Category Archives: rollovers

Best Interest Standard of Care for Advisors #54


2020-02, best interest, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers
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The Department of Labor’s “Fiduciary Rule,” PTE 2020-02: An Overview

This article is an overview of the requirements of PTE 2020-02. It discusses the expanded fiduciary definition, the conditions in the PTE, and the DOL’s non-enforcement policy in effect until December 20, 2021.

Key Takeaways

    • Broker-dealers, investment advisers, insurance companies and banks (“financial institutions) are already subject to the expanded fiduciary definition for advice to plans, participants and IRAs, including recommendations to rollover plan benefits to an IRA.
    • The new fiduciary “rule” has two parts with their own effective dates. The first part, the expanded definition of fiduciary advice, became effective for enforcement purposes on February 16.
    • The second part, the prohibited transaction exemption, also became effective on February 16, but a non-enforcement policy delayed the enforcement of most, but not all, of its conditions to December 21.That non-enforcement requires satisfaction of the Impartial Conduct Standards (ICS).The non-enforcement policy applies to the DOL and IRS, but does not impact private rights of action.
    • Financial institutions need to have practices in place now to comply with the ICS, and then, before December 21, need to have disclosures, policies, practices and processes in place for compliance with the full exemption. Because of the volume of work to be done, that work should be underway by now.
    • This article is a summary of the work to be done.

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”).

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Best Interest Standard of Care for Advisors #53


2020-02, best interest, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers
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The Department of Labor’s “Fiduciary Rule,” PTE 2020-02:  The FAQs

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

  • The new fiduciary “rule” has two parts with their own effective dates.
  • The first part-the expanded definition of fiduciary advice-became effective for enforcement purposes on February 16.
  • The second part-the prohibited transaction exemption-also became on February 16, but a non-enforcement policy delayed most, but not all, of its conditions to December 21.
  • The condition now in effect is satisfaction of the Impartial Conduct Standards.

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”).

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Best Interest Standard of Care for Advisors #52


2020-02, best interest, DOL, fiduciary, IRA, prohibited transaction, rollovers
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The Department of Labor’s “Fiduciary Rule,” PTE 2020-02:  The FAQs

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”).

In addition, , the DOL announced,  in the preamble to the PTE, an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries and therefore will need the protections afforded by the exemption. The relief provided by the exemption is conditional, that is, the “conditions” in the exemption must be satisfied in order to obtain relief from the prohibited transaction rules in ERISA and the Internal Revenue Code. For the period from February 16 until December 20, a DOL and IRS non-enforcement policy based on the Impartial Conduct Standards will be available.

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Best Interest Standard of Care for Advisors #51


2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, prohibited transaction, reg BI, rollovers
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The Department of Labor’s “Fiduciary Rule,” PTE 2020-02 (Part 16): Mitigation Strategies

This series focuses on the DOL’s new fiduciary “rule”. This post is the 16th in a subseries discussing special compliance issues related to the rule. This article looks at compliance with the rule’s mitigation requirements, with particular emphasis on broker-dealers and investment advisers.

On February 16, 2021, the DOL’s prohibited transaction exemption (PTE) 2020-02 became effective. (Improving Investment Advice for Workers & Retirees) It allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”).

In the preamble to the PTE, the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries and therefore will need the protections afforded by the exemption. They will also need to satisfy the best interest standard of care. The relief provided by the exemption is conditional, that is, the “conditions” in the exemption must be satisfied to obtain relief from the prohibited transaction rules in ERISA and the Internal Revenue Code. For the period from February 16 until December 20, a DOL and IRS non-enforcement policy based on the Impartial Conduct Standards will be available.

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Best Interest Standard of Care for Advisors #50


2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, reg BI, rollovers
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The Department of Labor’s “Fiduciary Rule,” PTE 2020-02 (Part 15): Mitigation Strategies

This series focuses on the DOL’s new fiduciary “rule”. This post is the 15th in a subseries discussing special or unique compliance issues related to the rule. This article looks at compliance with the rule’s mitigation requirements, with particular emphasis on broker-dealers and investment advisers.

On February 16, 2021, the DOL’s prohibited transaction exemption (PTE) 2020-02 became effective. (Improving Investment Advice for Workers & Retirees) It allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”).

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Best Interest Standard of Care for Advisors #43


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The Department of Labor’s Prohibited Transaction Exemption and Its Impact on Recommendations to Plans, Participants and IRAs (Part 8)

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.” It allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”).

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Best Interest Standard of Care for Advisors #42


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 7)

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.” It allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“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 be fiduciaries and therefore will need the protections afforded by the exemption. In addition, they will need prudent, or best practice, processes to satisfy the fiduciary and best interest standards of care.

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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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