DOL issues final fiduciary rule and related exemptions

Employment Hallway

Employee Benefits Alert


The final DOL fiduciary regulation (the Final Rule) and other guidance published by the DOL on April 8 will have a significant effect on those who provide investment advice and sell investment products and services to employee benefit plans and IRAs.

Coverage.  The Final Rule applies to (1) employee benefit plans that are governed by the Employee Retirement Income Security Act of 1974 ("ERISA") (referred to as "ERISA plans") and (2) plans and arrangements, including IRAs, that are subject to Section 4975 of the Internal Revenue Code of 1986 (the "Code").  The latter category includes plans such as Keogh plans that are subject to Section 4975 of the Code but not to ERISA ("non-ERISA plans").  ERISA plans and non-ERISA plans are referred to as “plans.”

Effective date.  The effective date of the Final Rule is June 7, 2016, but the provisions of the Final Rule will not apply until April 10, 2017, referred to as the “applicability date.”  Limited additional transition relief is available until January 1, 2018, under exemptions released with the Final Rule.

Link.  You can access the Final Rule and the new and revised exemptions on the DOL website here.


The Final Rule takes an approach similar to that of the 2015 proposed regulation (the Proposed Rule).  That is, the Final Rule expands the definition of “fiduciary” in the context of plan and IRA investments to cover many routine sales and marketing practices.  In effect, after the Final Rule becomes applicable, there will no longer be a seller’s exception for “recommendations” of investments to smaller plans, plan participants and IRAs.  If a financial adviser recommends the purchase of an investment to these potential buyers, it will be a fiduciary, as will its employer.  If the financial adviser will receive a fee based on the customer purchasing the recommended investment, the transaction constitutes “self-dealing,” which is prohibited in the absence of an exemption.

To address the prohibited transaction issue, the DOL has issued a best interest contract exemption (the BIC exemption) which is intended to allow investment recommendations to these “retail” buyers, but the exemption is subject to a number of strict conditions.  In addition to the BIC exemption, the DOL also issued a new exemption for certain principal transactions and modified several existing exemptions.


The Final Rule reflects a number of significant changes from the Proposed Rule, including the following:

  • Providing that marketing one’s investment advisory services to a plan (e.g., “hire me”) is not fiduciary advice, unless the marketing includes specific investment recommendations.
  • Deleting appraisals from the definition of fiduciary advice, to be dealt with separately in future guidance.
  • Permitting the use of named investment products in asset allocation models and interactive materials for use by participants in ERISA plans (but not IRAs).
  • Expanding the “seller’s exception,” referred to as the exception for recommendations to “independent fiduciaries with financial expertise.”
  • Reducing the disclosure and recordkeeping requirements.

The Best Interest Contract Exemption was also revised in several respects, including:

  • Deleting the approved asset list.
  • Eliminating the requirement to provide a written contract for ERISA plans, and permitting the written contract to be provided to IRAs and non-ERISA plans at the time the investment transaction is entered into.
  • Providing a mechanism to correct good faith errors without loss of the exemption.


Definition.  The Final Rule spells out when a person will be a “fiduciary” with respect to a plan or IRA as a result of providing investment advice.[1]  As a general rule, a person is an investment-advice fiduciary with respect to a plan or IRA if the person provides to a plan, plan fiduciary, plan participant, IRA or IRA owner the following types of advice for a fee or other compensation, direct or indirect:

(1)        a recommendation as to the advisability of acquiring, holding, disposing of, or exchanging, securities or other investment property, or a recommendation as to how securities or other investment property should be invested after the securities or other investment property are rolled over, transferred or distributed from the plan or IRA

(2)        a recommendation  as to the management of securities or other investment property, including, among other things, recommendations on investment policies or strategies, portfolio composition, selection of other persons to provide investment advice or investment management services, selection of investment account arrangements (e.g., brokerage versus advisory); or recommendations with respect to rollovers, transfers, or distributions from a plan or IRA.

Note:  The reference in this definition to the “selection of other persons to provide investment advice” makes it clear that a financial institution or adviser can solicit a plan to retain the financial institution or an affiliate to provide investment advisory services and that the solicitation is not itself fiduciary advice.  This clarifying change would cover a response to an RFP from a plan requesting investment advisory services.

To be a fiduciary, a person making a recommendation must (1) represent or acknowledge that it is acting as a fiduciary, (2) render advice pursuant to a written or verbal agreement, arrangement, or understanding that the advice is based on the particular investment needs of the advice recipient; or (3) direct the advice to a specific recipient regarding the advisability of a particular investment or management decision with respect to securities or other property of the plan or IRA.

