An EBSA news release said that, under the amendments to Prohibited Transaction Exemption (PTE) 75-1, a plan may engage in transactions with broker-dealers, reporting dealers and banks that are plan fiduciaries. This is true as long as the institutions and their affiliates do not have investment authority over or provide investment advice about the plan’s assets involved in the transaction.
The announcement said EBSA also issued a similar change to (PTE) 84-24 for insurance agents and brokers, pension consultants and mutual fund principal underwriters to carry out transactions involving sales of insurance and mutual fund products and to receive related commissions.
EBSA said the changes are at least partly prompted by the consolidation in the financial services industry that has resulted in more affiliations between companies. One protection afforded by the exemptions is that the terms of the transactions are required to be as favorable to the plans as an arm’s length transaction with an unrelated party would be.
The amendments to PTE 75-1 are retroactively effective to January 1, 1975. The amendments to PTE 84-24 are effective on the date of publication in the Federal Register. The amended exemptions are scheduled for publication in the February 3, 2006 Federal Register.
The Employee Retirement Income Security Act (ERISA) generally prohibits plans from entering into transactions with plan fiduciaries and other related parties unless an exemption applies.