available to the Insurer.
In response to these commenters, the
Department has not included the phrase
‘‘or are likely to fail’’ after ‘‘who have
failed’’ in the Final Amendment,
because it may have been read to require
predictive powers, which the
Department did not intend. The
Department also agrees that a prudent
process for reviewing Independent
Producers must include a careful review
of ‘‘objective material,’’ but the
Department does not agree that a
prudent process can be fully specified
in advance by reference to a tightly
limited set of objective materials and
therefore has not adopted changes
requested by commenters to further
narrow the requirements of Section
VII(c)(3).

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Providing Policies and Procedures to the
Department
Proposed Section VII(c)(4) would
have required Insurers to provide their
complete policies and procedures to the
Department upon request within 10
business days of the request. The
provision is also part of the Policies and
Procedures condition in PTE 2020–02
and was subject to comments in
connection with that exemption. As
described in the preamble to the final
amendment to PTE 2020–02, one
commenter expressed support, noting
that this condition would provide a
meaningful incentive for Financial
Institutions to ensure that policies and
procedures are reasonably designed.
Another commenter strongly urged the
Department to eliminate this condition
and instead rely on its subpoena
authority, if necessary. Another
comment requested more time to
provide the certification to the
Department. In response to this
comment, although the Department
expects that the policies and procedures
should be easily located, the
Department also recognizes the
possibility of inadvertent noncompliance because of the tight
timeline. After considering these
comments, the Department has retained
Section VII(c)(4) but extended the time
for Insurers to provide their complete
policies and procedures to the
Department from within 10 business
days as proposed to within 30 days of
request.
Retrospective Review
Under Section VII(d), the Insurer
whose product the Independent
Producer recommends must have a
process for conducting a retrospective
review of each Independent Producer at
least annually that is reasonably
designed to detect and prevent
violations of, and achieve compliance
with, the exemption’s conditions. The
retrospective review also includes a
review of Independent Producers’
documentation of rollover
recommendations and required rollover
disclosure. As part of this review, the
Insurer is expected to prudently
determine whether to continue to
permit individual Independent
Producers to sell the Insurer’s annuity
contracts to Retirement Investors.
Additionally, the Insurer must update
its policies and procedures as business,
regulatory, and legislative changes and
events dictate, and ensure that its
policies and procedures remain
prudently designed, effective, and
compliant with Section VII(c). To
ensure Retirement Investors receive the

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same protections, whether they receive
advice under PTE 2020–02 or PTE 84–
24, the Department has made the
retrospective review conditions
substantively identical, with a few
specific obligations tailored to the
insurance industry. In addition, under
the Proposed Amendment, the Insurer
was expected to give the Independent
Producer the methodology and results of
the retrospective review, including a
description of any non-exempt
prohibited transaction the Independent
Producer engaged in with respect to
investment advice defined under Code
section 4975(e)(3)(B), and instruct the
Independent Producer to correct those
prohibited transactions, report the
transactions to the IRS on Form 5330,
pay the resulting excise taxes imposed
by Code section 4975, and provide the
Insurer with a certification that the
Independent Producer has filed the
Form 5330 within 30 days after the form
is due (including extensions).
Under the Proposed Amendment, the
methodology and results of the
retrospective review had to be reduced
to a written report that is provided to a
Senior Executive Officer of the Insurer.
As proposed, that Senior Executive
Officer also had to certify, annually,
that:
(A) The officer has reviewed the
retrospective review report;
(B) The Insurer has provided
Independent Producers with the
information required under (d)(2) and
has received a certification that the
Independent Producer has filed Form
5330 within 30 days after the form is
due (including extensions);
(C) The Insurer has established
policies and procedures prudently
designed to ensure that Independent
Producers achieve compliance with the
conditions of this exemption, and has
updated and modified the policies and
procedures as appropriate after
consideration of the findings in the
retrospective review report; and
(D) The Insurer has in place a prudent
process to modify such policies and
procedures as set forth in Section
VII(d)(1).
The review, report, and certification
was proposed to be completed no later
than six months following the end of the
period covered by the retrospective
review. The Proposed Amendment
would have required the Insurer to
retain the report, certification, and
supporting data for a period of six years
and make the report, certification, and
supporting data available to the
Department within 10 business days of
request.
Some commenters supported the
retrospective review condition and

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supported having Insurers undertake a
regular process to ensure that their
policies and procedures are reasonably
designed to detect and prevent
violations of, and achieve compliance
with, the conditions of the exemption.
However, other commenters raised
concerns, viewing the condition as
excessive and inefficient. Commenters
asserted that it is both impractical and
unnecessary for Insurers to review each
recommendation and expressed concern
about the volume of recommendations.
One commenter requested confirmation
that testing done as part of the
retrospective review could rely on
standard sampling and testing
techniques. Another commenter pointed
to the language in the preamble to the
Proposed Amendment acknowledging
that insurance companies working with
Independent Producers have less direct
control over the conduct and
compensation of Independent Producers
than over their employees. As a result,
they stated that Insurers would not have
access to the information they would
need to effectively ensure that
Independent Producers fully complied
with the Impartial Conduct Standards
and the other exemption conditions.
One commenter expressed concern that
under the exemption, Independent
Producers are not required to provide
Insurers with sufficient information for
them to be able to conduct the
retrospective review. Some commenters
argued that the Department should
instead rely on the NAIC Model
Regulation’s written report to senior
management which details a review,
with appropriate testing, reasonably
designed to determine the effectiveness
of the insurer’s supervision system, the
exceptions found, and corrective action
taken or recommended, if any.
Some commenters also raised specific
concerns with the Senior Executive
Officer certification requirement. They
noted that other regulators typically
require that certifications provide
assurance that company systems or
procedures are ‘‘reasonably designed to
achieve compliance,’’ a standard that
they asserted was lower than what is
required for Independent Producers to
achieve compliance with impartial
conduct standards. Other commenters
stated that the retrospective review
should not consider the filing of the IRS
Form 5330, arguing this is beyond the
Department’s regulatory authority. A
few commenters raised specific
concerns that Insurers were not the
appropriate party to file Form 5330
under the Code. Others argued that
requiring Insurers to file Form 5300

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interfered with State regulation of
insurance.
One commenter requested more time
to provide the certification to the
Department. In response to this
comment, although the Department
expects that these reports should
already be completed at the time of the
request and easily located, it recognizes
the possibility of inadvertent noncompliance because of the tight timeline
and has modified the requirement to
give Insurers 30 days to provide the
certification.
The Department is finalizing the
retrospective review requirement
because of the fundamental importance
of a regular review process to ensure
that the Policies and Procedures are
working and that Independent
Producers are complying with the
Impartial Conduct Standards. In
response to commenters, the
Department has added to Section (d)(1)
a clarification that Insurers may rely in
part on sampling of each Independent
Producer’s transactions to conduct their
retrospective reviews, as long as any
sampling or other method is designed to
identify potential violations, problems,
and deficiencies that need to be
addressed.
The Department is also making
several other changes to specifics of the
retrospective review provision. To
address concerns from some
commenters about having the Insurer
file Form 5330, the Department is
revising the filing obligation to be the
responsibility of the Independent
Producer, which is a fiduciary, and thus
a ‘‘disqualified person liable for the tax
under Code section 4975 for
participating in a prohibited
transaction.’’ 36 However, the Insurer is
expected to instruct the Independent
Producer to correct those prohibited
transactions, report the transactions to
the IRS on Form 5330, pay the resulting
excise taxes imposed by Code section
4975, and provide the Insurer with a
certification that it has filed Form 5330
within 30 days after the form is due
(including extensions). The Department
is also revising Section VII(d)(3) for
consistency with amended PTE 2020–
02. The methodology and results of the
retrospective review must be reduced to
a written report that is provided to a
Senior Executive Officer of the Insurer.
This is essential for Insurers to know
that their Independent Producers are
actually correcting prohibited
transactions.
The Department is also revising the
Senior Executive Officer certification to
36 IRS Form 5330 instructions https://
www.irs.gov/pub/irs-pdf/i5330.pdf.

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incorporate the amended provisions
regarding Form 5330. Under the Final
Amendment, the required certification
states that the officer has reviewed the
retrospective review report, the Insurer
has provided Independent Producers
with the information required under
(d)(2), and the Insurer has received a
certification that affected Independent
Producers have filed Form 5330 within
30 days after the form is due (including
extensions).
Self-Correction
Section VII(e) allows the Independent
Producer to correct violations to avoid
a non-exempt prohibited transaction in
certain circumstances. Self-correction is
allowed in cases when either (1) the
Independent Producer has refunded any
charge to the Retirement Investor; or (2)
the Insurer has rescinded a mis-sold
annuity, canceled the contract, and
waived the surrender charges. The
correction must occur no later than 90
days after the Independent Producer
learned of the violation or reasonably
should have learned of the violation; the
Independent Producer must notify the
person(s) at the Insurer responsible for
conducting the retrospective review
during the applicable review cycle; and
the violation and correction must be
specifically set forth in the written
report of the retrospective review
required under Section VII(d)(2).
The appropriate remedy for a nonexempt prohibited transaction involving
an annuity purchase is rescission,
which requires the insurer to cancel the
contract and waive surrender charges.
The correction must occur no later than
90 days after the Independent Producer
learned, or reasonably should have
learned, of the violation. Lastly, the
Independent Producer must notify the
person(s) at the Insurer responsible for
conducting the retrospective review
during the applicable review cycle and
the violation and correction must
specifically be set forth in the written
retrospective review report.
One commenter stated that it is
unclear what is exactly meant by a
‘‘mis-sold’’ annuity and what is
supposed to happen if an agent and
Insurer disagree in that regard. Thus,
according to this commenter, it is
unclear how the agent or Insurer in the
case of retrospective review would even
discover any non-exempt prohibited
transaction. This same commenter also
questioned whether all non-exempt
prohibited transactions require
rescission or whether there is a
materiality threshold. This commenter
also stated that the Proposed
Amendment did not address the
common situation where an Insurer

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rescinds an annuity as a matter of
customer service without determining
or admitting any violation of laws or, in
this case, noncompliance with impartial
conduct standards. Finally, this
commenter asked how situations would
be handled where agents and Insurers
disagree on the need for correction
under PTE 84–24.
As discussed in the preamble to PTE
2020–02 in response to comments, the
Department notes that no one is
required to use the self-correction
provision. Furthermore, not all
violations of the exemption can be
corrected under the self-correction
provision. In addition, minor disclosure
failures can be corrected under Section
VII(b)((7), which provides that the
Independent Producer will not fail to
satisfy the disclosure conditions solely
because it makes an error or omission in
disclosing the required information
while acting in good faith and with
reasonable diligence. To avoid a
violation of the exemption, the
Independent Producer must disclose the
correct information as soon as
practicable, but not later than 30 days
after the date on which it discovers or
reasonably should have discovered the
error or omission. Lastly, the
Department notes that merely
rescinding an annuity as a matter of
customer service is not self-correcting if
there was no violation to correct.
While the Insurer may discover
violations eligible for self-correction as
part of its retrospective review under
Section VII(d), it is the Independent
Producer’s obligation to self-correct
under Section VII(e) to avoid the
resulting prohibited transaction and
imposition of an excise tax. If there is
disagreement, the Independent Producer
ultimately has the responsibility as a
fiduciary to decide whether to take
action. Based on what the Insurer learns
through the review process, and the
specific facts and circumstances, a
reasonable Insurer may conclude that it
is imprudent to continue authorizing
that Independent Producer to sell its
annuity contracts and act accordingly.
To the extent that the Independent
Producer does not or cannot correct the
violation, the consequence is that a
prohibited transaction has occurred
with attendant liability for the excise
tax.
As discussed in the proposal to PTE
2020–02, some commenters raised
concerns about the lack of a materiality
threshold, and the requirement that all
mistakes be reported and remediated, no
matter how minor or inadvertent.
However, the self-correction provisions
are measured and proportional to the
nature of the injury. They simply

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require timely correction of the
violation of the law and notice to the
person responsible for retrospective
review of the violation, so that the
significance and materiality of the
violation can be assessed by the
appropriate person responsible for
assessing the effectiveness of the firm’s
compliance oversight. In addition, to
address the commenters’ concern about
the burden associated with the selfcorrection provision, the Department
has deleted the requirement to report
each correction to the Department in
this Final Amendment. This change
should ease the compliance burden.
Furthermore, to the extent parties are
wary of utilizing the self-correction
provision because they would have to
report each self-correction to the
Department, they should feel more
comfortable correcting each violation
they find that is eligible for selfcorrection after this modification. The
Department notes that it may request
Independent Producers to provide
evidence of self-corrections through the
recordkeeping provisions in Section IX.
Eligibility
The Proposed Amendment added
Section VIII which identifies
circumstances under which an
Independent Producer would have
become ineligible to rely on the
exemption for 10 years, and also
circumstances when an entity would
not have been permitted to serve as an
Insurer under this exemption for 10
years. The proposed eligibility
provisions were similar to the
provisions of Section III of PTE 2020–
02 and are intended to promote
compliance with the exemption
conditions. The Department continues
to believe that the eligibility provisions
are important to ensure that
Independent Producers comply with the
obligations of the exemption, subject to
oversight by Insurers that take
compliance with the exemption’s
conditions seriously. Therefore, after
consideration of the comments, the
Department has determined to retain the
eligibility provision of Section VIII, but
it has made several important
modifications that are discussed below.
Under the Final Amendment, an
Independent Producer or Insurer can
become ineligible as a result of a
conviction by: (A) a U.S. Federal or
State court as a result of any felony
involving abuse or misuse of such
person’s employee benefit Plan position
or employment, or position or
employment with a labor organization;
any felony arising out of the conduct of
the business of a broker, dealer,
investment adviser, bank, insurance

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32321

company or fiduciary; income tax
evasion; any felony involving larceny,
theft, robbery, extortion, forgery,
counterfeiting, fraudulent concealment,
embezzlement, fraudulent conversion,
or misappropriation of funds or
securities; conspiracy or attempt to
commit any such crimes or a crime in
which any of the foregoing crimes is an
element; or a crime that is identified or
described in ERISA section 411; or (B)
a foreign court of competent jurisdiction
as a result of any crime, however
denominated by the laws of the relevant
foreign or state government, that is
substantially equivalent to an offense
described in (A) above (excluding
convictions that occur within a foreign
country that is included on the
Department of Commerce’s list of
‘‘foreign adversaries’’ that is codified in
15 CFR 7.4 as amended).
Independent Producers and Insurers
also lose eligibility if they are found or
determined in a final judgment or courtapproved settlement in a Federal or
State criminal or civil court proceeding
brought by the Department, the
Department of the Treasury, the Internal
Revenue Service, the Department of
Justice, a State insurance regulator, or
State attorney general, to have
participated in one or more of the
following categories of misconduct
irrespective of whether the court
specifically considers this exemption or
its terms: (A) engaging in a systematic
pattern or practice of violating the
conditions of this exemption in
connection with otherwise non-exempt
prohibited transactions; (B)
intentionally engaging in conduct that
violates the conditions of this
exemption in connection with otherwise
non-exempt prohibited transactions; or
(C) providing materially misleading
information to the Department, the
Department of the Treasury, the Internal
Revenue Service, the Department of
Justice, a State insurance regulator, or
State attorney general in connection
with the conditions of the exemption.
In addition, Independent Producers
(but not Insurers) will become ineligible
if they are found or determined in a
final judgment or court-approved
settlement in a Federal or State criminal
or civil court proceeding brought by the
Department, the Department of the
Treasury, the Internal Revenue Service,
the Department of Justice, a State
insurance regulator, or State attorney
general, to have engaged in a systematic
pattern or practice of failing to correct
prohibited transactions, report those
transactions to the IRS on Form 5330, or
pay the resulting excise taxes imposed
by Code section 4975 in connection
with non-exempt prohibited

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transactions involving investment
advice under Code section 4975(e)(3)(B).
The Final Amendment specifies that
an Insurer or Independent Producer that
is ineligible to rely on this exemption
may rely on an existing statutory or
separate class prohibited transaction
exemption if one is available or may
apply for an individual prohibited
transaction exemption from the
Department.
Most of the comments the Department
received on eligibility were combined
with the comments submitted under
PTE 2020–02 and were essentially the
same. Those comments directly
submitted under PTE 84–24 are also
very similar to the comments under PTE
2020–02 regarding eligibility. For
additional discussion of the comments
received regarding eligibility please see
the grant notice for PTE 2020–02
published elsewhere in today’s issue of
the Federal Register. Many commenters
variously asserted that the proposed
addition of the eligibility provisions to
the exemptions exceeded the
Department’s authority; undermined
parties’ ability to rely on the
exemptions; unduly broadened the
conditions for eligibility; and would
result in reduced choice and access to
advice for Retirement Investors.
Generally, these commenters requested
that the Department not include the
proposed ineligibility sections in the
Final Amendment and requested that, if
the Department does move forward with
these sections, that it apply the
provisions prospectively.