A “recommendation” means a communication that, based on its content, context and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular course of action.

As an example of the broad reach of this definition, the regulation notes that presenting a list of securities to a particular recipient will be a recommendation even if no recommendation is made with respect to any one security.

Also, in the preamble to the Final Rule, the DOL cautions that call center employees who are paid only a salary will become fiduciaries if they make specific recommendations to plan participants and IRA owners.

Non-recommendations:  The following activities, however, do not constitute recommendations that will trigger fiduciary status:

(1)  Providing an investment platform.  Marketing or making available to a plan fiduciary a platform from which the plan fiduciary may select or monitor investment alternatives for participants in the plan.  The offer of the platform must not take into account the individualized needs of the plan, its participants, or beneficiaries.  This exception is intended to provide relief to service providers, such as record-keepers and third-party administrators, who provide a platform or selection of investment alternatives to participants.  As one condition of this exception, the platform provider must disclose that it is not providing impartial investment advice or giving advice in a fiduciary capacity.  The plan fiduciary selecting the platform must also be independent of the platform provider.

(2)  Selection and monitoring assistance.  In connection with providing an investment platform, identifying investment alternatives that meet objective criteria specified by the plan fiduciary, i.e., considering parameters such as expense ratios, size of fund, type of asset.  The platform provider must disclose any financial interest it has in the alternatives it recommends, including the precise nature of such interest.  Also, under this exception, a platform provider may respond to an RFP by identifying a limited or sample set of investment alternatives based on only the size of the employer or plan, the current investment alternatives under the plan, or both.  Finally, under this exception, the platform provider may provide objective financial data and comparisons with independent benchmarks to the plan fiduciary.  However, if a platform provider offers advice that is customized to the needs of the plan, other than as specifically described above, the platform provider will be a fiduciary.

To illustrate the fine line that the DOL is drawing in this area, the preamble to the Final Rule states that a platform provider may develop and offer standardized platforms that are segmented by size of plan, e.g., platforms for small, medium and large plans.  According to the preamble, the platform provider may offer these segmented platforms to the fiduciary of a small plan, but if the platform provider states that the small plan platform is appropriate for the small plan, the line is crossed and the platform provider may become a fiduciary.  The preamble also confirms that the platform provider exception is available for 403(b) plans that are subject to ERISA.

(3)  General communications.  Providing general communications that a reasonable person would not view as an investment recommendation, such as general circulation newsletters, commentary in publicly broadcast talk shows, remarks in widely attended speeches and conferences, research or news reports prepared for general distribution, general marketing materials, general market data, price quotes, performance reports or prospectuses.

(4)  Investment education.  Furnishing or making available to plan participants and beneficiaries information about the operation of the plan, general financial, investment and retirement information, and asset allocation models and interactive investment materials.  This exception for investment education is subject to a number of restrictions, including restrictions that apply when identifying particular investment products or investment alternatives.  Generally, asset allocation models and interactive investment materials provided to IRAs may not name specific investments.

Transactions not treated as fiduciary advice.  The following activities would come within the general definition of fiduciary advice, but are excluded under special exceptions:

(1)  Transactions with independent fiduciaries with financial expertise.  This “seller’s exception” allows communications that might otherwise trigger fiduciary status if the plan fiduciary receiving the communication is in a category presumed to be sophisticated about financial matters.  These “independent fiduciaries with financial expertise” are presumed to understand that they are receiving a sales pitch and that the prospective “seller” is not acting in their best interest.

The specified fiduciaries with financial expertise are (a) a bank, (b) an insurance company, (c) an entity registered as an investment adviser under the Investment Advisers Act of 1940 or registered as an investment adviser with the state in which it has its principal office, (d) a broker-dealer registered with the SEC, and (e) an independent fiduciary that holds, or has under management or control, at least $50 million 

Note:  The Proposed Rule had a similar seller’s exception, but it was based on the number of participants in the plan, rather than the status of the plan’s independent fiduciary as a financial institution or its assets under management. 

