Here is a brief update on some important aspects of the Department of Labor’s Fiduciary Rule – the implementation of which has been delayed until July 1, 2019 after being originally scheduled for January 1, 2018.
- The Prohibited Transaction Exemption 84-24, or PTE 84-24 that has been used since June 9, 2017 remains in place, but only covers certain insurance contracts. The types of products covered by PTE 84-24 cover fixed rate annuities and life insurance.
- Agents should be using the PTE 84-24 disclosure form with transactions in which they receive a commission for sales or rollovers involving qualified funds, including for fixed rate annuity and insurance sales, and mutual fund commissions. Products not covered under the PTE 84-24 include fixed indexed annuities and variable annuities.
- The PTE 84-24 disclosure form permits an agent to receive a sales commission for fixed rate annuity and insurance sales if the agent observes the impartial conduct standards, which require that the agent act in the best interest of the client and not make misleading statements in any information provided to the client. In addition, the agent must be sure the commission is reasonable; make certain written disclosures to the client; and obtain client approval of the transaction in advance.
- To recap: Advisors recommending fixed rate annuities and life insurance to retirement plan participants and retirement investors with IRAs act as fiduciaries. This requires agents to gather information relevant to the product being recommended and the investor’s needs; assess that information; and then make an informed recommendation that puts the interests of the investor first.
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