Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules 75979 

(iii) As to rolling over, transferring, or 

distributing assets from a plan or IRA, 

including recommendations as to 

whether to engage in the transaction, the 

amount, the form, and the destination of 

such a rollover, transfer, or distribution. 

(11) The term ‘‘investment property’’ 

does not include health insurance 

policies, disability insurance policies, 

term life insurance policies, or other 

property to the extent the policies or 

property do not contain an investment 

component. 

(12) The term ‘‘relative’’ means a 

person described in section 3(15) of the 

Act and section 4975(e)(6) of the Code 

or a brother, a sister, or a spouse of a 

brother or sister. 

(g) Applicability. Effective December 

31, 1978, section 102 of the 

Reorganization Plan No. 4 of 1978, 5 

U.S.C. App. 237, transferred the 

authority of the Secretary of the 

Treasury to promulgate regulations of 

the type published herein to the 

Secretary of Labor. Accordingly, in 

addition to defining a ‘‘fiduciary’’ for 

purposes of section 3(21)(A)(ii) of the 

Act, this section applies to the parallel 

provision in section 4975(e)(3)(B) of the 

Code, which defines a ‘‘fiduciary’’ of a 

plan defined in Code section 4975 

(including an IRA) for purposes of the 

prohibited transaction provisions in the 

Code. For example, a person who 

satisfies paragraphs (c)(1) and (e) of this 

section in connection with a 

recommendation to a retirement 

investor that is an employee benefit 

plan as defined in section 3(3) of the 

Act, a fiduciary of such a plan, or a 

participant or beneficiary of such plan, 

including a recommendation concerning 

the rollover of assets currently held in 

a plan to an IRA, is a fiduciary subject 

to Title I of the Act. 

(h) Continued applicability of State 

law regulating insurance, banking, or 

securities. Nothing in this section shall 

be construed to affect or modify the 

provisions of section 514 of Title I of the 

Act, including the savings clause in 

section 514(b)(2)(A) for State laws that 

regulate insurance, banking, or 

securities. 

Signed at Washington, DC, this 24th day of 

October, 2023. 

Lisa M. Gomez, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. 2023–23779 Filed 11–2–23; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2550 

[Application No. D–12057] 

ZRIN 1210–ZA32 

Proposed Amendment to Prohibited 

Transaction Exemption 2020–02 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Notice of Proposed Amendment 

to Class Exemption PTE 2020–02. 

SUMMARY: This document contains a 

notice of pendency before the 

Department of Labor (the Department) of 

a proposed amendment to class 

prohibited transaction exemption (PTE) 

2020–02, which provides relief for 

certain compensation received by 

investment advice fiduciaries. The 

proposed amendment would affect 

participants and beneficiaries of Plans, 

IRA owners, and fiduciaries with 

respect to such Plans and IRAs. 

DATES: Public Comments. Comments are 

due on or before January 2, 2024. 

Public Hearing. The Department 

anticipates holding a public hearing 

approximately 45 days following the 

date of publication in the Federal 

Register. Specific information regarding 

the date, location, and submission of 

requests to testify will be published in 

a notice in the Federal Register. 

Applicability Date. The Department 

proposes to make the final amendment 

effective 60 days after it is published in 

the Federal Register. 

ADDRESSES: All written comments 

concerning the proposed amendment 

should be sent to the Employee Benefits 

Security Administration, Office of 

Exemption Determinations, U.S. 

Department of Labor through the 

Federal eRulemaking Portal and 

identified by Application No. D–12057: 

Federal eRulemaking Portal: Visit 

http://www.regulations.gov. Follow the 

instructions for sending comments. 

Docket: For access to the docket to 

read background documents or 

comments, including the plain-language 

summary of the proposal required by 

the Providing Accountability Through 

Transparency Act of 2023, please go to 

the Federal eRulemaking Portal at 

http://www.regulations.gov. 

See SUPPLEMENTARY INFORMATION

below for additional information 

regarding comments. 

FOR FURTHER INFORMATION CONTACT: 

Susan Wilker, telephone (202) 693– 

8540, Office of Exemption 

Determinations, Employee Benefits 

Security Administration, U.S. 

Department of Labor (this is not a tollfree number). 

SUPPLEMENTARY INFORMATION: 

Comment Instructions 

Warning: All comments received will 

be included in the public record 

without change and will be made 

available online at http:// 

www.regulations.gov, including any 

personal information provided, unless 

the comment includes information 

claimed to be confidential or other 

information whose disclosure is 

restricted by statute. If you submit a 

comment, EBSA recommends that you 

include your name and other contact 

information, but DO NOT submit 

information that you consider to be 

confidential, or otherwise protected 

(such as Social Security number or an 

unlisted phone number), or confidential 

business information that you do not 

want publicly disclosed. However, if 

EBSA cannot read your comment due to 

technical difficulties and cannot contact 

you for clarification, EBSA might not be 

able to consider your comment. 

Additionally, the http:// 

www.regulations.gov website is an 

‘‘anonymous access’’ system, which 

means EBSA will not know your 

identity or contact information unless 

you provide it. If you send an email 

directly to EBSA without going through 

http://www.regulations.gov, your email 

address will be automatically captured 

and included as part of the comment 

that is placed in the public record and 

made available on the internet. 

Background 

The proposed amendment to PTE 

2020–02 would provide additional 

protections for employee benefit plans 

described in ERISA section 3(3) and any 

plan described in Code section 

4975(e)(1)(A) (Plans) and investors and 

additional clarity for investment advice 

fiduciaries seeking to receive 

compensation for their advice, 

including as a result of advice to roll 

over assets from a Plan to an individual 

retirement account (IRA), and to engage 

in principal transactions, that would 

otherwise violate the prohibited 

transaction provisions of Title I of the 

Employee Retirement Income Security 

Act of 1974 (ERISA) and Internal 

Revenue Code (Code) section 4975. 

As described elsewhere in this edition 

of the Federal Register, the Department 

is proposing to amend the regulation 

defining when a person renders 

‘‘investment advice for a fee or other 

compensation, direct or indirect’’ with 


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75980 Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules 

1For purposes of this disclosure, and throughout 

the exemption, the term fiduciary status is limited 

to fiduciary status under Title I of ERISA, the Code, 

or both. While this exemption and the SEC’s 

Regulation Best Interest both use the term ‘‘best 

interest,’’ the Department retains interpretive 

authority with respect to satisfaction of this 

exemption. 

respect to any moneys or other property 

of an employee benefit plan, for 

purposes of the definition of a 

‘‘fiduciary’’ in section 3(21)(A)(ii) of 

ERISA and in section 4975(e)(3)(B) of 

the Code. The Department also is 

proposing amendments to existing 

prohibited transaction exemptions 

(PTEs) 75–1, 77–4, 80–83, 83–1, 86–128, 

and 84–24 elsewhere in this edition of 

the Federal Register. 

Description of the Proposed 

Amendment to PTE 2020–02 

The Department is proposing to 

amend PTE 2020–02, which was 

designed to promote investment advice 

that is in the best interest of retirement 

investors (for example, Plan participants 

and beneficiaries, and IRA owners) by 

permitting advisers to receive 

compensation for the advice that is 

otherwise barred by statute so long as 

advisers comply with the terms of the 

exemption. The current exemption 

conditions emphasize mitigating 

conflicts of interest and ensuring that 

retirement investors receive advice that 

is prudent and loyal. An important 

objective of the existing exemption is to 

require fiduciary investment advice 

providers to adhere to stringent 

standards that are designed to ensure 

that their investment recommendations 

reflect the best interest of Plan and IRA 

investors. Accordingly, under the 

current framework of PTE 2020–02, 

Financial Institutions and Investment 

Professionals relying on the existing 

exemption must: 

• acknowledge their fiduciary status 1

in writing; 

• disclose their services and material 

conflicts of interest; 

• adhere to Impartial Conduct 

Standards requiring them to: 

Æ investigate and evaluate 

investments, provide advice, and 

exercise sound judgment in the same 

way that knowledgeable and impartial 

professionals would (in other words, 

their recommendations must be 

‘‘prudent’’); 

Æ act with undivided loyalty to 

retirement investors when making 

recommendations (in other words, they 

must never place their own interests 

ahead of the retirement investor’s 

interest, or subordinate the retirement 

investor’s interests to their own); 

Æ charge no more than reasonable 

compensation and comply with Federal 

securities laws regarding ‘‘best 

execution’’; and 

Æ avoid making misleading 

statements about investment 

transactions and other relevant matters; 

• adopt policies and procedures 

prudently designed to ensure 

compliance with the Impartial Conduct 

Standards and mitigate conflicts of 

interest that could otherwise cause 

violations of those standards; 

• document and disclose the specific 

reasons that any rollover 

recommendations are in the retirement 

investor’s best interest; and 

• conduct an annual retrospective 

compliance review. 

The Department is proposing to 

maintain all of these core protections in 

PTE 2020–02 that provide fundamental 

investor protections. 

This proposed amendment would 

build on these existing conditions to 

provide more certainty for Retirement 

Investors receiving advice and Financial 

Institutions and Investment 

Professionals complying with the 

exemption’s conditions. In this regard, 

the Department is proposing additional 

disclosures to ensure that Retirement 

Investors have sufficient information to 

make informed decisions about the costs 

of the investment advice transaction and 

about the significance and severity of 

the investment advice fiduciary’s 

Conflicts of Interest. The proposed 

amendment also would provide more 

guidance for Financial Institutions and 

Investment Professionals complying 

with the Impartial Conduct Standards 

and implementing their policies and 

procedures. 

Importantly, the Department is not 

proposing to require a contract for 

investment advice to IRAs, as it did in 

2016. Neither the existing PTE 2020–02 

nor the proposed amendment creates 

any new causes of action or requires 

Financial Institutions to provide 

enforceable warranties to Retirement 

Investors. The primary penalty for an 

IRA fiduciary that engages in a nonexempt prohibited transaction by failing 

to satisfy the exemption conditions of 

amended PTE 2020–02 would be the 

prohibited transaction excise tax 

imposed under Code section 4975 and 

enforced by the Department of the 

Treasury and the Internal Revenue 

Service (IRS). This proposal would 

require Financial Institutions, as part of 

their retrospective review, to report any 

non-exempt prohibited transactions in 

connection with fiduciary investment 

advice by filing IRS Form 5330, 

correcting those transactions, and 

paying any resulting excise taxes. The 

proposed amendment would add failure 

to correct prohibited transactions, report 

those transactions to the IRS on Form 

5330, and pay the resulting excise tax 

imposed under Code section 4975 to the 

list of behaviors that could make a 

Financial Institution ineligible to rely 

on PTE 2020–02 for ten years. The 

Department believes these proposed 

conditions would provide important 

protections to Retirement Investors by 

enhancing the existing protections of 

PTE 2020–02. 

Effective Date 

PTE 2020–02 was originally 

published on December 18, 2020, and it 

became effective on February 16, 2021. 

The Department proposes that the 

amendment to PTE 2020–02 will be 

effective on the date that is 60 days after 

the publication of a final amendment in 

the Federal Register. This current 

exemption (PTE 2020–20) will remain 

effective under its existing conditions 

until the effective date of a final 

amendment, if granted. 

To provide absolute clarity, the 

Department confirms that the 

restrictions of ERISA section 

406(a)(1)(A), 406(a)(1)(D), and 406(b) 

and the sanctions imposed by Code 

section 4975(a) and (b), by reason of 

Code section 4975(c)(1)(A), (D), (E) and 

(F), would not apply to the receipt of 

compensation by a Financial Institution, 

Investment Professional, or any Affiliate 

and Related Entity in connection with 

investment advice, if the 

recommendation were made before the 

effective date of the final amendment to 

PTE 2020–02, or if the compensation 

was received pursuant to a systematic 

purchase program established before the 

effective date of the final amendment. 

Also, no party would be required to 

comply with the amended conditions 

for a transaction that occurred before the 

effective date of the final amended 

exemption. 

Exemption Scope 

The Department is proposing minor 

changes and clarifications to the scope 

of the exemption. PTE 2020–02 

currently permits Financial Institutions, 

Investment Professionals, and their 

Affiliates and Related Entities to receive 

reasonable compensation as a result of 

providing fiduciary investment advice, 

including as a result of investment 

advice to roll over assets from a Plan to 

an IRA. Subject to additional 

conditions, the exemption also provides 

relief for Financial Institutions, 

Investment Professionals, Affiliates and 

Related Entities to engage in certain 

principal transactions, and to receive a 

mark-up, mark-down, or other payment. 

The Department is not proposing 

changes to these covered transactions. 


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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules 75981 

2Elsewhere in this edition of the Federal 

Register, the Department is proposing to amend 

PTEs 75–1, 77–4, 80–83, 84–24, and 86–128. 

3The definition of Financial Institution in 

Section V(e) includes an entity that is ‘‘(1) 

Registered as an investment adviser under the 

Investment Advisers Act of 1940 (15 U.S.C. 80b–1 

et seq.) or under the laws of the state in which the 

adviser maintains its principal office and place of 

business.’’ References in the preamble to registered 

investment advisers include both SEC- and stateregistered investment advisers. 

4Section V(e)(2) includes ‘‘A bank or similar 

financial institution supervised by the United States 

or a state, or a savings association (as defined in 

section 3(b)(1) of the Federal Deposit Insurance Act 

(12 U.S.C. 1813(b)(1)))’’ In the preamble to PTE 

2020–02, the Department clarified that the 

Department interprets this definition to extend to 

credit unions.’’ 85 FR 82811. 

5As defined in Section V(i) of the exemption, the 

term ‘‘Plan’’ means any employee benefit plan 

described in ERISA section 3(3) and any plan 

described in Code section 4975(e)(1)(A). In Section 

V(g), the term ‘‘Individual Retirement Account’’ or 

‘‘IRA’’ is defined as any account or annuity 

described in Code section 4975(e)(1)(B) through (F), 

including an Archer medical savings account, a 

health savings account, and a Coverdell education 

savings account. While the Department uses the 

term ‘‘Retirement Investor’’ throughout this 

document, the exemption is not limited only to 

investment advice fiduciaries of employee pension 

benefit plans and IRAs. Relief would be available 

for investment advice fiduciaries of employee 

welfare benefit plans as well. 

6 85 FR 40838 (‘‘The Department seeks comment 

on the definition of Financial Institution in general 

and whether any other type of entity should be 

included. The Department also seeks comment as 

to whether the definition is overly broad, or 

whether Retirement Investors would benefit from a 

narrowed list of Financial Institutions. In addition, 

the Department requests comment on whether the 

definition of Financial Institution is sufficiently 

broad to cover firms that render advice with respect 

to investments in Health Savings Accounts (HSA), 

and about the extent to which Plan participants 

receive investment advice in connection with such 

accounts.’’) In finalizing PTE 2020–02, the 

Department determined to not expand the scope of 

the exemption. 

At the same time, the Department 

notes that more parties may need to rely 

on an amended PTE 2020–02, because 

of the Department’s proposed 

amendment to the definition of 

‘‘fiduciary investment advice.’’ If the 

new rule is adopted, parties that have 

not been fiduciaries under the five-part 

test may become fiduciaries in the 

future. In addition, the Department is 

proposing to amend other class 

prohibited transaction exemptions that 

provide relief for fiduciary investment 

advice.2 Parties that have been relying 

on those exemptions may choose to 

comply with the amended PTE 2020–02 

instead. The Department requests 

comment on whether other or additional 

changes are needed to the scope of the 

exemption in light of the changes 

proposed elsewhere in this edition of 

the Federal Register. 

Covered Principal Transactions 

The Department is proposing minor 

changes to the definition of Covered 

Principal Transaction. As proposed, a 

‘‘Covered Principal Transaction’’ is a 

principal transaction that: 

(1) For sales to a Plan or an IRA: 

(i) Involves a U.S. dollar denominated 

debt security issued by a U.S. 

corporation and offered pursuant to a 

registration statement under the 

Securities Act of 1933, a U.S. Treasury 

Security, a debt security issued or 

guaranteed by a U.S. federal government 

agency other than the Department of the 

Treasury, a debt security issued or 

guaranteed by a government-sponsored 

enterprise, a municipal security, a 

certificate of deposit, an interest in a 

Unit Investment Trust, or any 

investment permitted to be sold by an 

investment advice fiduciary to a 

Retirement Investor under an individual 

exemption granted by the Department 

after the effective date of this exemption 

that includes the same conditions as 

this exemption; and 

(ii) A debt security may only be 

recommended in accordance with 

written policies and procedures adopted 

by the Financial Institution that are 

reasonably designed to ensure that the 

security, at the time of the 

recommendation, has no greater than 

moderate credit risk and sufficient 

liquidity that it could be sold at or near 

carrying value within a reasonably short 

period of time; and 

(2) For purchases from a Plan or an 

IRA, involves any securities or 

investment property. 

This is very similar to the current 

definition in PTE 2020–02, with minor 

wording changes for clarity. The 

Department is considering revising the 

beginning of Section II(d) to read ‘‘A 

‘Covered Principal Transaction’ is a 

principal transaction for cash that . . .’’ 

Adding the phrase ‘‘for cash’’ would 

prevent in-kind transactions from being 

Covered Principal Transactions. The 

Department seeks comment on this 

revision and particularly would like to 

receive information regarding whether 

eliminating in-kind assets would reduce 

the complexity and conflicts of interest 

involved in these transactions. 

The Department is also proposing to 

add a definition of Riskless Principal 

Transaction to PTE 2020–02. Proposed 

Section V(l) provides that ‘‘Riskless 

Principal Transaction’’ means a 

transaction in which a Financial 

Institution, after having received an 

order from a Retirement Investor to buy 

or sell an asset, purchases or sells the 

asset for the Financial Institution’s own 

account to offset the contemporaneous 

transaction with the Retirement 

Investor. A Riskless Principal 

Transaction is not a Covered Principal 

Transaction. While these are technically 

executed as principal transactions, the 

Department is not including them in the 

definition of Covered Principal 

Transaction. Thus, there is no limitation 

on the types of products that may be 

sold in a Riskless Principal Transaction. 

Adding the definition provides clarity 

regarding which transactions qualify as 

Riskless Principal Transactions. The 

Department requests comment on this 

definition. The Department notes that 

Financial Institutions should take care 

in determining that a product is eligible 

for a Covered Principal Transaction or 

Riskless Principal Transaction. These 

definitions are intentionally narrow, 

based on the potentially acute conflicts 

of interest created by principal 

transactions. If a Financial Institution 

later determines that an Investment 

Professional recommended a principal 

transaction that was neither a Covered 

Principal Transaction nor a Riskless 

Principal Transaction, then that 

transaction was not eligible for this 

exemption and may need to be reversed 

to put the Retirement Investor in the 

same position they would have been if 

the transaction had not occurred. 

Financial Institutions, Investment 

Professionals, and Retirement Investors 

The Department is not proposing 

substantive changes to definitions of the 

parties that can rely on the exemption. 