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Scope of Ineligibility
One commenter claims that the
Proposed Amendment would impose
unreasonably harsh sets of conditions
on both Independent Producers and on
Insurers, under which both would be
under constant threat of loss of the
exemption for a 10-year period and, in
the case of Insurers, loss of the
exemption could be triggered by events
involving other parties over whom the
Insurer has no direct involvement.
Another commenter expressed concern
that the proposed ineligibility
provisions applied too broadly to
insurance producers, insurance carriers
and their foreign and domestic affiliates.
Some commenters objected to the
breadth of the provisions’ application to
‘‘Affiliates’’ and requested that the Final
Amendment instead use the term
‘‘controlled group,’’ which has a clear
and well-defined meaning. Some
commenters similarly objected to the
scope of conduct treated as
disqualifying and asserted that
disqualification should not extend to

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criminal conduct that does not involve
the management of retirement assets.
In response to the commenters, the
Department has decided to use the term
‘‘Controlled Group’’ for purposes of
ineligibility of Insurers under Section
VIII(b) of the exemption and has revised
that Section accordingly. The Final
Amendment also adds Section
VIII(b)(3), which defines Controlled
Group. Under this definition, an entity
is in the same Controlled Group as an
Insurer if the entity (including any
predecessor or successor to the entity)
would be considered to be in the same
‘‘controlled group of corporations’’ as
the Insurer or ‘‘under common control’’
with the Insurer as those terms are
defined in Code section 414(b) and (c)
(and any regulations issued thereunder).
The Department declines, however, to
narrow the Final Amendments’
definition of crimes to only those crimes
that arise out of the provision of
investment advice or the management of
plan assets. The enumerated crimes in
Section VIII reflect egregious
misconduct, typically in a financial
context, that is clearly relevant to the
parties’ willingness and commitment to
comply with important legal
obligations. There is little basis for
concluding that Retirement Investors
should be sanguine or that the
Department should be confident of
compliance when the Independent
Producer or Insurer engages in serious
crimes, such as embezzlement or
financial fraud, but the specific victims
were non-Retirement Investors.
However, to the extent Independent
Producers or Insurers have continued
need for an exemption notwithstanding
such a conviction, they can apply with
the Department for an individual
prohibited transaction exemption that
would include appropriate protective
conditions based on the Department’s
assessment of the particular facts and
circumstances, and the remedial actions
the parties have taken to ensure a
prospective culture of compliance.
Foreign Convictions
Several commenters claimed that the
Department has no basis for expanding
the ineligibility provisions to include
‘‘substantially equivalent’’ foreign
crimes committed by foreign affiliates
and that the inclusion of foreign
affiliates is overbroad and will create
unintended consequences, especially
when the conduct does not need to
relate directly to the provision of
investment advice. These commenters
stated that such inclusion will result in
ineligibility for conduct that is
unrelated to the provision of fiduciary
investment advice and for conduct in

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which the fiduciary has not participated
and about which it has no knowledge.
Another commenter stated ineligibility
could be triggered by events involving
other parties over which the insurer has
no direct involvement, such as the
conviction of an affiliate company of
any of the specified crimes under the
laws of a foreign country.
Several comments regarding PTEs
2020–02 and 84–24 stated that the
proposed ineligibility provisions raised
serious questions of fairness, national
security, and U.S. sovereignty. These
commenters claimed that ineligibility
could result from the conviction of an
affiliate in a foreign court for a violation
of foreign law without due process
protections or without the same level of
due process afforded in the United
States. Some commenters state that it is
not clear that the Department is
equipped to make the ‘‘substantially
equivalent’’ determination and doing so
could result in inconsistency and
unfairness. One commenter agreed that
investment transactions that include
retirement assets are increasingly likely
to involve entities that may reside or
operate in jurisdictions outside the U.S.
and that reliance on the exemptions
therefore must appropriately be tailored
to address criminal activity, whether
occurring in the U.S. or in a foreign
jurisdiction, but noted their concerns
with the potential lack of due process in
foreign jurisdictions.
Other commenters were concerned
that some foreign courts could be
vehicles for hostile governments to
achieve political ends as opposed to
dispensing justice and for interference
in the retirement marketplace for
supposed wrongdoing that is wholly
unrelated to managing retirement assets.
They further noted concerns that these
governments could potentially assert
political influence over fiduciary advice
providers looking to avoid a foreign
criminal conviction.
After considering these comments, the
Department is retaining the inclusion of
foreign convictions in the Final
Amendment. Retirement assets are often
involved in transactions that take place
in entities that operate in foreign
jurisdictions therefore making the
criminal conduct of foreign entities
relevant to eligibility under PTE 84–24.
An ineligibility provision that is limited
to U.S. Federal and State convictions
would ignore these realities and provide
insufficient protection for Retirement
Investors. Moreover, foreign crimes call
into question an Insurer’s and
Independent Producer’s culture of
compliance just as much as domestic
crimes, whether prosecuted
domestically or in foreign jurisdictions.

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The Department does not expect that
questions regarding ‘‘substantially
equivalent’’ will arise frequently,
especially given the Final Amendment’s
use of the term ‘‘Controlled Group’’
instead of ‘‘Affiliate,’’ as discussed
above. But, when these questions do
arise, those impacted may contact the
Office of Exemption Determinations for
guidance, as they have done for many
years.37 As discussed in more detail
below, the one-year Transition Period
that has been added to the exemption
and the ability to apply for an
individual exemption, give parties both
the time and the opportunity to address
any issues about the relevance of any
specific foreign conviction and its
applicability to ongoing relief pursuant
to PTE 84–24. Insurers and Independent
Producers should interpret the scope of
the eligibility provision broadly with
respect to foreign convictions and
consistent with the Department’s
statutorily mandated focus on the
protection of Plans in ERISA section
408(a) and Code section 4975(c)(2). In
situations where a crime raises
particularly unique issues related to the
substantial equivalence of the foreign
criminal conviction, the Insurers and
Independent Producers may seek the
Department’s views regarding whether
the foreign crime, conviction, or
misconduct is substantially equivalent
to a U.S. Federal or State crime.
However, any Insurer or Independent
Producer submitting a request for
review should do so promptly, and
whenever possible, before a judgment is
entered in a foreign conviction.
The exemption for Qualified
Professional Asset Managers (QPAMs),
PTE 84–14, has a similar
disqualification provision and the
Department is not aware that any
foreign convictions have occurred in
foreign nations with respect to the
QPAM exemption that are intended to
harm U.S.-based financial institutions
and believes there is a small likelihood
of such occurrences. Further, the types
of foreign crimes of which the
Department is aware from its experience
37 PTE 84–14 contains a similar eligibility
provision which has long been understood to
include foreign convictions. Impacted parties have
successfully sought OED guidance regarding this
eligibility provision whenever individualized
questions or concerns arise. See, e.g., Prohibited
Transaction Exemption (PTE) 2023–15, 88 FR 42953
(July 5, 2023); 2023–14, 88 FR 36337 (June 2, 2023);
2023–13, 88 FR 26336 (Apr. 28, 2023); 2023–02, 88
FR 4023 (Jan. 23, 2023); 2023–01, 88 FR 1418 (Jan.
10, 2023); 2022–01, 87 FR 23249 (Apr. 19, 2022);
2021–01, 86 FR 20410 (Apr. 19, 2021); 2020–01, 85
FR 8020 (Feb. 12, 2020); PTE 2019–01, 84 FR 6163
(Feb. 26, 2019); PTE 2016–11, 81 FR 75150 (Oct. 28,
2016); PTE 2016–10, 81 FR 75147 (Oct. 28, 2016);
PTE 2012–08, 77 FR 19344 (March 30, 2012); PTE
2004–13, 69 FR 54812 (Sept. 10, 2004).

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processing recent PTE 84–14 QPAM
individual exemption requests for relief
from convictions have consistently
related to the subject institution’s
management of financial transactions
and/or culture of compliance. For
example, the underlying foreign crimes
in those individual exemption requests
have included: aiding and abetting tax
fraud in France (PTE 2016–10, 81 FR
75147 (October 28, 2016) corrected at 88
FR 85931 (December 11, 2023), and PTE
2016–11, 81 FR 75150 (October 28,
2016) corrected at 89 FR 23612 (April 4,
2024)); attempting to peg, fix, or
stabilize the price of an equity in
anticipation of a block offering in Japan
(PTE 2023–13, 88 FR 26336 (April 28,
2023)); illicit solicitation and money
laundering for the purposes aiding tax
evasion in France (PTE 2019–01, 84 FR
6163 (February 26, 2019)); and spot/
futures-linked market price
manipulation in South Korea (PTE
2015–15, 80 FR 53574 (September 4,
2015)).38
However, to address the concern
expressed in the public comments that
convictions have occurred in foreign
nations that are intended to harm U.S.based financial institutions, the
Department has revised Section
VIII(a)(1)(B) and VIII(b)(1)(B) in the
Final Amendment to exclude foreign
convictions that occur within foreign
jurisdictions that are included on the
Department of Commerce’s list of
‘‘foreign adversaries.’’ 39 Therefore, the
Department will not consider foreign
38 On December 12, 2018, Korea’s Seoul High
Court for the 7th Criminal Division (the Seoul High
Court) reversed the Korean Court’s decision and
declared the defendants not guilty; subsequently,
Korean prosecutors appealed the Seoul High Court’s
decision to the Supreme Court of Korea, On
December 21, 2023, the Supreme Court of Korea
affirmed the reversal of the Korean Conviction, and
it dismissed all judicial proceedings against DSK.
39 15 CFR 7.4. The list of foreign adversaries
currently includes the following foreign
governments and non-government persons: The
People’s Republic of China, including the Hong
Kong Special Administrative Region (China); the
Republic of Cuba (Cuba); the Islamic Republic of
Iran (Iran); the Democratic People’s Republic of
Korea (North Korea); the Russian Federation
(Russia); and Venezuelan politician Nicola´s Maduro
(Maduro Regime). The Secretary of Commerce’s
determination is based on multiple sources,
including the National Security Strategy of the
United States, the Office of the Director of National
Intelligence’s 2016–2019 Worldwide Threat
Assessments of the U.S. Intelligence Community,
and the 2018 National Cyber Strategy of the United
States of America, as well as other reports and
assessments from the U.S. Intelligence Community,
the U.S. Departments of Justice, State and
Homeland Security, and other relevant sources. The
Secretary of Commerce periodically reviews this list
in consultation with appropriate agency heads and
may add to, subtract from, supplement, or
otherwise amend the list. Sections VIII(a)(1)(B) and
VIII(b)(1)(B) of the Final Amendment will
automatically adjust to reflect amendments the
Secretary of Commerce makes to the list.

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convictions that occur under the
jurisdiction of the listed ‘‘foreign
adversaries’’ as an ineligibility event
and has added the phrase ‘‘excluding
convictions and imprisonment that
occur within foreign countries that are
included on the Department of
Commerce’s list of ‘‘foreign adversaries’’
that is codified in 15 CFR 7.4.
Due Process
The Department also received several
comments regarding the proposed
ineligibility notice process. The
Proposed Amendment would have
provided that the Department could
issue a written ineligibility notice for
(A) engaging in a systematic pattern or
practice of violating the conditions of
this exemption in connection with
otherwise non-exempt prohibited
transactions; (B) intentionally violating,
or knowingly participating in violations
of, the conditions of this exemption in
connection with otherwise non-exempt
prohibited transactions; (C) engaging in
a systematic pattern or practice of
failing to correct prohibited
transactions, report those transactions to
the IRS on Form 5330, and pay the
resulting excise taxes imposed by Code
section 4975 in connection with nonexempt prohibited transactions
involving investment advice under Code
section 4975(e)(3)(B); or (D) providing
materially misleading information to the
Department in connection with the
conditions of the exemption.
Generally, these comments reflected
the view that the Department had
inappropriately asserted authority to
determine ineligibility without external
review and without appropriate due
process protections. Commenters
stressed that disqualification effectively
imposed a 10-year ban, and many
expressed the view that more
procedural protections were necessary
for such a significant consequence and
that disqualification should be more
tightly linked to failure to meet the
conditions of the exemption. Some
commenters contended that, by leaving
too much discretion to the Department,
the process would create uncertainty
and adversely affect the ability of
Retirement Investors to get sound
advice. Some commenters expressed
concern that the Department’s
ineligibility process was insufficient
because it did not provide a chance for
a hearing before an impartial
administrative judge or Article III judge,
an express right of appeal, and formal
procedures for the presentation of
evidence.
Some commenters on both PTEs
2020–02 and 84–24 also stated that
while the six-month period provided in

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the exemption may be adequate time to
send a notice to Retirement Investors, it
is insufficient time for a financial
institution to determine an alternative
means of complying with ERISA in
order to continue to provide advice to
Retirement Investors. These commenters
requested the Department to revise the
exemption to provide for at least 12
months to make the transition away
from reliance on PTE 84–24 or to find
an alternative means of complying with
ERISA following a finding of
ineligibility.
After consideration of the comments
and to address the due process
concerns, the Department has
determined to modify Sections VIII(a)(2)
and VIII(b)(2) of the ineligibility
provisions. While maintaining the types
of conduct that can lead to ineligibility,
amended Section VIII(a)(2) and
VIII(b)(2) of the Final Amendment
removes the discretion of the
Department from making the
determination of whether the conduct
has occurred and limits disqualification
to court-supervised determinations.
Under the provision as amended,
ineligibility under Section VIII(a)(2) will
occur as a result of an Independent
Producer being found or determined in
a final judgment or court-approved
settlement in a Federal or State criminal
or civil court proceeding brought by the
Department, the Department of the
Treasury, the IRS, the Department of
Justice, a State insurance regulator, or a
State attorney general to have
participated in one or more of the
following categories of conduct
irrespective of whether the court
specifically considers this exemption or
its terms: (A) engaging in a systematic
pattern or practice of conduct that
violates the conditions of this
exemption in connection with otherwise
non-exempt prohibited transactions; (B)
intentionally engaging in conduct that
violates the conditions of this
exemption in connection with otherwise
non-exempt prohibited transactions; (C)
engaging in a systematic pattern or
practice of failing to correct prohibited
transactions, report those transactions to
the IRS on Form 5330, or pay the
resulting excise taxes imposed by Code
section 4975 in connection with nonexempt prohibited transactions
involving investment advice under Code
section 4975(e)(3)(B); or (D) providing
materially misleading information to the
Department, the Department of the
Treasury, the Internal Revenue Service,
the Department of Justice, a State
insurance regulator, or State attorney
general in connection with the
conditions of this exemption.

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Likewise, ineligibility under Section
VIII(b)(2) will occur as a result of an
Insurer being found or determined in a
final judgment or court-approved
settlement in a Federal or State criminal
or civil court proceeding brought by the
Department, the Department of the
Treasury, the IRS, the Department of
Justice, a State insurance regulator, or a
State attorney general to have
participated in one or more of the
following categories of conduct
irrespective of whether the court
specifically considers this exemption or
its terms: (A) engaging in a systematic
pattern or practice of violating the
conditions of this exemption in
connection with otherwise non-exempt
prohibited transactions; (B)
intentionally engaging in conduct that
violates the conditions of this
exemption in connection with otherwise
non-exempt prohibited transactions; or
(C) providing materially misleading
information to the Department, the
Department of the Treasury, the Internal
Revenue Service, the Department of
Justice, a State insurance regulator, or
State attorney general in connection
with the conditions of this exemption.
Ineligibility under Section VIII(a)(2)
and (b)(2) will therefore operate in the
same manner as ineligibility for a
criminal conviction defined in Section
VIII(a)(1) and (b)(1), subject to the
timing and scope provisions in Section
VIII(c). An Insurer or Independent
Producer will become ineligible only
after a court has found or determined in
a final judgment or approved settlement
that the conduct listed in Section
VIII(a)(2) or (b)(2) has occurred. In
response to concerns raised by
commenters, the Department has made
changes so that any ineligibility occurs
only after a conviction, a court’s final
judgment, or a court approved
settlement.
Thus, ineligibility will follow a
determination in civil or criminal court
proceedings subject to the full array of
procedural protections associated with
legal proceedings overseen by courts
and will include the normal judicial
oversight associated with convictions,
final judgments, and court approved
settlements. In addition to providing
sufficient due process, this revised
ineligibility provision (i.e., having
ineligibility occur only after a
conviction, a court’s final judgment, or
a court approved settlement) gives those
facing ineligibility ample notice and
time to prepare for ineligibility and the
resulting One-Year Transition Period
discussed below. An ineligible Insurer
or Independent Producer would become
eligible to rely on this exemption again
if there is a subsequent judgment

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reversing the conviction or final
judgement.
Timing of Ineligibility and One-Year
Transition Period
Several commenters to both PTE
2020–02 and PTE 84–24 expressed
concern that the eligibility provisions
would apply retrospectively and urged
the Department to confirm that
ineligibility under the exemption would
occur only on a prospective basis after
finalization of the amendment to the
exemption. Additionally, some
commenters asserted that the six-month
period provided in the Proposed
Amendment following ineligibility
would be insufficient for Insurers and
Independent Producers to prepare for
any inability to provide retirement
investment advice for a fee, determine
an alternative means of complying with
ERISA, and to prepare and submit an
individual exemption. Another
commenter stated that providing a
longer 12-month period would enable
Insurers and Independent Producers to
find alternative compliant means to
help retirement investors and would
enable retirement investors to continue
to receive investment recommendations
in their best interest.
One commenter claimed that the
sudden real or impending loss of
significant numbers of providers, or
even a handful of the largest among
them, as the result of their
disqualification would cause significant
disruption as Plans would have no more
than six months to find suitable
replacements and would impose harm
on Retirement Investors who have hired
a disqualified firm.
The Department confirms that
ineligibility under Section VIII will be
prospective such that only convictions,
final judgments, or court-approved
settlements occurring after the
Applicability Date of this Final
Amendment will cause ineligibility. In
addition, the six-month lag period for
eligibility has been replaced with the
One-Year Transition Period in Section
VIII(c)(2). Accordingly, while Section
VIII(c) now provides that a party
becomes ineligible upon the date of
conviction, final judgment, or courtapproved settlement that occurs after
the Applicability Date of the exemption,
the One-Year Transition period provides
Insurers and Independent Producers
ample time in which to prepare for the
loss of the exemptive relief under PTE
84–24, determine alternative means for
compliance, prepare and protect
Retirement Investors, and apply for an
individual exemption.
The Final Amendment indicates that
relief under the exemption during the

