What Is PTE 84-24 for a 401(k) Plan?

PTE 84-24 solves a compensation conflict, not an investment-selection problem. In its operative 2026 form, the exemption can allow specified insurance agents, brokers, pension consultants, insurance companies and investment-company principal underwriters to participate in plan purchases and receive sales commissions that otherwise could violate ERISA's prohibited-transaction rules. The protection is conditional: ordinary business, arm's-length economics, reasonable total compensation and—where the transaction requires it—advance disclosure and approval by an independent plan fiduciary.^[1][2][5]

That distinction is the article.

An annuity can satisfy every PTE 84-24 condition and still be:

• too expensive
• too illiquid
• poorly matched to the plan
• backed by a weaker insurer
• inferior to available alternatives.

The exemption asks whether a conflicted transaction can occur.

ERISA Section 404 asks whether the fiduciary should choose it.^[10]

Why Can an Insurer-Paid Commission Be an ERISA Problem?

Assume a 401(k) committee is considering a group annuity.

Agent A recommends Contract X.

The plan pays the insurer:

$5 million

of plan assets.

The insurer pays Agent A:

2%

of the premium.

Commission:

$100,000.

The committee never writes a check to Agent A.

That does not eliminate the compensation conflict.

If Agent A is a party in interest or fiduciary and its recommendation or transaction causes it to receive compensation tied to plan assets, ERISA Sections 406(a) and 406(b) can be implicated.^[9]

PTE 84-24 provides a defined route for specified insurance and annuity transactions.

The Exemption Covers More Than Agent Commissions

The 2006 operative text contains six transaction categories in Section III.^[2]

Section III(a)

Receipt, directly or indirectly, by an insurance agent, broker or pension consultant of a sales commission from an insurance company in connection with a plan purchase of an insurance or annuity contract.

Section III(b)

Receipt of a sales commission by a principal underwriter for a registered investment company when plan assets purchase securities issued by that investment company.

Section III(c)

Effecting by an insurance agent, broker, pension consultant or investment-company principal underwriter of a covered purchase transaction.

Section III(d)

A plan-asset purchase of a covered insurance or annuity product directly from the issuing insurer.

Section III(e)

A covered contract purchase from an insurer whose fiduciary or service-provider status arises solely from sponsoring a master or prototype plan.

Section III(f)

Specified purchase or sale of registered investment-company securities where the investment company, principal underwriter or investment adviser is a fiduciary or service provider solely because of master/prototype-plan sponsorship, nondiscretionary trust services or both.^[2]

Treating PTE 84-24 as:

"the annuity commission exemption"

is useful shorthand.

It is not the whole legal text.

The Most Common 401(k) Fact Pattern Is Still Commission-Based Insurance Distribution

For a plan sponsor, the practical PTE 84-24 question often begins with three parties:

1. plan fiduciary
2. insurance intermediary
3. insurance company.

The intermediary recommends or effects a purchase.

The insurance company issues the contract.

The intermediary receives compensation from the insurer.

The conflict becomes sharper when:

• commission differs by product
• commission differs by insurer
• renewal compensation varies
• surrender charges make replacement expensive
• agent is affiliated with one insurer
• agent's contract limits the products it can recommend.

PTE 84-24 makes those economics visible to the authorizing fiduciary.

It does not pretend they disappear.

Three General Conditions Apply Across the Covered Transactions

Section IV provides three conditions that organize the exemption.^[2]

Ordinary course

The transaction must be effected in the ordinary course of the relevant intermediary's, insurer's or principal underwriter's business.

Arm's-length economics

Terms must be at least as favorable to the plan as an arm's-length transaction with an unrelated party.

Reasonable total compensation

The combined total of fees, commissions and other consideration received for:

• services to the plan
• the insurance, annuity or investment-company transaction

cannot exceed reasonable compensation within the exemption's stated ERISA and Code framework.^[2][11][12]

These are economic conditions.

Disclosure alone cannot cure a transaction that fails them.

"Ordinary Course" Is a Real Limit

Suppose an insurance broker normally sells group annuity contracts.

For one large plan, the broker creates a side arrangement under which:

• plan pays unusual consulting fee
• insurer pays enhanced placement fee
• broker receives separate transition payment
• affiliate receives a one-time marketing allowance.

Calling the package an:

annuity sale

does not answer whether the transaction is being effected in the broker's ordinary course of business.

An exemption written for recurring commercial activity should not be treated as permission for a bespoke value-transfer arrangement.