PTE 2020–02 is available to Financial 

Institutions (registered investment 

advisers,3 broker-dealers, banks,4 and 

insurance companies) and their 

Investment Professionals (individual 

employees, agents, and representatives) 

that provide fiduciary investment 

advice to Retirement Investors (Plan 

participants and beneficiaries, IRA 

owners, and Plan and IRA fiduciaries).5

As it did in 2020, the Department 

requests comment on this definition of 

Financial Institution and whether any 

other type of entity should be included.6

The Department is proposing a very 

minor change to the definition of 

‘‘Retirement Investor.’’ Proposed 

Section V(l) defines Retirement Investor 

as ‘‘(1) A participant or beneficiary of a 

Plan with authority to direct the 

investment of assets in his or her 

account or to take a distribution; (2) The 

beneficial owner of an IRA acting on 

behalf of the IRA; or (3) A fiduciary of 

a Plan or an IRA.’’ In the proposed 

amendment, the definition of 

Retirement Investor is re-designated as 

Section V(n), and section V(n)(3) reads 

‘‘A fiduciary acting on behalf of a Plan 

or an IRA.’’ The Department intends this 


lotter on DSK11XQN23PROD with PROPOSALS3
75982 Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules 

7The SECURE Act was enacted as Division O of 

the Further Consolidated Appropriations Act, 2020 

(Pub. L. 116–94, 133 Stat. 2534 (Dec. 20, 2019)). The 

SECURE Act amended ERISA section 3(2) to 

authorize PEPs and added new ERISA sections 

3(43) which establishes requirements for PEPs and 

3(44), which establishes requirements for PPPs. 

8 85 FR 82798, 82819 (Dec. 18, 2020). 

9ERISA section 408(g) and the regulations 

thereunder provide prohibited transaction relief for 

certain investment advice arrangements that use fee 

leveling or use computer models. See 29 CFR 

2550.408g–1 and Code section 4975(f)(8). 

as a mere clarification that advice 

provided to a Plan or IRA fiduciary 

must be in the Best Interest of the Plan 

or IRA, and not the Best Interest of the 

fiduciary. The Department requests 

comment on whether additional 

clarifications are necessary. 

Exclusions 

PTE 2020–02 Section I(c) provides 

that the exemption does not apply in 

certain situations. The Department is 

proposing changes to expand the 

availability of this exemption, to 

facilitate more Financial Institutions 

and Investment Professionals providing 

high quality advice to Retirement 

Investors. 

Pooled Employer Plans (PEPs) 

PTE 2020–02 Section I(c)(1) currently 

provides an exclusion from the 

exemption if the Plan is covered by Title 

I of ERISA and the Investment 

Professional, Financial Institution or 

any Affiliate is (A) the employer of 

employees covered by the Plan, or (B) a 

named fiduciary or plan administrator 

with respect to the Plan that was 

selected to provide advice to the Plan by 

a fiduciary who is not independent of 

the Financial Institution, Investment 

Professional, and their Affiliates. In 

2020, the Department received 

comments requesting additional 

guidance and clarification regarding the 

exemption’s application to PEPs, which 

were authorized by the Setting Every 

Community Up for Retirement 

Enhancement Act of 2019 (SECURE 

Act).7 In finalizing PTE 2020–02, the 

Department explained its belief that it 

was premature to address issues related 

to PEPs, given their recent origination, 

unique structure, and likelihood of 

significant variations in potential 

business models, as the Pooled Plan 

Providers (PPPs) were still deciding 

how to structure their operations.8

Based on PEP developments since 

December 2020, including the 

Department’s final rule establishing 

registration requirements for PPPs under 

29 CFR 2510.3–44, the Department is 

now proposing to change the exclusions 

so that PTE 2020–02 clearly would 

cover investment advice provided by an 

Investment Professional, Financial 

Institution, or any Affiliate that is a PPP. 

The proposal amends the existing 

exclusion to clearly provide that a PPP 

can provide investment advice to a PEP 

within the framework of the exemption. 

This would allow PEPs to receive 

investment advice in the same manner 

as other ERISA plans. The proposed text 

would allow Investment Professionals, 

Financial Institutions, or any Affiliates 

to be a named fiduciary or plan 

administrator of the PEP, if that named 

fiduciary or plan administrator is a PPP 

that is registered with the Department 

under 29 CFR 2510.3–44. However, it 

would not provide relief for a PPP’s 

decision to hire an affiliated or related 

party as an advice provider. 

To ensure PEPs are properly covered, 

the Department is also proposing certain 

changes to the definitions in Section V. 

The proposed amendment would add 

the defined terms ‘‘PEP’’ and ‘‘PPP’’ by 

referencing ERISA section 3(43) and 

3(44), the statutory provisions defining 

PEPs and PPPs that were added to 

ERISA by the SECURE Act. The 

Department seeks comment on how 

PEPs and PPPs may use this exemption. 

For example, will advice be provided 

directly to the PEP, or will it be 

provided to the PPP in connection with 

the PEP? Will the exemption be used to 

provide advice to employers 

participating in the PEP? 

Robo Advice 

The Department is proposing to 

remove PTE 2020–02 Section I(c)(2), 

which excludes investment advice 

generated solely by an interactive 

website in which computer softwarebased models or applications provide 

investment advice based on personal 

information each investor supplies 

through the website, without any 

personal interaction or advice with an 

Investment Professional (robo-advice). 

As explained in the preamble to PTE 

2020–02, the statutory exemption in 

ERISA section 408(b)(14), (g), and Code 

section 4975(d)(17) and 4975(f)(8), 

includes specific conditions that are 

tailored to computer-generated 

investment advice. PTE 2020–02, by 

contrast, was tailored to investment 

advice that is provided through a 

human Investment Professional who is 

supervised by a Financial Institution. 

The Department is now proposing to 

amend PTE 2020–02 to allow Financial 

Institutions providing investment 

advice through computer models to rely 

on the exemption. The Department 

understands that Financial Institutions 

may use a combination of computer 

models and individual Investment 

Professionals to provide investment 

advice and may wish to have a single set 

of policies and procedures that can 

govern all recommendations, regardless 

of whether a Retirement Investor speaks 

with an Investment Professional. 

Including computer-generated advice in 

this exemption would simplify 

Financial Institutions’ compliance, so 

that a Retirement Investor could request 

an Investment Professional’s assistance 

with a particular transaction, or an 

Investment Professional could review 

the computer model’s 

recommendations, without separate 

analysis as to whether an Investment 

Professional has provided fiduciary 

investment advice. 

Like any other advice arrangement, 

Financial Institutions relying on 

computer models would have to satisfy 

the exemption’s best interest standard 

and other protective conditions in order 

to satisfy PTE 2020–02. For example, a 

computer model that preferentially 

recommends that a Retirement Investor 

purchase products that generate more 

income to the Financial Institution 

would not be permitted under this 

exemption. The Department is not, 

however, proposing to require Financial 

Institutions to comply with the 

conditions of the statutory exemption in 

ERISA 408(g) 9 in order to rely on PTE 

2020–02. The Department believes that 

the additional conditions of this 

exemption, particularly the 

retrospective review and ineligibility 

provisions, would provide strong 

protections that are not a part of the 

statutory exemption. However, 

complying with the statutory exemption 

conditions could form the basis for 

policies and procedures that effectively 

mitigate Conflicts of Interest. To 

enhance their policies and procedures, 

it would be reasonable for a Financial 

Institution to incorporate some, but not 

all, of the statutory exemption 

conditions when relying on PTE 2020– 

02, although a Financial Institution 

could not merely pick and choose 

among the conditions of both 

exemptions in an attempt to avoid the 

meaningful conflict mitigation 

requirements each exemption provides. 

In other words, a Financial Institution 

must determine that its policies and 

procedures are, in fact, prudently 

designed to ensure compliance with the 

Best Interest standard, regardless of 

whether the policies and procedures 

include conditions taken from the 

statutory exemption. 

The Department requests comment on 

amending PTE 2020–02 to provide relief 

for Financial Institutions that provide 

investment advice through computer 

models without the involvement of an 


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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules 75983 

10 29 CFR 2510.3–21(c)(1)(i) and (ii)(B) or 26 CFR 

54.4975–9(c)(1)(i) and (ii)(B). 

11 85 FR 82798, 40842 (Dec. 18, 2020). 

Investment Professional. The 

Department also requests responses to 

the following questions: 

• Are Financial Institutions currently 

relying on the statutory exemption in 

ERISA section 408(g)? 

• Are Financial Institutions that use 

computer models providing advice in a 

manner that does not require a 

prohibited transaction exemption? 

• Would expanding PTE 2020–02 to 

include investment recommendations 

by computer models allow more 

conflicted investment advice? 

• Are Financial Institutions providing 

rollover advice via computer models? 

Æ If so, would those Financial 

Institutions be able to provide the 

required Rollover disclosure in Section 

II(b)(5)? 

Æ If not, are there other ways the 

Financial Institution can ensure that the 

Retirement Investor receives a full 

explanation of why the recommended 

product is in their Best Interest? 

• Are Financial Institutions using 

artificial intelligence to provide 

investment advice? If so, how are those 

Financial Institutions compensated for 

advice provided in this manner and do 

they rely on PTE 2020–02 or on the 

statutory exemption in ERISA section 

408(g)? Would recommendations that 

relied in whole or part on artificial 

intelligence require additional or 

separate conditions? 

Investment Discretion 

Section I(c)(3) of PTE 2020–02 

currently excludes transactions that 

involve the Investment Professional 

acting in a fiduciary capacity other than 

as an investment advice fiduciary 

within the meaning of the regulations 

issued by the Department and the 

Department of the Treasury/IRS,10

which set forth the definition of 

fiduciary investment advice. In the 

preamble to PTE 2020–02, the 

Department explained it was citing the 

Department’s five-part test as the 

governing authority for status as an 

investment advice fiduciary.11

Now that the Department is proposing 

to amend the regulation defining an 

investment advice fiduciary, the 

Department is also proposing to 

simplify the language in the exemption. 

Specifically, the proposed amendment 

redesignates Section I(c)(3) as Section 

I(c)(2), which would exclude from the 

exemption advice provided in a 

fiduciary capacity other than as an 

investment advice fiduciary within the 

meaning of ERISA section 3(21)(A)(ii)) 

and Code section 4975(e)(3)(B) and the 

regulations issued thereunder. While 

the Department does not intend to 

change the substance of this exclusion, 

the Department is proposing to clarify 

that Financial Institutions and 

Investment Professionals cannot rely on 

the exemption if they act in a fiduciary 

capacity other than as an investment 

advice fiduciary. 

Impartial Conduct Standards 

Best Interest 

The Best Interest standard in PTE 

2020–02 currently requires investment 

advice to be, at the time it is provided, 

in the Best Interest of the Retirement 

Investor. As defined in current Section 

V(b), Best Interest advice (1) reflects the 

care, skill, prudence, and diligence 

under the circumstances then prevailing 

that a prudent person acting in a like 

capacity and familiar with such matters 

would use in the conduct of an 

enterprise of a like character and with 

like aims, based on the investment 

objectives, risk tolerance, financial 

circumstances, and needs of the 

Retirement Investor, and (2) does not 

place the financial or other interests of 

the Investment Professional, Financial 

Institution or any Affiliate, Related 

Entity, or other party ahead of the 

interests of the Retirement Investor, or 

subordinate the Retirement Investor’s 

interests to their own. 

The proposed amendment would 

retain the Best Interest standard from 

PTE 2020–02. To provide additional 

clarity, the Department is proposing to 

add an example to the operative text 

from the 2020–02 preamble specifying 

that it is impermissible for the 

Investment Professional to recommend a 

product that is worse for the Retirement 

Investor because it is better for the 

Investment Professional’s or the 

Financial Institution’s bottom line. In 

other words, the requirement for 

Investment Professionals not to 

subordinate the Retirement Investor’s 

interests to their own is not satisfied if 

the Investment Professional merely 

considers the Retirement Investor’s 

interests along with its own and the 

Financial Institution’s in choosing 

which product to recommend to a 

Retirement Investor. The Department 

notes this standard is consistent with 

the SEC’s standards for both registered 

investment advisers and broker-dealers. 

As the Department stated in the 

preamble to PTE 2020–02, this Best 

Interest standard allows Investment 

Professionals and Financial Institutions 

to provide investment advice despite 

having a financial or other interest in 

the transaction, so long as they do not 

place their own interests ahead of the 

interests of the Retirement Investor or 

subordinate the Retirement Investor’s 

interests to their own. For example, in 

choosing between two investments 

offered and available to the investor 

from the Financial Institution, it is not 

permissible for the Investment 

Professional to advise investing in the 

one that is worse for the Retirement 

Investor but better for the Investment 

Professional’s or the Financial 

Institution’s bottom line. It bears 

emphasis, however, that this standard 

should not be read as somehow 

foreclosing the Investment Professional 

and Financial Institution from being 

paid on a transactional basis, nor does 

it foreclose investment advice on 

proprietary products or investments that 

generate Third-Party Payments, or 

advice based on investment menus that 

are limited to such products, in part or 

whole. Financial Institutions and 

Investment Professionals are entitled to 

receive reasonable compensation fairly 

disclosed for their work, as long as they 

do not subordinate the Retirement 

Investor’s interests to their own and 

have appropriate policies and 

procedures to safeguard against 

imprudent or disloyal advice. 

Certainly, in many cases, it is in the 

Retirement Investor’s best interest to 

receive advice from Investment 

Professionals that are compensated 

through commissions incurred on a 

transactional basis, rather than as part of 

an ongoing fee-based relationship (for 

example, pursuant to an advisory 

relationship subject to a recurring 

charge based on assets under 

management). In such cases, the fact 

that the Investment Professional 

received a commission for their services 

is not inconsistent with the principles 

set forth herein. Conversely, a 

recommendation to enter into a feebased arrangement may, in certain 

cases, be inconsistent with the Best 

Interest standard. For example, ‘‘reverse 

churning,’’ or recommending that a 

Retirement Investor continue to receive 

advice and hold assets subject to an 

ongoing advisory fee, in circumstances 

where the investor has low trading 

activity and little need for ongoing 

advice, would constitute a violation of 

the Impartial Conduct Standards and 

ERISA section 406(b)(1) that is not 

covered by this exemption. In the 

discussion of the policies and 

procedures requirement under Section 

II(c), the Department provides 

additional guidance on how Financial 

Institutions that construct their 

investment menus with reference to 

proprietary products or Third-Party 


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payments can comply with the 

exemption. 

Finally, it should be noted that this 

Best Interest standard also does not 

impose an unattainable obligation on 

Investment Professionals 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 

such advice were even possible at the 

time of the transaction. 

Reasonable Compensation and Best 

Execution 

The Department is retaining the 

reasonable compensation and best 

execution standards from PTE 2020–02, 

with minor adjustments to the language. 

Section II(a)(2)(A) provides that the 

compensation received, directly or 

indirectly, by the Financial Institution, 

Investment Professional, their Affiliates 

and Related Entities for their fiduciary 

investment advice services provided to 

the Retirement Investor must not exceed 

reasonable compensation within the 

meaning of ERISA section 408(b)(2) and 

Code section 4975(d)(2). In addition, 

Section II(a)(2)(B) provides that the 

Financial Institution and Investment 

Professional must seek to obtain the best 

execution of the recommended 

investment transaction that is 

reasonably available under the 

circumstances as required by the 

Federal securities laws. 

No Misleading Statements 

The Department is also maintaining 

the requirement in Section II(a)(3), 

which prohibits Financial Institutions 

and Investment Professionals from 

making materially misleading 

statements to Retirement Investors. It is 

not sufficient for such statements to be 

technically accurate; therefore, the 

Department is clarifying that this 

condition is not satisfied if a Financial 

Institution or Investment Professional 

omits information that is needed to 

make the statement not misleading in 

light of the circumstances under which 

it was made. The Financial Institution 

and Investment Professional must 

consider whether the information 

provides data the Retirement Investor 

likely would need or want to know 

about the recommended investment and 

provide that information in a manner 

the Retirement Investor can understand. 

Disclosure 

Section II(b) of PTE 2020–02 currently 

requires Financial Institutions to 

provide certain disclosures to 

Retirement Investors before engaging in 

a transaction pursuant to the exemption. 

The Financial Institution must provide 

a written acknowledgment that the 

Financial Institution and its Investment 

Professionals are fiduciaries under Title 

I of ERISA and the Code, as applicable, 

with respect to any investment 

recommendations provided by the 

Financial Institution or Investment 

Professional to the Retirement Investor. 

The Financial Institution must also 

provide an accurate written description 

of the services to be provided to the 

Retirement Investor and the Financial 

Institution’s and Investment 

Professional’s material Conflicts of 

Interest that is not misleading in all 

material respects. In addition, under 

current Section II(c)(3) of PTE 2020–02, 

before engaging in a rollover 

recommended pursuant to the 

exemption, the Financial Institution 

must provide Retirement Investors with 

documentation of specific reasons why 

the rollover recommendation is in the 

Retirement Investor’s best interest. 

As part of this amendment to PTE 

2020–02, the Department is proposing 

additional disclosures described below, 

which the Department has determined 

will help ensure that Retirement 

Investors have sufficient information to 

make an informed decision about the 

costs of the transaction and the 

significance and severity of the 

Financial Institution’s Conflicts of 

Interest. The Department requests 

comment on these disclosures and is 

particularly interested in receiving 

information regarding whether 

additional or alternative information 

would be helpful to Retirement 

Investors. Since many Financial 

Institutions are already complying with 

PTE 2020–02, the Department is 

interested in hearing from those 

Financial Institutions and from 

investors about the helpfulness of the 

current disclosures and what 

information might provide additional 

protections. 

Pre-Transaction Disclosure 

Before engaging in a transaction 

pursuant to this exemption, PTE 2020– 

02 Section II(b)(1) currently requires the 

Financial Institution to provide a 

written acknowledgment that the 

Financial Institution and its Investment 

Professionals are fiduciaries under Title 

I of ERISA or the Code, or both, as 

applicable, with respect to any 

investment recommendations provided 

by the Financial Institution or 

Investment Professional to the 

Retirement Investor. The Department 

has become concerned that some parties 

misinterpret this condition and claim to 

satisfy it through artful phrasing that 

does not, in fact, tell the Retirement 

Investor if the recommendation is made 

by a fiduciary (for example, by saying 

they ‘‘may’’ be fiduciaries or that they 

are fiduciaries to the extent they meet 

the definition of fiduciary investment 

advice under the ERISA or the Code). 

Before executing a recommended 

transaction, however, a Retirement 

Investor should know whether the 

recommendation is coming from a 

Financial Institution or Investment 

Professional who is subject to the 

ERISA/Code fiduciary standard. 

Similarly, if the Financial Institution 

and Investment Professional are to 

comply with the law and meet the 

exemption’s conditions, they should 

decide if they are acting as a fiduciary, 

inasmuch as their legal obligations and 

exemption conditions turn on fiduciary 

status under ERISA, the Code, or both. 

The proposed amendment would 

clarify the fiduciary acknowledgment 

requirement so that the Financial 

Institution must provide a written 

acknowledgment that the Financial 

Institution and its Investment 

Professionals are providing fiduciary 

investment advice to the Retirement 

Investor and are fiduciaries under Title 

I, the Code, or both when making an 

investment recommendation. If 

Financial Institutions and Investment 

Professionals are unwilling to meet this 

exemption condition, they must 

restructure their operations to avoid 

prohibited transactions. 

