What Is PTE 94-20 for a 401(k) Plan?

PTE 94-20 lets a 401(k) plan trade foreign currency directly with a covered financial institution that already has a party-in-interest relationship with the plan. The trade is not exempt because the institution is a custodian or because its FX desk quotes a market price. The protection depends on a sharper fact: an independent plan fiduciary must direct the transaction by specifying both the amount of currency and the exchange rate.^[1][2]

That one requirement explains most of the exemption.

The bank may execute.

It may stand as principal counterparty.

It may earn an embedded FX spread.

It may not use the plan relationship to decide when or at what rate the plan trades and then rely on PTE 94-20 as if the transaction had been independently directed.

Why Can a Routine Currency Trade Be an ERISA Problem?

A 401(k) plan can hold international assets through:

• separate accounts
• collective investment trusts
• institutional mandates
• direct securities
• other structures.

Those investments create foreign-currency cash flows.

Examples:

• euro dividend
• yen bond coupon
• sterling security settlement
• Canadian-dollar sale proceeds.

The plan may use its global custodian or another bank to convert the currency.

If that institution is already a:

• trustee
• custodian
• fiduciary
• service provider
• other party in interest

a direct principal currency trade can fall within ERISA Section 406(a).^[1][6]

The plan is exchanging property with an entity that has a prohibited-transaction relationship to it.

The class relief lets the plan use an otherwise conflicted financial institution when the safeguards are satisfied.

The Exemption Solves the Counterparty Conflict, Not the Investment Decision

Consider a global custodian.

The custodian holds plan assets.

That custody relationship can make the institution a party in interest.

Its FX desk also makes markets in:

EUR/USD.

The plan needs to buy euros.

Two questions follow.

Can the plan trade directly with that bank?

PTE 94-20 can provide Section 406(a) relief if the conditions are met.^[1]

Should the plan trade at that quoted rate?

That remains a fiduciary question under Section 404.^[7]

That relief does not certify:

• best execution
• narrowest spread
• lowest cost
• appropriate hedge ratio
• correct currency view.

Those are separate judgments.

The Dealer Can Act as Principal

The covered financial institution can stand on the other side of the currency trade.

That distinguishes the transaction from ordinary agency execution.

Suppose the plan:

sells $11 million buys €10 million.

The bank buys the dollars and sells the euros from its own dealing operation.

The bank's economic compensation may be embedded in the exchange rate.

There may be no line item labeled:

commission.

That does not make the dealer economically neutral.

Current Transactions Use Section I(b)

PTE 94-20 contains historical and prospective provisions.^[1]

Section I(a)

Covers qualifying transactions during:

January 1, 1975 through June 18, 1991.

Section I(b)

Applies to qualifying transactions on or after:

June 18, 1991.^[1]

For a 2026 transaction, Section I(b) is the relevant route.

The historical provision matters mainly when reviewing legacy activity.

What Relief Does PTE 94-20 Provide?

The exemption provides relief from:

• ERISA Section 406(a)(1)(A)
• Section 406(a)(1)(B)
• Section 406(a)(1)(C)
• Section 406(a)(1)(D)

and parallel Code sanctions described in the exemption.^[1][6]

Those provisions address transactions such as:

• sale or exchange of property
• lending or extension of credit
• furnishing services or facilities
• transfers involving plan assets for the benefit of a prohibited counterparty.

A foreign-currency exchange is property changing hands.

The bank's preexisting relationship with the plan is what creates the need for relief.

Section 406(b) Remains Outside the General Relief

DOL stated expressly that the relief stops short of transactions prohibited by:

• Section 406(b)
• Code Section 4975(c)(1)(E) and (F).^[1]

That boundary is not technical.

It prevents the fiduciary bank from saying:

"We are a permitted FX counterparty, so we may also use fiduciary authority to decide the trade in our own favor."

The exemption protects the party-in-interest transaction.

It does not authorize fiduciary self-dealing.

Why Did DOL Refuse to Give Broad 406(b) Relief?

During the rulemaking, commenters wanted standing-instruction transactions covered.

DOL focused on the risk that a fiduciary bank could determine:

• timing
• exchange rate

and thereby affect its own compensation.^[1]

If the dealer can choose the rate at which it trades against the plan, an embedded spread creates a direct conflict.