Arm's-Length Means the Plan Needs a Comparator

The comparison standard asks whether the plan receives economics at least as favorable as it could obtain in a comparable unrelated-party deal.^[2]

That cannot be tested in a vacuum.

A fiduciary should compare:

• insurer pricing
• guarantee terms
• surrender schedule
• participant fees
• crediting methodology
• mortality and expense charges where applicable
• administrative charges
• contract expenses
• commissions
• service scope
• portability
• termination economics.

The useful comparator is not:

"what this insurer usually charges."

It is:

"what an unrelated plan buyer could obtain under comparable circumstances."

Reasonable Compensation Is Not a Commission-Only Test

The text combines:

• services compensation
• transaction compensation.^[2]

That means the analysis should not stop at:

Agent commission = 1.5%.

Suppose:

Relevant combined economics:

$200,000

before deciding which components are legally attributable under the facts.

A 1.5% commission can be reasonable while the total compensation package is not.

Convert Percentages to Dollars

Plan purchases:

$8 million

of annuity contract value.

Agent commission:

1.25%.

Dollar commission:

$100,000.

If the committee only sees:

1.25%

the number may appear small.

If the service consists of:

• two finalist meetings
• implementation support
• annual review

the $100,000 amount becomes easier to benchmark.

Percentage disclosure is necessary.

Dollar context improves fiduciary judgment.

The Exemption Is Not Available to Every Related Person

Section V(a) excludes specified persons from the ordinary Section III(a)-(d) route.^[2]

A person seeking relief through this ordinary route cannot occupy any of these disqualifying roles:

1. a trustee of the plan, except a qualifying nondiscretionary trustee that does not render investment advice about any plan assets
2. the plan administrator
3. a fiduciary expressly authorized in writing to manage, acquire or dispose of plan assets on a discretionary basis
4. for relevant post-1978 transactions, an employer whose employees are covered by the plan.^[2]

That is an important boundary.

PTE 84-24 uses disclosure and independent approval.

It is not designed to let the person with final discretionary control approve its own commission-generating transaction.

Advice Fiduciary and Discretionary Fiduciary Are Not the Same Thing

The operative exclusion is aimed at a fiduciary with written discretionary authority over plan assets.^[2]

A person can potentially be:

an investment-advice fiduciary

without having:

discretionary management authority.

That distinction matters.

Under current law, investment-advice fiduciary status generally begins with the restored five-part test when the person is not already a fiduciary through another statutory function.^[3][4][6]

If all fiduciary-advice elements are satisfied and the adviser receives conflicted compensation, an exemption can be needed.

PTE 84-24 may cover specified narrower insurance or investment-company transactions.

PTE 2020-02 can provide broader relief under a different condition set.^[6][7]

A 3(38) Manager Cannot Treat PTE 84-24 as Ordinary Commission Relief

Assume Investment Manager M has discretionary authority over the plan assets being used for the annuity purchase.

M can decide:

• whether to buy
• which insurer
• how much
• when to transact.

M or an affiliate also expects a sales commission.

The ordinary PTE 84-24 route is not built for that fact pattern.

The discretionary-fiduciary exclusion matters before the committee even reaches the disclosure form.^[2]

A signed commission acknowledgment does not cure a scope failure.

The 2006 Amendment Added an Important Affiliate Exception

The 2006 amendment addressed a narrower problem.

A covered insurance intermediary, insurer or investment-company principal underwriter can be affiliated with:

• a trustee
• an investment manager

without automatically losing PTE 84-24 relief if that trustee or manager has:

no discretionary authority or control over the plan assets involved in the transaction

other than qualifying nondiscretionary-trustee authority.^[2]

The test is asset-specific.

Affiliation alone is not always disqualifying.

Control over the assets funding the transaction is the key issue.

Example: Affiliate Manages a Different Sleeve

Plan has:

$300 million.

Affiliated investment manager controls:

$80 million equity portfolio.

Plan committee separately decides to use:

$10 million

of cash held outside that mandate to buy an annuity through an affiliated insurance agent.

If that manager cannot direct or control the $10 million funding this annuity purchase, the 2006 affiliate amendment can matter.^[2]

Do not jump from:

same corporate family

to:

automatic failure.

Map actual authority.

Change the Facts: The Affiliate Controls the Funding Assets

Same plan.

Same agent.

This time the affiliated investment manager controls the cash sleeve and decides which assets to liquidate and whether the annuity purchase occurs.

Now the 2006 exception is much harder to fit because the affiliate has discretionary authority over the assets involved.

The legal analysis follows:

which assets + which authority

not:

which logo appears on the business card.

