Category Archives: DOL

Best Interest Standard of Care for Advisors #41


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers, SEC

The Department of Labor’s Prohibited Transaction Exemption and Its Impact on Recommendations to Plans, Participants and IRAs (Part 6)

On February 16, 2021, the DOL’s prohibited transaction exemption (PTE) 2020-02 became effective. The PTE is titled “Improving Investment Advice for Workers & Retirees.” (https://www.govinfo.gov/content/pkg/FR-2019-07-12/pdf/2019-12208.pdf)  It allows investment advisers, broker-dealers, banks, and insurance companies (collectively referred to as “financial institutions”), and their representatives (collectively referred to as “investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (collectively referred to as “retirement investors”).

In the preamble to the PTE, the DOL also announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will become fiduciaries and therefore need the protections afforded by the exemption. In addition, they will need prudent, or best practice, processes to satisfy those standards of care.

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Best Interest Standard of Care for Advisors #40


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers, SEC

The Department of Labor’s Prohibited Transaction Exemption and Its Impact on Recommendations to Plans, Participants and IRAs (Part 5)

On December 18, 2020, the DOL issued its final prohibited transaction exemption (PTE) that permits investment advisers, broker-dealers, banks and insurance companies, and their representatives, to receive conflicted compensation resulting from nondiscretionary fiduciary investment advice. The PTE is titled “Improving Investment Advice for Workers & Retirees.” The citation is Prohibited Transaction Exemption 2020-02. (https://www.govinfo.gov/content/pkg/FR-2019-07-12/pdf/2019-12208.pdf) The exemption became effective on February 16, 2021.

The exemption imposes certain “conditions” that must be satisfied for financial institutions (that is, broker-dealers, investment advisers, banks or insurance companies) and their individual representatives (called “investment professionals” in the exemption) to receive the relief provided by the exemption. This article builds on the earlier posts Parts 1-4, Best Interest #36, #37, #38, and #39. This article and the ones that follow will address interesting, and perhaps lesser known, issues in the exemption.

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Best Interest Standard of Care for Advisors #39


best interest, DOL, fiduciary, investment adviser, IRA, prohibited transaction, reg BI, rollovers
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Investment Adviser Considerations: The Department of Labor’s Prohibited Transaction Exemption and Its Impact on Recommendations to Plans, Participants and IRAs (Part 4)

On December 18, 2020, the DOL issued its final prohibited transaction exemption (PTE) that will allow conflicted compensation resulting from nondiscretionary fiduciary investment advice. The PTE is titled “Improving Investment Advice for Workers & Retirees.” The citation is Prohibited Transaction Exemption 2020-02. (https://www.govinfo.gov/content/pkg/FR-2019-07-12/pdf/2019-12208.pdf) The exemption became effective on February 16, 2021.

The exemption and the associated expansion of the definition of fiduciary advice will have the greatest impact on recommendations by investment advisers and broker-dealers (1) to retirement plan participants to take rollovers to IRAs with the advisors, and (2) to IRA owners about how to invest in their IRAs. My last article, Best Interest #38, discussed the impact on investment advisers who recommend rollovers. This article covers the impact on investment advisers for their services to IRAs and related conflicts of interest.

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Best Interest Standard of Care for Advisors #38


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, reg BI, rollovers
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The Department of Labor’s Proposed Prohibited Transaction Exemption and Its Impact on Recommendations to Plans, Participants and IRAs (Part 3): Investment Adviser Considerations

On December 18, 2020, the DOL issued its final prohibited transaction exemption (PTE) that will allow conflicted compensation resulting from nondiscretionary fiduciary investment advice. The PTE is titled “Improving Investment Advice for Workers & Retirees.”  The citation is Prohibited Transaction Exemption 2020-02. The exemption is effective February 16, 2021.

The exemption and the associated expansion of the definition of fiduciary advice will have the greatest impact on recommendations by investment advisers and broker-dealers (1) to retirement plan participants about rollovers, and (2) to IRA owners about how to invest in their IRAs. This article focuses on the impact on investment advisers who recommend rollovers.

