I have been writing extensively on my blog about annuities not meeting the criteria for exemptions from being classified as ERISA Prohibited Transactions.  https://commonsense401kproject.com/2025/05/10/annuities-flunk-prohibited-transactions-exemption-scotus-ruling-will-open-floodgates-of-litigation/

 

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First I started with the four pillars of the DOL’s Impartial Conduct Standards under PTE 2020‑02:

A. Care Obligation
B. Loyalty Obligation
C. Reasonable Compensation
D. No Materially Misleading Statements (including omissions)

Many annuity sales into ERISA plans currently fail one or more of these obligations, particularly with respect to:

• Hidden spread compensation,
• Inadequate due diligence on the general account backing the annuity,
• Opaque or omitted disclosures,
• And advisors who do not formally acknowledge fiduciary status in writing.

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Have Any Annuity Contracts Accepted ERISA Fiduciary Responsibility?

✅ Very Few — and Almost Never in the Contract Itself

In general:

• Group annuity contracts (e.g., used in 401(k) plans or defined benefit de-risking) may be accompanied by side agreements or representations from advisors, but:
  • The insurance contract itself typically does not declare the insurer (or even the selling agent) as a fiduciary.
  • Fiduciary acknowledgments, if they exist, come in the form of separate representations or appendices (required under PTE 2020-02 or 84-24).

🟥 In Most Cases:

• Insurers explicitly disclaim fiduciary status in contracts.
• Brokers or agents resist fiduciary acknowledgments—unless they’re affiliated RIAs under pressure.
• Disclosure documents are vague, omitting spread compensation or how crediting rates are determined.

Examples of Industry Practice:

1. Disclaiming Fiduciary Status

Many annuity providers include contract clauses like:

“The insurer and its agents are not acting in a fiduciary capacity under ERISA or any applicable law in connection with the sale of this product.”

2. Delegating Due Diligence to the Plan Sponsor

Even in group annuity settings (e.g., stable value GICs, fixed annuity options), the language often places full fiduciary duty on the plan sponsor, e.g.:

“The Plan Fiduciary represents that it has independently evaluated the investment and insurance features of this contract.”

3. PTE 84-24 Acknowledgments—But Weakly Enforced

Some insurers may have separate PTE 84‑24 disclosure forms, which technically acknowledge:

• Reasonable compensation,
• Advisor acting in the best interest,
• No misleading info.

But in practice, these are often:

• Not thoroughly explained to the plan,
• Signed by non-fiduciary agents,
• Not integrated into the contract,
• Poorly documented or monitored.

Recommendations for Plan Sponsors

If a plan is considering an annuity product under ERISA, the following should be required:

1. Fiduciary Acknowledgment Letter — from the advisor or insurer.
2. PTE 2020-02 or 84-24 Compliance Certificate — signed and included with plan records.
3. Full Disclosure Statement — fees, conflicts, and spread compensation outlined clearly.
4. Contract Review — ensure it doesn’t disclaim fiduciary responsibility while shifting burden to the sponsor.

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CONCLUSION

I am hopeful that the new SCOTUS decision will guide judges to compel them to disclose in discovery https://commonsense401kproject.com/2025/04/21/scotus-9-0-erisa-decision-in-cunningham-v-cornell-university-case-confirms-my-view-on-annuities-as-prohibited-transactions/. These spreads, which I feel in most cases are excessive, could be used to measure damages.