Insurance and Annuity Disclosures Are Specific

Before executing a Section III(a), (c) or relevant (d) insurance/annuity transaction, the agent, broker or pension consultant must provide specified information in writing to an independent fiduciary of the plan.^[2]

The disclosure must be calculated to be understood by a fiduciary with no special insurance or investment expertise.

Three categories matter.

Relationship and limitation

If the intermediary is affiliated with the recommended insurer—or an agreement with the insurer limits which insurance or annuity contracts the intermediary can recommend—the nature of that affiliation, limitation or relationship must be disclosed.

Commission

The sales commission must be expressed as a percentage of gross annual premium payments for:

• first year
• each succeeding renewal year.

Contract economics

The disclosure must describe charges, fees, discounts, penalties or adjustments that may apply in connection with:

• purchase
• holding
• exchange
• termination
• sale.^[2]

That is a broader economic picture than the commission alone.

Captive Distribution Is Not the Same as Independent Shopping

Suppose Agent A can sell only Insurer X products under its distribution agreement.

The agent recommends Insurer X annuity.

The disclosure should not leave the fiduciary with the impression that Agent A surveyed:

the annuity market.

The limitation itself is material under PTE 84-24's disclosure structure.^[2]

That does not make a captive agent improper.

It changes what the committee should infer from the recommendation.

Example: Commission Schedule

Premium:

$2 million.

Commission schedule:

• Year 1: 2.00%
• Year 2: 0.50%
• Year 3: 0.50%
• Year 4: 0.25%.

Dollar amounts if full premium basis applies as represented:

• Year 1: $40,000
• Year 2: $10,000
• Year 3: $10,000
• Year 4: $5,000.

A committee that sees only:

2% initial commission

does not yet understand the renewal economics.

PTE 84-24 requires the schedule to reach succeeding renewal years.^[2]

Surrender Charges Belong in the Conflict File

Assume contract has:

• 7% surrender charge in year 1
• 6% in year 2
• declining annually to zero.

The agent's commission is:

2%.

The product cost question is not:

"Is 2% reasonable?"

The plan also needs to understand the economic cost of changing its mind.

Exit restrictions can create:

• lock-in
• reduced bargaining leverage
• replacement friction
• greater importance of insurer quality.

The exemption expressly requires disclosure of relevant penalties and adjustments.^[2]

Written Approval Is Required Before the Insurance Transaction

After receiving the required insurance/annuity information, the independent fiduciary must:

1. acknowledge receipt in writing
2. approve the transaction on behalf of the plan
3. do so before execution.^[2]

That timing matters.

A committee cannot execute the transaction on Monday and collect a ratification signature on Friday as though the order were irrelevant.

The protection is designed around informed authorization.

"Independent Fiduciary" Does Not Always Mean Outside Consultant

The operative text says the approving fiduciary:

may be an employer of employees covered by the plan.^[2]

That surprises people.

A plan sponsor's internal investment committee can potentially serve as the authorizing fiduciary if the applicable independence conditions are satisfied.

The fiduciary cannot be:

• an insurance agent or broker involved in the transaction
• the involved pension consultant
• the involved insurance company.

It also cannot receive direct or indirect personal compensation from a party dealing with the plan in connection with the transaction.^[2]

Independence is about the transaction.

Not necessarily physical separation from the employer.

Employer as Approver Is Different From Employer as Commission Recipient

PTE 84-24 permits the employer to serve as the independent fiduciary in the specified approval role.^[2]

That does not mean the employer can turn around and become the compensated intermediary.

Section V separately excludes an employer whose employees are covered by the plan from the ordinary Section III(a)-(d) transaction route.^[2]

The same word:

employer

appears in two different capacities.

Do not merge them.

Mutual-Fund Principal-Underwriter Disclosure Is Similar but Not Identical

For a plan purchase of registered investment-company securities where the principal underwriter receives a sales commission, Section V(c) has its own disclosure structure.^[2]

The principal underwriter must disclose:

• its relationship to the recommended investment company and any resulting limitation on recommendations
• the sales commission as a percentage of the plan's gross payment and amount actually invested
• the material costs and economic adjustments that can apply when the position is bought, held, exchanged, terminated or sold.^[2]

The independent fiduciary then approves the transaction.

But the approval mechanics differ from the insurance subsection.

Mutual-Fund Approval Can Be Presumed in the Stated Circumstances

Under the operative Section V(c)(2), absent facts or circumstances indicating otherwise, approval may be presumed if the fiduciary permits the investment-company transaction to proceed after receiving the written disclosure.^[2]

That is not the same language used for insurance and annuity purchases.

