Insurance Agents and others cannot avoid the Department of Labor’s Fiduciary Rule when selling fixed indexed annuities (“FIAs”). The U.S. Court of Appeals for the 10th Circuit, in its decision Market Synergy Inc. v. United States Department of Labor, et als, upheld the Department of Labor’s rule redefining who is a “fiduciary” of an employee benefit plan under ERISA that includes 401(k) plans. Since an insurance agent receives a commission for selling an annuity, under ERISA the agent is deemed a “fiduciary” to the investor and barred from receiving the commission. However, the DOL had permitted the agent to receive a commission under its previous rule called the Prohibited Transaction Rule (PTE) 84-24. In December 2015, the DOL proposed a new rule that would “update existing rules to distinguish more appropriately between the sorts of advice relationships that should be treated as fiduciary in nature and those that should not.” The proposed amendments to PT 82-24 created an exemption called the Best Interest Contract Exemption that permits an insurance agent to be paid commissions for the sale of FIAs and variable annuities provided that the agent acts in the best interests of the investor.

This document has been prepared by Despo Law Group for informational purposes only and is not offered as legal advice. The information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. This information is not intended to be a source for legal advice, and thus the reader should not rely on any information provided as such.

William A. Despo, Esq.
Despo Law Group
36 Bingham Avenue
Rumson, NJ 07760

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