The U.S. Department of Labor (“DOL”) has signaled plans to revisit the procedures governing prohibited transaction exemptions (PTEs) under the Employee Retirement Income Security Act (“ERISA”). The Department’s Employee Benefits Security Administration (“EBSA”) listed a proposal in its 2026 regulatory agenda to update the exemption procedure regulation to reduce regulatory burdens on applicants and improve how the exemption process operates (“RIN 1210-AC42”). 

Specific regulatory changes have not yet been proposed, but the agency has indicated that it is exploring ways to make the exemption process more efficient and easier for applicants to navigate. The notice identified August 2026 as the target date for a proposed rule, but no proposed rule had been published as of this writing. 

These anticipated changes could have important implications for plan sponsors, fiduciaries, retirement and welfare plan service providers, and employers that fund benefits through affiliated entities such as captive insurance and reinsurance companies by potentially simplifying the process for PTE approval. Major employers are constantly evaluating optimal benefit solutions, and captives have produced 10% to 15% savings each year. As the regulatory process moves forward, organizations should continue to prioritize strong fiduciary governance and monitor future regulatory developments and guidance.

“The retirement industry continues to evolve, and regulations need to evolve with it,” said Prabal Lakhanpal, Senior Vice President at Spring Consulting Group and Alera Group’s National Captive Practice Leader. “While improving efficiency is important, it is equally important to maintain the protections that help safeguard plan participants and provide confidence for employers. This is a good opportunity for organizations to review their governance practices and ensure they remain aligned with ERISA requirements.” 

Understanding Prohibited Transaction Exemptions 

ERISA establishes fiduciary standards designed to protect retirement plan participants and beneficiaries. As part of those protections, ERISA generally prohibits transactions between a plan and a “party in interest,” a fairly broad category that includes the sponsor, entities it controls or owns, fiduciaries, and service providers. The law generally prohibits certain transactions that could create conflicts of interest between plans, their sponsors, and plan participants and beneficiaries. 

In certain circumstances, however, the Department of Labor may grant relief from specific ERISA restrictions identified in the PTE application when the proposed transaction meets three criteria: 

  1. It must be administratively feasible. 
  1. It must be in the interests of plan beneficiaries. 
  1. It must protect beneficiaries’ and participants’ rights.

When an applicant demonstrates that appropriate safeguards are in place and that the transaction is in the best interests of plan participants, meeting the three requirements outlined above allows fiduciaries and other parties in interest to engage in transactions that would otherwise be prohibited under ERISA, provided they satisfy specific regulatory conditions. 

Relief from ERISA prohibited transaction requirements can come in several exemption forms: 

  1. Individual Exemptions 
  1. Class Exemptions  
  1. Statutory Exemptions 

Individual exemptions are granted specifically to one applicant and one proposed transaction based on its specific facts. Class exemptions are granted to any organization that meets the conditions outlined in the original exemption. Statutory exemptions are written directly into ERISA and apply automatically to any transaction that meets the conditions Congress set out in ERISA itself. EXPRO exemptions (granted under PTE 96-62) serve as an expedited pathway for applicants whose proposed transaction is substantially similar to exemptions previously approved by the Department (generally, two individual exemptions granted within the prior five years). 

Many exemptions include ongoing oversight requirements, documentation standards, and independent reviews intended to mitigate potential conflicts and maintain fiduciary accountability. Because prohibited transaction exemptions play an important role in the employee benefits ecosystem, changes to the application process could influence how organizations approach fiduciary oversight, service provider relationships, and plan governance. 

An Example: Funding Employee Benefits through a Captive 

Employers with captives have established programs and processes in place for funding insured and uninsured lines of business, providing significant cost savings and a better understanding of their specific organizational risks and exposures. Often, these organizations begin with property and casualty or medical stop-loss feasibility studies to determine whether establishing a captive is worth the upfront investment and resources. After operating a captive for several years and gaining experience with its management, organizations often begin exploring additional opportunities to enhance their benefit plans. This is where ERISA-qualified benefits and PTEs may enter the discussion. 

Employers that sponsor ERISA plans are parties in interest with respect to those plans. The same generally applies to entities in which the employer holds a 50 percent or greater interest, including captives. Using a captive to (re)insure ERISA-covered benefits, such as group life and disability benefits or pension plans, results in a prohibited transaction unless an existing exemption applies, or the employer obtains a new exemption. The Department has a long history of granting exemptions permitting these arrangements. Since 2001, most captive reinsurance relief has been approved through the EXPRO process rather than through full individual exemption applications, although EXPRO filings have largely ceased since 2017. 

For employers considering opportunities to increase employee benefit plan funding efficiencies, understanding how the exemption process works is a meaningful business consideration rather than merely a compliance footnote. This includes understanding how long the process takes, what it costs, and what must be documented. Having the right partner can help employers navigate these requirements and provide appropriate guidance.

What Could Change

To better understand the potential impact of RIN 1210-AC42, it is helpful to consider the motivations behind the initiative. Prior to the 2020s, the last substantial change to the exemption regulation dated back to 2011. In 2022, EBSA proposed significant updates to the regulation and PTE process, which were finalized in 2024 and implemented for applications filed on or after April 8, 2024. 