DOL was not prepared to conclude that the original proposed safeguards adequately controlled that risk.

The result was a narrower exemption built around genuine independent direction.

"Directed" Has a Precise Meaning

For PTE 94-20, a foreign-exchange transaction is directed only when the independent fiduciary instructs the dealer to purchase or sell:

1. a specific amount of currency
2. at an exchange rate fixed by that fiduciary.^[1]

Both elements matter.

Direction is not merely:

"Buy euros."

It is not:

"Convert the dividend."

It is not:

"Execute at your best available rate."

The rate cannot be left for the conflicted dealer to determine when relying on this exemption.

Example: A Properly Directed Trade

Independent fiduciary decides plan needs:

€10 million.

Bank quotes:

EUR/USD 1.0875.

Fiduciary accepts and directs:

Buy €10 million at 1.0875 dollars per euro.

The amount is fixed.

The rate is fixed.

The bank then executes the trade.

That fits the core definition of independent direction, assuming the other conditions are met.^[1]

Example: The Rate Is Left Blank

The fiduciary tells the custodian:

"Convert $10 million into euros at tomorrow's prevailing rate."

Amount:

specified.

Rate:

not specified.

The bank will determine the actual rate later.

That does not satisfy PTE 94-20's definition of directed transaction.^[1]

A different exemption may be relevant.

A Limit Order Is Not Automatically the Same as a Specific Rate

Suppose the fiduciary says:

"Buy €10 million if EUR/USD reaches 1.0800 or better."

The instruction identifies:

• amount
• price condition.

Whether a specific execution structure fits the exemption should be tested against the exact direction and transaction documents.

The safest PTE 94-20 fact pattern is the one the text expressly describes:

a fixed currency amount at a fixed rate.

Do not replace that wording with a looser trading convention without analysis.

PTE 98-54 Exists Because Standing Instructions Did Not Fit

Global custodians face routine small currency flows.

A foreign equity portfolio may generate:

• dividends
• interest
• sale residuals
• tax refunds.

Calling the investment manager for a fresh rate approval every time can be inefficient.

DOL recognized that problem.

But it did not solve it by stretching the meaning of:

directed

inside PTE 94-20.

It later issued PTE 98-54 for specified standing-instruction transactions.^[2][4][5]

That distinction is central to both exemptions.

A Standing Instruction Delegates More Execution Mechanics

A standing instruction might say:

"Whenever foreign dividends are received, convert them to U.S. dollars under the custodian's standing FX process."

The fiduciary approves the framework in advance.

It does not approve:

• each precise amount before trade
• each specific exchange rate before trade.

That is why PTE 98-54 requires its own safeguards.

It supplements PTE 94-20.

It does not replace it.^[2]

The Directing Fiduciary Must Be Independent

Section I requires direction by a fiduciary independent of:

• bank
• broker-dealer
• affiliates.^[1]

The definition adds another safeguard.

The independent fiduciary cannot have been appointed by the executing institution or one of its related entities.^[1]

The dealer cannot create its own nominal independent approver and then trade against the plan.

The direction has to come from a genuinely separate plan decision maker.

Example: Independent Investment Manager

Plan sponsor appoints Investment Manager M.

M has no affiliation with Custodian Bank C.

M controls the plan's international separate account.

M calls Bank C's FX desk and approves:

Sell ¥1.5 billion at the quoted USD/JPY rate.

That can fit the independence structure.

The fact that Bank C is the plan's custodian does not disqualify the trade.

That is the conflict the PTE is designed to solve.

Example: Bank Appoints the Fiduciary

Bank C selects and appoints Adviser A to act as the plan fiduciary for FX decisions.

A then directs trades back to Bank C.

Even if A is a separate legal entity, the PTE's definition specifically addresses appointment by the dealer or a related entity.^[1]

Independence is not just a corporate-name test.

The Dealer Cannot Have Discretion Over the Assets Involved

Section II requires that neither the:

• bank
• broker-dealer
• affiliate

have discretionary authority or control over investment of the assets used in the FX transaction.^[1]

This is a functional test.

A bank can be a custodian.

A custodian can perform ministerial tasks.

But if the bank also has discretionary investment authority over the assets being converted, this class relief is not the clean route.

Custody and Discretion Are Different

A global custodian may:

• hold securities
• collect income
• process settlements
• provide FX quotes.