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Transition Period is available for a
maximum period of one year after the
Ineligibility Date if the Insurers or
Independent Producer, as applicable,
submits a notice to the Department at
PTE84-24@dol.gov within 30 days after
ineligibility begins under Section
VIII(c). No relief will be available for
any transactions (including past
transactions) effected during the OneYear Transition Period unless the
Insurer or Independent Producer
complies with all the conditions of the
exemption during such one-year period.
The Department notes that it included
the One-Year Transition Period in the
Final Amendment to reduce the costs
and burdens associated with the
possibility of ineligibility, and to give
Insurers or Independent Producers an
opportunity to apply to the Department
for individual prohibited transaction
exemptions with appropriate protective
conditions.
The One-Year Transition Period
begins on the date of the conviction, the
final judgment (regardless of whether
that judgment remains under appeal), or
court approved settlement. Insurers or
Independent Producers that become
ineligible to rely on this exemption may
rely on a statutory prohibited
transaction exemption, such as ERISA
section 408(b)(14) and Code section
4975(d)(17), or separate administrative
prohibited transaction exemption if one
is available, or may seek an individual
prohibited transaction exemption from
the Department. In circumstances where
the Insurers or Independent Producers
become ineligible, the Department
believes the interests of Retirement
Investors are best protected by the
procedural protections, public record,
and notice and comment process
associated with the individual
exemption applications process. When
processing individual exemption
applications, the Department has unique
authority to efficiently gather evidence,
consider the issues, and craft protective
conditions that meet the statutory
standard. If the Department concludes,
consistent with the statutory standards
set forth in ERISA section 408(a) and
Code section 4975(c)(2), that an
individual exemption is appropriate,
Retirement Investors can make their
own independent determinations
whether to engage in otherwise
prohibited transactions with the
Insurers or Independent Producers.
The Department encourages any
Insurers or Independent Producers
facing allegations that could result in
ineligibility to begin the individual
exemption application process as soon
as possible. If the applicant becomes
ineligible and the Department has not

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granted a final individual exemption,
the Department will consider granting
retroactive relief, consistent with its
policy as set forth in 29 CFR 2570.35(d);
the Department cautions that retroactive
exemptions may require additional
prospective compliance.
Form 5330
The Department received comments
that expressed concern over the
imposition of ineligibility based on the
Independent Producers’ failure to make
the required Code section 4975 excise
tax filing and to comply with IRS Form
5330 filing requirements and excise tax
payment obligations. Several
commenters stated this provision is
unreasonable and that the Department
has no statutory or regulatory
enforcement authority to base
ineligibility on these Code provisions
and claimed this was overreach by the
Department. These commenters urged
the Department to remove this provision
from the exemption.
The Department is retaining
ineligibility based on failure to correct
prohibited transactions, report those
transactions to the IRS on Form 5330 or
pay the resulting excise taxes imposed
by Code section 4975 in connection
with non-exempt prohibited
transactions involving investment
advice as defined under Code section
4975(e)(3)(B). The excise tax is the
Congressionally imposed sanction for
engaging in a non-exempt prohibited
transaction and provides a powerful
incentive for compliance with the
participant-protective terms of this
exemption. Insisting on compliance
with the statutory obligation to pay the
excise tax provides an important
safeguard for compliance with the tax
obligation when violations occur and
focuses the institution’s attention on
instances where the conditions of this
exemption have been violated, resulting
in a non-exempt prohibited transaction.
Moreover, the failure to satisfy this
condition calls into question the
Independent Producer’s commitment to
regulatory compliance, as is critical to
ensuring adherence to the conditions of
this exemption including the Impartial
Conduct Standards.
By including this provision in the
Final Amendment, the Department does
not claim authority to impose taxes
under the Code, and leaves
responsibility for collecting the excise
tax and managing related filings to the
IRS. Since an obligation already exists
to file Form 5330 when parties engage
in non-exempt prohibited transactions,
the Department is merely conditioning
relief in the exemption on their
compliance with existing law. The

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condition provides important
protections to Retirement Investors by
enhancing the existing protections of
PTE 84–24.
Moreover, as discussed above,
ineligibility under Section VIII(a)(2)(C)
would only occur following a court
finding that an Independent Producer
engaged in a systematic pattern or
practice of failing to correct prohibited
transactions, report those transactions to
the IRS on Form 5330 or pay the
resulting excise taxes imposed by Code
section 4975. Imposing ineligibility only
after such determinations in connection
with court proceedings removes the
Department from the determination
process and provides ample due
process.
Alternative Exemptions
An Insurer or Independent Producer
that is ineligible to rely on this
exemption may rely on a statutory or
separate administrative prohibited
transaction exemption if one is available
or may request an individual prohibited
transaction exemption from the
Department. To the extent an applicant
requests retroactive relief in connection
with an individual exemption
application, the Department will
consider the application in accordance
with its retroactive exemption policy as
set forth in 29 CFR 2570.35(d). The
Department may require additional
prospective compliance conditions as a
condition of providing retroactive relief.
A few commenters also expressed
concern that the Alternative Exemptions
process was not sufficient. One
commenter in particular expressed
concern with the length and expense of
seeking to obtain an individual
exemption, claiming this would result
in harm to Plans.
As discussed above, the violations
that would trigger ineligibility are
serious, call into question the parties’
willingness or ability to comply with
the obligations of the exemption, and
have been determined in court
supervised proceedings. In such
circumstances, it is important that the
parties seek individual relief from the
Department if they would like to
continue to have the benefit of an
exemption that permits them to engage
in conduct that would otherwise be
illegal. As part of such an on the record
process, they can present evidence and
arguments on the scope of the
compliance issues, the additional
conditions necessary to safeguard
Retirement Investor interests, and their
ability and commitment to comply with
protective conditions designed to ensure
prudent advice and avoid the harmful

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Federal Register / Vol. 89, No. 81 / Thursday, April 25, 2024 / Rules and Regulations

impact of dangerous conflicts of
interest.
One commenter also speculated that
the loss of the exemption based on
ineligibility would effectively require
the Insurer to acknowledge fiduciary
status in connection with any request
for an individual exemption. The
Department notes, however, that it
would base any decisions on whether to
grant such an exemption and the
possible conditions it would include in
such exemption, including the need for
a fiduciary acknowledgment, on the
particular facts and circumstances that
were presented by an applicant.

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Recordkeeping
Section IX provides that Independent
Producers and Insurers must maintain
for a period of six years from the date
of the covered transaction records
demonstrating compliance with this
exemption and make such records
available to the extent permitted by law,
including 12 U.S.C. 484, to any
authorized employee of the Department
or the Department of the Treasury,
including such employees of the
Internal Revenue Service. While the
Department had proposed a broader
recordkeeping condition affording
greater public access to the records, the
Department has determined that the
recordkeeping provisions for advice
under PTE 84–24 should be narrowed
consistent with those in PTE 2020–02.
Although the proposed broader
recordkeeping condition was consistent
with other exemptions, the Department
understands commenters’ concerns
about broader access to the documents
and has concern that broad access to the
documents could have a
counterproductive impact on the
formulation and documentation of
appropriate firm oversight and control
of recommendations by Independent
Producers. Therefore, the Department
has determined this narrower
recordkeeping language satisfies ERISA
section 408(a) and Code section
4975(c)(2). However, the Department
intends to monitor compliance with the
exemption closely and may, in the
future, expand the recordkeeping
requirement if appropriate. Any future
amendments would be preceded by
notice and an opportunity for public
comment.

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Executive Order 12866 and 13563
Statement
Executive Orders 12866 40 and
13563 41 direct agencies to assess all
costs and benefits of available regulatory
alternatives. If regulation is necessary,
agencies must choose a regulatory
approach that maximizes net benefits,
including potential economic,
environmental, public health and safety
effects; distributive impacts; and equity.
Executive Order 13563 emphasizes the
importance of quantifying costs and
benefits, reducing costs, harmonizing
rules, and promoting flexibility.
Under Executive Order 12866,
‘‘significant’’ regulatory actions are
subject to review by the Office of
Management and Budget (OMB). As
amended by Executive Order 14094,42
entitled ‘‘Modernizing Regulatory
Review,’’ section 3(f) of Executive Order
12866 defines a ‘‘significant regulatory
action’’ as any regulatory action that is
likely to result in a rule that may: (1)
have an annual effect on the economy
of $200 million or more (adjusted every
three years by the Administrator of the
Office of Information and Regulatory
Affairs (OIRA) for changes in gross
domestic product); or adversely affect in
a material way the economy, a sector of
the economy, productivity, competition,
jobs, the environment, public health or
safety, or State, local, Territorial, or
Tribal governments or communities; (2)
create a serious inconsistency or
otherwise interfere with an action taken
or planned by another agency; (3)
materially alter the budgetary impacts of
entitlement grants, user fees, or loan
programs or the rights and obligations of
recipients thereof; or (4) raise legal or
policy issues for which centralized
review would meaningfully further the
President’s priorities or the principles
set forth in the Executive order, as
specifically authorized in a timely
manner by the Administrator of OIRA in
each case. It has been determined that
this amendment is significant within the
meaning of section 3(f)(1) of the
Executive Order. Therefore, the
Department has provided an assessment
of the amendment’s costs, benefits, and
transfers, and OMB has reviewed the
rulemaking.
40 58

FR 51735 (Oct. 4, 1993).
FR 3821 (Jan. 21, 2011).
42 88 FR 21879 (Apr. 6, 2023).
41 76

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Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C.
3506(c)(2)(A)), the Department solicited
comments concerning the information
collection requirements (ICRs) included
in the proposed rulemaking. The
Department received comments that
addressed the burden estimates used in
the analysis of the proposed rulemaking.
The Department reviewed these public
comments in developing the paperwork
burden analysis and subsequently
revised the burden estimates in the
amendments to the PTEs discussed
below.
ICRs are available at RegInfo.gov
(https://www.reginfo.gov/public/do/
PRAMain). Requests for copies of the
ICR or additional information can be
sent to the PRA addressee:
By mail: James Butikofer, Office of
Research and Analysis, Employee
Benefits Security Administration, U.S.
Department of Labor, 200 Constitution
Avenue NW, Room N–5718,
Washington, DC 20210
By email: ebsa.opr@dol.gov
The OMB will consider all written
comments that they receive within 30
days of publication of this notice.
Written comments and
recommendations for the information
collection should be sent to https://
www.reginfo.gov/public/do/PRAMain.
Find this particular information
collection by selecting ‘‘Currently under
30-day Review—Open for Public
Comments’’ or by using the search
function.
As discussed in detail above, PTE 84–
24, as amended, will exclude
compensation received as a result of the
provision of investment advice from the
existing relief provided in Section II,
which will be redesignated as Section
II(a) and add new Sections VI and -XI
and redesignate the definitions as
Section X, which will provide relief for
investment advice limited to the narrow
category of transactions in which an
independent, insurance-only agent, or
Independent Producer, provides
investment advice to a Retirement
Investor regarding an annuity or
insurance contract. Additionally, as
amended, the exemption requires the
Independent Producers engaging in
these transactions to adhere to certain
Impartial Conduct Standards, including
acting in the best interest of the Plans
and IRAs when providing advice.

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Financial institutions and investment
professionals that engage in all other
investment advice transactions,
including those involving captive or
career insurance agents, will rely on
PTE 2020–02 to receive exemptive relief
for investment advice transactions. PTE
84–24 will require certain new
disclosures, annual retrospective
reviews, and compliance with policy
and procedure requirements. These
requirements are ICRs subject to the
PRA. Readers should note that the
burden discussed below conforms to the
requirements of the PRA and is not the
incremental burden of the changes.43

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1.1 Preliminary Assumptions
In the analysis discussed below, a
combination of personnel will perform
the tasks associated with the ICRs at an
hourly wage rate of $165.29 for an
Independent Producer, $65.99 for
clerical personnel, and $165.71 for a
legal professional, and $133.24 for a
senior executive.44
The Department does not have
information on how many Retirement
Investors, including Plan beneficiaries
and participants and IRA owners,
receive disclosures electronically from
investment advice fiduciaries. For the
purposes of this analysis in the
Proposed Amendment, the Department
assumed that the percent of Retirement
Investors receiving disclosures
electronically would be similar to the
percent of Plan participants receiving
disclosures electronically under the
Department’s 2002 and 2020 electronic
disclosure rules, which was 3.9 percent
at the time.45 The Department received
comment regarding this assumption
presenting anecdotal evidence that the
rate would be substantially lower,
presumably due to the different
characteristics of IRA and annuity
consumers compared with actively
working Plan participants. Accordingly,
the Department revisited and revised
43 For a more detailed discussion of the marginal
costs associated with the Amendments to PTE 84–
24, refer to the Regulatory Impact Analysis (RIA) in
the Notice of Proposed Rulemaking published
elsewhere in today’s edition of the Federal Register.
44 Internal Department calculation based on 2023
labor cost data. For a description of the
Department’s methodology for calculating wage
rates, see https://www.dol.gov/sites/dolgov/files/
EBSA/laws-and-regulations/rules-and-regulations/
technical-appendices/labor-cost-inputs-used-inebsa-opr-ria-and-pra-burden-calculations-june2019.pdf.
45 The Department estimates that 58.3 percent of
Retirement Investors receive electronic disclosures
under the 2002 electronic disclosure safe harbor
and that an additional 37.8 percent of Retirement
Investors receive electronic disclosures under the
2020 electronic disclosure safe harbor. In total, the
Department estimates 96.1 percent (58.3 percent +
37.8 percent) of Retirement Investors receive
disclosures electronically.

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the estimate to 71.8 percent of the
disclosures sent to Retirement Investors
being sent electronically, and the
remaining 28.2 percent sent by mail.46
Furthermore, the Department estimates
that communications between
businesses (such as disclosures sent
from one financial institution to
another) will be 100 percent electronic.
The Department assumes any
documents sent by mail would be sent
by First Class Mail, incurring a postage
cost of $0.68 for each piece of mail.47
Additionally, the Department assumes
that documents sent by mail would
incur a material cost of $0.05 for each
page.
1.2 Costs Associated With Satisfying
Conditions for Transactions Described
in Section III(a)–(f)
Insurance agents and brokers, pension
consultants, insurance companies, and
investment company principal
underwriters are expected to continue to
take advantage of the exemption for
transactions described in Section III(a)–
(f). The Department estimates that 3,030
insurance agents and brokers, pension
consultants, and insurance companies
will continue to take advantage of the
exemption for transactions described in
Section III(a)–(f). This estimate is based
on the following assumptions:
• According to the Insurance
Information Institute, in 2022, there
were 3,328 captive agents, which are
insurance agents who work for only one
insurance company.48 The Insurance
Information Institute also found that life
and annuity insurers accounted for 47.4
percent of all net premiums for the
insurance industry in 2022.49 Thus, the
Department estimates there are 1,577
46 The Department used information from a
Greenwald & Associates survey which reported that
84 percent of retirement plan participants find
electronic delivery acceptable, and data from the
National Telecommunications and Information
Administration internet Use Survey which
indicated that 85.5 percent of adults 65 and over
use email on a regular basis, which is used as a
proxy for internet fluency and usage. Therefore, the
assumption is calculated as: (84% find electronic
delivery acceptable) × (85.5% are internet fluent) =
71.8% are internet fluent and find electronic
delivery acceptable.
47 United States Post Service, First-Class Mail,
(2023), https://www.usps.com/ship/first-classmail.htm.
48 Insurance Information Institute, A Firm
Foundation: How Insurance Supports the
Economy—Captives by State, 2021–2022, https://
www.iii.org/publications/a-firm-foundation-howinsurance-supports-the-economy/a-50-statecommitment/captives-by-state (last visited August
25, 2023).
49 Insurance Information Institute, Facts +
Statistics: Industry Overview—Insurance Industry
at-a-Glance, https://www.iii.org/fact-statistic/factsstatistics-industry-overview.

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32327

insurance agents and brokers relying on
the existing provisions.50
• The Department expects that
pension consultants would continue to
rely on the existing PTE 84–24. Based
on 2021 Form 5500 data, the
Department estimates that 1,011
pension consultants serve the retirement
market.51
In the Department’s 2016 Regulatory
Impact Analysis, it estimated that 398
insurance companies wrote annuities.52
The Department requested information
on how the number of insurance
companies underwriting annuities has
changed since then but received no
meaningful insight. The Department
revisited the estimate and settled on a
revised approach to bring the estimate
more current. To form a basis for its
assumption of insurance companies
affected by the rule, the Department
looked at the estimate of 398 insurance
companies writing annuities used in the
2016 RIA. This assumption was based
on data of insurance companies that
reported receiving either individual or
group annuity considerations in 2014.53
Comparatively, there were 710 firms in
the direct life insurance carrier industry
in 2014.54 By these measures, in 2014,
insurance companies writing annuities
accounted for 56 percent of the direct
life insurance carrier industry.
To gain more insight into annuity
underwriting, as it pertains to the life
insurance industry, the Department
looked to the evolution of premiums. In
2014, annuity premiums accounted for
55 percent of life and annuity insurance
50 The number of captive insurance agents is
estimated as: 3,328 captive agents × 47.4% = 1,577
captive insurance agents serving the annuity
market.
51 Internal Department of Labor calculations
based on the number of unique service providers
listed as pension consultants on the 2021 Form
5500 Schedule C.
52 This estimate is based on 2014 data from SNL
Financial on life insurance companies that reported
receiving either individual or group annuity
considerations. (See Employee Benefits Security
Administration, Regulating Advice Markets
Definition of the Term ‘‘Fiduciary’’ Conflicts of
Interest—Retirement Investment Advice Regulatory
Impact Analysis for Final Rule and Exemptions,
(April 2016), https://www.dol.gov/sites/dolgov/files/
EBSA/laws-and-regulations/rules-and-regulations/
completed-rulemaking/1210-AB32-2/ria.pdf.)
53 Employee Benefits Security Administration,
Regulating Advice Markets Definition of the Term
‘‘Fiduciary’’ Conflicts of Interest—Retirement
Investment Advice Regulatory Impact Analysis for
Final Rule and Exemptions, pp. 108–109 & 136–
137, (April 2016), https://www.dol.gov/sites/dolgov/
files/EBSA/laws-and-regulations/rules-andregulations/completed-rulemaking/1210-AB32-2/
ria.pdf.
54 United States Census Bureau, 2014 SUSB
Annual Data Tables by Establishment Industry,
(December 2016).