The Department is proposing to add a 

requirement in Section II(b)(2) that the 

Financial Institutions include with the 

initial disclosure a written statement of 

the Best Interest standard of care owed 

by the Investment Professional and 

Financial Institution to the Retirement 

Investor. PTE 2020–02 Section II(b)(2) 

currently requires a written description 

of the services to be provided and the 

Financial Institution’s and Investment 

Professional’s material Conflicts of 

Interest that is accurate and not 

misleading in all material respects. The 

Department is proposing to re-designate 

this provision as Section II(b)(3), replace 

‘‘all material respects’’ with ‘‘any 

material respect,’’ and add a 

clarification that this description will 

include the amount the Retirement 

Investor will directly pay for such 

services and the amounts the Financial 

Institution and Investment Professional 

receive from other sources, including 

through Third-Party Payments. If, for 

example, the Retirement Investor will 

pay through commissions or 

transaction-based payments, the written 

statement must clearly disclose that fact. 

This description must be written in 

plain English, taking into consideration 

a Retirement Investor’s level of financial 


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12 ‘‘While the exemption does not include specific 

safe harbors, the Department confirms that 

Financial Institutions may rely, in whole or in part, 

on other regulatory disclosures to satisfy certain 

aspects of this disclosure requirement, for example, 

the disclosures required under Regulation Best 

Interest and Form CRS, applicable to broker-dealers; 

Form ADV including Form CRS, applicable to 

registered investment advisers; and disclosures 

required under insurance and banking laws when 

such disclosures cover services to be provided and 

the Financial Institution’s and Investment 

Professional’s material Conflicts of Interest. 

Avoiding duplication of disclosures is important 

and the Department reiterates that the disclosure 

standard under this exemption may be satisfied in 

whole, or in part, by using other required 

disclosures to the extent those disclosures include 

information required to be disclosed by the 

exemption. Allowing the use of other disclosures to 

meet the disclosure standard under this exemption 

should serve to harmonize this exemption’s 

conditions with those of other disclosure regimes.’’ 

85 FR at 82830. 

13 In addition, Section IV already requires 

Financial Institutions to ‘‘maintain[ ] for a period of 

six years records demonstrating compliance with 

this exemption and make[ ] such records available, 

to the extent permitted by law including 12 U.S.C. 

484, to any authorized employee of the Department 

or the Department of the Treasury.’’ 

14The Department included very similar language 

in its April 2021 FAQs, Q15. When this policy was 

challenged in litigation, the court determined that 

that policy was a procedurally proper interpretive 

rule, and it was not arbitrary and capricious, 

because it is ‘‘the type of documentation that . . . 

is precisely of the nature that a prudent investment 

advisor would undertake. Accordingly, it neither 

contradicts the 2020 Exemption nor goes beyond 

it.’’ Am. Securities Asso’n v. Dep’t of Labor, No. 

8:22–cv–330, 2023 WL 1967573, at *21 (M.D. Fla. 

Feb. 13, 2023). 

experience. As explained previously in 

the preamble to final PTE 2020–02 

published in 2020, the Department 

anticipates Financial Institutions are 

able to satisfy this disclosure 

requirement in part through disclosures 

required by other regulators.12 The 

Department requests comment whether 

additional specificity is needed, 

particularly as to the type of Third-Party 

Payments or other incentives provided 

to the Financial Institution. 

The Department is also proposing a 

new Section II(b)(4) which would 

require Financial Institutions to inform 

Retirement Investors of their right to 

obtain specific information regarding 

costs, fees, and compensation that is 

described in dollar amounts, 

percentages, formulas, or other means 

reasonably designed to present 

materially accurate disclosure of their 

scope, magnitude, and nature. The 

Financial Institution must provide the 

information in sufficient detail for the 

Retirement Investor to make an 

informed judgment about the costs of 

the transaction and the significance and 

severity of Conflicts of Interest. This 

includes the total compensation that the 

Financial Institution and Investment 

Professional receive, not just the costs 

directly paid by the Retirement Investor. 

This disclosure also must describe how 

the Retirement Investor can receive the 

information free of charge. The 

Department is not proposing to require 

Financial Institutions to maintain 

records of every transaction or be able 

to quickly provide specific information 

regarding costs or fees generated by 

specific transactions. However, the 

Department is proposing to require 

Financial Institutions to maintain 

sufficient records to allow them to 

meaningfully respond to Retirement 

Investors’ requests to demonstrate how 

the Financial Institution and its 

Investment Professionals are 

compensated in connection with their 

recommendations.13

To assist Financial Institutions and 

Investment Professionals in complying 

with this exemption condition, the 

Department is providing the following 

model language that will satisfy Section 

II(b)(1), (2), and (4). 

When we make investment 

recommendations to you regarding your 

retirement plan account or individual 

retirement account, we are fiduciaries within 

the meaning of Title I of the Employee 

Retirement Income Security Act and/or the 

Internal Revenue Code, as applicable, which 

are laws governing retirement accounts. The 

way we make money creates some conflicts 

with your interests, so we operate under a 

special rule that requires us to act in your 

best interest and not put our interest ahead 

of yours. Under this special rule’s provisions, 

we must: 

• Meet a professional standard of care 

when making investment recommendations 

(give prudent advice); 

• Never put our financial interests ahead 

of yours when making recommendations 

(give loyal advice); 

• Avoid misleading statements about 

conflicts of interest, fees, and investments; 

• Follow policies and procedures designed 

to ensure that we give advice that is in your 

best interest; 

• Charge no more than is reasonable for 

our services; and 

• Give you basic information about 

conflicts of interest. 

You can ask us for more information 

explaining costs, fees, and compensation, so 

that you may make an informed judgment 

about the costs of the transaction and about 

the significance and severity of the Conflicts 

of Interest. We will provide you with this 

information at no cost to you. 

Please note that the Department is not 

proposing to include model language for 

Section II(b)(3) because many different 

types of Financial Institutions will rely 

on this exemption and provide a wide 

range of services to Plans and 

Retirement Investors. 

Rollover Disclosure 

The proposed amendment would 

clarify the rollover disclosure. While the 

current requirement is a part of both the 

disclosure conditions in Section II(b)(3) 

and the policies and procedures 

condition in Section II(c)(3) of PTE 

2020–02, the proposed amendment 

would consolidate this into one 

condition in amended Section II(b)(5). 

This requirement extends to 

recommended rollovers from a Plan to 

another Plan or IRA as defined in Code 

section 4975(e)(1)(B) or (C), from an IRA 

as defined in Code section 4975(e)(1)(B) 

or (C) to a Plan, from an IRA to another 

IRA, or from one type of account to 

another (e.g., from a commission-based 

account to a fee-based account). 

Before engaging in a rollover or 

making a recommendation to a Plan 

participant as to the post-rollover 

investment of assets currently held in a 

Plan, the Financial Institution, and 

Investment Professional must consider 

and document their conclusions as to 

whether a rollover is in the Retirement 

Investor’s Best Interest and provide that 

documentation to the Retirement 

Investor. Relevant factors to consider 

must include but are not limited to: 

(i) the alternatives to a rollover, 

including leaving the money in the Plan 

or account type, as applicable; 

(ii) the comparative fees and 

expenses; 

(iii) whether an employer or other 

party pays for some or all administrative 

expenses; and 

(iv) the different levels of fiduciary 

protection, services and investments 

available. 

When considering the alternatives to 

a rollover recommendation, the 

Financial Institution and Investment 

Professional should not focus solely on 

the Retirement Investor’s existing 

investment allocation without 

considering other investment options in 

the existing Plan or IRA.14

Investment Professionals and 

Financial Institutions should make 

diligent and prudent efforts to obtain 

information about the fees, expenses, 

and investment options offered in the 

Retirement Investor’s Plan account. In 

general, such information should be 

readily available to the Retirement 

Investor as a result of Department 

regulations mandating disclosure of 

plan-related information to the plan’s 

participants that is found at 29 CFR 

2550.404a–5. If the Retirement Investor 

refuses to provide such information, 

even after a full explanation of its 

significance, and the information is not 

otherwise readily available, the 

Financial Institution and Investment 

Professional should make a reasonable 

estimate of a Plan’s expenses, asset 


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15The burden is estimated as: (19,290 entities × 

8 hours) = 154,320 hours. A labor rate of $133.05 

is used for a computer programmer professional. 

The labor rate is applied in the following 

calculation: (19,290 entities × 8 hours) × $133.05 = 

$20,532,276. 

16Except where specified, as here, ‘‘days’’ refers 

to calendar days. 

values, risk, and returns based on 

publicly available information. The 

Financial Institution and Investment 

Professional should document and 

explain the assumptions used in the 

estimate and their limitations. In such 

cases, the Financial Institution and 

Investment Professional could rely on 

alternative data sources, such as the 

Plan’s most recent Form 5500 or reliable 

benchmarks on typical fees and 

expenses for the type and size of the 

Plan that holds the Retirement 

Investor’s account. The Department 

welcomes comments on reliable 

benchmarks that could be used for this 

purpose. 

The Department notes it would be 

permissible under this exemption for a 

Financial Institution to charge a discrete 

fee for the rollover analysis and charge 

separately for advice following the 

rollover. Like all other service providers 

and investment advice fiduciaries, the 

Financial Institution may only charge 

reasonable compensation for the 

rollover analysis and must satisfy all 

other conditions of the exemption. 

Web Disclosure 

The Department also seeks comment 

on whether Financial Institutions 

should be required to provide additional 

disclosures to Retirement Investors and 

the investing public. In particular, the 

Department is interested in receiving 

comments regarding whether it should 

require Financial Institutions to 

maintain a public website containing 

the pre-transaction disclosure, a 

description of the Financial Institution’s 

business model, associated Conflicts of 

Interest (including arrangements that 

provide Third-Party Payments), and a 

schedule of typical fees. The website 

could be formatted as a separate 

website, a web page on an existing 

website, or in some other way that is 

publicly accessible. If the Department 

were to add a web disclosure 

requirement, the Department would also 

require Financial Institutions to provide 

Retirement Investors with a link to the 

web disclosure (or a printed web 

address) as part of the pre-transaction 

disclosures currently required by 

Section II(b)(1)–(4). 

The Department is interested in 

receiving data and other information 

regarding the benefits of such a 

disclosure. The Department estimates 

that, if such a disclosure were required, 

it would require eight hours of labor 

annually from a computer programmer, 

on average, resulting in an annual cost 

of approximately $20.5 million.15 The 

Department welcomes comments on the 

accuracy of Department’s estimates on 

the required time to maintain the 

disclosure, and how many Financial 

Institutions currently have the 

technology infrastructure to post a web 

disclosure. The Department is also 

interested in receiving any data that 

commenters may have that can inform 

an estimate of the extent to which 

Retirement Investors, investment 

consultants, and third-party 

intermediaries would visit and use a 

web page that includes such 

disclosures, and the extent to which 

such disclosures could drive better 

investor outcomes. 

The Department contemplates that, to 

the extent applicable, the website would 

list all product manufacturers and other 

parties with whom the Financial 

Institution maintains arrangements that 

provide Third-Party Payments to the 

Investment Professional, the Financial 

Institution, or Affiliates with respect to 

specific investment products or classes 

of investments recommended to 

Retirement Investors; a description of 

the arrangements, including a statement 

on whether and how these arrangements 

impact Investment Professionals’ 

compensation, and a statement on any 

benefits the Financial Institution 

provides to the product manufacturers 

or other parties in exchange for the 

Third-Party Payments. 

The website may describe the above 

arrangements with product 

manufacturers, Investment 

Professionals, and others by reference to 

dollar amounts, percentages, formulas, 

or other means reasonably calculated to 

present a materially accurate 

description of the arrangements. 

Similarly, the Financial Institution may 

group disclosures on the website based 

on reasonably defined categories of 

investment products or classes, product 

manufacturers, Investment 

Professionals, and arrangements, and it 

may disclose reasonable ranges of 

values, rather than specific values as 

appropriate. Regardless of how it is 

constructed, the website should fairly 

disclose the scope, magnitude, and 

nature of the Financial Institution’s 

compensation arrangements and 

Conflicts of Interest in sufficient detail 

to permit visitors to the website to make 

an informed judgment about the 

significance of the compensation 

practices and Conflicts of Interest with 

respect to transactions recommended by 

the Financial Institution and its 

Investment Professionals. 

Good Faith 

Section II(b)(6) of the proposal would 

provide that the Financial Institution 

will not fail to satisfy the conditions in 

Section II(b) solely because it, acting in 

good faith and with reasonable 

diligence, makes an error or omission in 

disclosing the required information, or 

if the disclosure is temporarily 

inaccessible through no fault of the 

Financial Institution, provided that the 

Financial Institution discloses the 

correct information as soon as 

practicable, but not later than 30 days 

after the date on which it discovers or 

reasonably should have discovered the 

error or omission. 

Under proposed Section II(b)(7) of the 

amendment, Investment Professionals 

and Financial Institutions may rely in 

good faith on information and 

assurances from the other entities that 

are not Affiliates as long as they do not 

know that such information is 

incomplete or inaccurate. The proposed 

exemption makes clear in Section 

II(b)(8) that Financial Institutions will 

not be required to disclose information 

pursuant to this Section II(b) if such 

disclosure is otherwise prohibited by 

law. 

Policies and Procedures 

Under PTE 2020–02, Section II(c), a 

Financial Institution must currently 

establish, maintain, and enforce written 

policies and procedures that it 

prudently designs to ensure that the 

Financial Institution and its Investment 

Professionals comply with the Impartial 

Conduct Standards. The proposed 

amendment clarifies, by adding 

examples to the operative text, some 

actions that Financial Institutions may 

not take because a reasonable person 

could conclude that they are likely to 

encourage Investment Professionals to 

make recommendations that are not in 

the Retirement Investors’ Best Interest. 

The Department is not proposing 

changes to the underlying requirements 

applicable to these policies and 

procedures but is proposing to require 

Financial Institutions to provide their 

complete policies and procedures to the 

Department upon request within 10 

business days of request.16

The Financial Institution’s policies 

and procedures must mitigate Conflicts 

of Interest to such an extent that a 

reasonable person reviewing the 

Financial Institution’s policies and 

procedures and its incentive practices as 


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17The Department provided further guidance on 

the policies and procedures in Questions 16 and 17 

of a set of Frequently Asked Questions available at 

https://www.dol.gov/sites/dolgov/files/ebsa/aboutebsa/our-activities/resource-center/faqs/newfiduciary-advice-exemption.pdf. 

a whole would conclude that they do 

not create an incentive for the Financial 

Institution or Investment Professional to 

place its interests ahead of the 

Retirement Investor’s interest.17 The 

policies and procedures must be 

prudently designed to protect 

Retirement Investors from 

recommendations to make excessive 

trades; to buy investment products, 

annuities, or riders that are not in the 

Retirement Investor’s Best Interest; or to 

allocate excessive amounts to illiquid or 

risky investments. To satisfy Section 

II(c), Financial Institutions may not use 

quotas, appraisals, performance or 

personnel actions, bonuses, contests, 

special awards, differential 

compensation, or other similar actions 

or incentives that are intended, or that 

a reasonable person would conclude are 

likely, to encourage Investment 

Professionals to make recommendations 

that are not in Retirement Investors’ 

Best Interest. A Financial Institution 

should not offer incentive vacations, or 

even paid trips to educational 

conferences, if the desirability of the 

destination is based on sales volume 

and satisfaction of sales quotas. 

The Financial Institution must pay 

close attention to any Conflicts of 

Interest that may exist within the 

Financial Institution itself. For example, 

it is not enough merely to pay 

Investment Professionals the same 

percentage of the Financial Institution’s 

compensation for a recommended 

investment product, as for other 

products, if the Financial Institution 

receives more compensation from 

recommending that product rather than 

other products. In such cases, the 

‘‘level’’ compensation percentage 

effectively directly transmits the 

Financial Institution’s conflict of 

interest to the Investment Professional, 

as the Investment Professional’s 

compensation is increased in direct 

proportion to the profitability of the 

investment to the firm. Thus, Section 

II(c) requires the Financial Institution to 

look carefully at its own incentives and 

ensure that all recommendations are 

focused on the Retirement Investor’s 

Best Interest rather than the Financial 

Institution’s interests. 

This is not to say the exemption is 

limited to certain types of Financial 

Institutions or investment products. 

Financial Institutions that offer a 

restricted menu of proprietary products 

or products that generate Third-Party 

Payments can establish, maintain, and 

enforce written policies and procedures 

that satisfy these requirements. For 

example, the Department would view a 

Financial Institution that authorizes a 

limited universe of investment 

recommendations as satisfying the 

policies and procedures requirement if 

it prudently does the following: 

• Documents in writing its limitations 

on the universe of recommended 

investments, the Conflicts of Interest 

associated with any contract, agreement, 

or arrangement providing for its receipt 

of Third-Party Payments or associated 

with the sale or promotion of 

proprietary products. 

• Documents any services it will 

provide to Retirement Investors in 

exchange for Third-Party Payments, as 

well as any services or consideration it 

will furnish to any other party, 

including the payor, in exchange for the 

Third-Party Payments. 

• Reasonably concludes that the 

limitations on the universe of 

recommended investments and 

Conflicts of Interest will not cause the 

Financial Institution or its Investment 

Professionals to receive compensation 

in excess of reasonable compensation 

for Retirement Investors as set forth in 

Section II(a)(2). 

• Reasonably concludes that these 

limitations and Conflicts of Interest will 

not cause the Financial Institution or its 

Investment Professionals to recommend 

imprudent investments; and documents 

in writing the bases for its conclusions. 

• Informs the Retirement Investor 

clearly and prominently in writing that 

the Financial Institution limits the types 

of products that it and its Investment 

Professionals recommend to proprietary 

products and/or products that generate 

Third-Party Payments. 

Æ In this regard, the notice should not 

simply state that the Financial 

Institution or Investment Professional 

‘‘may’’ limit investment 

recommendations based on whether the 

investments are proprietary products or 

generate Third-Party Payments, without 

specific disclosure of the extent to 

which recommendations are, in fact, 

limited on that basis. 

• Clearly explains its fees, 

compensation, and associated Conflicts 

of Interest to the Retirement Investor in 

plain English. 

• Ensures that all recommendations 

are based on the Investment 

Professional’s considerations of factors 

or interests such as investment 

objectives, risk tolerance, financial 

circumstances, and needs of the 

Retirement Investor. 

• At the time of the recommendation, 

the amount of compensation and other 

consideration reasonably anticipated to 

be paid, directly or indirectly, to the 

Investment Professional, Financial 

Institution, or their Affiliates or Related 

Entities for their services in connection 

with the recommended transaction is 

not in excess of reasonable 

compensation within the meaning of 

ERISA section 408(b)(2) and Code 

section 4975(d)(2). 

• The Investment Professional’s 

recommendation reflects the care, skill, 

prudence, and diligence under the 

circumstances then prevailing that a 

prudent person acting in a like capacity 

and familiar with such matters would 

use in the conduct of an enterprise of a 

like character and with like aims, based 

on the investment objectives, risk 

tolerance, financial circumstances, and 

needs of the Retirement Investor; and 

the Investment Professional’s 

recommendation is not based on the 

financial or other interests of the 

Investment Professional or on the 

Investment Professional’s consideration 

of any factors or interests other than the 

investment objectives, risk tolerance, 

financial circumstances, and needs of 

the Retirement Investor. 