The person providing the investment advice to the independent fiduciary of the plan or IRA must know or reasonably believe that the independent fiduciary is capable of evaluating investment risks independently, both in general and with respect to particular transactions and strategies.  Also, the person providing the advice must inform the independent fiduciary that the person is not undertaking to provide impartial advice or to give advice as a fiduciary, and must disclose the existence and nature of the person’s financial interests in the transaction.  The independent fiduciary must be independent of the person providing the advice, but apparently does not have to be independent of the IRA owner or the plan sponsor.  In addition, this exception will not apply if the person recommending a transaction receives a fee from the plan, plan fiduciary, IRA or IRA owner for the provision of investment advice (as opposed to the provision of other services) in connection with the transaction.  Thus, if the conditions are satisfied, this exception would cover the sale of an investment product to a plan represented by an independent fiduciary with financial expertise, as defined in the Final Rule, provided that the seller is not receiving a fee for advising the plan.

(2)  Swap and security-based swap transactions.  This exception allows swap dealers, security-based swap dealers, major swap participants, major security-based swap participants and swap clearing firms to provide advice to plans in connection with these types of swap transactions.  The plan must be advised by an independent fiduciary, and the swap dealer, etc., may not receive a fee directly from the plan or plan fiduciary for providing advice (as opposed to other services) to the plan.  (The independent fiduciary is not required to be an “independent fiduciary with financial expertise” as defined in the seller’s exception.)  The person providing the advice must obtain a written representation from the plan fiduciary confirming the person’s non-fiduciary status.

(3)  Advice from employees.  Employees of a plan sponsor (or its affiliate), employees of a plan or a plan fiduciary, and employees of an employee organization may provide advice in connection with certain matters without becoming a fiduciary if the employee does not receive compensation for the advice beyond the normal compensation for work provided for the employer and certain other conditions are satisfied.  The employer’s job responsibilities cannot include the provision of investment advice, so this exception generally applies to “incidental” advice.

Exception for execution of securities transactions.  The execution of securities transactions by a broker, dealer or bank, without any solicitation of the trade and without the provision of any investment advice, does not result in fiduciary status under the Final Rule.  However, the broker cannot have any significant discretion in connection with the transaction.  For example, the instructions to the broker from the plan or IRA generally must include a price range for the transaction, a time span not longer than five business days, and the maximum or minimum amount to be purchased or sold.


The DOL has also revised and finalized the BIC exemption that it proposed last year.  The BIC exemption is intended to allow financial institutions and the individual brokers and other advisers who work for financial institutions to market and sell investments to “retail” plan and IRA investors.  The DOL refers to these investors as “Retirement Investors,” defined to include (1) a plan participant or beneficiary who can direct investments or decide to take a distribution, (2) the beneficial owner or an IRA acting on behalf of the IRA, and (3) a “retail” fiduciary, defined as a plan or IRA fiduciary that is not an “independent fiduciary with financial expertise” as defined in the Final Rule.

Note:  Under the definition of fiduciary in the Final Rule, marketing of investments to non-retail investors (i.e., plans advised by an independent fiduciary with financial expertise) can be done without triggering fiduciary status.

Without an exemption such as the BIC exemption, a fiduciary for a plan or IRA cannot recommend an investment to a retail investor if it will receive a fee or other compensation as a result of the recommendation.

Deletion of the approved asset list.  The final BIC exemption does not include the approved list of investment assets that was a feature of the proposed BIC exemption.  Thus, any category of asset can be marketed to Retirement Investors, including IRAs, if the conditions of the exemption are otherwise satisfied.  In the preamble to the final regulation, however, the DOL states:

“The fact that the exemption was broadened [to eliminate the approved asset list] does not mean the [DOL] is no longer concerned about some of the attributes of the investments that were not initially included in the proposed definition of Asset, such as unusual complexity, illiquidity, risk, lack of transparency, high fees or commissions, or tax benefits that are generally unnecessary in these tax preferred accounts. . . . Moreover, the [DOL] intends to pay special attention to recommendations involving such products after the applicability date to ensure adherence to the Impartial Conduct Standards and verify that the exemption is sufficiently protective.”

General requirements.  To rely on the exemption, financial institutions and advisers must do the following:

(1)  Adhere to “Impartial Conduct Standards,” as defined in the exemption

(2)  Acknowledge that they are acting as fiduciaries under ERISA or the Code, or both

(3)  Adopt policies and procedures designed to ensure that advisers adhere to the Impartial Conduct Standards

(4)  Disclose important information relating to fees, compensation and material conflicts of interest and

(5)  Retain records demonstrating compliance with the exemption.