Those services do not automatically mean it decides investment strategy.

A discretionary manager, by contrast, may decide:

• whether to hold foreign currency
• when to hedge
• how much to hedge
• which counterparty to use.

The class relief is built for the first kind of dealer role, with another fiduciary directing the trade.

It is not built to let the same institution make the investment decision and deal against the plan.

The Dealer Also Cannot Render Investment Advice on Those Assets

The condition separately bars the executing institution and its related entities from rendering investment advice regarding those assets.^[1]

Current 29 CFR 2510.3-21 uses the restored five-part investment-advice framework after the 2024 rule was vacated in 2026.^[9][10]

A 2026 compliance review should therefore ask what the institution actually does.

Labels are not enough.

Execution Information Is Not Necessarily Investment Advice

A dealer can provide information such as:

• current bid
• current offer
• settlement convention
• market liquidity
• trade mechanics.

That is different from recommending:

"You should hedge 80% of this position today."

or:

"You should sell the yen because we expect it to weaken."

The first category can be execution information.

The second can become investment advice depending on the broader relationship and current fiduciary test.^[9]

The fact pattern is strongest when the dealer executes a decision made elsewhere.

The First Pricing Test Is Market-Wide

Section II requires that, when the transaction is entered, its terms are no less favorable to the plan than terms generally available in comparable arm's-length FX transactions between unrelated parties.^[1]

That asks:

What could an unrelated customer obtain in the market for a comparable trade?

Relevant variables can include:

• currency pair
• notional
• tenor
• time of day
• liquidity
• settlement
• credit exposure
• option terms.

A EUR/USD spot trade cannot be benchmarked casually against an illiquid emerging-market forward.

Comparable means comparable.

Section III Adds a Dealer-Specific Pricing Check

For current Section I(b) transactions, Section III also requires terms no less favorable than those the:

• bank
• broker-dealer
• affiliate

affords in comparable arm's-length FX transactions involving unrelated parties.^[1]

That is a slightly different lens.

One benchmark asks about:

terms generally available.

The other asks about:

terms this dealer gives unrelated counterparties in comparable business.

The plan should not receive worse treatment because the dealer knows the plan is operationally captive.

Why Two Pricing Tests Matter

Imagine the broad market spread for a trade is approximately:

8 basis points.

Bank normally charges unrelated institutional customers:

6 basis points.

Bank charges the plan:

12 basis points.

That can fail both comparisons.

Now assume broad market terms range near:

10 basis points

but bank's similar unrelated customers receive:

5 basis points.

The plan's 9-basis-point trade may look market-consistent.

It can still raise a dealer-specific no-less-favorable issue.

The second condition prevents the plan relationship from becoming a pricing disadvantage.

Zero Commission Does Not Mean Zero Cost

FX dealers commonly earn through:

spread.

Suppose interdealer economics imply:

1.0850.

Plan buys euros at:

1.0865.

Difference:

0.0015 dollars per euro.

On €10 million:

$15,000

of economic difference before considering the appropriate executable benchmark.

There may be no separate invoice.

The rate is the economics.

Compare Like With Like

A fiduciary evaluating execution should control for:

• size
• time
• currency
• liquidity
• settlement date
• credit terms
• forward points
• market volatility.

A quote obtained two hours later is not necessarily a valid benchmark.

Neither is a retail FX screen.

The PTE's arm's-length condition is not satisfied by collecting any two numbers that happen to be labeled:

exchange rate.

Written Policies and Procedures Are Mandatory

For prospective transactions, the executing institution must maintain written policies and procedures governing FX transactions with plans for which it is a:

• trustee
• custodian
• fiduciary
• other party in interest
• disqualified person.^[1]

The procedures must assure that the person acting for the institution knows:

this customer is a plan.

That identification requirement is operationally important.

Why Must the FX Desk Know It Is Dealing With a Plan?

ERISA trades can require:

• independent direction
• specific rate
• special confirmation
• records
• compliance review.

If a dealer treats the plan as just another institutional account, ordinary trading systems may not capture those requirements.

DOL rejected an argument that uniform treatment of all customers made plan identification unnecessary.^[1]

The institution needs to know when the exemption applies.

