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PTE 84-24: A Sample Form

There is NO standard or official PTE 84-24 form or wording, so don't get hung up on that. We have seen a variety of excellent forms devised by SPBA members containing the disclosure elements. Many include other types of bonus, commission, or payments (PPO, PBM, etc.) under what is shown in the form below as #6. Rather than having a separate form which needs formal signature & acceptance by the client, some TPAs incorporate the disclosure into their TPA admin contract so that there is no question that it was seen and approved/accepted by the client.

PTE 84-24 is only a slightly updated replacement version of what was previously known as PTE 77-9, so you may hear someone incorrectly refer to 77-9. While the PTE 84-24 was specifically and solely applicable to Stop-Loss commissions, some TPAs combine their disclosure of PPO, PBM or other kinds of fees into the same or similar format or into what is shown as item #6 in the sample below. THE GOAL IS SIMPLY TO BE SURE TO GIVE THE CLIENT DISCLOSURE WITH INFORMED CONSENT. (The wording below and general advice on this or any other topic is in no way SPBA providing legal advice or services.)

Many years ago, SPBA had an ERISA attorney draft some sample language (but you are free to improvise). The text of that sample form is below:

To: (name of official plan fiduciary)

From: (name of TPA), Third Party Administrator

(name of TPA) is a third party administrator providing services to (name of plan). Prohibited Transaction Class Exemption 84-24 (PTE 84-24) as issued by the Department of Labor permits receipt of reasonable compensation by certain enumerated interested parties, including TPAs, for services rendered if proper disclosure is given and the transaction is approved by appropriate independent Plan fiduciaries. PTE 84-24 requires that the transaction must be at arm's length and also must be in the best interests of the plan participants. This notice is to satisfy the requirements of PTE 84-24.

(There are then spaces to describe the Stop-Loss insurer and relationship, to be filled out where applicable)

1. Description of transaction: (Stop-Loss)

2. Name of insurer: (Stop-loss insurer)

3. ( ) The TPA is not affiliated with the Insurer whose contract is being recommended and is not limited by any agreement with the Insurer.

(or)

( )The TPA is affiliated with the Insurer whose contract is being recommended or is limited by an agreement with the Insurer. (Explain affiliation or agreement.)

4. Sales Commission (expressed as as percentage of gross annual premiums) if override commissions apply, explain below:

First year = %

Each renewal year = %

5. Description of any additional charges, fees, discounts, penalties or adjustment incurred by the Plan or may be incurred by the Plan under the insurance company policy or contract (use additional sheets if necessary)/

>Expense Fees, etc.

>>Expense Fees, etc.

>>>Expense Fees, etc.

6. Description of any other fees, service charges or other compensation which should be disclosed to the independent fiduciary to permit the independent fiduciary(s) to determine that total compensation form the Plan or Plan Assets received by the TPA is "reasonable".

Fiduciaries' Acknowlegement

I hearby acknowledge that in my capacity as an independent fiduciary with authority to act on behalf of the Plan, I have received the above information concerning the above transaction and I approve the transaction on behalf of the plan. I am not an insurance agent, broker, pension consultant or insurance company involved in the transaction. Further, I will not receive any compensation or other consideration directly or indirectly, for my own personal account from any party dealing with the Plan in connection with the transaction.

Signed: (Fiduciary #1) Date

Signed (Fiduciary #2) Date

 

SPBA comment: Don't go into panic mode or feel that this is the official or only format. The purpose of the PTE 84-24 (and related disclosure) is to protect your (TPA's) posterior; to show that you were totally open with the client. Read the piece on the website titled "Stop-Loss PTE 84-24 for an beackground explanation. The important part is to focus on fulfilling the intent, not getting hung up on specific words.