Impartial conduct standards – the best interest standard.  The financial institution relying on the BIC exemption must state that it and its individual advisers will adhere to the following standards, and must in fact comply with the standards:

(1)  The investment advice provided must be, at the time of the recommendation, in the best interest of the Retirement Investor.  The adviser must take into account the investment objectives, risk tolerance, financial circumstances and needs of the Retirement Investor, without regard to the financial or other interests of the adviser, the financial institution or any affiliate or related entity, or other party.

(2)  The compensation of the financial institution, the adviser and their affiliates in connection with the advice must not exceed “reasonable compensation” as determined under ERISA and the Code.

(3)  Statements by the financial institutions and the adviser to the Retirement Investor must not be materially misleading when they are made.

In the preamble to the BIC exemption, the DOL makes comments about the best interest standard that may be intended to make it more workable:

  • “Without regard to the financial or other interests of the adviser” does not preclude the receipt of fees or other compensation by the adviser.
  • The best interest standard “does not impose an unattainable obligation on advisers and financial institutions to somehow identify the single ‘best’ investment for the Retirement Investor out of all the investments in the national or international marketplace, assuming that such advice were even possible.”
  • “An adviser and financial institution do not have to recommend the transaction that is the lowest cost or generates the lowest fees without regard to other relevant factors.”

Despite these statements in the preamble, however, the burden of proof will be on the financial institution or adviser, and it may be difficult for a financial institution or adviser to establish that its recommendations do not take into account the fees that it will receive, and that the recommended investment is in the best interest of the client or customer.

Written contract requirement.  In the case of investment advice provided to an investor that is an IRA or Non-ERISA Plan, the financial institution must enter into a written contract with the investor, to be signed by the investor and the financial institution, stating that the financial institution and its advisers are fiduciaries and warranting that they will comply with the impartial conduct standards, including the best interest standard.  The contract must be entered into prior to or at the same time as the execution of the investment transaction that results from the investment advice.  If the investment advice precedes the signing of the contract, the contract must by its terms apply to the period prior to the signing of the contract.  The DOL has suggested that a financial institution might comply with this timing requirement by incorporating the written contract into its account opening procedures.

The written contract may include an arbitration provision, but it may not include exculpatory language limiting the financial institution’s or the adviser’s liability for violation of the contract.  Also, the contract may not preclude the investor’s participation in a class action lawsuit to enforce the terms of the contract.

This written contract requirement was included for IRAs and non-ERISA plans because the DOL has no enforcement authority over such entities.  The written contract requirement does not apply to ERISA plans, but such plans can sue under ERISA to enforce the requirements of the fiduciary regulation and the obligations undertaken pursuant to the BIC exemption.

Quotas, bonuses, other differential compensation.  As part of the required policies and procedures to prevent conflicts of interest, the financial institution must not use quotas, appraisals, performance or personnel actions, bonuses, contests, special awards, differential compensation or other actions or incentives that are intended or would reasonably be expected to cause advisers to make recommendations that are not in the best interest of a Retirement Investor.  The DOL will permit the payment of differential compensation to advisers for different investment products, but solely in cases where the additional compensation reflects a “neutral” factor, such as the additional effort that may be needed to sell more complex investment products, such as variable annuities.

Note:  The DOL has said that it is not mandating “level fees” and that other compensation arrangements are permissible.  However, in many contexts, these required policies and procedures will require advisers to be compensated using a level fee arrangement.

Apparently a financial institution that employs brokers or other advisers may receive differential compensation in connection with investment transactions, e.g., due to the different costs associated with different products, such as equity funds vs. fixed income funds, provided that the advisers who sell the investments are paid using a level fee or other method that avoids or mitigates conflicts of interest.

Disclosure.  The required disclosure includes disclosure of material conflicts of interest and the policies that have been adopted to mitigate them, typical fees and service charges, payments (if any) to be received from third parties in connection with the accounts, and whether the financial institution offers proprietary products.  In addition, the financial institution must maintain a website with this information.  The disclosures do not have to be repeated for sales of the same investment product within one year of the original disclosure, unless there are material changes.

Level fee fiduciary.  If a financial institution or adviser that is a fiduciary charges a level fee − that is, a fee based on a fixed percentage of the value of the assets under management or a set fee that does not vary with the particular investment recommended − then a streamlined set of requirements will apply in lieu of certain of the above requirements.   The fiduciary must acknowledge its fiduciary status, and it must comply with the Impartial Conduct Standards, including the best interest standard.  Also, if the level fee fiduciary recommends that a Retirement Investor roll over assets from a plan to an IRA, the fiduciary must document the specific reasons for the recommendation and why it was in the best interest of the Retirement Investor.  The documentation must consider the alternatives to the rollover, including leaving the assets in the Retirement Investor’s current employer’s plan, taking into account whether plan administrative expenses are paid by the employer or the plan.  If an adviser recommends converting a commission based account to a level fee account, the adviser must document why that is in the best interest of the Retirement Investor.