The Department intends this as an 

example of one way a Financial 

Institution could satisfy the policies and 

procedures requirement, but not the 

only way. The Department requests 

comment on whether additional 

guidance is needed regarding a 

Financial Institution or Investment 

Professional’s recommendations of 

proprietary products to a Retirement 

Investor, and, if so, the type of guidance 

that would be most useful. 

Retrospective Review 

The Department is proposing to retain 

the retrospective review in PTE 2020– 

02, Section II(d) with certain 

modifications. The review must be 

reasonably designed to detect and 

prevent violations of, and achieve 

compliance with, the conditions of the 

exemption, including the Impartial 

Conduct Standards, and the policies and 

procedures governing compliance with 

the exemption. The Department is 

clarifying that as part of the review, it 

expects Financial Institutions to 

determine whether they have complied 

with each exemption condition. This 

expectation is based in part on the 

premise that PTE 2020–02 currently 

requires the Financial Institution’s 

Senior Executive Officer to certify that 

the Financial Institution has policies 

and procedures in place that are 

prudently designed to achieve 

compliance with the exemption 

conditions as part of the retrospective 

review. In order to make that 


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18 85 FR 82798, 82839 (Dec. 18, 2020). 

19Chamber of Commerce v. U.S. Dep’t of Labor, 

885 F.3d 360, 384 (5th Cir. 2018). For additional 

information regarding correcting prohibited 

transactions see Voluntary Fiduciary Correction 

Program Under the Employee Retirement Income 

Security Act of 1974, 71 FR 20262 (Apr. 19, 2006). 

certification, the retrospective review 

must be reasonably designed to detect 

and prevent violations of, and achieve 

compliance with, all conditions of the 

exemption itself. Consistent with this 

expectation, the Department has 

received self-correction notifications 

summarizing the Financial Institution’s 

annual retrospective review and 

identifying its failure to comply with a 

range of conditions. 

The Department is also adding a 

clarification that, as part of its 

retrospective review, the Financial 

Institution must update its policies and 

procedures as business, regulatory, and 

legislative changes and events dictate, 

and to ensure they remain prudently 

designed, effective, and compliant with 

Section II(c). This is intended as 

clarification of the current PTE 2020–02, 

which requires Financial Institutions 

‘‘maintain’’ their policies and 

procedures and also requires the Senior 

Executive Officer’s certification to 

include that the Financial Institution 

has in place a prudent process to modify 

the policies and procedures. The 

Department is proposing to add this 

language to Section II(d)(1) for clarity. 

In the Department’s view, an annual 

review will generally be appropriate. 

However, Financial Institutions may 

choose to conduct their reviews more 

frequently and should do so as 

circumstances dictate. For example, if a 

Financial Institution knows or should 

know that non-exempt prohibited 

transactions or violations of either the 

Impartial Conduct Standards or policies 

and procedures conditions have 

occurred, the Financial Institution 

cannot wait until the next annual 

review to correct transactions or revise 

its policies and procedures. 

As the Department described in the 

preamble to PTE 2020–02 when it was 

finalized in 2020, an appropriate 

retrospective review would be aimed at 

detecting non-compliance across a wide 

range of transaction types and sizes, 

large and small, identifying deficiencies 

in the policies and procedures, and 

rectifying those deficiencies. For large 

Financial Institutions that conduct large 

numbers of transactions each year, 

sampling may not be the sole means of 

testing compliance, but it is an 

important and necessary component of 

any prudent review process and should 

be performed in a manner designed to 

identify potential violations, problems, 

and deficiencies that need to be 

addressed.18

The methodology and results of the 

retrospective review must be reduced to 

a written report that is provided to a 

Senior Executive Officer. The 

Department is proposing some edits to 

the Senior Executive Officer’s report. 

The Department is making minor edits 

to reflect the clarifications to the 

retrospective review described above. In 

addition, the Department is proposing to 

amend Section II(d)(3) to require the 

Senior Executive Officer to certify that 

the Financial Institution has filed (or 

will file timely, including extensions) 

Form 5330 to report to the IRS any nonexempt prohibited transactions 

discovered by the Financial Institution 

in connection with investment advice 

covered under Code section 

4975(e)(3)(B). The certification must 

also include that the Financial 

Institution has corrected those 

transactions and paid any resulting 

excise taxes owed under Code section 

4975. As further described below, the 

Department is proposing to amend other 

sections of PTE 2020–02 to ensure 

Financial Institutions pay the excise 

taxes owed on non-exempt prohibited 

transactions. In its decision vacating the 

2016 rulemaking, the Fifth Circuit wrote 

that ‘‘ERISA Title II only punishes 

violations of the ‘prohibited 

transactions’ provision by means of IRS 

audits and excise taxes.’’ 19 Consistent 

with this reasoning, the Department is 

proposing to require the Senior 

Executive Officer to carefully review 

transactions, correct violations, and pay 

any required excise taxes. 

The review, report, and certification 

must be completed no later than six 

months following the end of the period 

covered by the review. The Financial 

Institution must retain the report, 

certification and supporting data for six 

years, and provide such information to 

the Department within 10 business days 

of request, to the extent permitted by 

law including 12 U.S.C. 484 (regarding 

limitations on visitorial powers for 

national banks). 

Self-Correction 

The Department is proposing to retain 

the self-correction in Section II(e) in 

amended PTE 2020–02. The exemption 

allows self-correction in certain cases 

when either the violation did not result 

in investment losses to the Retirement 

Investor, or the Financial Institution 

made the Retirement Investor whole for 

any resulting losses. In this context, 

‘‘losses’’ are not limited to 

recommendations that leave the 

Retirement Investor with fewer assets 

than originally invested. For example, if 

the Financial Institution’s fees are 

excessive, the Financial Institution 

cannot keep the fees just because the 

Retirement Investor did not lose money 

in the transaction. 

Since finalizing PTE 2020–02, the 

Department has received several selfcorrection emails under Section II(e). 

Most of these emails describe late 

disclosures (including both fiduciary 

acknowledgments and rollover analyses) 

which may be corrected under PTE 

2020–02 as long as all of the required 

information was provided to the 

Retirement Investor, even if not in 

writing, so that the Financial Institution 

is confident that the Retirement Investor 

had the information needed to make an 

informed investment decision before a 

transaction was executed pursuant to 

the Financial Institution or Investment 

Professional’s recommendation. 

The Department has also received 

questions about the types of transactions 

that can be corrected under PTE 2020– 

02, Section II(e). If a recommendation 

satisfies all conditions of the exemption, 

but due to a clerical error the wrong 

asset is purchased or sold, the Financial 

Institution must correct this error as 

quickly as possible by ensuring the 

Retirement Investor’s account is in the 

same position it would have been if the 

correct transaction had occurred. 

However, if an Investment Professional 

has recommended a transaction that was 

not in the Retirement Investor’s Best 

Interest, the Retirement Investor may be 

prohibited from returning money to an 

ERISA account after it has been rolled 

over into an IRA. Even if the IRA 

investments have performed well since 

the rollover, the Retirement Investor 

may have been harmed by the loss of 

ERISA Title I’s protections. The 

Department requests comment on 

whether additional clarifications are 

needed as to the types of transactions 

eligible for correction under Section 

II(e). 

Eligibility 

The Department is proposing to retain 

the eligibility provision in Section III, 

which identifies circumstances under 

which an Investment Professional or 

Financial Institution will become 

ineligible to rely on the exemption for 

a period of 10 years. The Department 

continues to maintain that the eligibility 

provisions ensure that Financial 

Institutions provide reasonable 

oversight of Investment Professionals 

and that both adopt a culture of 

compliance. The Department is 

proposing certain changes to Section III, 

mostly for clarity. The Department 

requests comment on these proposed 


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changes and whether additional clarity 

is needed. 

The Department is proposing to 

expand ineligibility to include Financial 

Institutions that are Affiliates, rather 

than a more limited definition of 

‘‘Controlled Group.’’ The Department 

remains concerned that a Financial 

Institution facing ineligibility for its 

actions affecting Retirement Investors 

could merely change its corporate form 

and continue to rely on the exemption. 

The Department understands there has 

been some confusion about what 

entities would be considered Financial 

Institutions in the same Controlled 

Group and has determined that by 

including Affiliates as opposed to 

Financial Institutions in the same 

Controlled Group, the provision will be 

better understood by the parties 

involved. Moreover, the inclusion of 

Affiliates ensures that Financial 

Institutions would be diligent in their 

obligation to monitor the actions of their 

Affiliates and foster a culture of 

compliance throughout the 

organization. 

The proposed amendment also would 

set forth the specific crimes (including 

foreign crimes) that could cause 

ineligibility in Section III(a). Under 

current PTE 2020–02, a Financial 

Institution or Investment Professional 

only becomes ineligible upon 

conviction of ‘‘crimes arising out of 

such person’s provision of investment 

advice to Retirement Investors.’’ The 

Department is proposing to broaden this 

to include the enumerated crimes, 

regardless of the conduct under which 

they arose. The Department is 

concerned that the limitation of ‘‘arising 

out of . . . provision of investment 

advice’’ is too narrow. Like the addition 

of Affiliates, this will help foster a 

culture of compliance throughout the 

organization in recognition of the 

importance of investment advice to 

Retirement Investors. The Department 

requests comment on this change. 

Similar to the amended retrospective 

review provision, the Department is 

proposing to add ineligibility for a 

systematic pattern or practice of failing 

to correct prohibited transactions, report 

those transactions to the IRS on Form 

5330 and pay the resulting excise taxes 

imposed by Code section 4975 in 

connection with non-exempt prohibited 

transactions involving investment 

advice under Code section 4975(e)(3)(B) 

to Section II(a)(2). This proposed 

amendment would ensure that IRAs and 

other Title II plans actually report and 

pay an excise tax that they owe. A single 

missed excise tax would not make the 

Financial Institution ineligible for 10 

years, but Financial Institutions that 

regularly disregard their legal obligation 

to pay excise taxes on prohibited 

transactions would need to find 

alternative relief. 

The Department is also making 

clarifying changes to the timing of the 

ineligibility designation set forth in 

Section III(b). While PTE 2020–02 

provides for different amounts of time 

before ineligibility, and then provides a 

one-year winding down period, the 

Department is proposing to simplify this 

process and create uniformity so that all 

entities would become ineligible six 

months after the conviction date, the 

date of the Department’s written 

determination regarding a foreign 

conviction, or the date of the 

Department’s written ineligibility notice 

regarding other misconduct, as 

applicable. In the Department’s view, 

the one-year wind down created a long 

period in which noncompliance and 

inappropriate conduct could continue. 

This six-month period will take the 

place of the winding down period and 

provide ample time for Financial 

Institutions and Investment 

Professionals to inform Retirement 

Investors of their ineligibility and/or 

find alternative means of complying 

with ERISA. During the six months, the 

Financial Institution and Investment 

Professionals are still fiduciaries that are 

subject to all of the fiduciary 

requirements and prohibited transaction 

rules. Thus, Financial Institutions and 

Investment Professionals must continue 

to comply with the exemption during 

those six months, and any transactions 

that do not meet the terms of the 

exemption will be subject to excise tax 

and ERISA penalties. 

Furthermore, the Department has 

clarified that the ineligibility remains in 

effect until the earliest of: (A) a 

subsequent judgment reversing a 

person’s conviction, (B) 10 years after 

the person became ineligible or is 

released from imprisonment, if later, or 

(C) the Department grants an individual 

exemption permitting reliance on this 

exemption, notwithstanding the 

conviction. 

The Department is proposing changes 

to Section III(c), which provides an 

opportunity to be heard. In a change 

from PTE 2020–02, Financial 

Institutions and Investment 

Professionals that become ineligible due 

to a conviction under Section III(a)(1)(A) 

would not have a separate opportunity 

to be heard by the Department following 

conviction by a U.S. Federal or state 

court of competent jurisdiction. A 

convicted advice provider has been 

provided due process by the U.S. court, 

and the criminal conduct underlying the 

conviction cannot be cured. Financial 

Institutions and Investment 

Professionals are required to act in the 

Best Interest of the Retirement Investor 

and in doing so, the Department expects 

them to act with a high degree of 

integrity and foster a culture of 

compliance. The criminal conduct 

underlying the conviction calls into 

question the advice provider’s ability to 

act in the Retirement Investor’s Best 

Interest, although a convicted Financial 

Institution or Investment Professional 

may be able to use other exemptions or 

apply for an individual exemption. The 

Department is proposing to provide an 

opportunity to be heard when the 

conviction is by a foreign court. Section 

III(c)(1) would allow Financial 

Institutions and Investment 

Professionals to submit a petition 

informing the Department of the 

conviction and seeking a determination 

that continued reliance on the 

exemption would not be contrary to the 

purposes of the exemption. 

Proposed Section III(c)(2) of the 

exemption would allow Financial 

Institutions and Investment 

Professionals that have engaged in 

conduct described in Section III(a)(2) to 

have the opportunity to cure the 

behavior and to be heard in an 

evidentiary hearing by the Department. 

Under this provision, before issuing a 

written ineligibility notice, the 

Department will issue a written warning 

to the Investment Professional or 

Financial Institution, as applicable, 

identifying the specific conduct, and 

provide a six-month period to cure the 

misconduct. At the end of the six-month 

period, if the Department determines 

that the Investment Professional or 

Financial Institution has not taken 

appropriate action to prevent recurrence 

of the disqualifying conduct, it will then 

provide an opportunity to be heard and 

present evidence, in person (including 

by phone or videoconference), or in 

writing, or a combination thereof. The 

evidentiary hearing will be limited to 

one conference unless the Department 

determines in its sole discretion to 

allow additional conferences. Following 

the hearing, the Department’s 

determination whether to issue the 

ineligibility notice will be based solely 

on its discretion. If the Department 

issues a written ineligibility notice, the 

notice will articulate the basis for the 

determination that the Investment 

Professional or Financial Institution 

engaged in conduct described in Section 

III(a)(2). 

For all hearings under Section III(c), 

the Department will consider the 

following when making its 

determination: 

• the gravity of the offense; 


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• the degree to which the underlying 

conduct concerned individual 

misconduct, or, alternately, corporate 

managers or policy; 

• recency of the conduct at issue; 

• any remedial measures the 

Investment Professional or Financial 

Institution has taken upon learning of 

the underlying conduct; and 

• other factors the Department 

determines in its discretion are 

reasonable in light of the nature and 

purposes of the exemption. 

The Department is also proposing to 

add the heading ‘‘Alternative 

exemptions’’ in Section III(d), which 

describes how a Financial Institution 

may continue business after becoming 

ineligible. The Department requests 

comments on the process described 

above, including whether it would be 

helpful to provide greater details about 

the evidentiary hearing and the written 

ineligibility notice, and, if so, what 

details are necessary. 

Recordkeeping 

The Department is considering 

amending the recordkeeping provisions 

in Section IV to allow more parties to 

review the records necessary to 

determine whether the exemption is 

satisfied. The recordkeeping provisions 

of PTE 2020–02 allow only the 

Department and the Department of the 

Treasury to inspect books and records. 

The Department originally proposed 

that records should be available for 

review by additional parties but limited 

that access in the final exemption in 

response to comments. Commenters 

expressed concern that parties might 

‘‘overwhelm’’ Financial Institutions 

with requests for use in litigation. 

Since PTE 2020–02 became effective, 

the Department has worked with 

Financial Institutions seeking to 

comply. The Department is of the view 

both that Financial Institutions could 

easily share their documentation of 

compliance and that Retirement 

Investors would benefit from access to 

that information. As described above, 

the Department is proposing additional 

disclosure requirements, which means 

some of this information would be 

provided to Retirement Investors 

without them needing to request to 

review records. In addition, the 

Department believes that most parties 

will likely not request records, and, 

when they do, the Department believes 

it is important that plans, unions and 

employee organizations, and 

participants and beneficiaries can access 

information they need to determine 

whether the exemption is satisfied and 

to understand how the Financial 

Institution and Investment Professional 

are acting in the Retirement Investor’s 

Best Interest. 

The Department seeks feedback on 

whether to replace Section IV with the 

following: 

(a) The Financial Institution maintains the 

records necessary to enable the persons 

described in subsection (a)(2) below to 

determine whether the conditions of this 

exemption have been met with respect to a 

transaction for a period of six years from the 

date of the transaction in a manner that is 

reasonably accessible for examination. No 

prohibited transaction will be considered to 

have occurred solely on the basis of the 

unavailability of such records if they are lost 

or destroyed due to circumstances beyond 

the control of the Financial Institution before 

the end of the six-year period: 

(1) No party, other than the Financial 

Institution responsible for complying with 

this section IV, will be subject to the civil 

penalty that may be assessed under ERISA 

section 502(i) or the excise tax imposed by 

Code section 4975(a) and (b), if applicable, if 

the records are not maintained or available 

for examination as required by this section 

IV. 

(2) Except as provided in subsection (3) or 

precluded by 12 U.S.C. 484 (regarding 

limitations on visitorial powers for national 

banks), and notwithstanding any provisions 

of ERISA section 504(a)(2) and (b), the 

records are reasonably available at their 

customary location during normal business 

hours for examination by: 

(A) Any authorized employee of the 

Department or the IRS or another state or 

Federal regulator; 

(B) Any fiduciary of a Plan that engaged in 

a transaction pursuant to this exemption; 

(C) Any contributing employer and any 

employee organization whose members are 

covered by a Plan that engaged in a 

transaction pursuant to this exemption; or 

(D) Any participant or beneficiary of a Plan 

or beneficial owner of an IRA acting on 

behalf of the IRA that engaged in a 

transaction pursuant to this exemption. 

(3) None of the persons described in 

subsection (2)(B)–(D) above are authorized to 

examine records regarding a transaction 

involving another Retirement Investor, 

privileged trade secrets or privileged 

commercial or financial information of the 

Financial Institution, or information 

identifying other individuals. 

(4) If the Financial Institution refuses to 

disclose information to a person described in 

subsection (2)(B)–(D) above on the basis that 

the information is exempt from disclosure, 

the Financial Institution must provide a 

written notice advising the requestor of the 

reasons for its refusal and that the 

Department may request that such 

information be produced to the Department 

by the end of the thirtieth (30th) day 

following the Department’s request. 

(b) A Financial Institution’s failure to 

maintain the records necessary to determine 

whether the conditions of this exemption 

have been met will result in the loss of the 

exemption only for the transaction or 

transactions for which records are missing or 

have not been maintained. Such failure does 

not affect the relief for other transactions if 

the Financial Institution maintains required 

records for such transactions in compliance 

with this section IV. 

The Department requests comment on 

both the burden to Financial Institutions 

and the benefits to Retirement Investors 

of being able to access this information 

on request. 

Executive Order 12866 and 13563 

Statement 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health, and safety 

effects; distributive impacts; and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying costs and benefits, reducing 

costs, harmonizing rules, and promoting 

flexibility. 