A Useful Procedure Should Catch the Trade Before Execution

An operational control can require:

Account identified as ERISA plan → party-in-interest relationship flagged → independent directing fiduciary verified → dealer discretion/advice check → specific amount captured → specific rate captured → market comparison completed → trade executed → confirmation generated → records archived.

A policy that merely recites PTE 94-20 after the trade has occurred is weak.

The compliance control belongs in the workflow.

Every Covered Current Trade Gets a Written Confirmation

Section III requires a written confirmation for each covered transaction.^[1]

The confirmation goes to:

the independent plan fiduciary who directed the trade.

It is transaction-specific.

A monthly summary may be useful operationally.

It does not replace the PTE's requirement if it fails the timing or content conditions.

The Confirmation Has Nine Core Data Points

The written confirmation must disclose:^[1]

1. account name
2. transaction date
3. exchange rate
4. settlement date
5. currencies exchanged
6. identity of currency sold
7. amount sold
8. identity of currency purchased
9. amount purchased.

That information lets the fiduciary reconstruct the transaction.

It also makes spread and settlement analysis possible.

The Confirmation Is Due Within Five Business Days

The exemption states:

no more than five business days after execution.^[1]

That is not:

• five settlement days
• five calendar days
• end of month.

A dealer relying on the exemption should build an automated deadline from trade execution.

Late documentation can create an exemption-compliance problem even when the economics were fair.

Trade Date and Settlement Date Are Different

Suppose trade is executed:

Monday.

Currencies settle:

Wednesday.

The confirmation should show both.

That distinction matters because FX can have:

• spot settlement
• forward settlement
• same-day settlement
• different market conventions.

A plan fiduciary needs to know when the economic commitment was made and when cash moves.

U.S. Dollars Are Not Required

DOL changed the proposed confirmation requirement after a commenter pointed out that not every FX transaction involves U.S. dollars.^[1]

The final rule requires disclosure of:

• currency sold
• amount sold
• currency purchased
• amount purchased.

That means a trade such as:

EUR → GBP

can fall within the exemption.

The transaction is foreign exchange because one nation's currency is exchanged for another.

Not because dollars appear on one side.

Spot Trades Fit the Definition

A basic spot transaction is the most intuitive case.

Example:

Plan sells:

$5 million.

Plan buys:

Swiss francs.

Independent fiduciary approves the exact rate.

Dealer executes.

If the party-in-interest, independence, pricing, discretion, advice, procedures, confirmation and record conditions are satisfied, PTE 94-20 can provide the relevant Section 406(a) relief.^[1]

Forward Contracts Can Fit

The definition includes:

a contract for an exchange

of one currency for another.^[1]

That reaches forward-style arrangements.

Example:

Plan knows it must pay:

€8 million

in three months for a foreign-security settlement.

Independent fiduciary directs a three-month forward at a specified forward rate.

The forward can fit the definition, subject to the other conditions.

The fiduciary should benchmark:

• spot reference
• interest-rate differential
• forward points
• dealer spread.

A forward rate cannot be evaluated as though it were today's spot rate.

Currency Options Are Expressly Included

DOL added language stating that the term foreign exchange transaction includes:

options contracts on foreign exchange transactions.^[1]

That removes ambiguity for a basic currency option.

An option can still be more complicated than spot FX.

Relevant economics can include:

• premium
• strike
• expiry
• volatility
• option style.

The same fiduciary principle applies:

the PTE does not prove the option is a prudent hedge.

Do Not Automatically Extend the PTE to Every Synthetic Currency Product

PTE 94-20 expressly mentions:

• exchange of currencies
• contract for such exchange
• FX options.^[1]

Later DOL discussion in another exemption context declined to expand identical definitional wording merely by inserting a broad reference to synthetic contracts when the record did not establish their scope.^[1]

That is a useful caution.

Modern currency products can include:

• nondeliverable forwards
• swaps
• cross-currency swaps
• structured derivatives.

Do not assume the label:

FX

is enough.

Map the legal instrument to the exemption text.

Six Years of Records Are Required

For current transactions, the executing dealer generally must preserve the records needed to determine whether the PTE conditions were satisfied for:

six years from the transaction date.^[1][3]

The record should make it possible to reconstruct:

• independent direction
• amount
• rate
• benchmark
• confirmation
• dealer status
• compliance conditions.

The confirmation alone may not prove every condition.