Note:  Although the DOL seems to favor level fee arrangements, the DOL expressed concern in the preamble that an adviser might recommend the conversion of an inactively traded commission account to a level fee advisory fee account, where the conversion would significantly increase the costs paid to the adviser or the financial institution.  The DOL would not consider such advice to be in the best interest of the client or customer.

If the adviser, financial institution or any affiliate receives sales commissions in addition to the level fees, the streamlined procedures of the level fee exception will not apply, and the arrangement will have to comply with the full requirements of the BIC exception.

Proprietary products and third-party payments.  The BIC exemption explicitly permits a financial institution to restrict an adviser’s recommendations to proprietary products or to investments that generate third-party payments.  Under this provision, the financial institution and adviser are deemed to satisfy the best interest standard, provided that they satisfy a number of conditions.  The exception requires additional disclosure to the Retirement Investor of the conflicts involved.  In addition, the financial institution must reasonably conclude that the limitations on the universe of recommended investments and material conflicts of interest will not result in unreasonable compensation or cause the financial institution or its advisers to recommend imprudent investments, and the financial institution must document in writing the bases for these conclusions.  Also, the recommendations must be based on the investment objectives, risk tolerance, financial circumstances and needs of the Retirement Investor, and not the financial or other interests of the Adviser.

Observation:  The conditions that apply to the sale of proprietary products and the receipt of third-party payments present a high threshold, one that may not be easy for a financial institution or adviser to meet.  Sellers of relatively low-fee proprietary investments may be able to make the case that they qualify, but many financial institutions and advisers will find it difficult to accept the risk that they can be second-guessed by Retirement Investors or the DOL:  “Your proprietary products are more expensive than certain generic investment alternatives.  Prove that the Retirement Investor is not disadvantaged, and prove that you have not taken your fees (or third-party payments) into account in making the recommendation.”

Exception for purchase of insurance and annuity contracts.  The BIC exemption generally does not apply to compensation received in connection with a principal transaction.  However, the BIC exemption includes an exemption for the purchase of an insurance or annuity contract from an insurance company that has a preexisting service provider or party in interest relationship to the plan or IRA, a transaction that would otherwise be a prohibited transaction.  Certain conditions must be satisfied, including that (1) the compensation for any services rendered in connection with the transaction must be reasonable and (2) the terms of the transaction must be at least as favorable as terms available in an arm’s length transaction.

Note:  Insurance agents and brokers who recommend and sell variable annuities, indexed annuities and similar annuities to Retirement Investors must comply with the requirements of the BIC exemption in the same manner as the sellers of other investment products.  Sellers of “fixed rate annuities,” however, may rely on amended prohibited transaction 84-24, which imposes somewhat less stringent conditions.

Notice to DOL.  A financial institution must notify the DOL before receiving any compensation if it intends to rely on the BIC exemption.  The notice does not have to identify clients or transactions, and a single notification will suffice.

Effective date.  The BIC exemption generally has the same applicability date as the Final Rule, that is, it applies to transactions on or after April 10, 2017.  However, during a transition period between April 10, 2017 and January 1, 2018, only a limited set of conditions will apply.  For example, the requirement to enter into a contract with non-ERISA plans and IRAs will not apply during the transition period.

Exemption for pre-existing transactions.  Transition relief is provided for securities or other investment property acquired before the applicability date under the Final Rule, subject to disclosure and reasonable compensation conditions.  The pre-existing investment transition relief also applies to investments made after the applicability date pursuant to a “systematic purchase program” established before that date.  The transition relief also covers additional investment advice with respect to the pre-existing investments after the applicability date, such as whether to sell or continue to hold the investments, subject to a limited set of conditions, including a reasonable compensation condition.   Additional “follow-on” investments in the pre-existing investments that are made after the applicability date will not be subject to transition relief unless they are made under a systematic purchase program.


