PTE 79-60 - commission for an insurance agent/broker who is the employer

Hi

I have been doing some research and see if there is an update to prohibited transaction exemption - PTE - 79-60. I have a broker who wants to start a defined benefit plan and include insurance in the plan where he is the broker. I have always known about the 5% rule i.e. his commission from this transaction cannot exceed 5% of the total insurance commissions income received for the year.

I found nothing to the contrary i.e. no changes.

Please let me know your thoughts/comments, if any.

Thank you

PS insurance in pension plans should be illegal

The Labor department’s website has a listing of prohibited-transaction exemptions, organized by EXPRO, class, and individual exemptions.

Under class exemptions, the website shows the history of an exemption, with Federal Register citations for each proposal, adoption, and amendment or clarification.  (For example, the display on the Qualified Professional Asset Manager exemption includes eight citations.)

Under “Insurance Agents In-house”, the display shows citations for the proposal and adoption (both in 1979) of PTE 79-60, and nothing further.

https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/exemptions/class

Here’s the government’s posting of the portion of 44 Fed. Reg. 59018 (Oct. 12, 1979):

https://s3.amazonaws.com/archives.federalregister.gov/issue_slice/1979/10/12/59015-59020.pdf#page=4

If it’s hard to read, better images are available from HeinOnline and other publishers.

Hi Peter

Thank you for providing the links however I have the actual PTE although my recent online search including the website you provided did not locate it for me.

I was more looking for any input from anyone who may have had some recent experience and see if any new rules/regulations that I may not be aware of. I have not had this situation in well over 10+ years.

Thank you,

The exemption has no change after October 12, 1979.

I’ve considered the exemption only once.  (And it was longer ago than your experience.)

I explained that the exemption does not relieve a plan’s fiduciary from its responsibility to act loyally and prudently for the exclusive purpose of providing the plan’s benefits.  A fiduciary must get the best deal the plan could obtain.

The insurance agency decided that its fiduciary responsibility required it to negotiate the life insurance contract to zero the commission with the insurer lowering the premiums for the contract’s death benefits and increasing the cash values.  An actuary reported to us that the insurer’s profit margin on the negotiated contract was equal to its margin on the commission-loaded contract.

Thank you for sharing your experience.

Have a great weekend.