Benefits and executive compensation partner Fred Reish and counsel Joan Neri authored an article for PlanAdviser titled, “The DOL’s Latest Proposed PTE,” that discusses the implications of the Department of Labor (DOL)’s recent proposal (Proposed Exemption).
In the article, the authors outline the three principal conditions of the Proposed Exemption: a standard of care (i.e., the Impartial Conduct Standards), policies and procedures to ensure compliance and an annual review obligation, and a disclosure obligation. The authors detail how investment advisers can apply these three conditions to their practice to meet the new requirements under the Proposed Exemption and avoid prohibited transactions.
The authors further explain that advisers’ policies and procedures may need to be updated to address mitigation of conflicts of interest because the Proposed Exemption specifically requires “the firm mitigate conflicts of interests by prudently designing policies and procedures and incentive practices to avoid misalignment of interests of the firm and its advisers with the interests of the plan participant.”
Another step the authors offer for investment advisers to consider implementing is to provide a written disclosure to plan participants prior to engaging in IRA rollovers that would affirm their fiduciary status, provide a description of services and include a description of any material conflicts of interest.
While it’s uncertain whether the Proposed Exemption will be adopted in its present form or be significantly modified, the authors note that until then, advisers can use a DOL and IRS Non-Enforcement Policy (Field Assistance Bulletin 2018-02) if the Impartial Conduct Standards are satisfied. The authors add that advisers may also consider observing the Impartial Conduct Standards when providing rollover advice, and review and update their policies and procedures as needed to promote compliance.
Read the full article on the PlanAdviser website (subscription required).