For insurance/annuity transactions, the text requires:

written acknowledgment + approval before execution.

For the principal-underwriter mutual-fund route, the exemption provides the stated presumption mechanism.^[2]

A compliance procedure should not use one generic authorization form and assume every subsection works the same way.

The Three-Year Rule Reduces Repetitive Disclosures

For additional purchases of the same kind of insurance or annuity contract or investment-company security, the written disclosure generally does not need to be repeated every time.^[2]

Two events reset the requirement:

Time

More than:

three years

have passed since the prior disclosure for the same kind of contract or security.

Material difference

The recommended contract/security or its commission is materially different from the product or commission previously approved.^[2]

The second trigger is more important operationally.

Three years is not permission to ignore change.

Example: Repeat Purchase After 28 Months

Committee approved a group annuity 28 months ago.

Current purchase uses:

• same contract form
• same insurer
• same commission
• same surrender schedule
• same material economics.

The repeat-purchase provision can avoid re-running the entire written disclosure solely because another purchase occurs within the three-year period.^[2]

The committee should still satisfy ordinary fiduciary monitoring.

PTE disclosure frequency and fiduciary review frequency are not identical.

Example: Commission Changes After 18 Months

Same contract.

Only 18 months have passed.

Commission rises from:

1.00%

to:

1.75%.

That can be materially different.

The committee should not say:

"Our PTE form is good for three years."

The material-difference trigger can require new disclosure and approval before the transaction.^[2]

Product Change Can Trigger New Disclosure Even If Commission Is Unchanged

Suppose commission remains:

1.25%.

But the new contract has:

• longer surrender period
• higher termination adjustment
• different guarantee
• different insurer affiliate
• new product restriction.

The PTE's material-difference language reaches the contract or security itself, not just commission.^[2]

A static commission does not freeze the disclosure.

Six Years of Records Are Required

For Section III(a), (b) and (c) transactions, the designated intermediary must retain or cause to be retained specified records for:

six years from the transaction date.^[2]

The records include:

• disclosures
• additional materials given to the fiduciary
• written acknowledgment required for insurance/annuity approval.

The exemption also specifies access rights for governmental authorities and identified plan stakeholders.^[2]

DOL's August 2026 information-collection notice continues to describe written authorization, preauthorization disclosure and records sufficient to demonstrate compliance as central PTE 84-24 information requirements.^[5]

A Good File Should Be Better Than the Minimum

A defensible transaction file should include:

• product proposal
• insurer
• intermediary
• affiliation map
• carrier appointment or product limitations
• commission schedule
• renewal compensation
• surrender/termination schedule
• other fees
• total-compensation map
• arm's-length comparison
• competing quotes
• insurer-selection analysis
• independent-fiduciary approval
• meeting minutes
• date of execution
• record-retention calendar.

The exemption is disclosure-based.

A weak file makes it hard to prove the disclosure actually happened before the transaction.

PTE 84-24 Is Not the ERISA Annuity-Provider Safe Harbor

INV-141 covers the fiduciary analysis for lifetime-income options.

ERISA Section 404(e) and the regulatory safe harbor in 29 CFR 2550.404a-4 concern the fiduciary's selection of an annuity provider for an individual account plan.^[13]

PTE 84-24 addresses something different:

otherwise prohibited transactions and compensation.

One transaction can require both analyses.

PTE 84-24 question

Can the agent, insurer or related party receive compensation or participate in this transaction?

Section 404(e) / 404a-4 question

Was the insurer-selection process prudent and does the fiduciary satisfy the applicable safe-harbor conditions?

Commission relief does not establish insurer prudence.

Insurer prudence does not exempt a prohibited commission.

A Strong Insurer Does Not Cure a Bad Commission Process

Assume insurer has:

• strong financial ratings
• large statutory surplus
• long operating history.

The fiduciary properly satisfies the applicable annuity-provider selection analysis.

Agent still failed to disclose:

• affiliation with insurer
• renewal commission
• 7-year surrender charge.

The insurer's financial strength does not cure defects in the required transaction disclosure.

Different legal rules protect different risks.

The Insurance Exemption Is Also Not PTE 2020-02

PTE 2020-02 is broader investment-advice compensation relief for qualifying financial institutions and investment professionals.^[6][7]

It uses a different compliance architecture, including:

• fiduciary acknowledgment
• Impartial Conduct Standards
• conflict disclosures
• policies and procedures
• retrospective review
• specific rollover documentation where applicable.^[5][7]

The current insurance exemption is narrower.