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premiums.55 By 2020, annuities had
fallen to 48 percent of life and annuity
insurance premiums. Between 2020 and
2022, the percentage remained constant
around 48 percent.56
• While premiums are not directly
related to the number of firms, the
Department thinks it is reasonable to
assume that the percent of life insurance
companies underwriting annuities may
have declined slightly since 2014. For
the purposes of this analysis, the
Department assumed that approximately
half of life insurance companies
underwrite annuities. According to the
2021 Statistics of U.S. Businesses
release, the most recent data available,
there were 883 firms in the direct life
insurance carrier industry.57 The
Department estimates that 442 life
insurance companies underwrite
annuities and will be affected by the
amendments.
In addition, investment company
principal underwriters may rely on the
exemption. In the Department’s
experience, investment company
principal underwriters almost never use
PTE 84–24. Therefore, the Department
assumes that 20 investment company
principal underwriters will engage in
one transaction annually under PTE 84–
24, 10 of which are assumed to service
Title I Plans and 10 are assumed to
service IRAs.
Further, the Department estimates
that there are approximately 765,124
ERISA covered pension Plans 58 and
approximately 67.8 million IRAs.59 The
Department estimates that 7.5 percent of
Plans are new accounts or new financial
advice relationships 60 and that 3
percent of Plans will use the exemption
for covered transactions.61 Based on
55 Insurance Information Institute, Life/Annuity
Insurance Income Statement, 2014–2018, https://
www.iii.org/table-archive/222464/file.
56 Insurance Information Institute, Facts +
Statistics: Life Insurance, (2024), https://
www.iii.org/fact-statistic/facts-statistics-lifeinsurance#Direct%20Premiums%20Written
%20By%20Line,%20Life/Annuity%20Insurance,
%202020-2022.
57 United States Census Bureau, 2021 SUSB
Annual Data Tables by Establishment Industry,
(December 2023).
58 Employee Benefits Security Administration,
United States Department of Labor, Private Pension
Plan Bulletin: Abstract of 2021 Form 5500 Annual
Reports, Table A1 (2023; forthcoming).
59 Cerulli Associates, 2023 Retirement-End
Investor, Exhibit 5.12. The Cerulli Report, (2023).
60 EBSA identified 57,575 new plans in its 2021
Form 5500 filings, or 7.5 percent of all Form 5500
pension plan filings.
61 In 2020, 7 percent of traditional IRAs were held
by insurance companies. (See Investment Company
Institute, The Role of IRAs in US Households’
Saving for Retirement, 2020, 27(1) ICI Research
Perspective (2021), https://www.ici.org/system/files/
attachments/pdf/per27-01.pdf.) This number has
been adjusted downward to 3 percent to account for

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these assumptions, the Department
estimates that 1,727 Plans would be
affected by the Final Amendments to
PTE 84–24.62
The Department requested, but did
not receive, comments on the
assumptions used in the Proposed
Amendment regarding annuity contracts
affected by the rulemaking. However, in
conjunction with updating its estimate
of the number of Independent Producers
the Department has revised its estimate
of annual annuity transactions affected
by the amendments to PTE 84–24,
increasing the estimate from 52,449 to
500,000.
While there are several sources of
information regarding total sales or size
of the annuity market that are generally
consistent, the same is not true for
transaction activity, which can vary
dramatically across quarters and
between sources. To improve its
estimate of annual annuity transactions
affected by the amendments to PTE 84–
24, the Department tried two
approaches which both relied on
LIMRA total fixed annuity sales data.
2023 LIMRA data indicates that 34
percent of fixed annuity sales were
fixed-indexed annuities.63 Assuming
sales are proportionate to transactions
and using data from the Retirement
Income Journal which reported roughly
109,863 fixed-indexed annuity products
were sold in the fourth quarter of
2021,64 annualizing this number to
439,452 the Department estimates that
roughly 838,000 additional fixed-rate
annuities (other than fixed-indexed)
were sold over the same period, for a
total of 1.3 million fixed annuity
transactions in 2021 using this
approach.
The Department considered an
alternative approach which estimated
the number of annual transactions by
dividing the total sales data from
LIMRA described above by the average
contract size as reported by the
Retirement Income Journal, which is
$147,860. Using the same proportional
methodology described above, this
approach yields an estimate of roughly
1.9 million transactions.
the fact that some transactions are not covered by
this exemption.
62 765,124 plans × 7.525 percent of plans are new
× 3 percent of plans with relationships with
insurance agents or pension consultants ≈ 1,727
plans.
63 LIMRA, Preliminary U.S. Individual Annuity
Sales Survey, Fourth Quarter 2023, (2023), https://
www.limra.com/siteassets/newsroom/fact-tank/
sales-data/2023/q4/4q-annuity-sales.pdf.
64 Pechter, K., Moore, S., Fixed Indexed
Annuities: What’s Changed (or Not) in Ten Years,
(June, 2022), https://retirementincomejournal.com/
article/fixed-indexed-annuities-a-retrospective/.

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Using this average of these estimates,
the Department then applied the
following assumptions to arrive at its
final estimate. Using McKinsey data on
annuity distribution channels, the
Department assumes that third-party
distribution channels account for 81
percent of the annuity sales volume.65
The Department further assumes that 80
percent of these annuities are held in
ERISA covered accounts or purchased
with ERISA Plan assets 66 and that 49
percent of transactions will rely on
investment advice.67 This results in an
estimate of roughly 500,000 ERISA
covered fixed annuity transactions
involving an Independent Producers
providing advice to an investor.68
The Final Amendment excludes some
entities currently relying on the
exemption to receive compensation in
connection with the provision of
investment advice. As such, the
Department acknowledges that the
estimates discussed above may
overestimate the entities able to rely on
the exemption for relief for the
transactions described in Section III(a)–
(f).
1.2.1 Written Authorization From the
Independent Plan Fiduciary
Based on the estimates discussed
above, the Department estimates that
authorizing fiduciaries for 1,727 Plans
and authorizing fiduciaries for 500,000
65 McKinsey & Company, Redefining the future of
life insurance and annuities distribution, (January,
2024), https://www.mckinsey.com/industries/
financial-services/our-insights/redefining-thefuture-of-life-insurance-and-annuities-distribution.
66 The Department recognized that not all
annuities sold are covered by this rulemaking,
however data is not available to estimate what
portion are covered with any sense of precision.
Examples of non-covered transactions include use
of non-retirement account funds to purchase an
annuity and noncovered public sector plans being
rolled into an annuity. The Department views 80%
as a reasonable assumption as it includes most
transactions while acknowledging that not all
transactions are covered under this rulemaking. As
a point of reference, each percentage point this
assumption is changed results in a 1.25 percentage
point change in the resulting estimate of ERISA
covered transactions involving an Independent
Producer providing advice to an investor.
67 U.S. Retirement-End Investor 2023:
Personalizing the 401(k) Investor Experience
Fostering Comprehensive Relationships,’’ The
Cerulli Report, Exhibit 6.04.
68 The final estimate is the rounded average of the
two approaches described above. The calculations
are as follows: [{[(109,863 fixed-indexed contracts
written × 4 quarters) ÷ 34% as the percentage of
fixed-indexed to all fixed-rate contracts] × 81% sold
by Independent Producers × 49% sold using
investment advice × 80% ERISA covered
transactions} + {[(148,860 avg. contract size ÷95.6
billion in annual fixed-indexed sales) ÷34% as the
percentage of fixed-indexed to all fixed-rate
contracts] × 81% sold by Independent Producers ×
49% sold using investment advice × 80% ERISA
covered transactions} ÷2] ≈ 501,013, rounded to
500,000.

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IRA transactions will be required to
send an advance written authorization
to the 3,040 financial institutions for
IRAs 69 for exemptive relief for the
transactions described in Section III(a)–
(f).
In the Plan universe, it is assumed
that a legal professional will spend five
hours per Plan reviewing the
disclosures and preparing an
authorization form. In the IRA universe,

it is assumed that a legal professional
working on behalf of the financial
institution for IRAs will spend three
hours drafting an authorization form for
IRA holders to sign. This results in an
hour burden of 17,756 hours with an
equivalent cost of $2.9 million.70
The Department expects that Plans
and IRAs will send the written
authorization through already
established electronic means, and thus,

32329

the Department does not expect plans to
incur any cost to send the authorization.
In total, as presented in the table
below, the written authorization
requirement, under the new conditions
of relief, is expected to result in an
annual total hour burden of 17,756
hours with an equivalent cost of
$2,942,374.

TABLE 1—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE WRITTEN AUTHORIZATION
Year 1
Activity
Burden hours

Subsequent years

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Legal ................................................................................................................

17,756

$2,942,374

17,756

$2,942,374

Total ..........................................................................................................

17,756

2,942,374

17,756

2,942,374

1.2.2

Disclosure

Based on the estimates discussed
above, the Department estimates that
approximately 3,050 financial
institutions 71 will continue to utilize
the exemption for exemptive relief for
the transactions described in Section
III(a)–(f) for each plan and IRA. In total,
the Department estimates that 3,040
entities will prepare disclosures for
plans and 3,040 entities would prepare
disclosures for IRAs. The Department
assumes that an in-house attorney will
spend one hour of legal staff time
drafting the disclosure for plans and one
hour of legal staff time drafting the
disclosure for IRAs. This results in an
hour burden of approximately 6,080

hours with an equivalent cost of
$1,007,508.72
The Department expects that the
disclosures for Plans will be distributed
through already established electronic
means, and thus, the Department does
not expect plans to incur any cost to
send the disclosures. The Department
lacks information on the proportion of
the IRA contracts that will occur via
Plan rollovers and therefore assumes all
disclosures will be sent directly to the
IRA customer. As previously stated, the
Department estimates that 71.8 percent
of disclosures for IRAs will be sent
electronically at no additional burden.
The remaining 28.2 percent of
authorizations will be mailed. For paper
copies, a clerical staff member is

assumed to require two minutes to
prepare and mail the required
information to the IRA customer. This
information will be sent to the 122,318
IRA customers plus the 10 investment
company principal underwriters for
IRAs entering into an agreement with an
insurance agent, pension consultant, or
mutual fund principal underwriter, and
based on the above, the Department
estimates that this requirement results
in an hour burden of 1,150 hours with
an equivalent cost of $75,881.73
In total, as presented in the table
below, providing the pre-authorization
materials is expected to impose an
annual total hour burden of 7,230 hours
with an equivalent cost of $1,083,388.

TABLE 2—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE DISCLOSURE
Year 1
Activity

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Burden hours

Subsequent years

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Legal ................................................................................................................
Clerical .............................................................................................................

6,080
1,150

$1,007,508
75,881

6,080
1,150

$1,007,508
75,881

Total ..........................................................................................................

7,230

1,083,388

7,230

1,083,388

The Department assumes that this
information will include seven pages
with 71.8 percent of disclosures
distributed electronically through

traditional electronic methods at no
additional burden, and the remaining
28.2 percent of disclosures will be
mailed. Accordingly, the Department

69 This includes 3,030 insurance agents and
brokers, pension consultants, and insurance
companies and 10 investment company
underwriters servicing IRAs.
70 The burden is estimated as: (1,727 plans × 5
hours) + (3,040 financial institutions × 3 hours) ≈
17,756 hours. A labor rate of approximately $165.71
is used for a legal professional. The labor rate is
applied in the following calculation: [(1,727 plans
× 5 hours) + (3,040 financial institutions × 3 hours)]
× $165.71 per hour ≈ $2,942,374.

71 This includes 3,030 insurance agents and
brokers, pension consultants, and insurance
companies and 20 investment company
underwriters servicing plans and IRAs.
72 The burden is estimated as: 3,040 financial
institutions × (1 hour for plans + 1 hour for IRAs)
≈ 6,080 hours. A labor rate of approximately
$165.71 is used for a legal professional. The labor
rate is applied in the following calculation: [3,040
financial institutions × (1 hour for plans + 1 hour
for IRAs)] × $165.71 per hour ≈ $1,007,508.

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73 The burden is estimated as: [(122,318 IRAs +
10 investment company principal underwriters for
IRAs × 28.2 percent paper) × (2 minutes ÷ 60
minutes)] ≈ 1,150 hours. A labor rate of $65.99 is
used for a clerical worker. The labor rate is applied
in the following calculation: [(122,318 IRAs + 10
investment company principal underwriters for
IRAs × 28.2 percent paper) × (2 minutes ÷ 60
minutes)] × $65.99 ≈ $75,881.

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estimates an annual cost burden of
approximately $35,531.74

TABLE 3—MATERIAL AND POSTAGE COST ASSOCIATED WITH THE DISCLOSURE
Year 1
Equivalent
burden cost

Pages

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Subsequent years
Equivalent
burden cost

Pages

Material and Postage Cost ..............................................................................

7

$35,531

7

$35,531

Total ..........................................................................................................

7

35,531

7

35,531

1.3 Costs Associated With Satisfying
Conditions for Transactions Described
in Section III(g)
The amendment provides relief for
Independent Producers that provide
fiduciary investment advice and engage
in the following transactions, including
as part of a rollover, as a result of
providing investment advice within the
meaning of ERISA section 3(21)(A)(ii)
and Code section 4975(e)(3)(B) and
regulations thereunder: (1) The receipt,
directly or indirectly, by an
Independent Producer of reasonable
compensation; and (2) the sale of a nonsecurity annuity contract or other
insurance product that does not meet
the definition of ‘‘security’’ under
Federal securities laws. The Department
expects that the Insurers covered by this
Final Amendment will be insurance
companies that directly write annuities.
The amendments outline conditions
pertaining to disclosure, policies and
procedures, and retrospective reviews
that need to be satisfied to rely on the
exemption. These conditions are
tailored to protect Retirement Investors
from the specific conflicts that arise for
Independent Producers when providing
investment advice to Retirement
Investors regarding the purchase of an
annuity. The Department received
several comments suggesting that its
estimate for the number of Independent
Producers was too low. While
commenters provided estimates that
were substantially higher, the
commenters did not provide any
documentation or basis for their
suggestions. In response, the
Department analyzed employment data
from the March 2023 Current
Population Survey to identify the
number of self-employed workers in the

‘‘Finance and Insurance’’ industry
whose occupation was listed as
‘‘Insurance Sales Agents.’’ This
identified 86,410 self-employed
insurance sales agents in the Finance
and Insurance industry.75 While the
Department assumes that not all of these
independent producers will sell
annuities, it utilizes this number while
recognizing that it likely reflects an
over-estimate.
Insurance companies are primarily
regulated by states and no single
regulator maintains a nationwide count
of insurance companies. Although state
regulators track insurance companies,
the total number of insurance
companies cannot be calculated by
aggregating individual state totals,
because individual insurance
companies often operate in multiple
states. As mentioned above, the
Department has updated its estimate of
the number of insurance companies
writing annuities for the 398 presented
in the 2016 Regulatory Impact Analysis,
to 442 in this rulemaking.
Some of these insurance companies
may not sell any annuity contracts to
IRAs or plans. Because of these data
limitations, the Department includes all
442 insurance companies in its cost
estimate, though this likely represents
an upper bound.
Insurance companies sell insurance
products through (1) captive insurance
agents that work for an insurance
company as employees or as
independent contractors who
exclusively sell the insurance
company’s products and (2)
independent agents who sell multiple
insurance companies’ products.
Independent agents may contract
directly with an insurance company or

through an intermediary. In recent
years, the market has seen a shift away
from captive distribution toward
independent distribution.76
The Department does not have strong
data on the number of insurance
companies using captive agents or
Independent Producers. In the Proposed
Amendment, the Department assumed
that the number of companies selling
annuities through captive or
independent distribution channels
would be proportionate to the sales
completed by each respective channel.
The Department requested comments on
this assumption but did not receive any
directly addressing it. In the Proposed
Amendment, the Department based its
estimate on the percent of sales
completed by independent agents and
career agents in the individual annuities
distribution channel. This resulted in an
estimate that approximately 46 percent
of sales are done through captive
distribution channels and 54 percent of
sales are done through independent
distribution channels.
One source stated that 81 percent of
individual annuities sales are conducted
by non-captive, or independent,
agents.77 The Department assumes that
the percent of companies selling
annuities through an independent
distribution channel is proportionate to
the percent of sales conducted through
an independent distribution channel.
The Department recognizes that the
distribution of sales by distribution
channel is likely different from the
distribution of insurance companies by
distribution channel.
Also, the Department recognizes that
some insurance companies use multiple
distribution channels, though the
Department did not receive any

74 The material cost is estimated as: [(122,318 IRA
authorizations + 10 investment company principal
underwriters for IRAs) × 28.2 percent paper] ×
[$0.68 + ($0.05 × 7 pages)] = $35,531.
75 EBSA Tabulations based off the March 2023
Current Population Survey.
76 Ramnath Balasubramanian, Rajiv Dattani,
Asheet Mehta, & Andrew Reich, Unbundling Value:
How Leading Insurers Identify Competitive
Advantage, McKinsey & Company, (June 2022),

https://www.mckinsey.com/industries/financialservices/our-insights/unbundling-value-howleading-insurers-identify-competitive-advantage;
Sheryl Moore, The Annuity Model Is Broken, Wink
Intel, (June 2022), https://www.winkintel.com/2022/
06/the-annuity-model-is-broken-reprint/.
77 This study considers sales by independent
agents, independent broker-dealers, national brokerdealers, and banks to be sales in the independent
distribution channel, while sales by career agents

and direct means are considered to be in the captive
distribution channel. (See Ramnath
Balasubramanian, Christian Boldan, Matt Leo,
David Schiff, & Yves Vontobel, Redefining the
Future of Life Insurance and Annuities Distribution,
McKinsey & Company (January 2024), https://
www.mckinsey.com/industries/financial-services/
our-insights/redefining-the-future-of-life-insuranceand-annuities-distribution.)

