DOL transition relief for investment advice fiduciaries rolls over to 2022 

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November 08, 2021

The Department of Labor (DOL) has extended its temporary nonenforcement relief for ERISA investment advice fiduciaries relying on a new prohibited transaction exemption (PTE 2020-02) that became effective earlier this year. Fiduciaries who comply with the PTE are able to receive certain compensation in connection with their advice — including advice to participants on retirement plan rollovers — that would otherwise give rise to a prohibited transaction under ERISA and the Internal Revenue Code.

DOL’s existing nonenforcement policy — originally scheduled to expire on Dec. 20 — will now extend through Jan. 31, 2022. During that time, DOL won’t enforce prohibited transaction claims against investment advice fiduciaries working diligently and in good faith to comply with the PTE’s impartial conduct standards. Those standards require fiduciaries to act in the retirement investor’s “best interest” and meet certain other conditions.

Additional transition relief applies to the PTE’s specific disclosure and documentation requirements for rollover recommendations through June 30, 2022. These PTE conditions require advice fiduciaries to document why a rollover recommendation is in a retirement investor’s best interest and disclose that evaluation to the individual. DOL says the additional time will help financial institutions facing challenges implementing the systems necessary to fully comply with the new requirements.

The extended transition relief comes as the retirement industry awaits further DOL guidance on fiduciary investment advice under ERISA. In 2018, a federal court vacated DOL’s 2016 investment advice regulation and related PTEs, reinstating the 1975 regulation and its five-part test. However, the agency’s most recent regulatory agenda signals developments on the horizon, which could include amendments to the 1975 regulation, amendments to existing PTEs and new exemptions.

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