It focuses on specified insurance, annuity and registered investment-company transactions and uses transaction-specific disclosure, approval and compensation rules.^[2][3][4]

The correct exemption follows:

• fiduciary status
• compensation type
• product
• legal entity
• transaction
• available conditions.

Why Use the Narrower Insurance Exemption If PTE 2020-02 Exists?

Because the exemptions solve overlapping but different problems.

The narrower exemption can be useful where:

• compensation is a covered insurance sales commission
• transaction fits the class exemption
• parties fit the permitted roles
• plan can satisfy independent approval and disclosure
• broader PTE 2020-02 architecture is unnecessary for that transaction.

PTE 2020-02 can be useful where:

• compensation is broader
• recommendation is fiduciary advice
• the financial institution and professional fit its definitions
• its conduct and supervisory conditions can be satisfied.

DOL's PTE 2020-02 FAQ states that insurers and agents may also rely on the narrower insurance exemption for specified compensation practices, including insurance-agent sales commissions and insurer compensation connected to annuity sales, when its conditions are satisfied.^[7]

Fiduciary Status Comes Before Exemption Choice

A commission is not automatically an ERISA fiduciary commission.

Current investment-advice analysis returned to the longstanding five-part test after the 2024 rulemaking was vacated.^[4][6]

For a person who is not already a fiduciary through another function, the investment-advice test generally asks whether the person:

• renders advice as to value or advisability of investing in, purchasing or selling securities or other property
• on a regular basis
• pursuant to a mutual agreement, arrangement or understanding
• with advice serving as a primary basis for investment decisions
• and individualized to the plan's needs.^[6]

If fiduciary status is absent, some Section 406(b) self-dealing concerns may not arise in the same way.

Party-in-interest rules can still matter.

Exemption analysis should not begin by assuming the conclusion.

The 2016 Rewrite Is Not Current Law

DOL amended the exemption in 2016 as part of the fiduciary-rule package.

Among other changes, the amendment narrowed annuity relief to defined:

fixed rate annuity contracts

and added Impartial Conduct Standards.^[3]

The Fifth Circuit vacated the entire 2016 fiduciary-rule package and associated PTE amendments.

In 2020, DOL formally returned it to its:

pre-amendment form.^[3]

The 2020 notice identifies that applicable version as:

• 49 FR 13208 (1984)
• corrected at 49 FR 24819
• amended at 71 FR 5887 (2006).^[3]

That is the current historical baseline.

Do Not Carry the 2016 Fixed-Rate Limitation Into 2026

A compliance memo that says:

"The exemption covers only fixed-rate annuities"

is using the vacated 2016 structure.

The pre-2016 operative text refers broadly to:

insurance or annuity contracts.^[2][3]

That does not mean every annuity transaction automatically fits.

Variable annuities, indexed annuities and other products can raise:

• securities-law issues
• state insurance-law issues
• fiduciary-status questions
• compensation issues
• other exemption questions.

But that 2016 fixed-rate limitation is not part of the current exemption.^[3]

The 2024 Independent-Producer Framework Is Also Not Current

DOL tried again in 2024.

The 2024 amendment created a new framework tailored to independent insurance producers recommending annuities from more than one insurance company, with conditions resembling parts of PTE 2020-02.^[14]

The 2024 package was stayed before becoming the stable operating framework.

Federal courts later vacated that rulemaking and its related exemption amendments.

DOL's March 2026 technical notice states that the:

pre-amendment version

of the exemption applies.^[4]

A 2024 compliance guide can therefore be materially wrong in 2026.

The Vacated 2024 Producer Regime Is Not Current Law

Do not import these 2024 concepts into the current exemption as operative conditions:

• new Independent Producer section
• 2024 producer fiduciary acknowledgment
• 2024 insurer supervisory process
• 2024 annual retrospective review architecture
• 2024 eligibility/disqualification framework.^[14]

Some similar duties can arise under:

• PTE 2020-02
• ERISA Section 404
• securities law
• state insurance law
• firm policy.

That is different from treating them as requirements of the restored exemption.

The Current-Law Timeline Is Simple Once the Vacated Layers Are Removed

1984 - PTE 84-24 granted

2002 - DOL clarified applicability to plans described in Code Section 4975 through PTE 2002-13 and related guidance.^[8]

2006 - affiliate rule amended - full exemption text reprinted.^[2]

2016 - fixed-rate-annuity limitation and other fiduciary-rule changes adopted

2018 / 2020 - 2016 package vacated - DOL formally restores PTE 84-24 to pre-2016 form.^[3]

2024 - independent-producer and related Retirement Security amendments adopted.^[14]

2026 - courts vacate 2024 rule and associated PTE amendments - DOL confirms pre-amendment PTE 84-24 applies.^[4]

For current work, the 2006-form exemption is the operative baseline.