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Federal Register / Vol. 89, No. 81 / Thursday, April 25, 2024 / Rules and Regulations
comment on how common the use of
multiple distribution channels is.
Looking at the 10 insurance companies
with highest annuity sales in 2022, one
relied on captive distribution channels,
seven relied on independent
distribution channels, and two relied on
both.78 Accordingly, most insurance
companies appear to primarily use
either captive distribution or
independent distribution. However, any
entity using a captive insurance
channel, or using both captive and
independent channels, likely has
already incurred most of the costs of
this rulemaking under PTE 2020–02.
Costs are estimated by assuming that
entities using a third-party distribution
system, even if they also use captive
agents, will incur costs for the first time
under amended PTE 84–24. This
assumption leads to an overestimation
of the cost incurred by insurance
companies.
Following from this assumption, the
Department estimates that 84 insurance
companies distribute annuities through
captive channels and will rely on PTE
2020–02 for transactions involving
investment advice. Further, the
Department estimates that 358
insurance companies distribute
annuities through independent channels
and will rely on PTE 84–24 for
transactions involving investment
advice.79
The Department estimates that 70 of
the 442 insurance companies are large
entities.80 In the Proposed Amendment,
the Department requested data on how
distribution channels differed by size of
insurance company but did not receive
any comments. In the absence of data

the intermediary for its services. The
costs for the intermediary to prepare the
disclosure may result in an increase in
commission. The Department expects
that this increase in commission will
not exceed the cost of preparing the
disclosure in house.

relating to the distribution channel
differences by firm size, the Department
uses the aggregate rate in its estimates.
That is, the Department assumes that 19
percent of large insurance companies
(13 insurance companies) sell annuities
through captive distribution channels,
while the remaining 71 of the 84
insurance companies distributing
annuities through captive channels are
assumed to be small.81 Additionally, 81
percent of large insurance companies
(57 insurance companies) sell annuities
through independent distribution
channels, while the remaining 301 of
the 358 insurance companies selling
annuities through independent
distribution channels are assumed to be
small.82
1.3.1

1.3.1.1 Written Acknowledgement
That the Independent Producer Is a
Fiduciary by the Independent Producer
The Department is including a model
statement in the preamble to PTE 84–24
that details what should be included in
a fiduciary acknowledgment for
Independent Producers.83 The
Department assumes that the time
associated with preparing the
disclosures will be minimal. Further,
these disclosures are expected to be
uniform in nature. Accordingly, the
Department estimates that these
disclosures will not take a significant
amount of time to prepare.
Due to the nature of Independent
Producers, the Department assumes that
most Insurers will make draft
disclosures available to Independent
Producers pertaining to their fiduciary
status. However, the Department
expects that a small percentage of
Independent Producers may draft their
own disclosures. The Department
assumes that a legal professional for all
358 Insurers and an insurance sales
agent for 5 percent of Independent
Producers, or 4,320 Independent
Producers, will spend 30 minutes to
produce a written acknowledgement in
the first year. This results in an
estimated burden of approximately
2,339 hours with an equivalent cost of
$386,657 in the first year.84

Disclosures

As discussed above, the Department
assumes that 86,410 Independent
Producers service the retirement market,
selling the products of 358 insurance
companies. For more generalized
disclosures, the Department assumes
that insurance companies will prepare
and provide disclosures to Independent
Producers selling their products.
However, some of the disclosures are
tailored specifically to the Independent
Producer and-or the transaction. The
Department assumes that these
disclosures will need to be prepared by
the Independent Producer themselves.
The Department recognizes that some
may rely on intermediaries in the
distribution channel to prepare more
specific disclosures; however, the
Department expects that the costs
associated with the preparation would
be covered by commissions retained by

TABLE 4—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE FIDUCIARY ACKNOWLEDGEMENT
Year 1
Activity
Burden hours

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Legal ................................................................................................................
Insurance Sales Agent ....................................................................................

78 Annuity sales are based on LIMRA, U.S.
Individual Fixed Annuity Sales Breakouts, 2022,
https://www.limra.com/siteassets/newsroom/facttank/sales-data/2022/q4/2022-ye--fixed-breakoutresults.pdf. Information on distribution channels is
based on review of insurance company websites,
SEC filings of publicly held firms, and other
publicly available sources.
79 The number of insurance companies using
captive distribution channels is estimated as 442 ×
81% ≈ 358 insurance companies. The number of
insurance companies using independent
distribution channels is estimated as 442–358 ≈ 84
insurance companies.
80 LIMRA estimates that, in 2016, 70 insurers had
more than $38.5 million in sales. See LIMRA Secure
Retirement Institute, U.S. Individual Annuity
Yearbook: 2016 Data, (2017).

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179
2,160

81 The number of large insurance companies
using a captive distribution channel is estimate as:
70 large insurance companies × 19% ≈ 13 insurance
companies. The number of small insurance
companies using a captive distribution channel is
estimated as: 84 insurance companies—13 large
insurance companies ≈ 71 small insurance
companies.
82 The number of large insurance companies
using an independent distribution channel is
estimate as: 70 large insurance companies × 81% ≈
57 insurance companies. The number of small
insurance companies using a captive distribution
channel is estimated as: 358 insurance companies—
57 large insurance companies ≈ 301 small insurance
companies.
83 85 FR 82798, 82827 (Dec. 18, 2020). The model
statement was also included in Frequently Asked

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Subsequent years

Equivalent
burden cost
$29,630
357,026

Burden hours
0
0

Equivalent
burden cost
$0
0

Questions in April 2021, New Fiduciary Advice
Exemption: PTE 2020–02 Improving Investment
Advice for Workers & Retirees Frequently Asked
Questions, Q13, (April 2021), https://www.dol.gov/
sites/dolgov/files/ebsa/about-ebsa/our-activities/
resource-center/faqs/new-fiduciary-adviceexemption.pdf.
84 The burden is estimated as: [(358 Insurers +
4,320 Independent Producers) × (30 minutes ÷ 60
minutes)] ≈ 2,339 hours. A labor rate of
approximately $165.71 is used for a legal
professional and $165.29 is used for an
independent producer. The labor rates are applied
in the following calculation: [(358 Insurers × (30
minutes ÷ 60 minutes)) × $165.71] + [(4,320
Independent Producers × (30 minutes ÷ 60
minutes)) × $165.71] ≈ $386,657.

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TABLE 4—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE FIDUCIARY ACKNOWLEDGEMENT—Continued
Year 1
Activity
Burden hours
Total ..........................................................................................................

1.3.1.2 Written Statement of the Care
Obligation and Loyalty Obligation
As discussed above, the Department
assumes that 86,410 Independent
Producers service the retirement market,
selling the products of 358 Insurers. Due

Subsequent years

Equivalent
burden cost

2,339

386,657

Burden hours

Equivalent
burden cost

0

0

an insurance sales agent for 5 percent of
Independent Producers, or 4,320
Independent Producers, will spend 60
minutes to prepare the statement in the
first year. This results in a burden of
4,678 hours with an equivalent cost of
$773,313 in the first year.85

to the nature of Independent Producers,
the Department assumes that most
Insurers will make draft disclosures
available to Independent Producers,
pertaining to the annuities they offer.
The Department assumes that an inhouse attorney for all 358 Insurers and

TABLE 5—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE WRITTEN STATEMENT OF THE BEST INTEREST
STANDARD OF CARE OWED
Year 1
Activity
Burden hours

Subsequent years

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Legal ................................................................................................................
Insurance Sales Agent ....................................................................................

358
4,320

$59,260
714,053

0
0

$0
0

Total ..........................................................................................................

4,678

773,313

0

0

1.3.1.3. Written Description of All
Material Facts
As discussed above, the Department
assumes that 86,410 Independent
Producers service the retirement market,
selling the products of 358 insurance
companies. For disclosures tailored
more specifically to an individual
Independent Producer, the Department
assumes that the disclosure will need to
be prepared by the Independent
Producer. The Department recognizes
that many Independent Producers may

Accordingly, the Department assumes
that all 86,410 Independent Producers
in this analysis would need to prepare
the disclosure. The Department assumes
that, for each of these Independent
Producers, an attorney will spend three
hours and five hours of legal staff time
drafting the written description for
small and large entities, respectively.
This results in an hour burden of
260,967 hours with an equivalent cost of
$43,244,858 in the first year.86

not have the internal resources to
prepare such disclosure. The
Department expects that some may rely
on intermediaries in the distribution
channel to prepare the disclosures and
some may seek external legal support.
However, the Department expects that
the costs associated with the
preparation will be covered by
commission retained by the
intermediary for its services or by the
fee paid to external legal support. As
such, the Department still attributes this
cost back to the Independent Producer.

TABLE 6—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE ALL MATERIAL FACTS
Year 1
Activity

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Burden hours

Subsequent years

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Legal ................................................................................................................

260,967

$43,244,858

0

$0

Total ..........................................................................................................

260,967

43,244,858

0

0

85 The burden is estimated as: (358 Insurers +
4,320 Independent Producers) × 1 hour ≈ 4,678
hours. A labor rate of approximately $165.71 is
used for a legal professional and $165.29 for an
independent producer. The labor rates are applied
in the following calculation: [(358 Insurers × 1 hour

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× $165.71) + (4,320 Independent Producers × 1 hour
× $165.29)] = $773,313.
86 The burden is estimated as: [(85,451 small
independent producers × 3 hours) + (869 large
independent producers × 5 hours)] ≈ 260,967
burden hours. Applying the labor rate of $165.71 is

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used for a legal professional. The labor rate is
applied in the following calculation: [(85,451 small
independent producers × 3 hours) + (869 large
independent producers × 5 hours)] × $165.71 =
$43,244,858.

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Federal Register / Vol. 89, No. 81 / Thursday, April 25, 2024 / Rules and Regulations
1.3.1.4—Before Recommending an
Annuity, Engaging in a Rollover, or
Making a Recommendation to a Plan
Participant as to the Post-Rollover
Investment of Assets Currently Held in
a Plan, the Independent Producer Must
Document Its Conclusions as to Whether
the Recommendation Is in the Investor’s
Best Interest
The amendment requires an
Independent Producer to provide a
disclosure to investors that documents
their consideration as to whether a
recommended annuity or rollover is in

the Retirement Investor’s best interest.
Due to the nature of this disclosure, the
Department assumes that the content of
the disclosure will need to be prepared
by the Independent Producer for each
transaction. The Department recognizes
that some may rely on intermediaries in
the distribution channel, and some may
seek external legal support to assist with
drafting the disclosures. However, the
Department expects that most
Independent Producers will prepare the
disclosure themselves.
For the purposes of this analysis, and
as developed in a preceding section, the

Department estimates that 500,000
Retirement Investors will receive
documentation on whether the
recommended annuity is in their best
interest each year.
The Department assumes that, for
each of these Retirement Investors, an
Independent Producer will spend 30
minutes of their time drafting the
documentation. This results in an
estimated hour burden of 250,000 hours
with an equivalent cost of $41.3 million
annually.87

TABLE 7—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE ROLLOVER DOCUMENTATION
Year 1
Activity
Burden hours

Subsequent years

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Insurance Sales Agent ....................................................................................

250,000

$41,322,500

250,000

$41,322,500

Total ..........................................................................................................

250,000

41,322,500

250,000

41,322,500

1.3.1.5 Mailing Cost for Disclosures
Sent From Independent Producers to
Retirement Investors
As discussed at the beginning of the
cost section, the Department assumes
that 28.2 percent of disclosures would
be mailed. Accordingly, of the estimated
500,000 affected Retirement Investors,

141,000 Retirement Investors are
estimated to receive paper disclosures.88
The Department further estimates that
10% of these Retirement Investors, or
14,100, will request a second, more
comprehensive disclosure related to the
Independent Producer’s compensation.
For paper copies, the Independent
Producer is assumed to require two

minutes to prepare and mail the primary
disclosure packet to the Retirement
Investors, and 10 minutes to prepare
and mail the second compensation
disclosure, upon request. This
requirement results in an estimated
hour burden of 13,503 hours with an
equivalent cost of $2,231,966.89

TABLE 8—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH PREPARING THE DISCLOSURES
Year 1
Activity
Burden hours

Subsequent years

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Insurance Sales Agent ....................................................................................

13,503

$2,231,966

13,503

$2,231,966

Total ..........................................................................................................

13,503

2,231,966

13,503

2,231,966

The Department assumes that this
information will include seven pages,
and that a second, optional

compensation disclosure will be two
pages, resulting in an annual cost

burden for material and paper costs of
$156,228.90

TABLE 9—MATERIAL COST ASSOCIATED WITH THE GENERAL DISCLOSURES
Year 1
Activity

Equivalent
burden cost

Pages

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General Disclosures ........................................................................................
Compensation Disclosure ................................................................................

87 The burden is estimated as: 500,000 rollovers
× (30 minutes ÷ 60 minutes) = 250,000 hours. A
labor rate of approximately $165.29 is used for an
Independent Producer. The labor rate is applied in
the following calculation: [500,000 rollovers × (30
minutes ÷ 60 minutes)] × $165.29 = $41,322,500.
88 This is estimated as: (500,000 Retirement
Investors × 28.2%) = 141,000 paper disclosures.

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2

89 This is estimated as: [141,000 paper disclosures
× (2 minutes ÷ 60 minutes)] + [14,100 paper
disclosures × (10 minutes) ÷ 60 minutes)] = 13,503
hours. A labor rate of $165.29 is used for an
Independent Producer. The labor rate is applied in
the following calculation: [141,000 paper
disclosures × (2 minutes ÷ 60 minutes)] + [14,100

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Subsequent years

$145,230
10,998

Equivalent
burden cost

Pages
7
2

$145,230
10,998

paper disclosures × (10 minutes ÷ 60 minutes)] ×
$165.29= $2,231,966.
90 This is estimated as: {141,000 rollovers
resulting in a paper disclosure × [$0.68 postage +
($0.05 per page × 7 pages)]} + {14,100 secondary
disclosures × [$0.68 postage + ($0.05 per page × 2
pages)]} = $156,228.

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TABLE 9—MATERIAL COST ASSOCIATED WITH THE GENERAL DISCLOSURES—Continued
Year 1
Activity

Equivalent
burden cost

Pages
Total ..........................................................................................................

Additionally, Independent Producers
will be required to send the
documentation to the Insurer. The
Department expects that such
documentation will be sent
electronically and result in a de minimis
burden.
1.3.2

Policies and Procedures

1.3.2.1 Insurers Must Establish,
Maintain, and Enforce Written Policies
and Procedures for the Review of Each
Recommendation Before an Annuity Is
Issued to a Retirement Investor, and the
Insurer Review Its Policies and
Procedures at Least Annually
As discussed above, the Department
estimates that 358 Insurers will need to
meet this requirement, of which 301 are
estimated to be small and 57 are
estimated to be large.91 The Department
assumes that, for each large insurance
company, an in-house attorney will
spend 40 hours of legal staff time
drafting the written description, and for
each small insurance company, an inhouse attorney will spend 20 hours of

Subsequent years

9

156,228

legal staff time. This results in an hour
burden of 8,286 hours with an
equivalent cost of $1,373,123 in the first
year.92
In the following years, the Department
assumes for each insurance company,
an in-house attorney will spend five
hours of legal staff time reviewing the
policies and procedures. This results in
an hour burden of 1,788 hours with an
equivalent cost of $296,302 in
subsequent years.93
The Final Amendment also requires
Insurers to provide their complete
policies and procedures to the
Department upon request. Based upon
prior experience, the Department
estimates that it will request three
policies and procedures in the first year
and one in subsequent years for entities
relying on PTE 84–24.94 The resulting
cost is estimated at $49 in the first year,
and $17 in subsequent years for a
clerical worker to prepare and fulfil the
request.95
Insurers will also be required to
review each of the Independent
Producer’s recommendations before an

Equivalent
burden cost

Pages
9

156,228

annuity is issued to a Retirement
Investor to ensure compliance with the
Impartial Conduct Standards and other
conditions of this exemption. This
requirement is consistent with the
language in NAIC’s 2010 model
regulation 275, Suitability in Annuity
Transactions,96 and the 2020 revisions
to NAIC Model Regulation 275, which
expanded the suitability standard to a
best interest standard.97 Most states
have adopted some form of the NAIC
Model Regulation 275.98 Accordingly,
the Department expects that Insurers
will be prepared to undergo this review
and approval process. The Department
assumes that it will take a financial
manager, with a labor rate of $198.25, an
average of 30 minutes to review and
provide a decision to the Independent
Producer on rollover recommendations.
Therefore, the Department estimates
that this will have an equivalent cost of
$49.6 million annually.99 The combined
estimated burden associated with
policies and procedures is presented
below in Table 10.

TABLE 10—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH POLICIES AND PROCEDURES
Year 1
Activity

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Burden hours

Subsequent years

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Legal ................................................................................................................
Clerical .............................................................................................................
Financial Manager ...........................................................................................

8,286
0.75
250,000

$1,373,123
49
49,562,500

1,788
0.25
250,000

$296,302
17
49,562,500

Total ..........................................................................................................

258,287

50,935,672

251,788

49,858,818

91 The number of large insurance companies
using an independent distribution channel is
estimated as: (70 large insurance companies x 81%)
≈ 57 insurance companies. The number of small
insurance companies using an independent
distribution channel is estimated as: (358 insurance
companies—57 large insurance companies) ≈ 301
small insurance companies.
92 This is estimated as: [(301 small insurance
companies × 20 hours) + (57 large insurance
companies × 40 hours)] ≈ 8,286 hours. A labor rate
of $165.71 is used for a legal professional. The labor
rate is applied in the following calculation: [(301
small insurance companies × 20 hours) + (57 large
insurance companies × 40 hours)] × $165.71 ≈
$1,373,123.
93 This is estimated as: 358 insurance companies
× 5 hours ≈ 1,788 hours. A labor rate of $165.71 is
used for a legal professional. The labor rate is

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applied in the following calculation: (358 insurance
companies × 5 hours) × $165.71 ≈ $296,302.
94 The number of requests in the first year is
estimated as: 358 Insurers × (165 requests in PTE
2020–02 ÷18,632 Financial Institutions in PTE
2020–02) ≈ 3 requests. The number of requests in
subsequent years is estimated as: 358 insurance
companies × (50 requests in PTE 2020–02 ÷18,632
Financial Institutions in PTE 2020–02) ≈ 1 request.
95 The burden in the first year is estimated as: 3
requests × (15 minutes ÷ 60 minutes) = 0.75 hours.
A labor rate of $65.99 is used for a clerical worker.
The labor rate is applied in the following
calculation: 3 requests × (15 minutes ÷ 60 minutes)
× $65.99 = $49.49. The burden in subsequent years
is estimated as: 1 request × (15 minutes ÷ 60
minutes) = 0.25 hours. A labor rate of $65.99 is used
for a clerical worker. The labor rate is applied in
the following calculation: 1 request × (15 minutes
÷ 60 minutes) × $65.99 = $16.50.