The Exemption Adds a U.S.-Jurisdiction Requirement

The text requires the records to be maintained:

within territories under the jurisdiction of the United States Government.^[1]

DOL considered requests to permit records held solely on foreign computer systems accessible from the United States.

It declined to broaden the rule because foreign-government restrictions could make those records unavailable.^[1]

That historical concern is easy to understand in modern cloud infrastructure.

The exact legal condition should still be checked rather than assuming technical accessibility is equivalent to the PTE's wording.

Electronic Records Can Still Be Records

The text never says:

paper only.

The practical issue is whether required records are:

• preserved
• accessible
• within the required jurisdictional framework
• available for examination.

Modern systems can satisfy recordkeeping functions electronically.

The institution should still map its actual storage architecture to the exemption condition.

Who Can Examine the Records?

The exemption gives specified access rights, upon reasonable notice during normal business hours, to:^[1]

• authorized DOL employees or representatives
• authorized IRS employees or representatives
• a plan fiduciary with authority to acquire or dispose of the affected assets, or its authorized representative
• a contributing employer to the plan, or its authorized representative.

The exact list matters.

Do not replace the PTE text with a generic statement that:

everyone connected with the plan may inspect the dealer's books.

Confidential Dealer Information Is Protected

Certain nongovernmental reviewers are not entitled to inspect the bank's or broker-dealer's:

• trade secrets
• privileged commercial information
• confidential financial information.^[1]

That balances two concerns.

The plan needs enough transparency to verify exemption compliance.

The dealer does not have to open unrelated proprietary trading information.

Lost Records Do Not Always Create a Retroactive Prohibited Transaction

The exemption contains a protection where records are lost or destroyed before the six-year period ends due to circumstances beyond the dealer's control.^[1]

It also protects an independent plan fiduciary from specified penalties or taxes solely because the dealer failed to maintain or provide the records as required.^[1]

That does not make recordkeeping optional.

It allocates consequences for a failure outside the independent fiduciary's control.

The Dealer Can Be a Fiduciary in Another Capacity

The exemption can apply where the executing institution may be:

• trustee
• custodian
• fiduciary
• other party in interest.^[1]

But the institution cannot have prohibited discretion or render investment advice concerning the particular assets involved in the FX trade under the exemption conditions.

ERISA fiduciary status is functional and can be asset-specific.^[9]

A bank can be fiduciary for one function while acting as non-discretionary dealer for another.

The file should identify the exact capacity.

Example: Custodian and Directed Dealer

Bank C:

• holds plan securities
• processes settlements
• has no investment discretion
• gives no investment recommendations.

Independent Manager M decides to buy:

£4 million

at an agreed GBP/USD rate.

M directs Bank C.

That is close to the intended PTE structure.

Example: Discretionary Currency Manager Trades Against Itself

Bank C is hired to:

• decide hedge ratios
• choose timing
• select currencies
• execute trades.

Bank C then trades as principal against the plan.

Now the same institution controls the investment decision and stands on the opposite side.

PTE 94-20's no-discretion condition is not satisfied.

Section 406(b) concerns also become obvious.

A Quote Is Not Necessarily Advice

A bank can say:

"We can sell you €10 million at 1.0875."

That is a dealing quote.

A bank can also say:

"You should increase your euro hedge from 50% to 90% because our strategists expect a 7% decline."

That is different.

The current five-part test determines whether investment advice fiduciary status exists in context.^[9][10]

An FX-desk label does not eliminate the need for that fiduciary-status analysis.

Competitive Bidding Is Evidence, Not a Stated Condition

Nothing in the text says:

obtain three quotes.

Its pricing conditions instead require no-less-favorable arm's-length terms.^[1]

A fiduciary can use several ways to support that conclusion:

• live competing quotes
• independent market data
• transaction-cost analysis
• post-trade benchmark
• historical peer data.

Competitive bidding is evidence.

It is not the only possible evidence.

One Quote Can Be Harder to Defend

Suppose plan trades an illiquid currency with its custodian.

No independent quote is obtained.

No third-party market feed is saved.

The bank's rate is accepted.

The trade may have been perfectly fair.

The record does not prove it well.

When the dealer already has a plan relationship creating party-in-interest status, execution evidence should be proportionate to:

• size
• liquidity
• spread
• complexity.

The larger the economics, the less persuasive:

"the rate looked normal"

becomes.

