Proposed Amendment to Prohibited Transaction Exemption 84-24

In connection with a consultation on a proposed new definition of an „investment advice fiduciary“ which would expand the scope of such to include all individuals and entities that provide investment advice or make investment recommendations whether it be to a pension plan or individual investors (EventID 23651), the Employee Benefits Security Administration (EBSA) has launched another consultation on changes to the Prohibited Transaction Exemption PTE 84–24.
PTE 84-24 allows certain transactions involving compensation for investment advice fiduciaries and service providers when they recommend the purchase of specific types of annuity contracts, insurance contracts, or investments in registered investment companies (like mutual funds) for retirement plans or individual retirement accounts (IRAs). Specifically, it permits insurance agents or brokers, pension consultants, and principal underwriters to receive compensation with respect to any such activity.
The EBSA now proposes to amend PTE 84–24 to create a new section specifically for independent insurance agents (called Independent Producers) selling non-securities annuities or other non-SEC-regulated insurance products to retirement Investors. This modification would basically introduce the same relief as currently applicable to above noted entities, which – by the way – will be moved to a different section of the PTE.
To rely on this proposed amendment, Independent Producers must sell annuities from at least two unrelated insurers. If they recommend or sell other investment products like mutual funds or stocks, they must follow PTE 2020–02 to qualify for fees related to those products. The revised PTE 84–24 would grant relief only for disclosed commissions or fees tied to annuity recommendations or other non-SEC-regulated insurance products.
The goal of the proposed amendments is to ensure fairness and a level playing field among all investment advice providers to retirement investors, regardless of the recommended investment products or the type of investment adviser. Details may be found in the enclosed legal document.