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96 NAIC Model Suitability Regulations,
§ 6(F)(1)(d) (2010), https://naic.soutronglobal.net/
Portal/Public/en-GB/RecordView/Index/25201.
97 NAIC Model Suitability Regulations,
§ 6(C)(1)(d) (2020), https://content.naic.org/sites/
default/files/inline-files/MDL-275.pdf.
98 As of October of 2021, only three states had not
adopted some form of NAIC Model Regulation 275.
(See A.D. Banker & Company, Annuity Best Interest
State Map and FAQs, (October 2021), https://
blog.adbanker.com/annuity-best-interest-state-mapand-faqs).
99 The burden is calculated as: 500,000
transactions × (30 minutes ÷ 60 minutes) ≈ 250,000
hours. A labor rate of $198.25 is used for a financial
manager. The labor rate is applied in the following
calculation: [500,000 transactions × (30 minutes ÷
60 minutes)] × $198.25 ≈ $49,562,500.

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Federal Register / Vol. 89, No. 81 / Thursday, April 25, 2024 / Rules and Regulations
1.3.3

Retrospective Review

The Final Amendment requires
Insurers to conduct a retrospective
review at least annually. The review
will be required to be reasonably
designed to prevent violations of and
achieve compliance with (1) the
Impartial Conduct Standards, (2) the
terms of this exemption, and (3) the
policies and procedures governing
compliance with the exemption. The
review will be required to evaluate the
effectiveness of the supervision system,
any noncompliance discovered in
connection with the review, and
corrective actions taken or
recommended, if any. Insurers will also
be required to provide the Independent
Producer with the underlying
methodology and results of the
retrospective review. For the Final

Amendment, the Department has stated
that Insurers may use sampling in their
review of an Independent Producer’s
transactions so long as any sampling or
other method is designed to identify
potential violations, problems, and
deficiencies that need to be addressed.

analysis, the Department assumes that,
on average, each Independent Producer
sells the products of three Insurers.
From each of these Insurers, they may
sell multiple products. As such, the
Department assumes that each year,
insurance companies would need to
prepare a total of 259,230 retrospective
reviews,100 or on average, each
insurance company will need to prepare
approximately 725 retrospective
reviews.101 The Department assumes
that, for each Independent Producer
selling an insurance company’s
products, a legal professional at the
insurance company would spend one
hour time, on average, drafting the
retrospective review. This results in an
estimated hour burden of 259,230 hours
with an equivalent cost of $43.0
million.102

1.3.3.1 The Insurance Company Must
Conduct a Retrospective Review, at
Least Annually, for Each Independent
Producer That Sells the Insurance
Company’s Annuity Contracts
The Department estimates that 358
Insurers will need to meet this
requirement. For this requirement the
information collection is documenting
the findings of the retrospective review.
The Department lacks data on, for a
given insurance company, how many
Independent Producers, on average, sell
their annuities. For the purposes of this

TABLE 11—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE RETROSPECTIVE REVIEW
Year 1
Activity
Burden hours

Subsequent years

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Legal ................................................................................................................

259,230

$42,957,003

259,230

$42,957,003

Total ..........................................................................................................

259,230

42,957,003

259,230

42,957,003

1.3.3.2 Certification by the Senior
Executive Officer of the Insurance
Company

The Department assumes it will take
a Senior Executive Officer four hours to
review and certify a report which details

the retrospective review. This results in
an annual hour burden of 1,430 hours
with an equivalent cost of $190,594.103

TABLE 12—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE CERTIFICATION BY THE SENIOR EXECUTIVE
OFFICER
Year 1
Activity
Burden hours

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Senior Executive Officer ..................................................................................

1,430

$190,594

1,430

$190,594

Total ..........................................................................................................

1,430

190,594

1,430

190,594

1.3.3.3 The Insurance Company
Provides to the Independent Producer
the Methodology and Results of the
Retrospective Review

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Subsequent years

The Department assumes that the
insurance company would provide the

methodology and results electronically.
The Department estimates that it would
take clerical staff five minutes to
prepare and send each of the estimated
259,230 retrospective reviews. This
results in an annual hour burden of
approximately 21,603 hours with an

equivalent cost of $1,425,549 104 The
Department expects that the results
would be provided electronically and
thus does not expect there to be any
material costs with providing
Independent Producers with the
retrospective review.

100 This is estimated as: 86,410 Independent
Producers × 3 insurance companies covered ≈
259,230 retrospective reviews.
101 This is estimated as: 259,230 retrospective
reviews ÷ 358 entities ≈ 725 retrospective reviews,
on average.
102 This is estimated as: 259,230 retrospective
reviews × 1 hour ≈ 259,230 hours. A labor rate of

$165.71 is used for a legal professional. The labor
rate is applied in the following calculation:
(259,230 retrospective reviews × 1 hour) × $165.71
≈ $42,957,003.
103 This is estimated as: 358 insurance companies
× 4 hours ≈ 1,430 hours. A labor rate of $133.24 is
used for a Senior Executive Officer. The labor rate
is applied in the following calculation: (358

insurance companies × 4 hours) × $133.24 ≈
$190,594.
104 This is estimated as: 259,230 retrospective
reviews × (5 minutes ÷ 60 minutes) ≈ 21,603 hours.
A labor rate of $65.99 is used for a clerical worker.
The labor rate is applied in the following
calculation: [259,230 retrospective reviews × (5
minutes ÷ 60 minutes)] × $65.99 ≈ $1,425,549.

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Federal Register / Vol. 89, No. 81 / Thursday, April 25, 2024 / Rules and Regulations

TABLE 13—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE PROVISION OF THE RESULTS OF THE
RETROSPECTIVE REVIEW
Year 1
Activity

Subsequent years

Equivalent
burden cost

Burden hours

Burden hours

Equivalent
burden cost

Clerical .............................................................................................................

21,603

$1,425,549

21,603

$1,425,549

Total ..........................................................................................................

21,603

1,425,549

21,603

1,425,549

1.3.4

Self-Correction

The amendment requires an
Independent Producer that chooses to
use the self-correction provision of the
exemption to notify the Insurer of any
corrective actions taken. As discussed
above, the Insurer must discuss
corrective actions in the retrospective
review. The Department does not have
sufficient information to estimate how
often violations will occur, or on how
often Independent Producers will
choose to use the self-correction
provisions of the amendment. However,
the Department expects that such

violations and corrections will be rare.
For illustration, the Department
assumes that one percent of transactions
will result in self-correction, this would
result in 5,000 notifications of selfcorrection being sent by Independent
Producers to Insurers. The Department
estimates that it will take an
Independent Producer 30 minutes, on
average, to draft and send a notification
to the Insurer, resulting in an estimated
burden of 2,500 hours and an annual
cost of $413,225.105
The self-correction provisions of this
rulemaking allow entities to correct
violations of the exemption in certain

circumstances, when either (1) the
Independent Producer has refunded any
charge to the Retirement Investor or (2)
the Insurer has rescinded a mis-sold
annuity, canceled the contract, and
waived the surrender charges. Without
the self-correction provisions, an
Independent Producer would be
required to report those transactions to
the IRS on Form 5330 and pay the
resulting excise taxes imposed by Code
section 4975 in connection with nonexempt prohibited transactions
involving investment advice under Code
section 4975(e)(3)(B).

TABLE 14—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH SELF-CORRECTION
Year 1

Subsequent years

Activity

Equivalent
burden cost

Burden hours

Equivalent burden cost

Burden hours

Clerical ...............................

2,500 .................................

$413,225 ...........................

2,500 .................................

$413,225

Total ...........................

2,500 .................................

413,225 .............................

2,500 .................................

413,225

1.3.5

Recordkeeping Requirement

The Final Amendment incorporates a
new provision in PTE 84–24 that is
similar to the recordkeeping provision
in PTE 2020–02. In the Proposed
Amendment, the Department proposed
a broader recordkeeping requirement.

For this analysis, the Department
considers the cost for Insurers and
Independent Producers complying with
the recordkeeping requirements. The
Department estimates that the
additional time needed to maintain
records to be consistent with the

exemption would take two hours for an
Independent Producer and two hours
for a legal professional at an insurer,
resulting in an hour burden of 173,535
hours and an equivalent cost of $28.7
million.106

TABLE 14—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE RECORDKEEPING REQUIREMENT
Year 1
Activity

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Burden hours

Subsequent years

Equivalent
burden cost

Burden hours

Equivalent
burden cost

Legal ................................................................................................................

173,535

$28,683,939

173,535

$28,683,939

Total ..........................................................................................................

173,535

28,683,939

173,535

28,683,939

105 The burden is estimated as: [500,000
transaction × 1% of transactions resulting in selfcorrection × (30 minutes ÷ 60 minutes)] ≈ 2,500
hours. A labor rate of $165.29 is used for an
Independent Producer. The labor rate is applied in
the following calculation: [500,000 transaction ×

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1% of transactions resulting in self-correction × (30
minutes ÷ 60 minutes)] × $165.29 ≈ $413,225.
106 This is estimated as: (86,410 Independent
Producers + 358 insurance companies) × 2 hours ≈
173,535 hours. A labor rate of $165.29 is used for
an Independent Producer and a rate of $165.71 for

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an insurance company legal professional. The labor
rate is applied in the following calculation: [(86,410
Independent Producers × 2 hours × $165.29) + (358
insurance companies × 2 hours × $165.71)] ≈
$28,683,939.

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Federal Register / Vol. 89, No. 81 / Thursday, April 25, 2024 / Rules and Regulations
1.4 Overall Summary
These paperwork burden estimates
are summarized as follows:
Type of Review: Revision of an
Existing Collection.
Agency: Employee Benefits Security
Administration, Department of Labor.
Title: Prohibited Transaction
Exemption (PTE) 84–24 for Certain
Transactions Involving Insurance
Agents and Brokers, Pension
Consultants, Insurance Companies, and
Investment Company Principal
Underwriters.
OMB Control Number: 1210–0158.
Affected Public: Businesses or other
for-profits; not for profit institutions.
Estimated Number of Respondents:
89,818.
Estimated Number of Annual
Responses: 1,498,615.
Frequency of Response: Initially,
annually, when engaging in exempted
transaction.
Estimated Total Annual Burden
Hours: 1,093,403 hours.
Estimated Total Annual Burden Cost:
$191,759.
Regulatory Flexibility Act
The Regulatory Flexibility Act
(RFA) 107 imposes certain requirements
on rules subject to the notice and
comment requirements of section 553(b)
of the Administrative Procedure Act or
any other law.108 Under section 604 of
the RFA, agencies must submit a final
regulatory flexibility analysis (FRFA) of
a final rulemaking that is likely to have
a significant economic impact on a
substantial number of small entities,
such as small businesses, organizations,
and governmental jurisdictions. This
amended exemption, along with related
amended exemptions and a rule
amendment published elsewhere in this
issue of the Federal Register, is part of
a rulemaking regarding the definition of
fiduciary investment advice, which the
Department has determined likely will
have a significant economic impact on
a substantial number of small entities.
The impact of this amendment on small
entities is included in the FRFA for the
entire project, which can be found in
the related notice of rulemaking found
elsewhere in this edition of the Federal
Register.

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Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 109 requires each
Federal agency to prepare a written
statement assessing the effects of any
107 5

U.S.C. 601 et seq.
U.S.C. 601(2), 603(a); see 5 U.S.C. 551.
109 Public Law 104–4, 109 Stat. 48 (Mar. 22,
1995).
108 5

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Federal mandate in a final rule that may
result in an expenditure of $100 million
or more (adjusted annually for inflation
with the base year 1995) in any 1 year
by state, local, and tribal governments,
in the aggregate, or by the private sector.
For purposes of the Unfunded Mandates
Reform Act, as well as Executive Order
12875, this amended exemption does
not include any Federal mandate that
will result in such expenditures.
Federalism Statement
Executive Order 13132 outlines
fundamental principles of federalism. It
also requires Federal agencies to adhere
to specific criteria in formulating and
implementing policies that have
‘‘substantial direct effects’’ on the states,
the relationship between the national
government and states, or on the
distribution of power and
responsibilities among the various
levels of government. Federal agencies
promulgating regulations that have
these federalism implications must
consult with State and local officials
and describe the extent of their
consultation and the nature of the
concerns of State and local officials in
the preamble to the final regulation.
Notwithstanding this, Section 514 of
ERISA provides, with certain exceptions
specifically enumerated, that the
provisions of Titles I and IV of ERISA
supersede any and all laws of the States
as they relate to any employee benefit
plan covered under ERISA.
The Department has carefully
considered the regulatory landscape in
the states and worked to ensure that its
regulations would not impose
obligations on impacted industries that
are inconsistent with their
responsibilities under state law,
including the obligations imposed in
states that based their laws on the NAIC
Model Regulation. Nor would these
regulations impose obligations or costs
on the state regulators. As discussed
more fully in the final Regulation and
previously in this preamble,110 there is
a long history of shared regulation of
insurance between the States and the
Federal government. The Supreme
Court addressed this issue and held that
‘‘ERISA leaves room for complementary
or dual federal or state regulation’’ of
insurance.111 The Department designed
the final Regulation and exemptions to
complement State insurance laws.112
110 See ‘‘The Department’s Role Related to the
Sale of Insurance Products to Retirement Investors,’’
supra.
111 See John Hancock Mut. Life Ins. Co. v. Harris
Trust & Sav. Bank, 510 U.S. 86, 98 (1993).
112 See BancOklahoma Mortg. Corp. v. Capital
Title Co., Inc., 194 F.3d 1089 (10th Cir. 1999)
(stating that McCarran-Ferguson Act bars the

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32337

The Department does not intend this
exemption to change the scope or effect
of ERISA section 514, including the
savings clause in ERISA section
514(b)(2)(A) for State regulation of
securities, banking, or insurance laws.
Ultimately, the Department does not
believe this class exemption has
federalism implications because it has
no substantial direct effect on the States,
on the relationship between the
National government and the States, or
on the distribution of power and
responsibilities among the various
levels of government.
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 ERISA
section 408(a) and/or Code section
4975(c)(2) does not relieve a fiduciary,
or other Party in Interest with respect to
a Plan or IRA, from certain other
provisions of ERISA and the Code,
including but not limited to any
prohibited transaction provisions to
which the exemption does not apply
and the general fiduciary responsibility
provisions of ERISA section 404 which
require, among other things, that a
fiduciary act prudently and discharge
their 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
requirements of Code section 401(a),
including that the Plan must operate for
the exclusive benefit of the employees
of the employer maintaining the Plan
and their beneficiaries;
(2) In accordance with ERISA section
408(a) and Code section 4975(c)(2), and
based on the entire record, the
Department finds that this exemption is
administratively feasible, in the
interests of Plans, their participants and
beneficiaries, and IRA owners, and
protective of the rights of participants
and beneficiaries of the Plan and IRA
owners;
(3) The Final Amendment is
applicable to a particular transaction
only if the transaction satisfies the
application of a Federal statute only if (1) the
Federal statute does not specifically relate to the
business of insurance; (2) a State statute has been
enacted for the purpose of regulating the business
of insurance; and (3) the Federal statute would
invalidate, impair, or supersede the State statute);
Prescott Architects, Inc. v. Lexington Ins. Co., 638
F. Supp. 2d 1317 (N.D. Fla. 2009); see also U.S. v.
Rhode Island Insurers’ Insolvency Fund, 80 F.3d
616 (1st Cir. 1996). The Supreme Court has held
that to ‘‘impair’’ a State law is to hinder its
operation or ‘‘frustrate [a] goal of that law.’’
Humana Inc. V. Forsyth, 525 U.S. 299, 308 (1999).

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conditions specified in the exemption;
and
(4) The Final Amendment is
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.
The Department is granting the
following amendments to the class
exemption on its own motion, pursuant
to its authority under ERISA section
408(a) and Code section 4975(c)(2) and
in accordance with procedures set forth
in 29 CFR part 2570, subpart B (76 FR
66637 (October 27, 2011)).113
Amendment to PTE 84–24
Section I—Retroactive Application
The restrictions of ERISA sections
406(a)(1)(A) through (D) and 406(b) and
the taxes imposed by Code section 4975
do not apply to any of the transactions
described in section III of this
exemption in connection with
purchases made before November 1,
1977, if the conditions set forth in
section IV are met.

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Section II—Prospective Application
(a) Except for the receipt of reasonable
compensation and/or the sale of any
property as a result of the provision of
investment advice within the meaning
of ERISA section 3(21)(A)(ii) or Code
section 4975(e)(3)(B) and regulations
thereunder, the restrictions of ERISA
sections 406(a)(1)(A) through (D) and
406(b) and the taxes imposed by Code
section 4975 do not apply to any of the
transactions described in section III(a)–
(f) of this exemption in connection with
purchases made after October 31, 1977,
if the conditions set forth in sections IV
and V are met.
(b) Effective on the date that is
September 23, 2024, the restrictions of
ERISA sections 406(a)(1)(A), (D) and
406(b) and the taxes imposed by Code
section 4975(a) and (b) by reason of
Code sections 4975(c)(1)(A), (D), (E) and
(F) do not apply to Independent
Producers that provide fiduciary
investment advice and engage in the
transactions described in Section III(g),
113 Reorganization Plan No. 4 of 1978 (5 U.S.C.
App. 1 (2018)) generally transferred the authority of
the Secretary of the Treasury to grant administrative
exemptions under Code section 4975 to the
Secretary of Labor. Procedures Governing the Filing
and Processing of Prohibited Transaction
Exemption Applications were amended effective
April 8, 2024 (29 CFR part 2570, subpart B (89 FR
4662 (January 24, 2024)).

