PTE 2020-02 is a prohibited transaction exemption issued by the U.S. Department of Labor that allows investment advice fiduciaries to receive compensation, including commissions and third-party payments, when providing advice to retirement investors-such as plan participants and IRA owners-under specified conditions. The exemption requires adherence to impartial conduct standards (best interest, reasonable compensation, and no misleading statements), written disclosures of conflicts, policies and procedures to mitigate conflicts, and annual retrospective review. For insurers and intermediaries distributing annuities and other products to retirement accounts, PTE 2020-02 is a central framework governing how advice and compensation can coexist under ERISA and the Internal Revenue Code.

In practice, compliance teams build entire supervision and documentation regimes around PTE 2020-02. Advisors who recommend annuities or certain life insurance products for rollovers and IRA transactions receive training on when they are acting as fiduciaries, what disclosures must be made, and how to document the basis for their recommendations. Firms develop standardized rollover analysis forms, best-interest questionnaires, and compensation conflict disclosures aligned with the exemption requirements. Audits and annual reviews examine samples of transactions to confirm that processes are followed. Understanding PTE 2020-02 is essential for producers working in the retirement space, as failure to comply can expose firms to regulatory enforcement and require unwinding of transactions.