Under Executive Order 12866, as 

amended by Executive Order 14094, 

‘‘significant’’ regulatory actions are 

subject to review by the Office of 

Management and Budget (OMB). 

Section 3(f) of the Executive Order 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

rule (1) having an annual effect on the 

economy of $200 million or more, or 

adversely and materially affecting a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or state, local, or 

tribal governments or communities; (2) 

creating a serious inconsistency or 

otherwise interfering with an action 

taken or planned by another agency; (3) 

materially altering the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising legal or policy issues for which 

centralized review would meaningfully 

further the President’s priorities, or the 

principles set forth in the Executive 

Order. It has been determined that this 

proposal is a ‘‘significant regulatory 

action’’ within the scope of section 

3(f)(1) of the Executive Order. 

Therefore, the Department has 

provided an assessment of the 

proposal’s potential costs, benefits, and 

transfers, and OMB has reviewed this 

proposed amendment pursuant to the 

Executive Order. 

Paperwork Reduction Act 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department conducts a 

preclearance consultation program to 

allow the general public and Federal 


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20For a more detailed discussion of the marginal 

costs associated with the proposed amendments to 

PTE 2020–02, refer to the Regulatory Impact 

Analysis (RIA) in the Notice of Proposed 

Rulemaking published elsewhere in today’s edition 

of the Federal Register. 

21 Internal DOL calculation based on 2023 labor 

cost data. For a description of the Department’s 

methodology for calculating wage rates, see https:// 

www.dol.gov/sites/dolgov/files/EBSA/laws-andregulations/rules-and-regulations/technicalappendices/labor-cost-inputs-used-in-ebsa-opr-riaand-pra-burden-calculations-june-2019.pdf. 

22 67 FR 17263. 

23The Department estimates approximately 

94.2% of retirement investors receive disclosures 

electronically, which is the sum of the estimated 

share of retirement investors receiving electronic 

disclosures under the 2002 electronic disclosure 

safe harbor (58.2%) and the estimated share of 

retirement investors receiving electronic disclosures 

under the 2020 electronic disclosure safe harbor 

(36.0%). 

24U.S. Post Office, First-Class Mail, (2023), 

https://www.usps.com/ship/first-class-mail.htm. 

25For more information on how the number of 

each type and size of entity is estimated, refer to 

the Affected Entity section of the RIA in the Notice 

of Proposed Rulemaking published elsewhere in 

today’s edition of the Federal Register. 

agencies to comment on proposed and 

continuing collections of information in 

accordance with the Paperwork 

Reduction Act of 1995 (PRA). This helps 

ensure that the public understands the 

Department’s collection instructions, 

respondents can provide the requested 

data in the desired format, reporting 

burden (time and financial resources) is 

minimized, collection instruments are 

clearly understood,and the Department 

can properly assess the impact of 

collection requirements on respondents. 

The Department is soliciting 

comments regarding the information 

collection request (ICR) included in the 

proposed amendments to the ICR. To 

obtain a copy of the ICR, contact the 

PRA addressee below or go to 

RegInfo.gov. The Department has 

submitted a copy of the rule to the 

Office of Management and Budget 

(OMB) in accordance with 44 U.S.C. 

3507(d) for review of its information 

collections. The Department and OMB 

are particularly interested in comments 

that: 

• Evaluate whether the collection of 

information is necessary for the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology 

(e.g., permitting electronically delivered 

responses). 

Commenters may send their views on 

the Departments’ PRA analysis in the 

same way they send comments in 

response to the proposed rule as a 

whole (for example, through the 

www.regulations.gov website), including 

as part of a comment responding to the 

broader proposed rule. Comments are 

due by January 2, 2024 to ensure their 

consideration. 

PRA Addressee: Address requests for 

copies of the ICR to James Butikofer, 

Office of Research and Analysis, U.S. 

Department of Labor, Employee Benefits 

Security Administration, 200 

Constitution Avenue NW, Room N– 

5718, Washington, DC 20210, or 

ebsa.opr@dol.gov. ICRs also are 

available at http://www.RegInfo.gov 

(http://www.reginfo.gov/public/do/ 

PRAMain). 

As discussed above in the preamble, 

the Department proposes to amend PTE 

2020–02 to require the provision of 

additional disclosures to retirement 

investors receiving advice and to 

provide more guidance for financial 

institutions and investment 

professionals complying with the 

Impartial Conduct Standards and 

implementing the policies and 

procedures. This proposal is intended to 

align with other regulators’ rules and 

standards of conduct. 

These requirements are ICRs subject 

to the PRA. Readers should note that the 

burden discussed below conforms to the 

requirements of the PRA and is not the 

incremental burden of the changes.20

1.1 Preliminary Assumptions 

In the analysis discussed below, a 

combination of personnel would 

perform the tasks associated with the 

ICRs at an hourly wage rate of $63.45 for 

clerical personnel, $133.05 for a 

computer programmer, and $159.34 for 

a legal professional, and $219.23 for a 

financial advisor.21

The Department does not have 

information on how many retirement 

investors, including plan beneficiaries 

and participants and IRA owners, 

receive disclosures electronically from 

investment advice fiduciaries. For the 

purposes of this analysis, the 

Department assumes that the percent of 

retirement investors receiving 

disclosures electronically would be 

similar to the percent of plan 

participants receiving disclosures 

electronically under the Department’s 

2020 electronic disclosure rules.22

Accordingly, the Department estimates 

that 94.2 percent of the disclosures sent 

to retirement investors would be sent 

electronically, and the remaining 5.8 

percent would be sent by mail.23 The 

Department requests comment on these 

assumptions. 

The Department assumes any 

documents sent by mail would be sent 

by first class mail, incurring a postage 

cost of $0.66 for each piece of mail.24

Additionally, the Department assumes 

that documents sent by mail would 

incur a material cost of $0.05 for each 

page. 

1.2 Affected Entities 

The Department expects the same 

19,290 entities that are affected by the 

existing PTE 2020–02 would be affected 

by the proposed amendments to the 

PTE. The number of entities by type and 

size are summarized in the table 

below.25

TABLE 1—AFFECTED ENTITIES BY TYPE AND SIZE

Small Large Total 

Broker-Dealer ............................................................................................................................... 395 1,499 1,894 

Retail ............................................................................................................................................ 287 1,034 1,321 

Non-Retail .................................................................................................................................... 108 465 573 

Registered Investment Adviser .................................................................................................... 2,996 12,986 15,982 

SEC .............................................................................................................................................. 220 7,350 7,570 

Retail ............................................................................................................................................ 74 4,570 4,644 

Non-Retail .................................................................................................................................... 146 2,780 2,926 

State ............................................................................................................................................. 2,776 5,636 8,412 

Retail ............................................................................................................................................ 2,166 4,399 6,566 

Non-Retail .................................................................................................................................... 610 1,237 1,847 


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26Federal Insurance Deposit Corporation, 

Statistics at a Glance—as of March 31, 2023, 

https://www.fdic.gov/analysis/quarterly-bankingprofile/statistics-at-a-glance/2023mar/industry.pdf. 27National Credit Union Administration, 

Quarterly Credit Union Data Summary 2023 Q2, 

https://ncua.gov/files/publications/analysis/ 

quarterly-data-summary-2023-Q2.pdf. 28U.S. Government Accountability Office, Private 

Deposit Insurance: Credit Unions Largely Complied 

with Disclosure Rules, But Rules Should be 

Clarified, (March 29, 2017), https://www.gao.gov/ 

products/gao-17-259. 29The total number of credit unions is calculated 

as: 4,686 federally insured credit unions/(100%–2% 

of credit unions that are privately insured) = 4,782 

total credit unions. The number of private credit 

unions is estimated as: 4,782 total credit unions ¥ 

4,686 federally insured credit unions = 96 credit 

unions with private deposit insurance. 30For more details about ‘‘networking 

arrangements,’’ see Employee Benefits Security 

Administration, Regulating Advice Markets 

Definition of the Term ‘‘Fiduciary’’ Conflicts of 

Interest—Retirement Investment Advice Regulatory 

Impact Analysis for Final Rule and Exemptions, 

(April 2016), https://www.dol.gov/sites/dolgov/files/ 

EBSA/laws-and-regulations/rules-and-regulations/ 

completed-rulemaking/1210-AB32-2/ria.pdf. 

Financial institutions that are broker-dealers, 

investment advisers, or insurance companies that 

participate in networking arrangements and provide 

fiduciary investment advice would be included in 

the counts in their respective sections. 

31The burden is estimated as: [(200 robo-advisers 

+ 1,011 pension consultants + 20 investment 

company underwriters) × 30 minutes] ÷ 60 minutes 

= 616 hours. The burden is estimated as: [(200 roboadvisers + 1,011 pension consultants + 20 

investment company underwriters) × 30 minutes] ÷ 

60 minutes × $159.34 = $98,074. 

TABLE 1—AFFECTED ENTITIES BY TYPE AND SIZE—Continued 

Small Large Total 

Insurer .......................................................................................................................................... 151 32 183 

Robo-Adviser ............................................................................................................................... 10 190 200 

Pension Consultant ...................................................................................................................... 930 81 1,011 

Investment Company Underwriter ............................................................................................... 20 0 20 

Total ...................................................................................................................................... 4,502 14,788 19,290 

In addition, the proposed 

amendments may affect banks and 

credit unions selling non-deposit 

investment products. There are 4,672 

federally insured depository institutions 

in the United States, consisting of 4,096 

commercial banks and 576 savings 

institutions.26 Additionally, there are 

4,686 federally insured credit unions.27

Moreover, in 2017, the U.S. Government 

Accountability Office estimated that 

approximately two percent of credit 

unions have private deposit 

insurance.28 Based on this estimate, the 

Department estimates that there are 

approximately 96 credit unions with 

private deposit insurance and 4,782 

credit unions in total.29

The Department understands that 

banks most commonly use ‘‘networking 

arrangements’’ to sell retail non-deposit 

investment products, including equities, 

fixed-income securities, exchangetraded funds, and variable annuities.30

Under such arrangements, bank 

employees are limited to performing 

only clerical or ministerial functions in 

connection with brokerage transactions. 

However, bank employees may forward 

customer funds or securities and may 

describe, in general terms, the types of 

investment vehicles available from the 

bank and broker-dealer under the 

arrangement. Similar restrictions on 

bank employees’ referrals of insurance 

products and state-registered investment 

advisers exist. 

Because of these limitations, the 

Department believes that, in most cases, 

such referrals would not constitute 

fiduciary investment advice within the 

meaning of the proposal. Due to the 

prevalence of banks using networking 

arrangements for transactions related to 

retail non-deposit investment products, 

the Department believes that most banks 

would not be affected by PTE 2020–02 

with respect to such transactions. 

The Department currently estimates 

that no banks or credit unions would be 

impacted by the proposed amendments 

to PTE 2020–02 but requests comments 

on this assumption. The Department is 

requesting comment on how frequently 

these entities use their own employees 

to perform activities that would 

otherwise be covered by the prohibited 

transaction provisions of ERISA and the 

Code. The Department seeks comment 

on the frequency with which bank or 

credit union employees recommend 

bank products to retirement investors 

and how they currently ensure such 

recommendations are prudent to the 

extent required by ERISA. The 

Department invites comments on the 

magnitude of any such costs and solicits 

data that would facilitate their 

quantification in the proposal. 

1.3 Production and Distribution of 

Required Disclosures for Investors 

1.3.1 Disclosure Requirements Under 

the Current PTE 2020–02 

Section II(b) currently requires 

financial institutions to provide certain 

disclosures to retirement investors 

before engaging in a transaction 

pursuant to the exemption. These 

disclosures include: 

• a written acknowledgment that the 

financial institution and its investment 

professionals are fiduciaries; 

• a written description of the services 

to be provided and any material 

conflicts of interest of the investment 

professional and financial institution; 

and 

• documentation of the financial 

institution and its investment 

professional’s conclusions as to whether 

a rollover is in the retirement investor’s 

best interest, before engaging in a 

rollover or offering recommendations on 

post-rollover investments. 

The following estimates reflect the 

ongoing paperwork burdens of the 

affected entities. Broker-dealers, 

registered investment advisers, and 

insurance companies were required to 

prepare these disclosures under the 

existing PTE 2020–02. The estimates 

below reflect paperwork burden these 

entities would incur to modify such 

exemption, but the Department assumes 

that these entities have already incurred 

costs related to drafting such 

disclosures. 

The Department estimates that 

preparing a disclosure indicating 

fiduciary status would take a legal 

professional at affected robo-advisors, 

pension consultants, and investment 

company underwriters 30 minutes, 

resulting in an hour burden of 616 hours 

and a cost burden of $98,074.31

The proposed amendment makes 

minor edits to the written 

acknowledgment that the financial 

institution and its investment 

professional are fiduciaries. The 

Department does not have data on how 

many financial institutions would need 

to modify their disclosures in response 

to this amendment; however, the 

Department expects that the disclosures 

required under the existing form of PTE 

2020–02 likely satisfy this requirement 

for most financial institutions covered 

under the existing exemption. For the 

purposes of this analysis, the 

Department assumes that 10 percent of 

financial entities under the existing 

exemption would need to update their 

disclosures and that it would take a 

legal professional at a financial 


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32The number of financial entities needing to 

update their written acknowledgement is estimated 

as: (1,894 broker-dealers × 10%) + (7,570 SECregistered investment advisers × 10%) + (8,412 

state-registered investment advisers × 10%) + (183 

insurers × 10%) = 1,806 financial institutions 

updating existing disclosures. [(1,806 financial 

institutions × 10 minutes) ÷ 60 minutes] = 301 

hours. The equivalent cost is estimated as: 301 

hours × $159.34 = $47,961. 

33The burden is estimated as: [(930 small pension 

consultants + 10 small robo-adviser + 20 small 

investment company underwriters) × 1 hour] + [(81 

large pension consultants + 190 large robo-advisers) 

× 5 hours] = 2,315 hours. The equivalent cost is 

estimated as: {[(930 small pension consultants + 10 

small robo-adviser + 20 small investment company 

underwriters) × 1 hour] + [(81 large pension 

consultants + 190 large robo-advisers) × 5 hours]} 

× $159.34 = $368,872. 

34The number of financial entities needing to 

update their written description of services is 

estimated as: 1,894 broker-dealers + 15,982 

registered investment advisers + 183 insurers = 

18,059 financial institutions updating existing 

disclosures. The burden is estimated as follows: 

[(18,059 financial institutions × 30 minutes) ÷ 60 

minutes] = 9,030 hours. The equivalent cost is 

estimated as: [(18,059 financial institutions × 30 

minutes) ÷ 60 minutes] × $159.34 = $1,438,761. 

35According to Cerulli, in 2022, there were 

4,485,059 DC plan-to-IRA rollovers and 707,104 DC 

plan-to-DC plan rollovers. (See Cerulli Associates, 

U.S. Retirement End-Investor 2023: Personalizing 

the 401(k) Investor Experience, Exhibit 6.02. The 

Cerulli Report.) These account estimates may 

include health savings accounts, Archer medical 

savings accounts, or Coverdell education savings 

accounts. 

36 Internal Revenue Service, SOI Tax Stats— 

Accumulation and Distribution of Individual 

Retirement Arrangement (IRA), Table 1: Taxpayers 

with Individual Retirement Arrangement (IRA) 

Plans, By Type of Plan, Tax Year 2020 (2023). 

37According to Cerulli, 49 percent of rollovers 

were mediated by an adviser, while 37 percent were 

self-directed. The remaining 14 percent were planto-plan rollovers. (See Cerulli Associates, U.S. 

Retirement-End Investor 2023: Personalizing the 

401(k) Investor Experience Fostering 

Comprehensive Relationships, Exhibit 6.04. The 

Cerulli Report.) 

38The number of affected rollovers is estimated 

as: (6,367,005 × 49%) = 3,119,832. 

institution, on average, 10 minutes to 

update existing disclosures. Roboadvisers, pension consultants, and 

investment company underwrites, who 

are not covered under the existing 

exemption would need to draft the 

acknowledgement. Updating the 

acknowledgement is estimated to result 

in an hour burden of 301 hours with an 

equivalent cost of $47,961.32

TABLE 2—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE FIDUCIARY ACKNOWLEDGEMENT

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Legal ................................................................................................................ 917 $146,035 0 $0 

Total .......................................................................................................... 917 146,035 0 0 

The Department estimates that 

preparing a disclosure identifying 

services provided and conflicts of 

interest would take a legal professional 

at affected robo-advisers, pension 

consultants, and investment company 

underwriters one hour at small financial 

institutions and five hours at large 

financial institutions, resulting in an 

hour burden of 2,315 hours and an 

equivalent cost burden of $368,872.33

The proposed amendments would 

also expand on the existing requirement 

for a written description of the services 

provided to also require a statement on 

whether the retirement investor would 

pay for such services, directly or 

indirectly, including through third-party 

payments. The Department assumes it 

would take a legal professional at a 

financial institution under the existing 

exemption 30 minutes to update 

existing disclosures to include this 

information. This results in an hour 

burden of 9,030 hours and an equivalent 

cost burden of $1,438,761 in the first 

year.34

TABLE 3—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE WRITTEN DESCRIPTION OF SERVICES PROVIDED

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Legal ................................................................................................................ 11,345 $1,807,633 0 $0 

Total .......................................................................................................... 11,345 1,807,633 0 0 

According to Cerulli Associates, in 

2022, almost 4.5 million defined 

contribution (DC) plan accounts with 

$779 billion in assets were rolled over 

to an IRA. Additionally, 0.7 million DC 

plan accounts with $66 billion in assets 

were rolled over to other employersponsored plans.35 It is challenging to 

obtain reliable data on other types of 

rollovers such as IRA-to-IRA and 

defined benefit (DB) plan-to-IRA. The 

Department uses Internal Revenue 

Service (IRS) data from 2020 on overall 

rollovers into IRAs, which is 5.7 million 

taxpayers and $618 billion.36 Adding in 

the figures for plan-to-plan rollovers, the 

Department estimates the total number 

of rollovers at 6.4 million accounts with 

$684 billion in assets. The Department 

requests comment on this estimate. 

Only rollovers overseen by an ERISA 

fiduciary would be affected by the 

proposed amendments to PTE 2020–02. 

The Department does not have 

compelling data on the percentage of 

rollovers that are overseen by an ERISA 

fiduciary. In 2022, 49 percent of DC 

plan-to-IRA rollovers, accounting for 63 

percent of DC plan rollover assets, were 

intermediated by an adviser.37 For 

purposes of this analysis, the 

Department assumes that advisers 

intermediating rollovers are ERISA 

fiduciaries, which means the estimate is 

an upper bound. The Department 

applies the estimate made for DC planto-IRA rollovers to all types of rollovers. 

Accordingly, the Department estimates 

that 3.1 million rollovers and $431 

billion in rollover assets would be 

affected by the proposed amendments to 

PTE 2020–02.38 The Department 

requests comments on these 

assumptions. 


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39 Deloitte, Regulation Best Interest: How Wealth 

Management Firms are Implementing the Rule 

Package, (March 6, 2020). This report was released 

before Regulation Best Interest was effective, so 

more broker-dealers may now document rollover 

recommendations. As such, this may represent an 

overestimate of the cost incurred to comply with 

this requirement. 