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in accordance with the conditions set
forth in Sections VI, VII, are satisfied,
and the Independent Producer and
Insurer are not ineligible under Section
VIII, and subject to the definitional
terms and recordkeeping requirements
in Sections IX and X.
Section III—Transactions
(a) The receipt, directly or indirectly,
by an insurance agent or broker or a
pension consultant of a sales
commission from an insurance company
in connection with the purchase, with
plan assets, of an insurance or annuity
contract, if the sales commission is not
received as a result of the provision of
investment advice within the meaning
of ERISA section 3(21)(A)(ii) and Code
section 4975(e)(3)(B) and regulations
thereunder.
(b) The receipt of a sales commission
by a Principal Underwriter for an
investment company registered under
the Investment Company Act of 1940
(hereinafter referred to as an investment
company) in connection with the
purchase, with plan assets, of securities
issued by an investment company if the
sales commission is not received as a
result of the provision of investment
advice within the meaning of ERISA
section 3(21)(A)(ii) and Code section
4975(e)(3)(B) and regulations
thereunder.
(c) The effecting by an insurance
agent or broker, pension consultant or
investment company Principal
Underwriter of a transaction for the
purchase, with plan assets, of an
insurance or annuity contract or
securities issued by an investment
company if the purchase is not as a
result of the provision of investment
advice within the meaning of ERISA
section 3(21)(A)(ii) and Code section
4975(e)(3)(B) and regulations
thereunder.
(d) The purchase, with plan assets, of
an insurance or annuity contract from
an insurance company if the purchase is
not as a result of the provision of
investment advice within the meaning
of ERISA section 3(21)(A)(ii) and Code
section 4975(e)(3)(B) and regulations
thereunder.
(e) The purchase, with plan assets, of
an insurance or annuity contract from
an insurance company which is a
fiduciary or a service provider (or both)
with respect to the Plan solely by reason
of the sponsorship of a Pre-approved
Plan if the purchase is not as a result of
the provision of investment advice
within the meaning of ERISA section
3(21)(A)(ii) and Code section
4975(e)(3)(B) and regulations
thereunder.

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(f) The purchase, with plan assets, of
securities issued by an investment
company from, or the sale of such
securities to, an investment company or
an investment company Principal
Underwriter, when such investment
company, Principal Underwriter, or the
investment company investment adviser
is a fiduciary or a service provider (or
both) with respect to the plan solely by
reason of: (1) the sponsorship of a Preapproved plan; or (2) the provision of
Nondiscretionary Trust Services to the
plan; or (3) both (1) and (2); and the
purchase is not as a result of the
provision of investment advice within
the meaning of ERISA section
3(21)(A)(ii) and Code section
4975(e)(3)(B) and regulations
thereunder.
(g) An Independent Producer may
engage in the following transactions,
including as part of a rollover, as a
result of providing investment advice
within the meaning of ERISA section
3(21)(A)(ii) and Code section
4975(e)(3)(B) and regulations
thereunder:
(1) The receipt, directly or indirectly,
by an Independent Producer of
reasonable compensation; and
(2) the sale of a non-security annuity
contract or other insurance product that
does not meet the definition of
‘‘security’’ under Federal securities
laws.
Section IV—Conditions With Respect to
Transactions Described in Section
III(a)–(f)
The following conditions apply to a
transaction described in Section III(a)–
(f):
(a) The transaction is effected by the
insurance agent or broker, pension
consultant, insurance company or
investment company Principal
Underwriter in the ordinary course of its
business as such a person.
(b) The transaction is on terms at least
as favorable to the plan as an arm’slength transaction with an unrelated
party would be.
(c) The combined total of all fees,
commissions and other consideration
received by the insurance agent or
broker, pension consultant, insurance
company, or investment company
Principal Underwriter:
(1) For the provision of services to the
plan; and
(2) In connection with the purchase of
insurance or annuity contracts or
securities issued by an investment
company is not in excess of ‘‘reasonable
compensation’’ within the
contemplation of section 408(b)(2) and
408(c)(2) of ERISA and section
4975(d)(2) and 4975(d)(10) of the Code.

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If such total is in excess of ‘‘reasonable
compensation,’’ the ‘‘amount involved’’
for purposes of the civil penalties of
section 502(i) of ERISA and the excise
taxes imposed by section 4975(a) and (b)
of the Code is the amount of
compensation in excess of ‘‘reasonable
compensation.’’
Section V—Conditions for Transactions
Described in Section III (a) Through (d)
The following conditions apply to a
transaction described in subsections (a),
(b), (c) or (d) of section III:
(a) The insurance agent or broker,
pension consultant, insurance company,
or investment company Principal
Underwriter is not:
(1) a trustee of the plan (other than a
Nondiscretionary Trustee who does not
render investment advice with respect
to any assets of the plan),
(2) a plan administrator (within the
meaning of section 3(16)(A) of ERISA
and section 414(g) of the Code),
(3) a fiduciary who is authorized to
manage, acquire, or dispose of the plan’s
assets on a discretionary basis, or
(4) for transactions described in
sections III (a) through (d) entered into
after December 31, 1978, an employer
any of whose employees are covered by
the plan.
Notwithstanding the above, an
insurance agent or broker, pension
consultant, insurance company, or
investment company Principal
Underwriter that is affiliated with a
trustee or an investment manager
(within the meaning of section VI(b))
with respect to a plan may engage in a
transaction described in section III(a)
through (d) of this exemption on behalf
of the plan if such trustee or investment
manager has no discretionary authority
or control over the plan assets involved
in the transaction other than as a
Nondiscretionary Trustee.
(b)(1) With respect to a transaction
involving the purchase with plan assets
of an insurance or annuity contract or
the receipt of a sales commission
thereon, the insurance agent or broker or
pension consultant provides to an
independent fiduciary or IRA owner
with respect to the plan prior to the
execution of the transaction the
following information in writing and in
a form calculated to be understood by a
plan fiduciary who has no special
expertise in insurance or investment
matters:
(A) If the agent, broker, or consultant
is an affiliate of the insurance company,
or if the ability of such agent, broker or
consultant is limited by any agreement
with such insurance company, the
nature of such affiliation, limitation, or
relationship;

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(B) The sales commission, expressed
as a percentage of gross annual premium
payments for the first year and for each
of the succeeding renewal years, that
will be paid by the insurance company
to the agent, broker or consultant in
connection with the purchase of the
contract; and
(C) For purchases made after June 30,
1979, a description of any charges, fees,
discounts, penalties or adjustments
which may be imposed under the
contract in connection with the
purchase, holding, exchange,
termination or sale of such contract.
(2) Following the receipt of the
information required to be disclosed in
subsection (b)(1), and prior to the
execution of the transaction, the
independent fiduciary or IRA owner
acknowledges in writing receipt of such
information and approves the
transaction on behalf of the plan. Such
fiduciary may be an employer of
employees covered by the plan, but may
not be an insurance agent or broker,
pension consultant or insurance
company involved in the transaction.
Such fiduciary may not receive, directly
or indirectly (e.g., through an Affiliate),
any compensation or other
consideration for his or her own
personal account from any party dealing
with the plan in connection with the
transaction.
(c)(1) With respect to a transaction
involving the purchase with plan assets
of securities issued by an investment
company or the receipt of a sales
commission thereon by an investment
company Principal Underwriter, the
investment company Principal
Underwriter provides to an Independent
fiduciary or IRA owner with respect to
the plan, prior to the execution of the
transaction, the following information
in writing and in a form calculated to be
understood by a plan fiduciary who has
no special expertise in insurance or
investment matters:
(A) the nature of the relationship
between the Principal Underwriter and
the investment company issuing the
securities and any limitation placed
upon the Principal Underwriter by the
investment company;
(B) The sales commission, expressed
as a percentage of the dollar amount of
the plan’s gross payment and of the
amount actually invested, that will be
received by the Principal Underwriter in
connection with the purchase of the
securities issued by the investment
company; and
(C) For purchases made after
December 31, 1978, a description of any
charges, fees, discounts, penalties, or
adjustments which may be imposed
under the securities in connection with

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the purchase, holding, exchange,
termination or sale of such securities.
(2) Following the receipt of the
information required to be disclosed in
subsection (c)(1), and prior to the
execution of the transaction, the
independent fiduciary or IRA owner
approves the transaction on behalf of
the plan. Unless facts or circumstances
would indicate the contrary, such
approval may be presumed if the
fiduciary or IRA owner permits the
transaction to proceed after receipt of
the written disclosure. Such fiduciary
may be an employer of employees
covered by the plan, but may not be a
Principal Underwriter involved in the
transaction. Such fiduciary may not
receive, directly or indirectly (e.g.,
through an affiliate), any compensation
or other consideration for his or her own
personal account from any party dealing
with the plan in connection with the
transaction.
(d) With respect to additional
purchases of insurance or annuity
contracts or securities issued by an
investment company, the written
disclosure required under subsections
(b) and (c) of this section V need not be
repeated, unless—
(1) More than three years have passed
since such disclosure was made with
respect to the same kind of contract or
security, or
(2) The contract or security being
purchased or the commission with
respect thereto is materially different
from that for which the approval
described in subsections (b) and (c) of
this section was obtained.
(e)(1) In the case of any transaction
described in Section III(a), (b), or (c) of
this exemption, the insurance agent or
broker (or the insurance company
whose contract is being described if
designated by the agent or broker),
pension consultant or investment
company Principal Underwriter must
retain or cause to be retained for a
period of six years from the date of such
transaction, the following:
(A) The information disclosed
pursuant to paragraphs (b), (c), and (d)
of this section V;
(B) Any additional information or
documents provided to the fiduciary
described in paragraphs (b) and (c) of
this section V with respect to such
transaction; and
(C) The written acknowledgement
described in paragraph (b) of this
section.
(2) A prohibited transaction will not
be deemed to have occurred if, due to
circumstances beyond the control of the
insurance agent or broker, pension
consultant, or Principal Underwriter,

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such records are lost or destroyed prior
to the end of such six-year period.
(3) Notwithstanding anything to the
contrary in ERISA section 504(a)(2) and
(b), such records must be made
unconditionally available for
examination during normal business
hours by duly authorized employees or
representatives of the Department of
Labor, the Internal Revenue Service,
plan participants and beneficiaries, any
employer of plan participants and
beneficiaries, and any employee
organization whose members are
covered by the plan.

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Section VI—Conditions for
Transactions Described in Section III(g)
The following conditions apply to
transactions described in Section III(g):
(a) The Independent Producer is
authorized to sell annuities from two or
more unrelated Insurers.
(b) The Independent Producer and the
Insurer satisfy the applicable conditions
in Sections VII and IX and are not
ineligible under Section VIII. The
Insurer will not necessarily become a
fiduciary under ERISA or the Code
merely by complying with this
exemption’s conditions.
(c) Exclusions. The relief in Section
III(g) is not available if:
(1) The Plan is covered by Title I of
ERISA and the Independent Producer,
Insurer, or any Affiliate is:
(A) the employer of employees
covered by the Plan, or
(B) the Plan’s named fiduciary or
administrator; provided however that a
named fiduciary or administrator or
their Affiliate may rely on the
exemption if it is selected to provide
investment advice by a fiduciary who:
(i) is not the Insurer, Independent
Producer, or an Affiliate;
(ii) does not have a relationship to or
an interest in the Insurer, Independent
Producer, or any Affiliate that might
affect the exercise of the fiduciary’s best
judgment in connection with
transactions covered by the exemption;
(iii) does not receive and is not
projected to receive within its current
Federal income tax year, compensation
or other consideration for their own
account from the Insurer, Independent
Producer, or an Affiliate in excess of
two (2) percent of the fiduciary’s annual
revenues based upon its prior income
tax year; or
(iv) is not the IRA owner or
beneficiary; or
(2) The transaction involves the
Independent Producer acting in a
fiduciary capacity other than as an
investment advice within the meaning
of ERISA section 3(21)(A)(ii) and Code

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section 4975(e)(3)(B) and regulations
thereunder.
Section VII—Investment Advice
Arrangement
Section VII(a) requires Independent
Producers to comply with Impartial
Conduct Standards, including a Care
Obligation and Loyalty Obligation,
when providing fiduciary investment
advice to Retirement Investors. Section
VII(b) requires Independent Producers
to acknowledge fiduciary status under
Title I of ERISA and/or the Code, and
provide Retirement Investors with a
written statement of the Care Obligation
and Loyalty Obligation, a written
description of the services they will
provide and the products they are
licensed and authorized to sell, and all
material facts relating to Conflicts of
Interest that are associated with their
recommendations. In addition, before
the sale of a recommended annuity,
Independent Producers must consider
and document their conclusions as to
whether the recommended annuity
meets the Care Obligation and Loyalty
Obligation. Independent Producers
recommending a rollover must also
provide additional disclosure as set
forth in subsection (b) below. Section
VII(c) requires Insurers to adopt policies
and procedures prudently designed to
ensure compliance with the Impartial
Conduct Standards and other conditions
of this exemption. Section VII(d)
requires the Insurer to conduct a
retrospective review, at least annually,
that is reasonably designed to detect and
prevent violations of, and achieve
compliance with, the Impartial Conduct
Standards and the terms of this
exemption. Section VII(e) allows
Independent Producers to correct
certain violations of the exemption
conditions and continue to rely on the
exemption for relief. In complying with
this Section VII, the Independent
Producer may reasonably rely on factual
representations from the Insurer, and
Insurers may rely on factual
representations from the Independent
Producer, as long as they do not have
knowledge that such factual
representations are incomplete or
inaccurate.
(a) Impartial Conduct Standards
The Independent Producer must
comply with the following ‘‘Impartial
Conduct Standards’’:
(1) Investment advice must, at the
time it is provided, satisfy the Care
Obligation and Loyalty Obligation. As
defined in Section X(b), to meet the Care
Obligation, advice must reflect the care,
skill, prudence, and diligence under the
circumstances then prevailing that a

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prudent person acting in a like capacity
and familiar with such matters would
use in the conduct of an enterprise of a
like character and with like aims, based
on the investment objectives, risk
tolerance, financial circumstances, and
needs of the Retirement Investor. As
defined in Section X(g), to meet the
Loyalty Obligation, the advice must not
place the financial or other interests of
the Independent Producer, Insurer or
any Affiliate, Related Entity, or other
party ahead of the Retirement Investor’s
interests, or subordinate the Retirement
Investor’s interests to those of the
Independent Producer, Insurer or any
Affiliate, Related Entity, or other party.
For example, in choosing between
annuity products offered by Insurers,
whose products the Independent
Producer is authorized to sell on a
commission basis, it is not permissible
for the Independent Producer to
recommend a product that is worse for
the Retirement Investor, but better or
more profitable for the Independent
Producer or the Insurer;
(2) The compensation received,
directly or indirectly, by the
Independent Producer does not exceed
reasonable compensation within the
meaning of ERISA section 408(b)(2) and
Code section 4975(d)(2); and
(3) The Independent Producer’s
statements to the Retirement Investor
(whether written or oral) about the
recommended transaction and other
relevant matters must not be materially
misleading at the time statements are
made. For purposes of this paragraph,
the term ‘‘materially misleading’’
includes omitting information that is
needed to prevent the statement from
being misleading to the Retirement
Investor under the circumstances.
(b) Disclosure
At or before the time a transaction
described in Section III(g) occurs, the
Independent Producer provides, in
writing, the disclosures set forth in
paragraphs (1)–(5) below to the
Retirement Investor. For purposes of the
disclosures required by Section
VII(b)(1)–(4), the Independent Producer
is deemed to engage in a covered
transaction on the later of (A) the date
the recommendation is made or (B) the
date the Independent Producer becomes
entitled to compensation (whether now
or in the future) by reason of making the
recommendation.
(1) A written acknowledgment that
the Independent Producer is providing
fiduciary investment advice to the
Retirement Investor and is a fiduciary
under Title I of ERISA, Title II of ERISA,
or both with respect to the
recommendation;

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(2) A written statement of the Care
Obligation and Loyalty Obligation,
described in Section VII(a) that is owed
by the Independent Producer to the
Retirement Investor;
(3) All material facts relating to the
scope and terms of the relationship with
the Retirement Investor, including:
(A) (i) The material fees and costs that
apply to the Retirement Investor’s
transactions, holdings, and accounts,
(ii) A notice of the Retirement
Investor’s right to request additional
information regarding cash
compensation;
(iii) Upon request of the Retirement
Investor in Section VII(b)(3)(A)(ii), the
Independent Producer shall disclose: (I)
A reasonable estimate of the amount of
cash compensation to be received by the
Independent Producer, which may be
stated as a range of amounts or
percentages; and (II) Whether the cash
compensation will be provided through
a one-time payment or through multiple
payments, the frequency and amount of
the payments, which may also be stated
as a range of amounts or percentages.
(B) The type and scope of services
provided to the Retirement Investor,
including any material limitations on
the recommendations that may be made
to the Retirement Investor; this
description must include the products
the Independent Producer is licensed
and authorized to sell, inform the
Retirement Investor in writing of any
limits on the range of insurance
products recommended, and identify
the specific Insurers and specific
insurance products available to
Independent Producer for
recommendation to the Retirement
Investor; and
(4) All material facts relating to
Conflicts of Interest that are associated
with the recommendation.
(5) Before the sale of a recommended
annuity, the Independent Producer
considers and documents the basis for
the determination to recommend the
annuity to the Retirement Investor and
provides that documentation to both the
Retirement Investor and to the Insurer;
(6) Rollover disclosure. Before
engaging in or recommending that a
Retirement Investor engage in a rollover
from a Plan that is covered by Title I of
ERISA or making a recommendation to
a Plan participant or beneficiary as to
the post-rollover investment of assets
currently held in a Plan that is covered
by Title I of ERISA, the Independent
Producer must consider and document
the bases for its recommendation to
engage in the rollover, and must provide
that documentation to both the
Retirement Investor and to the Insurer.
Relevant factors to consider must

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include to the extent applicable, but in
any event are not limited to:
(A) the alternatives to a rollover,
including leaving the money in the
Plan, if applicable;
(B) the fees and expenses associated
with the Plan and the recommended
investment;
(C) whether an employer or other
party pays for some or all of the Plan’s
administrative expenses; and
(D) the different levels of fiduciary
protection, services, and investments
available.
(7) The Independent Producer will
not fail to satisfy the conditions in
Section VII(b) solely because it makes
an error or omission in disclosing the
required information while acting in
good faith and with reasonable
diligence, provided that the
Independent Producer discloses the
correct information as soon as
practicable, but not later than 30 days
after the date on which it discovers or
reasonably should have discovered the
error or omission.
(8) Independent Producers and
Insurers may rely in good faith on
information and assurances from each
other and from other entities that are not
Affiliates as long as they do not know
or have a reason to know that such
information is incomplete or inaccurate.
(9) The Independent Producer is not
required to disclose information
pursuant to this Section VII(b) if such
disclosure is otherwise prohibited by
law.
(c) Policies and Procedures
(1) The Insurer establishes, maintains,
and enforces written policies and
procedures for the review of each
recommendation, before an annuity is
issued to a Retirement Investor pursuant
to an Independent Producer’s
recommendation, that are prudently
designed to ensure compliance with the
Impartial Conduct Standards and other
exemption conditions. The Insurer’s
prudent review of the Independent
Producer’s specific recommendations
must be made without regard to the
Insurer’s own interests. An Insurer is
not required to supervise an
Independent Producer’s
recommendations to Retirement
Investors of products other than
annuities offered by the Insurer.
(2) The Insurer’s policies and
procedures mitigate Conflicts of Interest
to the extent that a reasonable person
reviewing the policies and procedures
and incentive practices as a whole
would conclude that they do not create
an incentive for the Independent
Producer to place its interests, or those
of the Insurer, or any Affiliate or Related