Many firms involved in the PTE process viewed the 2024 changes as increasing the cost and complexity of obtaining an exemption, with some arguing that the changes could discourage applications and disproportionately favor larger organizations with the resources necessary to pursue PTEs. 

According to the Department’s agenda, the agency intends to streamline the prohibited transaction exemption process. Although no proposed amendments have been released, industry observers expect the Department to revisit the existing application requirements, documentation expectations, and procedural steps added in 2024. A streamlined PTE process could provide greater clarity and efficiency for organizations seeking exemptions. Stakeholders should also evaluate how any changes may affect the level of review, transparency, and participant protections associated with these exemptions. 

“Making the regulatory process more efficient benefits everyone involved in the benefits ecosystem,” said Karin Landry, Senior Consultant at Spring Consulting Group. “Plan sponsors, fiduciaries, service providers, and participants all benefit from a process that is streamlined, transparent, consistent, and practical.” 

Why This Matters 

While the anticipated changes primarily relate to the exemption process itself, they could influence how benefit plan service providers approach fiduciary responsibilities and how employers manage and fund their benefit programs. Regulatory reform could expand the number of organizations able to pursue an exemption in a timely fashion if EXPRO and other administrative procedures were simplified. A larger applicant pool could, in theory, increase competition among service providers, driving down the cost of obtaining relief and potentially providing participants with enhanced benefits or lower costs, as captive exemptions typically require. 

A more efficient exemption process could create opportunities for innovation and allow organizations to explore new employee benefit funding solutions while maintaining safeguards and passing through at least 51% of any savings to participants and beneficiaries. At the same time, strong fiduciary oversight remains essential to preserving participant trust and ensuring retirement plans continue to operate in accordance with ERISA requirements. 

What This Means for Employers 

Although the Department of Labor has not yet released specific proposed amendments, employers and plan fiduciaries can take proactive steps to prepare for potential regulatory changes. Key considerations include monitoring regulatory developments, reviewing fiduciary governance practices, evaluating service provider relationships, maintaining thorough documentation, and consulting experienced advisors as needed. 

Employers should: 

  • Monitor upcoming DOL guidance and proposed rulemaking to understand how regulatory changes may affect retirement plan governance and fiduciary oversight. 
  • Confirm that committee structures, governance policies, and fiduciary processes are current, well documented, and consistently followed. 
  • Engage investment advisors, recordkeepers, consultants, and other service providers to understand whether potential regulatory changes could affect existing arrangements or responsibilities. 
  • Thoroughly document fiduciary decisions, as documentation remains one of the most effective ways to demonstrate prudent oversight under ERISA. 
  • Work with trusted benefits professionals and ERISA counsel to understand how evolving regulations may affect their organization. 

Regardless of how the exemption process evolves, ERISA’s fiduciary standards continue to require that decisions be made prudently and solely in the best interests of plan participants and beneficiaries. Organizations that maintain strong governance practices today will be better positioned to adapt as additional guidance becomes available. 

Questions Employers Should Be Asking Now

While the Department of Labor’s proposed changes have not yet been released, employers and retirement plan fiduciaries can begin evaluating whether their current governance frameworks are positioned to respond to future regulatory developments. 

Consider asking: 

  • Are our fiduciary governance processes well documented and consistently followed ? 
  • Have we recently evaluated our relationships with investment managers, advisors, recordkeepers, and other service providers ? 
  • If we previously considered a benefit captive funding arrangement but set it aside because the exemption process was too burdensome, would it still be a barrier to entry ? 
  • Do we understand where potential conflicts of interest could arise within our benefit plans ? 
  • Are we actively monitoring regulatory developments that could affect plan administration ? 
  • Would our current governance policies and procedures allow us to adapt if regulatory expectations change ? 
  • Are we working with experienced advisors who can help us navigate an evolving regulatory environment ? 

Taking the time to evaluate these areas now can help employers strengthen fiduciary oversight and position their organizations to adapt as the benefits landscape continues to evolve.

Looking Ahead

Once proposed amendments are released, plan sponsors will have the opportunity to review the details and provide feedback before any final regulations are adopted. 

Policies and processes evolve with each administration, and employers should take this into consideration. The current rulemaking reflects the present administration’s deregulatory priorities.  

This reality underscores the importance of building governance practices and policies that are durable enough to withstand regulatory cycles rather than structuring them around any single rule or administration. 

For employers, fiduciaries, and retirement plan service providers, now is an appropriate time to review existing governance practices, stay informed about regulatory developments, and prepare for potential changes. Employers looking to better understand how potential changes to the DOL’s prohibited transaction exemption process may affect their plans can work with Spring Consulting Group’s retirement consulting team to evaluate fiduciary governance practices, compliance considerations, and strategies for adapting to a changing regulatory environment. 

Sources:
– U.S. Department of Labor- Employee Benefits Security Administration Regulatory Agenda 
https://www.dol.gov/agencies/ebsa/laws-and-regulations/regulatory-agenda 
– U.S. Department of Labor- Exemption Procedures Under ERISA 
https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/exemptions 
– U.S. Department of Labor- Prohibited Transaction Exemptions 
https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/exemptions/class 
– Office of Information and Regulatory Affairs- Unified Regulatory Agenda 
https://www.reginfo.gov