Best Execution and PTE Compliance Are Different Questions

A trade can meet the PTE's no-less-favorable condition and still not be the best available execution.

Example:

• market-consistent rate: 1.0870
• bank rate: 1.0872
• another dealer would have executed 1.0867.

The first bank may still be within a defensible range of comparable arm's-length terms.

The fiduciary still has to decide whether using it was prudent.

PTE 94-20 creates a floor.

Section 404 can demand better judgment.^[7]

FX Cost Should Be Converted Into Dollars

Suppose plan converts:

€25 million.

Execution is 4 basis points worse than a defensible benchmark.

Approximate cost:

€25,000,000 × 0.0004 = €10,000 equivalent

before currency translation.

A few basis points can look immaterial on a single ticket.

A global plan trading hundreds of millions each year can accumulate meaningful cost.

Fiduciary oversight should aggregate execution quality.

The PTE Does Not Set Currency-Hedging Policy

The exemption says nothing about whether a 401(k) should:

• hedge foreign equity
• leave currency unhedged
• use 50% hedge
• use dynamic hedge
• hedge only fixed income.

Those decisions depend on:

• investment mandate
• volatility
• liabilities
• benchmark
• participant structure
• cost.

The PTE starts after the plan has a legitimate reason to transact.

It governs the conflicted counterparty relationship.

A Forward Hedge Can Be Exempt and Still Be Bad

Plan owns:

$100 million equivalent

of Japanese equities.

Manager decides to hedge:

100%

of yen exposure for one year.

The bank counterparty trade satisfies PTE 94-20.

But the hedge could still be imprudent if:

• investment policy calls for unhedged exposure
• forward cost is excessive
• manager mismeasures exposure
• hedge creates liquidity risk
• collateral terms are weak.

Exemption compliance is not portfolio construction.

The Exemption's Plan Definition Is Narrower Than Some Later PTEs

PTE 94-20 defines employee benefit plan by reference to Title I:

• pension plans under 29 CFR 2510.3-2
• welfare plans under 29 CFR 2510.3-1.^[1]

During rulemaking, a commenter asked DOL to include non-Title-I:

• IRAs
• owner-only Keogh plans.

DOL declined because it found the record insufficient.^[1]

For a conventional employer 401(k), that is not a problem.

A 401(k) is the kind of Title I pension plan the exemption was designed to reach.

Do Not Import PTE 97-11 Into the FX Analysis

PTE 97-11 covers reduced or no-cost services tied to:

• IRAs
• certain Keogh plans

under a relationship-banking structure.^[2]

It is not the FX exemption for employer 401(k)s.

The numerical sequence can mislead.

Exemption number does not define transaction type.

The transaction and plan type do.

PTE 98-54 Is the Logical Next Article

DOL's current class-exemption page groups:

PTE 94-20 and PTE 98-54

under foreign exchange transactions.^[2]

The relationship is clean.

PTE 94-20

Independent fiduciary directs:

• specific amount
• specific rate.

PTE 98-54

Independent fiduciary authorizes defined:

• standing-instruction conversions

under a different safeguard package.^[2][4][5]

A fiduciary should first classify which model it is using.

PTE 98-54 Has a $300,000 Boundary

At a high level, PTE 98-54 can cover specified standing-instruction transactions such as:^[5]

• conversion of income items
• de minimis currency purchases or sales connected with foreign-security transactions

up to a:

$300,000 U.S.-dollar equivalent

per covered transaction under the exemption's prospective framework.^[5]

That limit belongs to PTE 98-54.

It should not be imported into PTE 94-20.

A properly directed PTE 94-20 trade does not become nonexempt solely because it exceeds $300,000.

Example: $20 Million Directed FX Trade

Plan manager needs:

€18 million

for a European securities purchase.

It receives a rate quote.

Manager independently directs the custodian bank to execute the precise amount at the precise rate.

Trade size:

well above $300,000.

That fact alone does not disqualify PTE 94-20.

The $300,000 standing-instruction limit addresses a different exemption.^[1][5]

Example: $200,000 Dividend Conversion

Plan receives:

€200,000

of dividends.

Standing instruction says custodian should convert eligible foreign income to dollars under its specified procedure.

No fiduciary approves the exact rate before the trade.

The directed-trade exemption is a poor fit because the rate was never fixed by the fiduciary.