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32341

Entity, ahead of the interests of the
Retirement Investor. The Insurer may
not use quotas, appraisals, performance
or personnel actions, bonuses, contests,
special awards, differential
compensation, or other similar actions
or incentives in a manner that is
intended, or that a reasonable person
would conclude are likely, to result in
recommendations that do not meet the
Care Obligation or Loyalty Obligation.
(3) The Insurer’s policies and
procedures include a prudent process
for determining whether to authorize an
Independent Producer to sell the
Insurer’s annuity contracts to
Retirement Investors, and for taking
action to protect Retirement Investors
from Independent Producers who have
failed to adhere to the Impartial
Conduct Standards, or who lack the
necessary education, training, or skill. A
prudent process includes careful review
of objective material, such as customer
complaints, disciplinary history, and
regulatory actions concerning the
Independent Producer, as well as the
Insurer’s review of the Independent
Producer’s training, education, and
conduct with respect to the Insurer’s
own products. The Insurer must
document the basis for its initial
determination that it can rely on the
Independent Producer to adhere to the
Impartial Conduct Standards, and must
review that determination at least
annually as part of the retrospective
review set forth in subsection (d) below.
(4) Insurers must provide their
complete policies and procedures to the
Department upon request within 30
days of request.
(d) Retrospective Review
(1) The Insurer conducts a
retrospective review of each
Independent Producer, at least annually,
that is reasonably designed to detect and
prevent violations of, and achieve
compliance with the conditions of this
exemption, including the Impartial
Conduct Standards, and the policies and
procedures governing compliance with
the exemption, including the
effectiveness of the supervision system,
the exceptions found, and corrective
action taken or recommended, if any.
The retrospective review also includes a
review of Independent Producers’
rollover recommendations and the
required rollover disclosure. As part of
this review, the Insurer prudently
determines whether to continue to
permit individual Independent
Producers to sell the Insurer’s annuity
contracts to Retirement Investors.
Additionally, the Insurer updates the
policies and procedures as business,
regulatory, and legislative changes and

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events dictate, to ensure that the
policies and procedures remain
prudently designed, effective, and
compliant with Section VII(c). Insurers
may rely in part on sampling of each
Independent Producer’s transactions to
conduct their retrospective reviews, as
long as any sampling or other method is
designed to identify potential violations,
problems, and deficiencies that need to
be addressed.
(2) The Insurer provides to each
Independent Producer the methodology
and results of the retrospective review,
including a description of any nonexempt prohibited transaction the
Independent Producer engaged in with
respect to investment advice defined
under Code section 4975(e)(3)(B), and
instructs the Independent Producer to:
(A) correct those prohibited
transactions;
(B) report the transactions to the IRS
on Form 5330;
(C) pay the resulting excise taxes
imposed by Code section 4975; and,
(D) provide the Insurer with a copy of
filed Form 5330 within 30 days after the
form is due (including extensions);
(3) The methodology and results of
the retrospective review are reduced to
a written report that is provided to a
Senior Executive Officer of the Insurer.
(4) The Senior Executive Officer must
certify, annually, that:
(A) The Senior Executive Officer has
reviewed the report of the retrospective
review report;
(B) The Insurer has provided
Independent Producers with the
information required under (d)(2) and
has received a certification that the
Independent Producer has filed Form
5330 within 30 days after the form is
due (including extensions);
(C) The Insurer has established
written policies and procedures that
meet the requirements of Section
VII(c)(1); and
(D) The Insurer has a prudent process
in place to modify such policies and
procedures as set forth in Section
II(d)(1).
(5) The review, report, and
certification are completed no later than
six months following the end of the
period covered by the review.
(6) The Insurer retains the report,
certification, and supporting data for a
period of six years and makes the report,
certification, and supporting data
available to the Department, within 30
days of request, to the extent permitted
by law.
(e) Self-Correction
A non-exempt prohibited transaction
will not occur due to a violation of the

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exemption’s conditions with respect to
a transaction, provided:
(1) Either the Independent Producer
has refunded any charge to the
Retirement Investor or the Insurer has
rescinded a mis-sold annuity, cancelled
the contract and waived the surrender
charges;
(2) The correction occurs no later than
90 days after the Independent Producer
learned of the violation or reasonably
should have learned of the violation;
and
(3) The Independent Producer notifies
the person(s) at the Insurer responsible
for conducting the retrospective review
during the applicable review cycle and
the violation and correction is
specifically set forth in the written
report of the retrospective review
required under Section VII(d)(3).
Section VIII—Eligibility
(a) Independent Producer
Subject to the timing and scope of
ineligibility provisions set forth in
subsection (c), an Independent Producer
will become ineligible to rely on the
relief for transactions described in
Section III(g), if, on or after September
23, 2024, the Independent Producer has
been:
(1) Convicted by either:
(A) a U.S. Federal or State court as a
result of any felony involving abuse or
misuse of such person’s employee
benefit plan position or employment, or
position or employment with a labor
organization; any felony arising out of
the conduct of the business of a broker,
dealer, investment adviser, bank,
insurance company or fiduciary; income
tax evasion; any felony involving
larceny, theft, robbery, extortion,
forgery, counterfeiting, fraudulent
concealment, embezzlement, fraudulent
conversion, or misappropriation of
funds or securities; conspiracy or
attempt to commit any such crimes or
a crime in which any of the foregoing
crimes is an element; or a crime that is
identified or described in ERISA section
411; or
(B) a foreign court of competent
jurisdiction as a result of any crime,
however denominated by the laws of the
relevant foreign or state government,
that is substantially equivalent to an
offense described in (A) above
(excluding convictions that occur
within a foreign country that is included
on the Department of Commerce’s list of
‘‘foreign adversaries’’ that is codified in
15 CFR 7.4 as amended); or
(2) Found or determined in a final
judgment or court-approved settlement
in a Federal or State criminal or civil
court proceeding brought by the

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Department, the Department of the
Treasury, the Internal Revenue Service,
the Department of Justice, a State
insurance regulator, or State attorney
general, to have participated in one or
more of the following categories of
conduct irrespective of whether the
court specifically considers this
exemption or its terms:
(A) engaging in a systematic pattern or
practice of conduct that violates the
conditions of this exemption in
connection with otherwise non-exempt
prohibited transactions;
(B) intentionally engaging in conduct
that violates the conditions of this
exemption in connection with otherwise
non-exempt prohibited transactions;
(C) engaging in a systematic pattern or
practice of failing to correct prohibited
transactions, report those transactions to
the IRS on Form 5330 or pay the
resulting excise taxes imposed by Code
section 4975 in connection with nonexempt prohibited transactions
involving investment advice under Code
section 4975(e)(3)(B); or
(D) providing materially misleading
information to the Department, the
Department of the Treasury, the Internal
Revenue Service, the Department of
Justice, a State insurance regulator, or
State attorney general in connection
with the conditions of the exemption.
(b) Insurers
Subject to the timing and scope of
ineligibility provisions set forth in
subsection (c), an entity will be
ineligible to serve as an Insurer if, on or
after September 23, 2024, the Insurer or
an entity in the same Controlled Group
as the Insurer has been:
(1) Convicted by either:
(A) a U.S. Federal or State court of
any felony involving abuse or misuse of
such person’s employee benefit plan
position or employment, or position or
employment with a labor organization;
any felony arising out of the conduct of
the business of a broker, dealer,
investment adviser, bank, insurance
company or fiduciary; income tax
evasion; any felony involving the
larceny, theft, robbery, extortion,
forgery, counterfeiting, fraudulent
concealment, embezzlement, fraudulent
conversion, or misappropriation of
funds or securities; conspiracy or
attempt to commit any such crimes or
a crime in which any of the foregoing
crimes is an element; or a crime that is
identified or described in ERISA section
411; or
(B) a foreign court of competent
jurisdiction as a result of any crime,
however denominated by the laws of the
relevant foreign or state government,
that is substantially equivalent to an

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offense described in (A) above
(excluding convictions that occur
within a foreign country that is included
on the Department of Commerce’s list of
‘‘foreign adversaries’’ that is codified in
15 CFR 7.4 as amended); or
(2) Found or determined in a final
judgment or court-approved settlement
in a Federal or State criminal or civil
court proceeding brought by the
Department, the Department of the
Treasury, the Internal Revenue Service,
the Department of Justice, a State
insurance regulator, or State attorney
general to have participated in in one or
more of the following categories of
conduct irrespective of whether the
court specifically considers this
exemption or its terms:
(A) engaging in a systematic pattern or
practice of conduct that violates the
conditions of this exemption in
connection with otherwise non-exempt
prohibited transactions;
(B) intentionally engaging in conduct
that violates the conditions of this
exemption in connection with otherwise
non-exempt prohibited transactions; or
(C) providing materially misleading
information to the Department, the
Department of the Treasury, the Internal
Revenue Service, the Department of
Justice, a State insurance regulator, or
State attorney general in connection
with the conditions of the exemption.
(3) Controlled Group. An entity is in
the same Controlled Group as an Insurer
if the entity (including any predecessor
or successor to the entity) would be
considered to be in the same ‘‘controlled
group of corporations’’ as the Insurer or
‘‘under common control’’ with the
Insurer as those terms are defined in
Code section 414(b) and (c) (and any
regulations issued thereunder),
(c) Timing and Scope of Ineligibility
(1) Ineligibility shall begin upon
either:
(A) the date of conviction, which shall
be the date of conviction by a U.S.
Federal or State trial court described in
Section VIII(a)(1) or VIII(b)(1) (or the
date of the conviction of any trial court
in a foreign jurisdiction that is the
equivalent of a U.S. Federal or State trial
court) that occurs on or after September
23, 2024 regardless of whether the
conviction remains under appeal; or
(B) the date of a final judgment
(regardless of whether the judgment
remains under appeal) or a courtapproved settlement described in
Section VIII(a)(2) or VIII(b)(2) that
occurs on or after September 23, 2024.
(2) One-Year Transition Period. An
Independent Producer or Insurer that
becomes ineligible under subsection
VIII(a) or VIII(b) may continue to rely on

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this exemption or serve as an Insurer for
up to 12 months after its ineligibility
begins as determined under subsection
(c)(1) if the Independent Producer or
Insurer, as applicable, provides notice to
the Department at PTE84-24@dol.gov
within 30 days after ineligibility begins.
(3) An Independent Producer will
become eligible to rely on this
exemption and an Insurer will become
eligible to serve as an Insurer again only
upon the earliest of the following
occurs:
(A) the date of a subsequent judgment
reversing such person’s conviction or
other court decision described in
Section VIII(a) or VIII(b);
(B) 10 years after the person became
ineligible as determined under
subsection (c)(1) or if later, 10 years
after the person was released from
imprisonment as a result of a crime
described in Section VIII(a)(1) or
Section VIII(b)(1); or
(C) the effective date an individual
exemption granted by the Department,
(under which the Department may
impose additional conditions)
permitting the person to continue its
reliance on this exemption.
(d) Alternative Exemptions
An Insurer or Independent Producer
that is ineligible to rely on this
exemption may rely on a statutory or
separate administrative prohibited
transaction exemption if one is available
or may request an individual prohibited
transaction exemption from the
Department. To the extent an applicant
requests retroactive relief in connection
with an individual exemption
application, the Department will
consider the application in accordance
with its retroactive exemption policy as
set forth in 29 CFR 2570.35(d). The
Department may require additional
prospective compliance conditions as a
condition of providing retroactive relief.
Section IX—Recordkeeping
The Independent Producer and
Insurer must maintain for a period of six
years records demonstrating compliance
with this exemption and makes such
records available, to the extent
permitted by law, to any authorized
employee of the Department or the
Department of the Treasury, which
includes the Internal Revenue Service.
Section X—Definitions
For purposes of this exemption, the
terms ‘‘insurance agent or broker,’’
‘‘pension consultant,’’ ‘‘insurance
company,’’ ‘‘investment company,’’ and
‘‘Principal Underwriter’’ mean such
persons and any Affiliates thereof. In

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addition, for purposes of this
exemption:
(a) ‘‘Affiliate’’ means:
(1) Any person directly or indirectly
through one or more intermediaries,
controlling, controlled by, or under
common control with the person (For
this purpose, ‘‘control’’ means the
power to exercise a controlling
influence over the management or
policies of a person other than an
individual);
(2) Any officer, director, partner,
employee, or relative (as defined in
ERISA section 3(15)), of the person; and
(3) Any corporation or partnership of
which the person is an officer, director,
or partner.
(b) Advice meets the ‘‘Care
Obligation’’ if, with respect to the
Retirement Investor, such advice reflects
the care, skill, prudence, and diligence
under the circumstances then prevailing
that a prudent person acting in a like
capacity and familiar with such matters
would use in the conduct of an
enterprise of a like character and with
like aims, based on the investment
objectives, risk tolerance, financial
circumstances, and needs of the
Retirement Investor.
(c) A ‘‘Conflict of Interest’’ is an
interest that might incline an
Independent Producer—consciously or
unconsciously—to make a
recommendation that is not
disinterested.
(d) ‘‘Independent Producer’’ means a
person or entity that is licensed under
the laws of a State to sell, solicit or
negotiate insurance contracts, including
annuities, and that sells to Retirement
Investors products of multiple
unaffiliated insurance companies, and
(1) is not an employee of an insurance
company (including a statutory
employee as defined under Code section
3121(d)(3)); or
(2) is a statutory employee of an
insurance company that has no financial
interest in the covered transaction.
(e) ‘‘Individual Retirement Account’’
or ‘‘IRA’’ means any plan that is an
account or annuity described in Code
section 4975(e)(1)(B) through (F).
(f) ‘‘Insurer’’ means an insurance
company qualified to do business under
the laws of a State, that: (A) has
obtained a Certificate of Authority from
the insurance commissioner of its
domiciliary State which has neither
been revoked nor suspended; (B) has
undergone and shall continue to
undergo an examination by an
independent certified public accountant
for its last completed taxable year or has
undergone a financial examination
(within the meaning of the law of its
domiciliary State) by the State’s

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insurance commissioner within the
preceding five years, (C) is domiciled in
a State whose law requires that an
actuarial review of reserves be
conducted annually and reported to the
appropriate regulatory authority; (D) is
not disqualified or barred from making
investment recommendations by any
insurance, banking, or securities law or
regulatory authority (including any selfregulatory organization and the
Department under Section VIII of this
exemption), that retains the
Independent Producer as an
independent contractor, agent or
registered representative.
(g) Advice meets the ‘‘Loyalty
Obligation’’ if, with respect to the
Retirement Investor, such advice does
not place the financial or other interests
of the Independent Producer, Insurer, or
any Affiliate, Related Entity, or other
party ahead of the interests of the
Retirement Investor or subordinate the
Retirement Investor’s interests to those
of the Independent Producer, Insurer, or
any Affiliate, Related Entity, or other
party.
(h) The term ‘‘Nondiscretionary Trust
Services’’ means custodial services,
services ancillary to custodial services,
none of which services are
discretionary, duties imposed by any
provisions of the Code, and services
performed pursuant to directions in

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accordance with ERISA section
403(a)(1).
(i) The term ‘‘Nondiscretionary
Trustee’’ of a plan means a trustee
whose powers and duties with respect
to the plan are limited to the provision
of Nondiscretionary Trust Services. For
purposes of this exemption, a person
who is otherwise a Nondiscretionary
Trustee will not fail to be a
Nondiscretionary Trustee solely by
reason of his having been delegated, by
the sponsor of a Pre-Approved Plan, the
power to amend such plan.
(j) ‘‘Plan’’ means any employee
benefit plan described in ERISA section
3(3) and any plan described in Code
section 4975(e)(1)(A).
(k) The term ‘‘Pre-Approved Plan’’
means a plan which is approved by the
Internal Revenue Service pursuant to
the procedure described in Rev. Proc.
2017–41, 2017–29 I.R.B. 92, or its
successors.
(l) A ‘‘Principal Underwriter’’ means
a principal underwriter as that term is
defined in section 2(a)(29) of the
Investment Company Act of 1940 (15
U.S.C. 80a–2(a)(29)).
(m) A ‘‘Related Entity’’ means any
party that is not an Affiliate, and (i) has
an interest in an Independent Producer
that may affect the exercise of the
fiduciary’s best judgment as a fiduciary,
or (ii) in which the Independent
Producer has an interest that may affect

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the exercise of the fiduciary’s best
judgment as a fiduciary.
(n) ‘‘Retirement Investor’’ means a
Plan, Plan participant or beneficiary,
IRA, IRA owner or beneficiary, Plan
fiduciary within the meaning of ERISA
section (3)(21)(A)(i) or (iii) and Code
section 4975(e)(3)(A) or (C) with respect
to the Plan, or IRA fiduciary within the
meaning of Code section 4975(e)(3)(A)
or (C) with respect to the IRA.
(o) A ‘‘Senior Executive Officer’’ is
any of the following: the chief
compliance officer, the chief executive
officer, president, chief financial officer,
or one of the three most senior officers
of the Insurer.
Section XI—Phase-In Period
During the one-year period beginning
September 23, 2024, Independent
Producers may receive compensation
under Section II(b) of this exemption if
the Independent Producer complies
with the Impartial Conduct Standards
set forth in Section VII(a) and the
fiduciary acknowledgment set forth in
Section VII(b)(1).
Signed at Washington, DC, this 10th day of
April, 2024.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits
Security Administration, U.S. Department of
Labor.
[FR Doc. 2024–08067 Filed 4–24–24; 8:45 am]
BILLING CODE 4510–29–P

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