A prohibited transaction exemption (PTE) is formal permission granted by the U.S. Department of Labor or written into its regulations that allows certain otherwise prohibited fiduciary transactions under ERISA and the Internal Revenue Code. Without an applicable exemption, fiduciaries and parties in interest cannot engage in conflicted transactions such as self-dealing, certain compensation arrangements, or specific dealings with retirement plan assets. PTEs lay out detailed conditions-such as disclosure, reasonableness of compensation, and impartial conduct standards-under which insurance and financial professionals may receive commissions or other compensation when advising ERISA plans and IRAs. Failure to satisfy exemption conditions can trigger excise taxes, rescission, and regulatory sanctions.

In the life insurance and annuity world, advisors encounter prohibited transaction exemptions when working with qualified plans, rollovers, and IRAs, particularly under PTE 84-24 and PTE 2020-02. Compliance departments develop procedures, disclosures, and documentation templates to help producers operate within these exemptions when recommending annuities or insurance products for retirement accounts. Training covers when an ERISA fiduciary role is triggered, what compensation is permitted, and which records must be retained. Advisors rely on home-office guidance to ensure that their recommendations satisfy impartial conduct standards and that required explanations of conflicts and alternatives are delivered. Understanding prohibited transaction exemptions is essential for aligning insurance recommendations with evolving fiduciary regulations.