PTE 98-54 may be the more relevant route if its complete conditions are satisfied.^[4][5]

Policies Should Distinguish the Two PTEs

A bank servicing retirement plans should not use one generic label:

ERISA FX exemption.

The trade-capture system should identify:

Directed FX

PTE 94-20.

Standing-instruction FX

PTE 98-54.

Why?

Because the conditions differ in:

• authorization
• trade size
• triggering events
• execution timing
• rate-setting process
• disclosures.

Misclassification can make a compliant-looking trade nonexempt.

Current OMB Status

DOL currently lists PTE 1994-20 with:

OMB Control No. 1210-0085

through:

April 30, 2028.^[2]

The information collection covers the operational protections embedded in the exemption, including:

• procedures
• confirmations
• records.^[2][3]

The OMB date concerns the paperwork approval.

It is not an automatic expiration date for the substantive PTE.

The ROIStreet Directed-FX Test

Identify why the plan needs currency → identify the FX counterparty → determine whether the FX counterparty is already a plan party in interest → identify exact plan assets involved → confirm dealer has no discretionary investment authority or control over those assets → confirm dealer does not render investment advice regarding them → identify the independent directing fiduciary → confirm the fiduciary was not appointed by dealer or affiliate → obtain specific currency amount → obtain specific exchange rate → document the direction before execution → compare terms with comparable unrelated-party arm's-length FX → compare plan treatment with dealer's comparable unrelated-customer terms → confirm dealer's written ERISA FX procedures apply → execute trade → send complete written confirmation within five business days → retain supporting records six years under the required jurisdictional framework → separately review Section 406(b) risk → separately evaluate prudence, spread, execution quality and currency strategy

The classification question comes first:

Did an independent fiduciary direct the exact trade, or did the dealer execute under a standing instruction?

If the answer is standing instruction, the directed-trade checklist is usually the wrong one.

Frequently Asked Questions

What does PTE 94-20 do?

It provides specified prohibited-transaction relief when an employee benefit plan trades foreign currency with a covered bank, broker-dealer or related entity that serves the plan in a role creating party-in-interest status.^[1]

Can a 401(k) plan use it?

Yes. The exemption's plan definition includes Title I pension plans, which includes conventional employer-sponsored 401(k) plans.^[1]

Why is an exemption needed?

A direct currency exchange with a covered financial institution that has party-in-interest status can implicate ERISA Section 406(a).^[6]

What does "directed" mean?

The independent fiduciary must specify both the currency amount and the rate at which the dealer is authorized to transact.^[1]

Can the bank choose the rate after receiving the order?

Not under the clean PTE 94-20 directed-trade definition. Leaving rate determination to the dealer is the problem the specific-rate condition is designed to avoid.^[1]

Can the fiduciary say "trade at market"?

That leaves the actual rate unset. A standing-instruction or other exemption analysis may be needed.

Does the independent fiduciary have to be unaffiliated with the bank?

Yes. The directing fiduciary must be independent of the bank, broker-dealer and affiliates.^[1]

Can the bank have appointed the independent fiduciary?

The definition says the fiduciary cannot have been appointed by the executing dealer or a related entity.^[1]

Can the bank also manage the assets being converted?

The exemption requires the executing institution and related entities to lack discretionary investment authority or control over the assets used in the transaction.^[1]

Can the dealer give investment advice?

The PTE's condition says the dealer and affiliates cannot render investment advice regarding investment of the assets involved.^[1] Current fiduciary status should be evaluated under the operative 29 CFR 2510.3-21 framework.^[9][10]

Does PTE 94-20 cover Section 406(b)?

Not generally. DOL expressly excludes Section 406(b) transactions from this relief.^[1]

Must the plan obtain three FX quotes?

The PTE does not expressly require three quotes. It requires no-less-favorable arm's-length terms. Multiple quotes can be useful evidence.

Can the dealer earn a spread?

A zero-spread trade is not required. The economic terms still must satisfy the no-less-favorable standards and fiduciary review.

What information must the confirmation contain?

Account name, transaction date, exchange rate, settlement date, currencies exchanged, currency sold and amount, and currency purchased and amount.^[1]

When is the confirmation due?

No later than five business days after execution.^[1]

How long are records kept?

Generally six years from the transaction date.^[1]

Does the PTE require records to be kept in the United States?