DOL Still Administers the Information Collection

On August 19, 2026, DOL published a request to extend the currently approved information collection for:

Insurance and Annuity Contracts and Mutual Fund Principal Underwriters (PTE 1984-24).^[5]

OMB Control Number:

1210-0158.

The current approval is scheduled to expire:

May 31, 2027.^[1][5]

The 2026 description still centers on:

• sales commissions
• written authorization
• preauthorization disclosure
• records sufficient to demonstrate compliance.^[5]

That aligns with the restored pre-2016 architecture.

The OMB Date Is Not the Exemption's Expiration Date

May 31, 2027 is the scheduled expiration of the current:

information-collection approval.

It is not an automatic sunset of the exemption itself.^[1][5]

The distinction matters because DOL periodically renews paperwork approvals.

A compliance calendar should track:

• exemption legal status
• OMB information-collection status

as separate items.

Exemption Compliance Does Not Make an Annuity Cheap

Consider two contracts.

Contract A

• insurer guarantee fee: 0.35%
• underlying investment expenses: 0.10%
• managed feature: 0.15%
• sales commission: 1.50%
• 5-year surrender schedule.

Contract B

• insurer guarantee fee: 0.55%
• underlying investments: 0.08%
• no separate managed feature
• sales commission: 0.75%
• 3-year surrender schedule.

PTE 84-24 tells you how to analyze the conflicted transaction.

It does not declare one product cheaper or better.

A fiduciary should compare:

• all-in cost
• benefit design
• insurer strength
• participant flexibility
• surrender economics
• compensation
• alternatives.

A Lower Commission Can Still Produce a Worse Contract

Contract A pays agent:

0.75%.

Contract B pays:

1.25%.

If Contract A has:

• much higher annual contract charges
• weaker guarantees
• longer surrender period
• poor portability

the lower commission does not prove better value.

Commission is one economic line.

PTE disclosure helps expose it.

Section 404 requires the committee to evaluate the whole product.^[10]

A Higher Commission Requires Explanation, Not Automatic Rejection

Suppose higher-commission contract includes:

• materially better guarantee
• lower ongoing participant cost
• stronger insurer
• better portability
• broader service.

The committee can still select it if the fiduciary process supports the decision and the PTE's compensation and other conditions are satisfied.

ERISA does not reduce product selection to:

lowest commission wins.

It requires disciplined comparison.

The Most Useful Compensation Map Has Four Layers

Layer 1: agent or broker

• first-year commission
• renewal commission
• bonuses
• allowances.

Layer 2: insurance company

• contract charges
• spreads
• mortality/expense economics
• surrender economics.

Layer 3: affiliates

• recordkeeping
• managed account
• subadvisory
• platform fees.

Layer 4: plan-paid services

• consulting
• implementation
• ongoing advice
• participant support.

The PTE reasonable-compensation analysis should be informed by actual total economics.

A commission disclosure is not a substitute for the map.

Replacement Transactions Deserve Extra Scrutiny

A plan replaces existing annuity contract.

Old contract has:

3% surrender charge.

New contract pays:

1.5% commission.

Even if new product is attractive, the replacement decision should quantify:

• surrender cost
• lost guarantees
• new lockup
• new commission
• insurer change
• benefit reset
• implementation cost.

A compensation exemption does not make churn prudent.

A Practical PTE 84-24 Review Test

Identify the product → classify it as insurance contract, annuity contract or registered investment-company security → identify every intermediary and compensation recipient → identify the exact Section III transaction category → determine whether the person is a party in interest, fiduciary or both → apply current fiduciary-status law rather than assuming every recommendation is fiduciary advice → test ordinary course of business → compare terms with an arm's-length unrelated-party transaction → map all direct and indirect compensation for services and the transaction → test reasonable compensation → determine whether Section V(a) excludes the intermediary because it is trustee, administrator, discretionary fiduciary or employer → if an affiliate is trustee or investment manager, test the 2006 asset-specific exception → for insurance/annuity purchases, disclose affiliation or recommendation limitation → disclose first-year and renewal-year sales commission → disclose contract charges, fees, discounts, penalties and adjustments → identify an independent fiduciary → obtain written acknowledgment and approval before the insurance/annuity transaction → for investment-company securities, use the separate principal-underwriter disclosure and approval rule → for repeat purchases, test three-year timing and material differences → retain required records for six years → decide whether PTE 2020-02 is the better or necessary exemption for the actual fiduciary-advice compensation → separately evaluate annuity-provider prudence under Section 404(e)/404a-4 where relevant → separately evaluate product cost, features, insurer strength, liquidity, surrender terms and participant fit under Section 404 → document why the plan would choose the product even if the commission recipient had no financial interest in the sale

The decisive question is not:

"Was the commission disclosed?"