In 2015, the DOL proposed a new exemption that would allow an investment advice fiduciary to engage in the sale and purchase of certain debt securities to or from a plan or IRA, where the investment advice fiduciary is acting as a principal in the transaction.  The DOL has now finalized that exemption with some modifications, as follows:

  • The revised principal transaction exemption covers interests in unit investment trusts and certificates of deposit, as well as the debt instruments covered by the proposed exemption.
  • The revised exemption does not include a requirement to obtain two independent price quotes for the debt securities involved.
  • The revised exemption does not require disclosure of the mark-down or mark-up of the debt investments purchased or sold.
  • The revised exemption eliminates the contract requirement for ERISA plans (similar to the contract requirement in the BIC exemption), and provides that the contract requirement for non-ERISA plans and IRAs may be satisfied at any time prior to or at the time the investment transaction is completed.
  • The revised exemption contains streamlined disclosure requirements, compared to the proposed exemption.
  • The revised exemption includes a mechanism for correcting good faith violations of the disclosure conditions.
  • The revised exemption covers “riskless principal transactions,” as defined below.

The final version of the exemption covers purchases and sales of “principal traded assets.” In the case of purchases by a Retirement Investor, a principal traded asset is defined as a debt security, a certificate of deposit or an interest in a unit investment trust.  For this purpose, a debt security includes a registered debt security issued by a US corporation, an agency debt security, an asset backed security guaranteed by an agency or by a government sponsored enterprise, and a US Treasury security.  In the case of sales by a Retirement Investor, a principal traded asset includes any securities or other investment property.  The broader definition for sales by a plan or IRA is intended to enhance the liquidity of investments for such investors.

In the case of the purchase of a debt security, the adviser must determine that the debt security possesses no more than a moderate credit risk, and that it is sufficiently liquid that it could be sold at or near its carrying value within a reasonably short period of time.  The preamble to the exemption states that the “moderate credit risk” condition is intended to identify investment grade securities, although the DOL acknowledges that the Dodd-Frank Act does not permit explicit reliance on credit ratings.

In addition, the final principal transaction exemption covers “riskless principal transactions” involving principal traded assets.  A riskless principal transaction is a transaction in which a financial institution, after having received an order from a Retirement Investor to buy or sell a principal traded asset, purchases or sells the asset for the financial institution’s own account to offset the contemporaneous transaction with the Retirement Investor.  Commenters on the proposed principal transaction exemption had told the DOL that many transactions with plans are carried out as riskless principal transactions, and that such transactions are similar to agency transactions in which a financial institution acquires an investment for an investor without taking title to the investment.  This type of transaction does not involve the risk that a financial institution will “dump” an unfavorable investment it has made on the Retirement Investor.

The conditions for application of the principal transaction exemption are similar to the conditions of the BIC exemption. The financial institution that engages in the transaction with a Retirement Investor must adhere to the best interest standard, acknowledge fiduciary status, avoid misleading statements, disclose fees and material conflicts of interest and adopt policies and procedures designed to mitigate conflicts of interest.  These requirements must be included in a written contract if the transaction is with an IRA or non-ERISA plan. The financial institution must also seek to obtain best execution of the transaction.


The DOL finalized a number of changes to existing prohibited transaction exemptions (“PTEs”), generally in line with the proposed changes to exemptions in 2015.  Two key changes were the incorporation of the Impartial Conduct Standards into existing exemptions, and the revision of certain exemptions to exclude IRAs, forcing them to rely on the BIC exemption.  The changes to the exemptions, which will be effective on April 10, 2017, include the following:

  • PTE 84-24 was amended to limit that exemption to fixed rate annuity contracts, and to exclude plan and IRA purchases of annuities that do not fit the definition of fixed rate annuity contracts.  Those other annuity contracts, i.e., variable annuities, indexed annuities and similar annuities, now must qualify for exemption under the BIC exemption.  In addition, PTE 84-24 was amended to incorporate the Impartial Conduct Standards (although not the contract requirement) for transactions covered by the exemption and to eliminate the exemption for IRA purchases of investment company securities.
  • PTE 86-128 and parts of PTE 75-1, which permitted the receipt of fees in connection with certain mutual fund and other securities transactions entered into by plans and IRAs, were amended to include the Impartial Conduct Standards and to exclude IRAs from the exemption, forcing them to rely on the BIC exemption.
  • PTE 75-1, which allowed broker dealers to extend credit to a plan in connection with the purchase or sale of securities, was amended to extend the exemption to the receipt of fees for the extension of credit to a plan or IRA by a broker dealer to avoid a failed securities transaction.

Please feel free to contact one of the members of our Employee Benefits Group if you have any questions about this topic.

[1]  Note that a person may be a fiduciary in another capacity, e.g., the term fiduciary includes a person who has discretionary authority in connection with the management or administration of a Plan.