Department of Labor Fiduciary Rule Update

What Exactly Is Changing?

The Department of Labor (DOL) Fiduciary Rule has been updated to expand the agency’s interpretation of the existing five-part test to determine when an individual is an ERISA fiduciary. For the period of February 16, 2021, through January 31, 2022, the DOL advised it would not pursue prohibited transactions claims against ERISA fiduciaries who comply with the impartial conduct standards for transactions. Impartial conduct standards require fiduciaries to (1) provide advice that 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, (2) receive only reasonable compensation, and (3) make statements that are not materially misleading.

However, beginning January 31, 2022, the DOL will require compliance with the Fiduciary Rule. We are providing this information to assist you with compliance and will continue to monitor DOL activity and advise you of any further enforcement delays.

ERISA Fiduciary Status

Updates to the DOL Fiduciary Rule will impact insurance Producers, as the ERISA fiduciary status may be triggered more easily under the DOL’s reinterpretation of the five-part test, especially for rollover or IRA recommendations. You are an ERISA fiduciary if you:

Render advice to ERISA retirement plans, participants in those plans or IRA owners as to the value of securities or other property, or makes recommendations as to the advisability of investing in, purchasing, or selling securities or other property;
On a regular basis;
Pursuant to a mutual understanding or agreement;
The advice will be a primary basis for investment decisions; and that
The advice is individualized to an ERISA plan participant or the IRA owner.

If a Producer is determined to be an ERISA fiduciary, to receive compensation, such as commissions, he/she must comply with the requirements of a PTE.

PTE 84-24

To receive compensation, Producers may still use PTE 84-24. The general conditions of PTE 84-24 include:

That a recommendation is made in the ordinary course of business and is as favorable as an arm’s length transaction with an unrelated party would be.
The combined total of all fees, commissions, etc., received by the Producer must not be in excess of “reasonable compensation.”

The Producer may not have certain relationships with the plan or IRA, including acting as a trustee or as an administrator to the plan or an employer.

PTE 84-24 also requires a Producer to disclose:

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

Important Forms and Documents

PTE 84-24 Form

NAFA “DOL Fiduciary Rule 3.0 Best Practices:

Carrier Specific DOL Resources