40The burden is estimated as follows: (3,119,833 

rollovers × 48% × 30 minutes) + (3,119,833 

rollovers × 52% × 5 minutes) = 883,953 hours. A 

labor rate of $219.23 is used for a personal financial 

adviser. The labor rate is applied in the following 

calculation: {[(3,119,833 rollovers × 48% × 30 

minutes) + (3,119,833 rollovers × 52% × 5 minutes)] 

÷ 60 minutes} × $219.23 = $193,788,961. 41The burden is estimated as follows: [(19,290 

financial institutions × 30 minutes) ÷ 60 minutes] 

= 10,352 hours. A labor rate of $159.34 is used for 

a lawyer. The labor rate is applied in the following 

calculation: [(19,290 financial institutions × 30 

minutes) ÷ 60 minutes] × $159.34 = $1,649,488. 

42The burden is estimated as follows: [(1,894 

broker-dealers + 15,982 registered investment 

advisers) × 30 minutes] + [(183 insurers + 200 roboadvisers + 1,011 pension consultants, and 20 

investment company underwriters) × 1 hour] = 

10,352 hours. A labor rate of $159.34 is used for a 

legal professional. The labor rate is applied in the 

following calculation: {[(1,894 broker-dealers + 

15,982 registered investment advisers) × 30 

minutes] + [(183 insurers + 200 robo-advisers + 

1,011 pension consultants, and 20 investment 

company underwriters) × 1 hour]} × $159.34 = 

$1,649,488. 

The current PTE required rollover 

documentation from plans to IRAs. As 

a best practice, the SEC already 

encourages firms to record the basis for 

significant investment decisions, such 

as rollovers, although doing so is not 

required. In addition, some firms may 

voluntarily document significant 

investment decisions to demonstrate 

compliance with applicable law, even if 

not required. A report commissioned by 

this commenter found that slightly more 

than half (52 percent) of respondents 

will ‘‘require best interest rationale 

documentation for rollover 

recommendations.’’ 39 The Department 

estimates that documenting each 

rollover recommendation will require 

30 minutes for a personal financial 

advisor whose firms currently do not 

require rollover documentations and 

five minutes for financial advisors 

whose firms already require them to do 

so. The Department estimates that this 

will result in an hour burden of 883,953 

hours with an equivalent cost of 

approximately $193.8 million.40 The 

Department requests comment on the 

time it would take to document the 

rollover recommendation. 

TABLE 4—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE ROLLOVER DOCUMENTATION

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Financial Adviser ............................................................................................. 883,953 $193,788,961 883,953 $193,788,961 

Total .......................................................................................................... 883,953 193,788,961 883,953 193,788,961 

1.3.2. New Disclosure Requirements 

Under the Proposed Amended PTE 

2020–02 

As amended, PTE 2020–02 would 

require financial institutions to provide 

investors with the following additional 

disclosures: 

(1) a written statement of the best interest 

standard of care owed; and 

(2) a written statement that the retirement 

investor has the right to obtain specific 

information regarding costs, fees, and 

compensation. 

Under the Investment Advisers Act of 

1940 and SEC Regulation Best Interest, 

most SEC-registered investment advisers 

and broker-dealers with retail investors 

already provide disclosures that the 

Department expects would satisfy these 

requirements. 

The proposed amendments would 

add a requirement for financial 

institutions to provide a written 

statement of the Best Interest standard 

of care owed. Under the Investment 

Advisers Act, the SEC’s Regulation Best 

Interest, and Form CRS, most SECregistered investment advisers and 

broker-dealers with retail investors are 

already required to provide disclosures 

that the Department expects would 

satisfy these requirements. 

The Department expects that the 

written statement of the Best Interest 

standard of care owed would not take a 

significant amount of time to prepare 

and would be uniform across clients. 

The Department assumes it would take 

a financial institution 30 minutes to 

prepare the statement, resulting in an 

hour burden of 10,352 hours and an 

equivalent cost burden of $1,649,488 in 

the first year.41

TABLE 5—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE BEST INTEREST STANDARD DISCLOSURE

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Legal ................................................................................................................ 10,352 $1,649,488 0 $0 

Total .......................................................................................................... 10,352 1,649,488 0 0 

For the added requirement of a 

written statement informing the investor 

of their right to obtain a written 

description of the financial institution’s 

policies and procedures and 

information regarding costs, fees, and 

compensation, the Department expects 

that many financial institutions’ 

disclosures, as required by the existing 

PTE 2020–02, already substantially 

comply with this regulation or would 

require modest adjustments to do so. 

The Department estimates that, on 

average, it would take a legal 

professional at broker-dealers and 

registered investment advisers, on 

average, 30 minutes to modify existing 

statements and that it would take 

insurers, robo-advisers, pension 

consultants, and investment company 

underwriters, on average, one hour to 

prepare the statement. This results in an 

hour burden of 10,352 hours and a cost 

burden of $1,649,488 in the first year.42


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43The burden is estimated as follows: [(19,290 

financial institutions × 10 disclosures × 5 minutes) 

÷ 60 minutes] = 16,075 hours. A labor rate of $63.45 

is used for a clerical worker. The labor rate is 

applied in the following calculation: [(16,075 

financial institutions × 10 disclosures × 5 minutes) 

÷ 60 minutes] × $63.45 = $1,019,959. 

44 ((19,290 financial institutions × 10 disclosures 

× 2 pages × $0.05) + (19,290 financial institutions 

× 10 disclosures × $0.66)) × 5.8% = $8,503. 

45According to Cerulli, in 2022, there were 

707,104 DC plan-to-DC plan rollovers. (See Cerulli 

Associates, U.S. Retirement End-Investor 2023: 

Personalizing the 401(k) Investor Experience, 

Exhibit 6.02. The Cerulli Report.) The Department 

also uses Internal Revenue Service (IRS) data from 

2020 on overall rollovers into IRAs, which is 

5,659,901 taxpayers. (See Internal Revenue Service, 

SOI Tax Stats—Accumulation and Distribution of 

Individual Retirement Arrangement (IRA), Table 1: 

Taxpayers with Individual Retirement Arrangement 

(IRA) Plans, By Type of Plan, Tax Year 2020. 

(2023).) The Department estimates the number of 

affected plans and IRAs to be equal to 50 percent 

of rollovers from retirement plans to IRAs. The total 

number of retirement investors that have 

relationships with financial institutions and are 

likely to engage in transacted covered under this 

PTE is estimated as: (707,104 DC plan-to-DC plan 

rollovers + 5,659,901 taxpayer with IRA rollovers) 

× 50 percent = 3,183,503. 

46This is estimated as: 3,183,503 rollovers × 5.8% 

= 184,643 disclosures. 

47This burden is estimated as: [(184,643 

disclosures × 5 minutes) ÷ 60 minutes] = 15,387 

hours. [(184,643 disclosures × 5 minutes) ÷ 60 

minutes] × $63.45 = $976,301. 

The Department does not have data 

on how often investors would request a 

written description of the financial 

institutions’ policies and procedures 

and information regarding costs, fees, 

and compensation. The Department 

assumes that, on average, each financial 

institution would receive 10 such 

requests annually and that most 

financial institutions already have such 

information available. The Department 

requests comment on these 

assumptions. The Department estimates 

it would take a clerical worker five 

minutes to prepare and send the 

disclosure, regardless of whether it is 

sent electronically or by mail. This 

results in an annual hour burden of 

16,075 with an equivalent cost of 

$1,019,959.43

TABLE 6—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE WRITTEN DESCRIPTION STATEMENT OF THE

RIGHT TO OBTAIN A WRITTEN DESCRIPTION OF THE FINANCIAL INSTITUTION’S POLICIES AND PROCEDURES AND PROVISION OF REQUESTED POLICIES AND PROCEDURES

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Legal ................................................................................................................ 10,352 $1,649,488 0 $0 

Clerical ............................................................................................................. 16,075 1,019,959 16,075 1,019,959 

Total .......................................................................................................... 26,427 2,669,447 16,075 1,019,959 

As discussed above, the Department 

assumes that 5.8 percent, or 11,188, of 

these disclosures would not be sent 

electronically. Financial institutions 

would incur $0.66 for postage and $0.10 

for the paper and printing costs of two 

pages for each of the disclosures that 

would not be sent electronically, which 

the Department estimates to cost 

$8,503.44

TABLE 7—MATERIAL AND POSTAGE COST ASSOCIATED WITH THE WRITTEN DESCRIPTION STATEMENT OF THE RIGHT TO

OBTAIN A WRITTEN DESCRIPTION OF THE FINANCIAL INSTITUTION’S POLICIES AND PROCEDURES AND PROVISION OF

REQUESTED POLICIES AND PROCEDURES

Year 1 Subsequent years 

Activity Pages Cost Pages Cost 

Material Cost .................................................................................................... 2 $8,503 2 $8,503 

Total .......................................................................................................... 2 8,503 2 8,503 

1.3.3. Provision of Disclosures 

Similar to the 2020 analysis, the 

Department assumes most required 

disclosures will be electronically 

delivered to plan fiduciaries. As 

discussed above, the Department 

assumes that approximately 5.8 percent 

of participants who roll over their plan 

assets to IRAs would not receive 

required disclosures electronically. The 

Department estimates that 

approximately 3.2 million retirement 

investors 45 have relationships with 

financial institutions and are likely to 

engage in transactions covered under 

this PTE. Of these 3.2 million retirement 

investors, it is estimated that 5.8 

percent, or 184,643 retirement investors, 

would receive paper disclosures.46 The 

Department estimates that preparing 

and sending each disclosure would take 

a clerical worker, on average, five 

minutes, resulting in an hour burden of 

15,387 hours with an equivalent cost of 

$976,301.47


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48The material and postage cost is estimated as: 

(184,643 disclosures × 4 pages × $0.05) + (184,643 

disclosures × $0.66 postage) = $158,793. 49 Department of Labor, Form PR, https://

www.dol.gov/agencies/ebsa/employers-andadvisers/plan-administration-and-compliance/ 

reporting-and-filing/form-pr. 

50The burden is estimated as follows: 382 PEPs 

× 2 hours = 764 hours. A labor rate of $159.34 is 

used for a lawyer. The labor rate is applied in the 

following calculation: 382 PEPs × 2 hours × $159.34 

= $121,736. 

51Based on 2021 EFAST filings as of August 22, 

2023, the Department estimates that there were 955 

employers in 382 PEPs. The Department does not 

have data on the number of employers since 

October 2022. To estimate the number of 

employees, the Department applies the ratio of 

employers to PEPs in October 2021 (955/382 ∼2.5) 

to the updated number of PEPs. Accordingly, the 

Department estimates that there are 955 employers 

in PEPs (382 × 2.5 = 955). The inaugural filing 

deadline for Form 5500 filings for PEPs with plan 

years beginning after January 1, 2021 was July 31, 

2022. The Department based its estimates on those 

filings it had received by August 22, 2023. 

However, since this is the first year PEPs could file, 

the Department anticipates that this understates the 

true number of PEPs affected by this proposed rule. 

52The burden is estimated as follows: [(955 

employers × 1 minute) ÷ 60 minutes] = 16 hours. 

A labor rate of $63.45 is used for a clerical worker. 

The labor rate is applied in the following 

calculation: [(955 employers × 1 minute) ÷ 60 

minutes] × $63.45 = $1,010. 

TABLE 8—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED PREPARING AND SENDING DISCLOSURES

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Clerical ............................................................................................................. 15,387 $976,301 15,387 $976,301 

Total .......................................................................................................... 15,387 976,301 15,387 976,301 

The Department assumes that the 

disclosures would require four pages in 

total, resulting in a material and postage 

cost of $158,793.48

TABLE 9—MATERIAL AND POSTAGE COST ASSOCIATED WITH SENDING DISCLOSURES

Year 1 Subsequent years 

Activity Pages Cost Pages Cost 

Material Cost .................................................................................................... 4 $158,793 4 $158,793 

Total .......................................................................................................... 4 158,793 4 158,793 

1.4 Costs Associated With Disclosures 

for PEPs 

Financial institutions providing 

investment advice for PEPs must 

provide to each participating employer 

an additional disclosure detailing any 

amounts the financial institution pays to 

or receives from the PPP or its affiliates 

in addition to any conflicts of interest 

that arise in connection with the 

investment advice it provides to a PEP. 

According to filings submitted to the 

Department, the Department estimates 

that there are 382 PEPs.49

The Department does not have data 

on what percent of PEPs would be 

affected by the exemption. The 

Department assumes that on average, 

one financial institution would need to 

prepare one disclosure for each PEP. 

The Department estimates that, on 

average, it would take legal staff for each 

entity two hours to draft the disclosure, 

resulting in an hour burden of 764 hours 

with an equivalent cost of $121,736 in 

the first year.50 The Department requests 

comment on this assumption and how 

frequently PPPs would provide 

investment advice to a PEP within the 

framework of the exemption. According 

to filings submitted to the Department, 

the Department estimates that there are 

955 employers in PEPs.51 The 

Department assumes that all of these 

disclosures will be sent electronically. 

Distributing the disclosures is estimated 

to take clerical personnel one minute 

per disclosure. This results in an hour 

burden of 16 hours, and assuming an 

hourly wage rate for clerical personnel 

of $63.45, the estimated equivalent cost 

burden is $1,010.52

TABLE 10—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH PREPARING AND SENDING DISCLOSURES

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Legal ................................................................................................................ 764 $121,736 0 $0 

Clerical ............................................................................................................. 16 1,010 16 1,010 

Total .......................................................................................................... 780 122,746 16 1,010 

1.5 Costs Associated With Annual 

Report of Retrospective Review 

The proposed amendment would 

require financial institutions to conduct 

a retrospective review at least annually. 

The review would be required to be 

reasonably designed to detect and 

prevent violations of, and achieve 

compliance with, (1) the conditions of 

this exemption, (2) the Impartial 

Conduct Standards, and (3) the policies 

and procedures governing compliance 

with the exemption. The Department is 

clarifying that the Financial Institution 

must update the policies and 

procedures as business, regulatory, and 

legislative changes and events dictate, to 


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53Rule 3110. Supervision, FINRA Manual, 

https://www.finra.org/rules-guidance/rulebooks/ 

finra-rules/3110. 

54Rule 3120. Supervisory Control System, FINRA 

Manual, https://www.finra.org/rules-guidance/ 

rulebooks/finra-rules/3120. 

55Rule 3130. Annual Certification of Compliance 

and Supervisory Processes, FINRA Manual, https:// 

www.finra.org/rules-guidance/rulebooks/finrarules/3130. 

56NAIC Model Regulation, Section 6.C.(2)(i). (The 

same requirement is found in the NAIC Suitability 

in Annuity Transactions Model Regulation (2010), 

Section 6.F.(1)(f).) 

57 2018 Investment Management Compliance 

Testing Survey, Investment Adviser Association 

(Jun. 14, 2018), https://higherlogicdownload.

s3.amazonaws.com/INVESTMENTADVISER/ 

aa03843e-7981-46b2-aa49-c572f2ddb7e8/Uploaded

Images/publications/2018-InvestmentManagement_Compliance-Testing-Survey-ResultsWebcast_pptx.pdf. 

58The burden is estimated as: [(395 small brokerdealers + (2,996 small registered-investment 

advisers × 8%) + 151 small insurers + 10 small 

robo-advisers + 930 small pension consultants + 20 

small investment company underwriters) × 10% × 

5 hours] + [(1,499 large broker-dealers + (12,986 

large registered-investment advisers × 8%) + 32 

large insurers + 190 large robo-advisers + 81 large 

pension consultants) × 10% × 10 hours] = 3,715 

hours. The equivalent cost is estimated as: {[(395 

small broker-dealers + (2,996 small registeredinvestment advisers × 8%) + 151 small insurers + 

10 small robo-advisers + 930 small pension 

consultants + 20 small investment company 

underwriters) × 10% × 5 hours] + [(1,499 large 

broker-dealers + (12,986 large registered-investment 

advisers × 8%) + 32 large insurers + 190 large roboadvisers + 81 large pension consultants) × 10% × 

10 hours]} × $159.34 = $591,948. 

59The burden is estimated as: [(395 small brokerdealers + (2,996 small registered-investment 

advisers × 92%) + 151 small insurers + 10 small 

robo-advisers + 930 small pension consultants + 20 

small investment company underwriters) × 90% × 

5 hours] + [(1,499 large broker-dealers + (12,986 

large registered-investment advisers × 92%) + 32 

large insurers + 190 large robo-advisers + 81 large 

pension consultants) × 90% × 10 hours] = 33,335 

hours. 

The equivalent cost is estimated as: {[(395 small 

broker-dealers + (2,996 small registered-investment 

advisers × 92%) + 151 small insurers + 10 small 

robo-advisers + 930 small pension consultants + 20 

small investment company underwriters) × 90% × 

5 hours] + [(1,499 large broker-dealers + (12,986 

large registered-investment advisers × 92%) + 32 

large insurers + 190 large robo-advisers + 81 large 

pension consultants) × 90% × 10 hours]} × $159.34 

= $5,311,672. 

60The burden is estimated as follows: [(19,290 × 

30 minutes) ÷ 60 minutes] = 9,645 hours. A labor 

rate of $159.34 is used for a legal professional. The 

labor rate is applied in the following calculation: 

[(19,290 × 30 minutes) ÷ 60 minutes] × $159.34 = 

$1,536,834. 

61The burden is estimated as: [(395 small brokerdealers + (2,996 small registered-investment 

advisers) + 151 small insurers + 10 small roboadvisers + 930 small pension consultants + 20 small 

investment company underwriters) × 2 hours] + 

[(1,499 large broker-dealers + (12,986 large 

registered-investment advisers) + 32 large insurers 

+ 190 large robo-advisers + 81 large pension 

consultants) × 4 hours] = 68,156 hours. The 

equivalent cost is estimated as: {[(395 small brokerdealers + (2,996 small registered-investment 

advisers) + 151 small insurers + 10 small roboadvisers + 930 small pension consultants + 20 small 

investment company underwriters) × 2 hours] + 

[(1,499 large broker-dealers + (12,986 large 

registered-investment advisers) + 32 large insurers 

+ 190 large robo-advisers + 81 large pension 

consultants) × 4 hours]} × $190.63 = $12,992,578. 

ensure they remain prudently designed, 

effective, and compliant with the 

exemption. This report would need to 

be certified by a Senior Executive. 

Many of the entities affected by PTE 

2020–02 likely already have 

retrospective review requirements. 

Broker-dealers are subject to 

retrospective review requirements under 

FINRA Rule 3110,53 FINRA Rule 3120,54

and FINRA Rule 3130; 55 SEC-registered 

investment advisers are already subject 

to retrospective review requirements 

under SEC Rule 206(4)–7; and insurance 

companies in many states are already 

subject to state insurance law based on 

the NAIC’s Model Regulation.56

Accordingly, in this analysis, the 

Department assumes that these entities 

will incur minimal costs to meet this 

requirement. 