The text requires records to be maintained within territories under U.S. governmental jurisdiction.^[1]

Does the transaction have to involve U.S. dollars?

No. DOL expressly modified the final confirmation requirements because some covered FX trades involve two non-dollar currencies.^[1]

Are forward contracts covered?

The definition includes a contract for the exchange of one nation's currency for another, which can encompass a forward structure when the other conditions are met.^[1]

Are currency options covered?

Yes. The exemption expressly includes options contracts on foreign-exchange transactions.^[1]

Are all currency swaps automatically covered?

The text does not expressly cover every modern synthetic currency structure. More complex derivatives should be mapped to the text rather than assumed in.

What is the difference between PTE 94-20 and PTE 98-54?

PTE 94-20 requires an independent fiduciary to direct a specific amount at a specific rate. PTE 98-54 provides separate relief for defined standing-instruction transactions under additional conditions.^[2][4][5]

Does the PTE 98-54 $300,000 limit apply to PTE 94-20?

No. That threshold is associated with the defined standing-instruction categories under PTE 98-54, not the ordinary directed-trade framework of PTE 94-20.^[5]

Is PTE 94-20 still active?

DOL continues to list PTE 1994-20 and currently shows OMB Control No. 1210-0085 through April 30, 2028.^[2]

Does April 30, 2028 mean the exemption expires?

No. That is the current information-collection expiration date, not an automatic sunset of the substantive class exemption.^[2]

Does an exempt FX trade satisfy ERISA's prudence requirement?

No. Section 404 remains separate.^[7][8]

Sources & References

1. U.S. Department of Labor — Employee Benefits Security Administration: Prohibited Transaction Exemption 94-20 — Class Exemption Relating to Certain Employee Benefit Plan Foreign Exchange Transactions — https://www.dol.gov/node/64506
2. U.S. Department of Labor — Employee Benefits Security Administration: Class Exemptions — Foreign Exchange Transactions, PTEs 1998-54 and 1994-20 — https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/exemptions/class
3. U.S. Department of Labor / Federal Register: Agency Information Collection Activities — Foreign Currency Transactions, PTE 94-20 (March 14, 2025) — https://www.govinfo.gov/content/pkg/FR-2025-03-14/pdf/2025-04072.pdf
4. U.S. Department of Labor / Federal Register: PTE 98-54 — Foreign Exchange Transactions Executed Pursuant to Standing Instructions, 63 FR 63503 (November 13, 1998) — https://www.govinfo.gov/content/pkg/FR-1998-11-13/pdf/98-30382.pdf
5. U.S. Department of Labor: Labor Department Finalizes Class Exemption on Foreign Exchange Transactions (November 12, 1998) — https://www.dol.gov/newsroom/releases/ebsa/ebsa19981112
6. Legal Information Institute / U.S. Code: 29 U.S.C. §1106 — Prohibited Transactions — https://www.law.cornell.edu/uscode/text/29/1106
7. Legal Information Institute / U.S. Code: 29 U.S.C. §1104 — Fiduciary Duties — https://www.law.cornell.edu/uscode/text/29/1104
8. Legal Information Institute / U.S. Code: 29 U.S.C. §1108 — Exemptions From Prohibited Transactions — https://www.law.cornell.edu/uscode/text/29/1108
9. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2510.3-21 — Definition of Fiduciary — https://www.law.cornell.edu/cfr/text/29/2510.3-21
10. 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
10. U.S. Department of Labor — Employee Benefits Security Administration: U.S. Department of Labor Restores Long-Standing Investment Advice Rule After Court Vacatur (March 18, 2026) — https://www.dol.gov/newsroom/releases/ebsa/ebsa20260318

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan fiduciary duties, foreign-exchange transactions, bank and broker-dealer relationships and ERISA prohibited-transaction exemptions. This article is not legal, fiduciary, securities, banking, derivatives, tax, investment, foreign-exchange or plan-administration advice. PTE 94-20 is highly fact-specific. Availability depends on the plan, counterparty, party-in-interest relationship, directing fiduciary, appointment history, discretionary authority, investment-advice status, currency amount, exchange rate, instrument, pricing, policies, confirmation, records and current law. A transaction that satisfies the class exemption can still be imprudent, poorly executed, unnecessarily expensive or inconsistent with a plan's investment policy.

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