It is:

"Does the exact transaction fit PTE 84-24, did an independent fiduciary receive and approve the required economics before execution, is total compensation reasonable, and can the plan separately prove that the product itself deserves plan assets?"

Frequently Asked Questions

What does the exemption cover?

It is a Department of Labor class exemption for specified insurance, annuity and registered investment-company transactions involving parties in interest or fiduciaries and for specified sales commissions connected to those transactions, subject to its conditions.^[1][2]

Why would an insurer-paid commission need an exemption?

Because indirect compensation tied to plan transactions can create party-in-interest or fiduciary self-dealing concerns under ERISA Section 406 even when the plan does not pay the intermediary directly.^[9]

Does it cover only annuities?

No. The operative text includes insurance contracts, annuity contracts and registered investment-company securities, plus specified transaction roles involving insurance companies and principal underwriters.^[2]

Does the exemption require arm's-length terms?

Yes. The plan must receive terms at least as favorable as it would receive in a comparable deal with an unrelated counterparty.^[2]

Does it require reasonable compensation?

Yes. The combined fees, commissions and other consideration identified by the exemption cannot exceed reasonable compensation.^[2][11][12]

Can a plan trustee rely on the ordinary exemption?

Generally not for Section III(a)-(d) transactions, except for the stated nondiscretionary-trustee exception.^[2]

Can a discretionary 3(38) manager collect the covered sales commission?

The ordinary route excludes a fiduciary expressly authorized in writing to manage, acquire or dispose of plan assets on a discretionary basis.^[2]

What changed in 2006?

DOL allowed specified intermediaries affiliated with a trustee or investment manager to rely on the exemption when the affiliate cannot direct the transaction assets, apart from qualifying nondiscretionary-trustee authority.^[2]

What must an insurance agent disclose?

The operative insurance/annuity provision requires disclosure of relevant affiliation or product restrictions, first-year and renewal compensation, and material contract costs or exit adjustments.^[2]

Does the independent fiduciary have to approve in writing?

For the insurance/annuity route, the fiduciary must acknowledge the required disclosure in writing and approve the transaction before execution.^[2]

Can the employer be the independent fiduciary?

The text permits an employer of covered employees to serve as the approving fiduciary, provided the other independence restrictions are satisfied.^[2]

Can the approving fiduciary receive compensation from the transaction?

The approving fiduciary cannot receive direct or indirect personal compensation or other consideration from a party dealing with the plan in connection with the transaction.^[2]

Are mutual-fund approval rules identical to annuity approval rules?

No. The principal-underwriter provision has a separate disclosure structure and allows approval to be presumed under the stated circumstances when the fiduciary permits the transaction to proceed after receiving the disclosure.^[2]

Must disclosures be repeated for every purchase?

Not necessarily. For additional purchases, disclosure generally need not be repeated until more than three years have passed unless the product/security or commission is materially different.^[2]

How long must records be retained?

Specified records generally must be retained for six years from the transaction date.^[2]

Is it the same as ERISA's annuity-selection safe harbor?

No. This exemption addresses prohibited transactions and compensation. ERISA Section 404(e) and 29 CFR 2550.404a-4 address fiduciary selection of annuity providers.^[13]

Is it the same as PTE 2020-02?

No. PTE 2020-02 is broader fiduciary investment-advice compensation relief with a different conduct, disclosure, policy and review framework.^[5][7]

Can an insurance professional still use PTE 2020-02?

Potentially, if the professional and financial institution fit its scope and satisfy its conditions. DOL has also stated that agents and insurers may rely on the narrower insurance exemption for covered compensation practices when its conditions are met.^[7]

Does the current exemption contain an Impartial Conduct Standard?

The 2016 amendment added Impartial Conduct Standards, but that amendment was vacated and the exemption returned to its pre-2016 form in 2020.^[3] Separate fiduciary duties and other laws can still impose conduct standards.

Is the current exemption limited to fixed-rate annuities?

No. That restriction came from the vacated 2016 amendment. DOL's 2020 notice returned the exemption to the pre-2016 form.^[2][3]

Is the 2024 independent-producer framework current?

No. The 2024 rulemaking and related amendment were vacated. DOL's March 2026 notice states that the pre-amendment version applies.^[4][14]

What is the operative version in 2026?