In 2018, the Investment Adviser 

Association estimated that 92 percent of 

SEC-registered investment advisers 

voluntarily provide an annual 

compliance program review report to 

senior management.57 The Department 

assumes that state-registered investment 

advisers exhibit similar retrospective 

review patterns as SEC-registered 

investment advisers. Accordingly, the 

Department estimates that eight percent, 

or 1,279 investment advisers advising 

retirement plans will incur costs 

associated with producing a 

retrospective review report. 

The Department assumes that only ten 

percent of financial institutions will 

incur the total costs of producing the 

retrospective review report. This is 

estimated to take a legal professional 

five hours for small firms and 10 hours 

for large firms. This results in an annual 

hour burden of 3,715 hours and an 

equivalent cost burden of $591,948.58

Financial Institutions that already 

produce retrospective review reports 

voluntarily or in accordance with other 

regulators’ rules likely will spend 

additional time to fully comply with 

this exemption condition such as 

revising their current retrospective 

review reports. This is estimated to take 

a financial professional one hour for 

small firms and two hours for large 

firms. This results in an annual hour 

burden of 33,335 hours and an 

equivalent cost burden of $5,311,672.59

The proposed amendments would 

add a requirement to review policies 

and procedures at least annually and to 

update them as needed to ensure they 

remain prudently designed, effective, 

and current. This includes a 

requirement to update and modify the 

policies and procedures, as appropriate, 

after considering the findings in the 

retrospective review report. For entities 

currently covered by PTE 2020–02, the 

Department estimates that it would take 

a legal professional an additional 30 

minutes for all entities covered under 

the existing and amended exemption. 

The Department estimates this would 

result an annual hour burden of 9,645 

with an equivalent cost of $1,536,834.60

In addition to conducting the audit 

and producing a report, financial 

institutions also will need to review the 

report and certify the exemption. This is 

estimated to take the certifying officer 

two hours for small firms and four hours 

for large firms. This results in an hour 

burden of 68,156 and an equivalent cost 

burden of $12,992,578.61

TABLE 11—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH THE RETROSPECTIVE REVIEW

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Legal ................................................................................................................ 46,695 $7,440,454 46,695 $7,440,454 

Senior Executive Staff ..................................................................................... 68,156 12,992,578 68,156 12,992,578 

Total .......................................................................................................... 114,851 20,433,032 114,851 20,433,032 


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62The burden is estimated as follows: [(930 small 

pension consultants + 10 small robo-adviser + 20 

small investment company underwriters) × 5 hours] 

+ [(81 large pension consultants + 190 large roboadvisers) × 10 hours] = 7,510 hours. A labor rate of 

$159.34 is used for a legal professional. The labor 

rate is applied in the following calculation: {[(930 

small pension consultants + 10 small robo-adviser 

+ 20 small investment company underwriters) × 5 

hours]} × $159.34 = $1,196,643. 

63The burden is estimated as follows: [(165 

policies and procedures × 15 minutes) ÷ 60 

minutes] = 41 hours. A labor rate of $63.45 is used 

for a clerical worker. The labor rate is applied in 

the following calculation: [(165 policies and 

procedures × 15 minutes) ÷ 60 minutes] × $63.45 

= $2,617. 

64The burden is estimated as follows: [(50 

policies and procedures × 15 minutes) ÷ 60 

minutes] = 13 hours. A labor rate of $63.45 is used 

for a clerical worker. The labor rate is applied in 

the following calculation: [(50 policies and 

procedures × 15 minutes) ÷ 60 minutes] × $63.45 

= $793. 

65 5 U.S.C. 601 et seq. 

66 5 U.S.C. 601(2), 603(a); see 5 U.S.C. 551. 

1.6 Costs Associated With Written 

Policies and Procedures 

Under the original exemption, 

financial institutions were already 

required to maintain their policies and 

procedures. Robo-advisers, pension 

consultants, and investment company 

underwriters, who are not covered 

under the existing exemption may need 

to develop policies and procedures. The 

Department estimates that initially 

establishing, maintaining, and enforcing 

written policies and procedures 

prudently designed to ensure 

compliance with the Impartial Conduct 

Standards will take a legal professional 

five hours for small entities and 10 

hours for large entities. The Department 

estimates the requirement would have 

an hour burden of 7,510 hours with an 

equivalent cost of $1,196,643 in the first 

year.62

TABLE 12—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH DEVELOPING POLICIES AND PROCEDURES

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Clerical ............................................................................................................. 7,510 $1,196,463 0 $0 

Total .......................................................................................................... 7,510 1,196,643 0 0 

The proposed amendments would 

require financial institutions to provide 

their complete policies and procedures 

to the Department upon request. Based 

on the number of cases in the past and 

current open cases that would merit 

such a request, the Department 

estimates that the Department would 

request 165 policies and procedures in 

the first year and 50 policies and 

procedures in subsequent years. The 

Department estimates that it will take a 

clerical worker 15 minutes to prepare 

and send their complete policies and 

procedures to the Department resulting 

in an hourly burden of approximately 

41 hours in the first year. Assuming an 

hourly wage rate for clerical personnel 

of $63.45, the estimated cost burden in 

the first year is $2,617.63 In subsequent 

years, the Department estimates that the 

requirement would result in an hour 

burden of approximately 13 hours with 

an equivalent cost of $793.64 The 

Department assumes financial 

institutions would send the documents 

electronically and thus would not incur 

costs for postage or materials. 

TABLE 13—HOUR BURDEN AND EQUIVALENT COST ASSOCIATED WITH PROVIDING POLICIES AND PROCEDURES TO THE

DEPARTMENT

Year 1 Subsequent years 

Activity Burden hours Equivalent 

burden cost Burden hours Equivalent burden cost 

Clerical ............................................................................................................. 41 $2,617 13 $793 

Total .......................................................................................................... 41 2,617 13 793 

1.7 Overall Summary 

The paperwork burden estimates are 

summarized as follows: 

Type of Review: Revision of an 

existing collection. 

Agency: Employee Benefits Security 

Administration, Department of Labor. 

Title: Fiduciary Proposed Transaction 

Exemption. 

OMB Control Number: 1210–0163. 

Affected Public: Business or other forprofit institution. 

Estimated Number of Respondents: 

19,290. 

Estimated Number of Annual 

Responses: 6,504,119. 

Frequency of Response: Initially, 

Annually, and when engaging in 

exempted transaction. 

Estimated Total Annual Burden 

Hours: 1,044,050. 

Estimated Total Annual Burden Cost: 

$167,296. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(RFA) 65 imposes certain requirements 

on rules subject to the notice and 

comment requirements of section 553(b) 

of the Administrative Procedure Act or 

any other law.66 Under section 603 of 

the RFA, agencies must submit an initial 

regulatory flexibility analysis (IRFA) of 

a proposal that is likely to have a 

significant economic impact on a 

substantial number of small entities, 

such as small businesses, organizations, 

and governmental jurisdictions. This 

proposed amended exemption, along 

with related amended exemptions and a 

proposed rule amendment published 

elsewhere in this issue of the Federal 

Register, is part of a rulemaking 

regarding the definition of fiduciary 

investment advice, which the 

Department has determined likely will 

have a significant economic impact on 

a substantial number of small entities. 

The impact of this proposed amendment 

on small entities is included in the IRFA 


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67Public Law 104–4, 109 Stat. 48 (Mar. 22, 1995). 

68Reorganization Plan No. 4 of 1978 (5 U.S.C. 

App. 1 (2018)) generally transferred the authority of 

the Secretary of the Treasury to grant administrative 

exemptions under Code section 4975 to the 

Secretary of Labor. 

for the entire project, which can be 

found in the related notice of proposed 

rulemaking found elsewhere in this 

edition of the Federal Register. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 67 requires each 

Federal agency to prepare a written 

statement assessing the effects of any 

Federal mandate in a proposed or final 

rule that may result in an expenditure 

of $100 million or more (adjusted 

annually for inflation with the base year 

1995) in any 1 year by state, local, and 

tribal governments, in the aggregate, or 

by the private sector. For purposes of 

the Unfunded Mandates Reform Act, as 

well as Executive Order 12875, this 

proposed amended exemption does not 

include any Federal mandate that will 

result in such expenditures. 

Federalism Statement 

Executive Order 13132 outlines 

fundamental principles of federalism. It 

also requires Federal agencies to adhere 

to specific criteria in formulating and 

implementing policies that have 

‘‘substantial direct effects’’ on the states, 

the relationship between the national 

government and states, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

these federalism implications must 

consult with State and local officials, 

and describe the extent of their 

consultation and the nature of the 

concerns of State and local officials in 

the preamble to the final regulation. 

Notwithstanding this, Section 514 of 

ERISA provides, with certain exceptions 

specifically enumerated, that the 

provisions of Titles I and IV of ERISA 

supersede any and all laws of the States 

as they relate to any employee benefit 

plan covered under ERISA. 

The Department does not intend this 

exemption to change the scope or effect 

of ERISA section 514, including the 

savings clause in ERISA section 

514(b)(2)(A) for State regulation of 

securities, banking, or insurance laws. 

Ultimately, the Department does not 

believe this proposed class exemption 

has federalism implications because it 

has no substantial direct effect on the 

States, on the relationship between the 

National government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. 

General Information 

The attention of interested persons is 

directed to the following: (1) The fact 

that a transaction is the subject of an 

exemption under ERISA section 408(a) 

and Code section 4975(c)(2) does not 

relieve a fiduciary, or other party in 

interest or disqualified person with 

respect to a Plan, from certain other 

provisions of ERISA and the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of ERISA 

section 404 which require, among other 

things, that a fiduciary act prudently 

and discharge his or her duties 

respecting the Plan solely in the 

interests of the participants and 

beneficiaries of the Plan. Additionally, 

the fact that a transaction is the subject 

of an exemption does not affect the 

requirement of Code section 401(a) that 

the Plan must operate for the exclusive 

benefit of the employees of the 

employer maintaining the Plan and their 

beneficiaries; (2) Before the proposed 

exemption may be granted under ERISA 

section 408(a) and Code section 

4975(c)(2), the Department must find 

that it is administratively feasible, in the 

interests of Plans and their participants 

and beneficiaries and IRA owners, and 

protective of the rights of participants 

and beneficiaries of the Plan and IRA 

owners; (3) If granted, the proposed 

exemption is applicable to a particular 

transaction only if the transaction 

satisfies the conditions specified in the 

exemption; and (4) The proposed 

exemption, if granted, is supplemental 

to, and not in derogation of, any other 

provisions of ERISA and the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction. 

The Department is proposing the 

following amendment on its own 

motion, pursuant to its authority under 

ERISA section 408(a) and Code section 

4975(c)(2) and in accordance with 

procedures set forth in 29 CFR part 

2570, subpart B (76 FR 66637 (October 

27, 2011)).68

Prohibited Transaction Exemption 

2020–02, Improving Investment Advice 

for Workers & Retirees 

Section I—Transactions 

(a) In General 

ERISA Title I (Title I) and the Internal 

Revenue Code (the Code) prohibit 

fiduciaries, as defined, that provide 

investment advice to Plans and 

individual retirement accounts (IRAs) 

from receiving compensation that varies 

based on their investment advice and 

compensation that is paid from third 

parties. Title I and the Code also 

prohibit fiduciaries from engaging in 

purchases and sales with Plans or IRAs 

on behalf of their own accounts 

(principal transactions). This exemption 

permits Financial Institutions and 

Investment Professionals who provide 

fiduciary investment advice to 

Retirement Investors to receive 

otherwise prohibited compensation and 

engage in riskless principal transactions 

and certain other principal transactions 

(Covered Principal Transactions) as 

described below. 

The exemption provides relief from 

the prohibitions of ERISA section 

406(a)(1)(A), (D), and 406(b), and the 

sanctions imposed by Code section 

4975(a) and (b), by reason of Code 

section 4975(c)(1)(A), (D), (E), and (F), if 

the Financial Institutions and 

Investment Professionals provide 

fiduciary investment advice in 

accordance with the conditions set forth 

in Section II and are eligible pursuant to 

Section III, subject to the definitional 

terms and recordkeeping requirements 

in Sections IV and V. 

(b) Covered Transactions 

This exemption permits Financial 

Institutions and Investment 

Professionals, and their Affiliates and 

Related Entities, to engage in the 

following transactions, including as part 

of a rollover from a Plan to an IRA as 

defined in Code section 4975(e)(1)(B) or 

(C), as a result of the provision of 

investment advice within the meaning 

of ERISA section 3(21)(A)(ii) and Code 

section 4975(e)(3)(B): 

(1) The receipt of reasonable 

compensation; and 

(2) The purchase or sale of an asset in 

a riskless principal transaction or a 

Covered Principal Transaction, and the 

receipt of a mark-up, mark-down, or 

other payment. 

(c) Exclusions 

This exemption does not apply if: 

(1) The Plan is covered by Title I and 

the Investment Professional, Financial 

Institution, or any Affiliate providing 

investment advice is 


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(A) the employer of employees 

covered by the Plan, or 

(B) the Plan’s named fiduciary or 

administrator; provided however that a 

named fiduciary or administrator or 

their Affiliate may rely on the 

exemption if it is: (i) selected to provide 

investment advice by a fiduciary who is 

Independent of the Financial 

Institution, Investment Professional, and 

their Affiliates, or (ii) a Pooled Plan 

Provider (PPP) registered with the 

Department under 29 CFR 2510.3–44; or 

(2) The transaction involves the 

Investment Professional or Financial 

Institution acting in a fiduciary capacity 

other than as an investment advice 

fiduciary within the meaning of ERISA 

section 3(21)(A)(ii) and Code section 

4975(e)(3)(B). 

Section II—Investment Advice 

Arrangement 

Section II(a) requires Investment 

Professionals and Financial Institutions 

to comply with Impartial Conduct 

Standards, including a best interest 

standard, when providing fiduciary 

investment advice to Retirement 

Investors. In addition, Section II(b) 

requires Financial Institutions to 

acknowledge fiduciary status under 

Title I and/or the Code, and provide 

investors with a statement of the best 

interest standard of care, a written 

description of the services they will 

provide and their Conflicts of Interest, 

rollover disclosure (as applicable), 

Financial Institution, and additional 

disclosure with respect to Pooled 

Employer Plans (as applicable). Section 

II(c) requires Financial Institutions to 

adopt policies and procedures 

prudently designed to ensure 

compliance with the Impartial Conduct 

Standards when providing fiduciary 

investment advice to Retirement 

Investors regarding compliance with the 

Impartial Conduct Standards. Section 

II(d) requires the Financial Institution to 

conduct a retrospective review of 

compliance with the Impartial Conduct 

Standards and the policies and 

procedures. Section II(e) allows 

Financial Institutions to correct certain 

violations of the exemption conditions 

and continue to rely upon the 

exemption for relief. 

(a) Impartial Conduct Standards 

The Financial Institution and 

Investment Professional comply with 

the following ‘‘Impartial Conduct 

Standards’’: 

(1) Investment advice is, at the time 

it is provided, in the Best Interest of the 

Retirement Investor. As defined in 

Section V(b), such advice: (A) reflects 

the care, skill, prudence, and diligence 

under the circumstances then prevailing 

that a prudent person acting in a like 

capacity and familiar with such matters 

would use in the conduct of an 

enterprise of a like character and with 

like aims, based on the investment 

objectives, risk tolerance, financial 

circumstances, and needs of the 

Retirement Investor; and (B) does not 

place the financial or other interests of 

the Investment Professional, Financial 

Institution or any Affiliate, Related 

Entity, or other party ahead of the 

interests of the Retirement Investor, or 

subordinate the Retirement Investor’s 

interests to their own. For example, in 

choosing between two investments 

offered and available to the Retirement 

Investor from the Financial Institution, 

it is not permissible for the Investment 

Professional to advise investing in the 

one that is worse for the Retirement 

Investor but better or more profitable for 

the Investment Professional or the 

Financial Institution. 

(2)(A) The compensation received, 

directly or indirectly, by the Financial 

Institution, Investment Professional, 

their Affiliates and Related Entities for 

their services does not exceed 

reasonable compensation within the 

meaning of ERISA section 408(b)(2) and 

Code section 4975(d)(2); and (B) as 

required by the Federal securities laws, 

the Financial Institution and Investment 

Professional seek to obtain the best 

execution of the investment transaction 

reasonably available under the 

circumstances; and 

(3) The Financial Institution’s and its 

Investment Professionals’ statements 

(written and oral) to the Retirement 

Investor about the recommended 

transaction and other relevant matters 

are not, at the time statements are made, 

materially misleading. For purposes of 

this paragraph, the term ‘‘materially 

misleading’’ includes omitting 

information that is needed to prevent 

the statement from being misleading to 

the Retirement Investor under the 

circumstances. 

(b) Disclosure 

Prior to engaging in a transaction 

pursuant to this exemption, the 

Financial Institution provides the 

disclosures set forth in (1)–(4) to the 

Retirement Investor: 

(1) A written acknowledgment that 

the Financial Institution and its 

Investment Professionals are providing 

fiduciary investment advice to the 

Retirement Investor and are fiduciaries 

under Title I, the Code, or both when 

making an investment recommendation; 

(2) A written statement of the Best 

Interest standard of care owed by the 

Investment Professional and Financial 

Institution to the Retirement Investor; 

(3) A written description of the 

services to be provided and the 

Financial Institution’s and Investment 

Professional’s material Conflicts of 

Interest that is accurate and not 

misleading in any material respect. This 

description will include a statement on 

whether the Retirement Investor will 

pay for such services, directly or 

indirectly, including through ThirdParty Payments. If, for example, the 

Retirement Investor will pay through 

commissions or transaction-based 

payments, the written statement must 

clearly disclose that fact. This statement 

must be written in plain English, taking 

into consideration a Retirement 

Investor’s level of financial experience; 

(4) A written statement that the 

Retirement Investor has the right to 

obtain specific information regarding 

costs, fees, and compensation, described 

in dollar amounts, percentages, 

formulas, or other means reasonably 

designed to present full and fair 

disclosure that is materially accurate in 

scope, magnitude, and nature, with 

sufficient detail to permit the 

Retirement Investor to make an 

informed judgment about the costs of 

the transaction and about the 

significance and severity of the Conflicts 

of Interest, and that describes how the 

Retirement Investor can get the 

information, free of charge; 

(5) Rollover disclosure. Before 

engaging in a rollover, or making a 

recommendation to a Plan participant as 

to the post-rollover investment of assets 

currently held in a Plan, the Financial 

Institution and Investment Professional 

must consider and document the basis 

for their conclusions as to whether a 

rollover is in the Retirement Investor’s 

Best Interest, and must provide that 

documentation to the Retirement 

Investor. Relevant factors to consider 

must include but are not limited to: 

(A) the alternatives to a rollover, 

including leaving the money in the Plan 

or account type, as applicable; 

(B) the fees and expenses associated 

with the Plan and the recommended 

investment or account; 

(C) whether an employer or other 

party pays for some or all of the Plan’s 

administrative expenses; and 

(D) the different levels of services and 

investments available under the Plan 

and the recommended investment or 

account. 

(6) The Financial Institution will not 

fail to satisfy the conditions in Section 

II(b) solely because it, acting in good 

faith and with reasonable diligence, 

makes an error or omission in disclosing 

the required information, provided that 


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the Financial Institution discloses the 

correct information as soon as 

practicable, but not later than 30 days 

after the date on which it discovers or 

reasonably should have discovered the 

error or omission. 

