Desk with various mugs, office supplies, small plant, and laptop on it


As of 12/20/2021

Recommendations to retirement plan participants or individual retirement account (IRA) owners to roll their accounts from a plan to an IRA or annuity will often be viewed as fiduciary advice under the new Department of Labor (DOL) guidance. This new DOL guidance was disclosed and discussed in the preamble to the DOL’s Prohibited Transaction Exemption (PTE) 2020-02, which is further summarized below. In addition to broker-dealer, investment advisory firms, and other financial institutions, insurance agents that provide fiduciary rollover recommendations will also need to consider their own compliance with ERISA and the Internal Revenue Code prohibited transaction rules.

Two ERISA exemptions (PTE 2020-02 and PTE 84-24) that are available to financial professionals who are providing ERISA fiduciary advice to retirement investors, including ERISA retirement plans, ERISA retirement plan participants, or IRA owners, are summarized below.

Expand All
PTE 2020-02


On December 15, 2020, the Department of Labor (DOL) issued a new class exemption that provides relief to fiduciaries who provide investment advice to employee benefit plans, plan participants, and owners of individual retirement accounts (IRAs) (“Retirement Investors”) from the prohibited transaction rules under the Employee Retirement Income Security Act of 1974 (ERISA) (the “Exemption”). The DOL also issued a set of FAQs on April 13, 2021 that addresses and provides clarifications of its Exemption.

The Exemption outlines a set of rules that will allow a Financial Institution (defined as a registered broker-dealer, investment adviser, bank, or insurance company) and its Investment Professionals who provide fiduciary investment advice to Retirement Investors to receive various forms of reasonable compensation for that advice. With the release of the Exemption, the DOL also affirmatively reinstated the 1975 “five-part test” that defines the type of conduct considered to be fiduciary investment advice under ERISA. In addition, prior DOL guidance that excluded rollover recommendations from the scope of the five-part test was revoked, thereby making rollover recommendations subject to the same test when determining whether they should be considered fiduciary investment advice. The Exemption became effective on Feb. 16, 2021 and full compliance was originally required by Dec. 20, 2021. However, on Oct. 25, 2021, DOL announced an extension of the compliance date until Jan. 31, 2022. At the same time, DOL also announced an extension until June 30, 2022 for agents and firms to be compliant with PTE 2020-02’s additional disclosure and documentation requirements applicable to rollover recommendations.

The FAQs provided by the DOL state that the DOL is reviewing issues of fact, law, and policy related to the Exemption and its regulation of fiduciary investment advice. The DOL also anticipates taking further regulatory actions which could including issuing new guidance around the Exemption or other rules or amending the Exemption.

Summary of the Exemption

The Exemption provides conditions under which Financial Institutions and its Investment Professionals providing fiduciary advice to Retirement Investors (“Advice Fiduciaries”), including fiduciary advice to roll over assets into an IRA, another retirement plan, or a different type of account, may receive reasonable compensation. The Exemption will allow the receipt of reasonable compensation even when there is a conflict of interest involved in the recommended transaction which would otherwise be prohibited under ERISA. The policy behind this is that compliance with the Exemption should adequately mitigate conflicts.

In issuing the Exemption, the DOL has indicated that until February 1, 2022 an Advice Fiduciary can comply with the Exemption by simply adhering to the Exemption’s Impartial Conduct Standards. After that date, compliance with the broader requirements of the Exemption will become mandatory (except that there is an extension until June 30, 2022 for compliance with the additional disclosure and documentation requirements applicable to rollovers), including meeting each of the following conditions summarized below:

  • Adherence to the Impartial Conduct Standards which requires that: (i) investment advice be provided in the “best interest” of the Retirement Investor; (ii) any compensation received, directly or indirectly, be reasonable; and (iii) any statements to the Retirement Investor about the recommended transaction or other relevant matters is not materially misleading;
  • Written Disclosure: Prior to engaging in a transaction pursuant to the Exemption, the Advice Fiduciaries must provide written disclosure to the Retirement Investor: (i) acknowledging that the Financial Institution and its Investment Professionals are fiduciaries under ERISA and/or the Internal Revenue Code, as applicable; (ii) describing the services to be provided; and (iii) describing any material conflicts of interest;
  • Rollover Analysis and Disclosure: Document and disclose the specific reasons that a recommendation to roll over assets is in the Retirement Investor’s best interest. This requirement extends to recommended rollovers from an ERISA plan to another ERISA plan or to an IRA; from an IRA to an ERISA plan or to another IRA; or from one type of account to another (e.g., from a commission-based account to a fee-based account);
  • Policies and Procedures: The Financial Institution must establish, maintain and enforce written policies and procedures prudently designed to ensure that the Financial Institution and its Investment Professionals comply with the Impartial Conduct Standards; and
  • Retrospective Review: The Financial Institution must conduct a retrospective review, at least annually, that is reasonably designed to assist the Financial Institution in detecting and preventing violations of, and achieving compliance with, the Impartial Conduct Standards and the policies and procedures governing compliance with the Exemption.

Please find FAQs intended to provide additional insight into this recent DOL guidance.

PTE 84-24


The Department of Labor (DOL) has recently updated their interpretation of the 1975 Five Part Test (“Five Part Test”), that defines ERISA fiduciary investment advice, including its perspective on how that definition applies to rollover recommendations from ERISA covered retirement plans and IRAs. Based on this new interpretation, some activities that previously were not considered ERISA fiduciary advice might now cause a financial professional to be deemed an ERISA fiduciary. Consequently, receiving any form of compensation for the advice provided could be a prohibited transaction unless an exemption can be used. Where a fiduciary commits a non-exempt prohibited transaction, they can be forced to pay back their commissions, and the amounts invested or received could be subject to an excise tax.

Summary of the Exemption

At a high level, the DOL has determined that any recommendation involving the assets of a retirement plan or IRA, including a recommendation to rollover those assets, could trigger ERISA fiduciary status if:

  1. The recommendation is made as to the advisability of investing in, purchasing, or selling securities or other property of the plan or IRA;
  2. There is a reasonable expectation that the relationship will be ongoing;
  3. The recommendation is made pursuant to a mutual agreement, arrangement, or understanding between you and your client;
  4. The recommendation serves as a primary basis for the investment made; and
  5. The recommendation is individualized based on the particular needs of the plan participant or IRA owner.

As you can see from the factors listed above, whether a rollover recommendation is fiduciary investment advice under ERISA is based on facts and circumstances. If an insurance agent is acting in an ERISA fiduciary capacity based on the above factors, one avenue to ensure compliance with DOL regulations is to use Prohibited Transaction Exemption (PTE) 84-24 (“PTE 84-24” or the “exemption”). Under PTE 84-24, the receipt of compensation based on the sale of an annuity product will be permitted if the conditions of the exemption have been satisfied.

To comply with PTE 84-24 when selling an insurance product you must:

  1. Be making a recommendation in the ordinary course of business and the sale must be on terms as favorable as someone would get in an arms’ length transaction with an unrelated person.
  2. The total amount of all fees, commissions and any other consideration paid to the insurance company or agent must be “reasonable.”
    • What amount is reasonable is defined by the marketplace.
    • Informal or formal benchmarking of fees and commissions and looking at the other products available to an individual can give you an idea of the reasonableness of fees.
  3. The insurance agent must make written disclosure which must be approved/signed by the purchaser:
    • Disclosing any affiliation between the agent and the insurance company whose product is being recommended,
    • Disclosing any sales commission payable in connection with the transaction and any other fees that are paid in associated with the product including any ongoing, or termination fees.

Unlike other exemptions, such as PTE 2020-02, the use of PTE 84-24 does not require an individual to acknowledge ERISA fiduciary status. Even if they are not planning to act in a fiduciary capacity but accidentally satisfy the elements of the Five Part Test, so long as the financial professional has provided the disclosure necessary to satisfy PTE 84-24 and met the requirements of the exemption as described above, the compensation received in connection with the insurance product recommendation will be permissible.

View a sample 84-24 Disclosure document

Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Please consult your own independent advisor as to any tax, accounting, or legal statements made herein.

Affiliates of Lincoln National Corporation include, but are not limited to, The Lincoln National Life Insurance Company, Lincoln Life & Annuity Company of New York, and Lincoln Retirement Services Company, LLC, herein separately and collectively referred to as “Lincoln.”

Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations.

For financial professional use only. Not for use with the public.