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Best Interest Standard of Care for Advisors #37


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, reg BI, rollovers
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The Department of Labor’s Proposed Prohibited Transaction Exemption and its Impact on Recommendations to Plans, Participants and IRAs (Part 2)

On July 7, 2020, the DOL issued a proposed prohibited transaction exemption (PTE) that would allow conflicted recommendations resulting from nondiscretionary fiduciary investment advice. The proposal is titled “Improving Investment Advice for Workers & Retirees.” And, as my last post, #36 (Part 1), explained, the DOL said that it is re-interpreting part of the definition of fiduciary advice to include many more recommendations, and especially rollover recommendations.

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Best Interest Standard of Care for Advisors #36


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, reg BI, rollovers

The Department of Labor’s Proposed Prohibited Transaction Exemption and its Impact on Recommendations to Plans, Participants and IRAs (Part 1)

 On July 7, 2020 the DOL issued a proposed prohibited transaction exemption (PTE) that would allow conflicted recommendations resulting from nondiscretionary fiduciary investment advice. The proposal is titled “Improving Investment Advice for Workers & Retirees.” As background, an exemption is an exception to the prohibited transaction rules, but the exception is only available if its conditions are satisfied…and there are conditions.

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Best Interest Standard of Care for Advisors #35


broker-dealers, DOL, registered investment advisers

Comparing the DOL Proposal to the Broker-Dealer and RIA Standards of Conduct

Broker-dealers and investment advisers are now governed by a best interest standard of care. Those standards are based largely on the same fiduciary principles that are incorporated into the ERISA prudent man standard. The DOL recently extended the ERISA standard to an expanded definition of fiduciary status in a new interpretation found in the preamble to its proposed Prohibited Transaction Exemption (PTE) for advice to plans, participants and IRAs. Among the conditions in the PTE is a requirement that advisors adhere to a best interest standard of care which, like its broker-dealer and RIA counterparts, is a combination of a duty of care and a duty of loyalty. This continues the convergence of the fiduciary standards for investment advisers and fiduciary advisors and the fiduciary-like standard for broker-dealers.

My colleagues, Joan Neri and Bruce Ashton, and I have recently written an article describing the similarities (and some differences) among those three pieces of guidance. The article includes a chart, which should make it easier to compare the different relevant provisions from the guidance.

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The DOL’s Fiduciary Rule: Will We Get a New Rule?


DOL, fiduciary, reg BI
by Brad Campbell and Fred Reish

As you may know, the Department of Labor has included the proposal of a new fiduciary rule on its Regulatory Agenda. The Agenda indicated that it would be issued in December of last year. But, of course, it hasn’t.

That raises the question of, if we get a proposed regulation in the near future, will it ever become a final rule?

Of course, if the current Administration wins the Presidential election, the proposed regulation would ultimately be adopted in final form (perhaps with some minor changes). However, if the White House changes parties after this November’s election, there may not be enough time for a regulation to be proposed and finalized. Here’s why.

There are several ways that a new, incoming Administration can stop a regulation from the prior Administration.

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Open Questions on Open MEPs


401(k), DOL

One of the shiny new coins of the 401(k) realm is “Open MEPs.” It’s anticipated that Congress will pass legislation this year that permits Open MEPs. Legislation is needed because of DOL guidance that, in essence, prohibits MEPs that are “open” to all employers. But, what is an Open Multiple Employer Plan? What other kinds of MEPs are there? How do the people that set up MEPs get paid? Here is an article that I, and my partners, Bruce Ashton and Josh Waldbeser, wrote on that subject for ASPPA.
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Best Practices for Plan Sponsors #6


401(k), best practices, DOL, fiduciary, plan sponsors, prudent

Why Wait Until After You are Sued?

This is the sixth of the series about Best Practices for Plan Sponsors.

I am surprised that, after all of the fiduciary litigation against 401(k) plan sponsors, many plan sponsors and their committees have not taken the basic steps to minimize the risk of being sued, or if sued, of being liable. In most of the settled cases, the plaintiffs’ class action attorneys require that certain conditions—or “best practices”—be adopted by the plan fiduciaries. And, in settlement after settlement, those conditions are, by and large, the same. That raises the obvious question, why haven’t plan committees reviewed these cases and instituted the practices required by the settlement agreements?

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