(7) Investment Professionals and 

Financial Institutions may rely in good 

faith on information and assurances 

from the other entities that are not 

Affiliates as long as they do not know 

or have reason to know that such 

information is incomplete or inaccurate. 

(8) The Financial Institution is not 

required to disclose information 

pursuant to this Section II(b) if such 

disclosure is otherwise prohibited by 

law. 

(c) Policies and Procedures 

(1) The Financial Institution 

establishes, maintains, and enforces 

written policies and procedures 

prudently designed to ensure that the 

Financial Institution and its Investment 

Professionals comply with the Impartial 

Conduct Standards in connection with 

covered fiduciary advice and 

transactions. 

(2) The Financial Institution’s policies 

and procedures mitigate Conflicts of 

Interest to the extent that a reasonable 

person reviewing the policies and 

procedures and incentive practices as a 

whole would conclude that they do not 

create an incentive for a Financial 

Institution or Investment Professional to 

place their interests ahead of the 

interests of the Retirement Investor. 

Financial Institutions may not use 

quotas, appraisals, performance or 

personnel actions, bonuses, contests, 

special awards, differential 

compensation, or other similar actions 

or incentives that are intended, or that 

a reasonable person would conclude are 

likely, to result in recommendations 

that are not in Retirement Investors’ 

Best Interest. 

(3) Financial Institutions must 

provide their complete policies and 

procedures to the Department upon 

request within 10 business days of 

request. 

(d) Retrospective Review 

(1) The Financial Institution conducts 

a retrospective review, at least annually, 

that is reasonably designed to assist the 

Financial Institution in detecting and 

preventing violations of, and achieving 

compliance with, this exemption, 

including the Impartial Conduct 

Standards and the policies and 

procedures governing compliance with 

the exemption. The Financial Institution 

updates the policies and procedures as 

business, regulatory, and legislative 

changes and events dictate, and to 

ensure they remain prudently designed, 

effective, and compliant with Section 

II(c). 

(2) The methodology and results of 

the retrospective review are reduced to 

a written report that is provided to a 

Senior Executive Officer. 

(3) A Senior Executive Officer of the 

Financial Institution certifies, annually, 

that: 

(A) The officer has reviewed the 

report of the retrospective review; 

(B) The Financial Institution has filed 

(or will file timely, including 

extensions) Form 5330 reporting any 

non-exempt prohibited transactions 

discovered by the Financial Institution 

in connection with investment advice 

covered under Code section 

4975(e)(3)(B), corrected those 

transactions, and paid any resulting 

excise taxes owed under Code section 

4975; 

(C) The Financial Institution has 

written policies and procedures that 

meet the conditions set forth in Section 

II(c)(1); and 

(D) The Financial Institution has in 

place a prudent process to modify such 

policies and procedures as set forth in 

Section II(d)(1). 

(4) The review, report, and 

certification are completed no later than 

six months following the end of the 

period covered by the review. 

(5) The Financial Institution retains 

the report, certification, and supporting 

data for a period of six years and makes 

the report, certification, and supporting 

data available to the Department, within 

10 business days of request, to the 

extent permitted by law including 12 

U.S.C. 484 (regarding limitations on 

visitorial powers for national banks). 

(e) Self-Correction 

A non-exempt prohibited transaction 

will not occur due to a violation of the 

exemption’s conditions with respect to 

a transaction, provided: 

(1) Either the violation did not result 

in investment losses to the Retirement 

Investor or the Financial Institution 

made the Retirement Investor whole for 

any resulting losses; 

(2) The Financial Institution corrects 

the violation and notifies the 

Department of Labor of the violation 

and the correction via email to IIAWR@

dol.gov within 30 days of correction; 

(3) The correction occurs no later than 

90 days after the Financial Institution 

learned of the violation or reasonably 

should have learned of the violation; 

and 

(4) The Financial Institution notifies 

the person(s) responsible for conducting 

the retrospective review during the 

applicable review cycle and the 

violation and correction is specifically 

set forth in the written report of the 

retrospective review required under 

subsection II(d)(2). 

Section III—Eligibility 

(a) General 

Subject to the timing and scope 

provisions set forth in subsection (b) 

and the opportunity to be heard as set 

forth in subsection (c), an Investment 

Professional or Financial Institution will 

be ineligible to rely on the exemption 

with respect to any transaction, if the 

Financial Institution, its Affiliate, or 

Investment Professional is described in 

(1) or (2): 

(1) The Investment Professional or 

Financial Institution has been convicted 

either: 

(A) by a U.S. Federal or state court as 

a result of any felony involving abuse or 

misuse of such person’s employee 

benefit plan position or employment, or 

position or employment with a labor 

organization; any felony arising out of 

the conduct of the business of a broker, 

dealer, investment adviser, bank, 

insurance company or fiduciary; income 

tax evasion; any felony involving 

larceny, theft, robbery, extortion, 

forgery, counterfeiting, fraudulent 

concealment, embezzlement, fraudulent 

conversion, or misappropriation of 

funds or securities; conspiracy or 

attempt to commit any such crimes or 

a crime in which any of the foregoing 

crimes is an element; or a crime that is 

identified or described in ERISA section 

411; or 

(B) by a foreign court of competent 

jurisdiction as a result of any crime, 

however denominated by the laws of the 

relevant foreign or state government, 

that is substantially equivalent to an 

offense described in (A). 

For purposes of this section (a)(1), a 

person shall be deemed to have been 

convicted of a crime as of the 

‘‘conviction date,’’ which is the date of 

the judgment of the trial court (or the 

date of the judgment of any court in a 

foreign jurisdiction that is the 

equivalent of a U.S. Federal or state trial 

court), regardless of whether that 

judgment remains under appeal. 

(2) The Investment Professional or 

Financial Institution has received a 

written ineligibility notice issued by the 

Department for: 

(A) engaging in a systematic pattern or 

practice of violating the conditions of 

this exemption in connection with 

otherwise non-exempt prohibited 

transactions; 

(B) intentionally violating the 

conditions of this exemption in 

connection with otherwise non-exempt 

prohibited transactions; 


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(C) engaging in a systematic pattern or 

practice of failing to correct prohibited 

transactions, report those transactions to 

the IRS on Form 5330 and pay the 

resulting excise taxes imposed by Code 

section 4975 in connection with nonexempt prohibited transactions 

involving investment advice under Code 

section 4975(e)(3)(B); or 

(D) providing materially misleading 

information to the Department in 

connection with the conditions of the 

exemption. 

(b) Timing and Scope of Ineligibility 

(1) Ineligibility shall begin six months 

after: 

(A) the conviction date defined in 

Section (a)(1); 

(B) the date of the Department’s 

written determination under Section 

(c)(1)(C) for a petition regarding a 

foreign conviction; or 

(C) the date of the written ineligibility 

notice described in subsection (a)(2). 

(2) A person shall become eligible to 

rely on this exemption again only upon 

the earliest of the following: 

(A) the date of a subsequent judgment 

reversing such person’s conviction 

described in (a)(1); 

(B) 10 years after the person became 

ineligible under Section III(b)(1) or 10 

years after the person was released from 

imprisonment as a result of a crime 

described in (a)(1), if later; or 

(C) the date, if any, the Department 

grants an individual exemption (which 

may impose additional conditions) to 

the person permitting its continued 

reliance on this exemption 

notwithstanding the conviction. 

(c) Opportunity To Be Heard 

(1) Foreign Convictions. 

(A) A Financial Institution, its 

Affiliate, or an Investment Professional 

that has been convicted by a foreign 

court of competent jurisdiction as 

provided in subsection (a)(1)(B)), the 

Financial Institution or Investment 

Professional may submit a petition to 

the Department that informs the 

Department of the conviction and seeks 

the Department’s determination that the 

Financial Institution’s continued 

reliance on the exemption would not be 

contrary to the purposes of the 

exemption. Petitions must be submitted 

to the Department within 10 business 

days after the conviction date by email 

to IIAWR@dol.gov. 

(B) Following receipt of the petition, 

the Department will provide the 

Investment Professional or Financial 

Institution with the opportunity to be 

heard in person (including by phone or 

videoconference), in writing, or a 

combination thereof. The opportunity to 

be heard will be limited to one 

conference unless the Department 

determines in its sole discretion to 

allow additional conferences. 

(C) Following the hearing, the 

Department will issue a written 

determination to the Financial 

Institution or Investment Professional, 

as applicable, articulating the basis for 

its determination whether or not to 

allow the Financial Institution or 

Investment Professional to continue 

relying on PTE 2020–02. 

(2) Written Ineligibility Notice. Prior 

to issuing a written ineligibility notice, 

the Department will issue a written 

warning to the Investment Professional 

or Financial Institution, as applicable, 

identifying specific conduct implicating 

subsection (a)(2) and providing a sixmonth opportunity to cure. At the end 

of the six-month period, if the 

Department determines that the 

Investment Professional or Financial 

Institution has not taken appropriate 

action to prevent recurrence of the 

disqualifying conduct, it will provide 

the Investment Professional or Financial 

Institution with the opportunity to be 

heard, in person (including by phone or 

videoconference), in writing, or a 

combination, before the Department 

issues the written ineligibility notice. 

The opportunity to be heard will be 

limited to one conference unless the 

Department determines in its sole 

discretion to allow additional 

conferences. The written ineligibility 

notice will articulate the basis for the 

determination that the Investment 

Professional or Financial Institution 

engaged in conduct described in 

subsection (a)(2). 

(3) Department’s Considerations. For 

hearings under (c)(1) and (c)(2), the 

Department will consider: the gravity of 

the offense; the degree to which the 

underlying conduct concerned 

individual misconduct, or, alternately, 

corporate managers or policy; recency of 

the conduct at issue; any remedial 

measures taken; and other factors the 

Department determines in its discretion 

are reasonable in light of the nature and 

purposes of the exemption. 

(d) Alternative Exemptions 

A Financial Institution or Investment 

Professional that is ineligible to rely on 

this exemption may rely on a statutory 

or separate administrative prohibited 

transaction exemption if one is available 

or seek an individual prohibited 

transaction exemption from the 

Department. To the extent an applicant 

seeks retroactive relief in connection 

with an exemption application, the 

Department will consider the 

application in accordance with its 

retroactive exemption policy as set forth 

in 29 CFR 2570.35(d). The Department 

may require additional prospective 

compliance conditions as a condition of 

retroactive relief. 

Section IV—Recordkeeping 

The Financial Institution maintains 

for a period of six years records 

demonstrating compliance with this 

exemption and makes such records 

available, to the extent permitted by law 

including 12 U.S.C. 484, to any 

authorized employee of the Department 

or the Department of the Treasury. 

Section V—Definitions 

(a) ‘‘Affiliate’’ means: 

(1) Any person directly or indirectly 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the Investment 

Professional or Financial Institution. 

(For this purpose, ‘‘control’’ would 

mean the power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual); 

(2) Any officer, director, partner, 

employee, or relative (as defined in 

ERISA section 3(15)), of the Investment 

Professional or Financial Institution; 

and 

(3) Any corporation or partnership of 

which the Investment Professional or 

Financial Institution is an officer, 

director, or partner. 

(b) Advice is in a Retirement 

Investor’s ‘‘Best Interest’’ if such advice 

(A) reflects the care, skill, prudence, and 

diligence under the circumstances then 

prevailing that a prudent person acting 

in a like capacity and familiar with such 

matters would use in the conduct of an 

enterprise of a like character and with 

like aims, based on the investment 

objectives, risk tolerance, financial 

circumstances, and needs of the 

Retirement Investor, and (B) does not 

place the financial or other interests of 

the Investment Professional, Financial 

Institution or any Affiliate, Related 

Entity, or other party ahead of the 

interests of the Retirement Investor, or 

subordinate the Retirement Investor’s 

interests to their own. 

(c) A ‘‘Conflict of Interest’’ is an 

interest that might incline a Financial 

Institution or Investment Professional— 

consciously or unconsciously—to make 

a recommendation that is not in the Best 

Interest of the Retirement Investor. 

(d) A ‘‘Covered Principal 

Transaction’’ is a principal transaction 

that: 

(1) For sales to a Plan or an IRA: 

(A) Involves a U.S. dollar 

denominated debt security issued by a 

U.S. corporation and offered pursuant to 


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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Proposed Rules 76003 

a registration statement under the 

Securities Act of 1933, a U.S. Treasury 

Security, a debt security issued or 

guaranteed by a U.S. federal government 

agency other than the U.S. Department 

of the Treasury, a debt security issued 

or guaranteed by a governmentsponsored enterprise, a municipal 

security, a certificate of deposit, an 

interest in a Unit Investment Trust, or 

any investment permitted to be sold by 

an investment advice fiduciary to a 

Retirement Investor under an individual 

exemption granted by the Department 

after the effective date of this exemption 

that includes the same conditions as 

this exemption; and 

(B) A debt security may only be 

recommended in accordance with 

written policies and procedures adopted 

by the Financial Institution that are 

reasonably designed to ensure that the 

security, at the time of the 

recommendation, has no greater than 

moderate credit risk and sufficient 

liquidity that it could be sold at or near 

carrying value within a reasonably short 

period of time; and 

(2) For purchases from a Plan or an 

IRA, involves any securities or 

investment property. 

(e) ‘‘Financial Institution’’ means an 

entity that is not suspended, barred or 

otherwise prohibited (including under 

Section III of this exemption) from 

making investment recommendations by 

any insurance, banking, or securities 

law or regulatory authority (including 

any self-regulatory organization), that 

employs the Investment Professional or 

otherwise retains such individual as an 

independent contractor, agent or 

registered representative, and that is: 

(1) Registered as an investment 

adviser under the Investment Advisers 

Act of 1940 (15 U.S.C. 80b–1 et seq.) or 

under the laws of the state in which the 

adviser maintains its principal office 

and place of business; 

(2) A bank or similar financial 

institution supervised by the United 

States or a state, or a savings association 

(as defined in section 3(b)(1) of the 

Federal Deposit Insurance Act (12 

U.S.C. 1813(b)(1))); 

(3) An insurance company qualified 

to do business under the laws of a state, 

that: (A) has obtained a Certificate of 

Authority from the insurance 

commissioner of its domiciliary state 

which has neither been revoked nor 

suspended; (B) has undergone and shall 

continue to undergo an examination by 

an independent certified public 

accountant for its last completed taxable 

year or has undergone a financial 

examination (within the meaning of the 

law of its domiciliary state) by the 

state’s insurance commissioner within 

the preceding five years, and (C) is 

domiciled in a state whose law requires 

that an actuarial review of reserves be 

conducted annually and reported to the 

appropriate regulatory authority; 

(4) A broker or dealer registered under 

the Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.); or 

(5) An entity that is described in the 

definition of Financial Institution in an 

individual exemption granted by the 

Department after the date of this 

exemption that provides relief for the 

receipt of compensation in connection 

with investment advice provided by an 

investment advice fiduciary under the 

same conditions as this class exemption. 

(f) For purposes of subsection I(c)(1), 

a fiduciary is ‘‘Independent’’ of the 

Financial Institution and Investment 

Professional if: 

(1) the fiduciary is not the Financial 

Institution, Investment Professional, or 

an Affiliate; 

(2) the fiduciary does not have a 

relationship to or an interest in the 

Financial Institution, Investment 

Professional, or any Affiliate that might 

affect the exercise of the fiduciary’s best 

judgment in connection with 

transactions covered by the exemption; 

and 

(3) the fiduciary does not receive and 

is not projected to receive within the 

current Federal income tax year, 

compensation or other consideration for 

his or her own account from the 

Financial Institution, Investment 

Professional, or an Affiliate, in excess of 

2% of the fiduciary’s annual revenues 

based upon its prior income tax year. 

(g) ‘‘Individual Retirement Account’’ 

or ‘‘IRA’’ means any plan that is an 

account or annuity described in Code 

section 4975(e)(1)(B) through (F). 

(h) ‘‘Investment Professional’’ means 

an individual who: 

(1) Is a fiduciary of a Plan or an IRA 

by reason of the provision of investment 

advice described in ERISA section 

3(21)(A)(ii) or Code section 

4975(e)(3)(B), or both, and the 

applicable regulations, with respect to 

the assets of the Plan or IRA involved 

in the recommended transaction; 

(2) Is an employee, independent 

contractor, agent, or representative of a 

Financial Institution; and 

(3) Satisfies the Federal and state 

regulatory and licensing requirements of 

insurance, banking, and securities laws 

(including self-regulatory organizations) 

with respect to the covered transaction, 

as applicable, and is not disqualified or 

barred from making investment 

recommendations by any insurance, 

banking, or securities law or regulatory 

authority (including any self-regulatory 

organization). 

(i) ‘‘Plan’’ means any employee 

benefit plan described in ERISA section 

3(3) and any plan described in Code 

section 4975(e)(1)(A). 

(j) A ‘‘Pooled Employer Plan’’ or 

‘‘PEP’’ means a pooled employer plan 

described in ERISA section 3(43). 

(k) A ‘‘Pooled Plan Provider’’ or 

‘‘PPP’’ means a pooled plan provider 

described in ERISA section 3(44). 

(l) ‘‘Riskless Principal Transaction’’ 

means a transaction in which a 

Financial Institution, after having 

received an order from a Retirement 

Investor to buy or sell an asset, 

purchases or sells the asset for the 

Financial Institution’s own account to 

offset the contemporaneous transaction 

with the Retirement Investor. A Riskless 

Principal Transaction is not a Covered 

Principal Transaction. 

(m) A ‘‘Related Entity’’ is any party 

that is not an Affiliate, but which either 

has, or in which the Investment 

Professional or Financial Institution has, 

an interest that may affect best judgment 

as a fiduciary. 

(n) ‘‘Retirement Investor’’ means: 

(1) A participant or beneficiary of a 

Plan with authority to direct the 

investment of assets in their account or 

to take a distribution; 

(2) The beneficial owner of an IRA 

acting on behalf of the IRA; or 

(3) A fiduciary acting on behalf of a 

Plan or an IRA. 

(o) A ‘‘Senior Executive Officer’’ is 

any of the following: the chief 

compliance officer, the chief executive 

officer, president, chief financial officer, 

or one of the three most senior officers 

of the Financial Institution. 

(p) ‘‘Third-Party Payments’’ include 

sales charges when not paid directly to 

the Financial Institution by the Plan, 

from a participant or beneficiary’s 

account, or from an IRA; gross dealer 

concessions; revenue sharing payments; 

12–1 fees; distribution, solicitation or 

referral fees; volume-based fees; fees for 

seminars and educational programs; and 

any other compensation, consideration, 

or financial benefit provided to the 

Financial Institution or an Affiliate or 

Related Entity by a third party as a 

result of a transaction involving a Plan, 

participant or beneficiary account, or 

IRA. 

Signed at Washington, DC, this 24th day of 

October, 2023. 

Lisa M. Gomez, 

Assistant Secretary, Employee Benefits 

Security Administration, U.S. Department of 

Labor. 

[FR Doc. 2023–23780 Filed 11–2–23; 8:45 am] 

BILLING CODE 4510–29–P 


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