The practical baseline is the 1984 exemption, as corrected in 1984 and amended in 2006, without the vacated 2016 or 2024 fiduciary-rule changes.^[2][3][4]

Is the exemption still administratively active?

Yes. DOL's class-exemption page continues to list PTE 1984-24, and an August 2026 Federal Register notice seeks extension of the information collection under OMB Control No. 1210-0158.^[1][5]

Does the current OMB approval expire May 31, 2027?

The currently approved information collection is scheduled to expire on that date.^[5] That is not an automatic termination date for the exemption.

Does satisfying the exemption prove an annuity is prudent?

No. ERISA Section 404 duties, insurer-selection analysis, product cost and participant suitability remain separate.^[10][13]

Sources & References

1. U.S. Department of Labor — Employee Benefits Security Administration: Class Exemptions — PTE 1984-24 — https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/exemptions/class
2. U.S. Department of Labor / Federal Register: PTE 84-24 as Amended in 2006, Full Reprinted Text, 71 FR 5887 (February 3, 2006) — https://www.govinfo.gov/content/pkg/FR-2006-02-03/pdf/E6-1504.pdf
3. U.S. Department of Labor / Federal Register: Conflict of Interest Rule—Retirement Investment Advice: Notice of Court Vacatur, 85 FR 40589 (July 7, 2020) — https://www.federalregister.gov/documents/2020/07/07/2020-14260/conflict-of-interest-rule-retirement-investment-advice-notice-of-court-vacatur
4. U.S. Department of Labor / Federal Register: Retirement Security Rule — Definition of an Investment Advice Fiduciary — Notice of Court Vacatur, 91 FR 13503 (March 20, 2026) — https://www.federalregister.gov/documents/2026/03/20/2026-05492/retirement-security-rule-definition-of-an-investment-advice-fiduciary-notice-of-court-vacatur
5. U.S. Department of Labor / Federal Register: Agency Information Collection Activities — PTE 1984-24, 91 FR 53657 (August 19, 2026) — https://www.govinfo.gov/content/pkg/FR-2026-08-19/pdf/2026-16880.pdf
6. U.S. Department of Labor — Employee Benefits Security Administration: Improving Investment Advice for Workers & Retirees — https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/improving-investment-advice-for-workers-and-retirees
7. U.S. Department of Labor — Employee Benefits Security Administration: New Fiduciary Advice Exemption — PTE 2020-02 FAQs — https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/new-fiduciary-advice-exemption
8. U.S. Department of Labor / Federal Register: PTE 2002-13 — Amendment Clarifying the Term Plan, 67 FR 9483 (March 1, 2002) — https://www.govinfo.gov/content/pkg/FR-2002-03-01/pdf/02-4872.pdf
9. Legal Information Institute / U.S. Code: 29 U.S.C. §1106 — Prohibited Transactions — https://www.law.cornell.edu/uscode/text/29/1106
10. Legal Information Institute / U.S. Code: 29 U.S.C. §1104 — Fiduciary Duties — https://www.law.cornell.edu/uscode/text/29/1104
11. Legal Information Institute / U.S. Code: 29 U.S.C. §1108 — Exemptions From Prohibited Transactions — https://www.law.cornell.edu/uscode/text/29/1108
12. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2550.408b-2 — Reasonable Contract or Arrangement — https://www.law.cornell.edu/cfr/text/29/2550.408b-2
13. Legal Information Institute / U.S. Code and CFR: ERISA Section 404(e) and 29 CFR §2550.404a-4 — Annuity Provider Selection Safe Harbors — https://www.law.cornell.edu/cfr/text/29/2550.404a-4
14. U.S. Department of Labor / Federal Register: 2024 Final Amendment to PTE 84-24, 89 FR 32302 (April 25, 2024) — https://www.federalregister.gov/documents/2024/04/25/2024-08069/amendment-to-prohibited-transaction-exemption-84-24

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan fiduciary duties, annuities, insurance contracts, sales commissions and ERISA prohibited-transaction exemptions. This article is not legal, fiduciary, insurance, securities, tax, investment or plan-administration advice. PTE 84-24 is transaction-specific. Availability depends on the product, intermediary, fiduciary status, party-in-interest relationships, discretionary authority, affiliate relationships, compensation, disclosure, approval, timing, repeat-purchase facts, records and current law. Insurance and annuity products also remain subject to insurer-credit, fee, liquidity, surrender, tax, securities and state-law considerations. Satisfying an exemption does not establish that a product is prudent or appropriate for a retirement plan.

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