From time to time, AIP Marketing Alliance checks government regulations to see what may affect independent agents nationwide – especially when the Department of Labor posts information concerning fiduciary rules. Effective February 1st, the Department of Labor has created new Fiduciary and Impartial Conduct Standards that impact qualified plans and IRAs.

These rules impact the Prohibited Transaction Exemption 84-24 (PTE 84-24) Disclosure form required between an agent and a client. These forms could also vary between each carrier, so understanding what form to use with each carrier becomes important IF you are deemed a fiduciary.

What Makes You a Fiduciary?

A person is deemed to be a fiduciary if the advice or recommendations:

1. Pertain to the purchase, sale, or value of securities or other property for a fee.
2. Are provided on a regular basis.
3. Are pursuant to a mutual understanding.
4. Are the primary basis for the investment decision.
5. Are individualized.

In other words, the insurance agent selling annuity contracts to qualified retirement plans or IRAs are likely to be classified as fiduciaries under the above five-part test.

So, I’m A Fiduciary… Now What?

Since you are deemed to be a fiduciary, you are obligated to adhere to Impartial Conduct Standards, which require that you make no misleading statements, and all compensation paid to you is reasonable. In addition, an insurance-only agent is prohibited from receiving compensation for a purchase within a retirement plan or IRA – unless that agent can rely on an exemption such as the Prohibited Transaction Exemption 84-24 (PTE 84-24) Disclosure Form.

How might you help meet your regulatory obligations?

If you are an agent as of February 1st, 2022, a PTE-84-24 Disclosure form is required to be signed by the client and the agent for every sale within a retirement plan or IRA, and the original left with the customer. The agent is required to keep all copies of client-signed PTE 84-24 Disclosure forms for the agent’s records.

Summary of steps:

1. Is this qualified money? If yes, you are acting as a fiduciary under the Impartial Conduct Standards.
2. As a fiduciary, you must disclose to your client your relationship to the carrier being recommended, any conflicts of interest, and any commission received.
3. Complete the required PTE 84-24 Disclosure form or other exemption form required by the carrier and request a client signature.
4. Give signed PTE 84-24 Disclosure form to your client and retain a copy of the form in your files.

If you have additional questions, you should contact your selected insurance carrier for the proper disclosure or exemption form. AIP Marketing Alliance is providing this content as information only.

Disclosure: Nothing in this release should be considered or relied upon as legal or tax advice. The information provided is considered accurate when released (January 2022) but is not guaranteed, and it is subject to change from time to time without notice. Clients must seek and rely upon their own tax and/or legal counsel.