The DOL’s expanded interpretation of fiduciary advice is described in the preamble to Prohibited Transaction Exemption (PTE) 2020-02.
When conflicted fiduciary advice is given to retirement investors (that is, retirement plans, participants (including rollovers), and IRA owners), it results in prohibited transactions under the Internal Revenue Code and ERISA. But the PTE then provides relief for conflicted non-discretionary recommendations. However, the relief is only available if all of the PTE’s conditions are satisfied.
The DOL’s fiduciary interpretation and the PTE and its requirements were not all effective at the same time, causing some confusion. This article discusses the four effective dates or, more appropriately, enforcement dates.
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 ERISA retirement plans, participants (including rollover recommendations), and IRA owners (including transfer recommendations)– all of whom are referred to as “retirement investors”. In addition, in the preamble to the PTE the DOL announced an expanded interpretation of fiduciary advice, meaning that many more financial institutions and investment professionals are fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.