Benefits and executive compensation partner Fred Reish, senior counsel Bruce Ashton and associate Stephen Pennartz co-authored an article for the Financial Planning Association’s Journal of Financial Planning. In it, they discuss how recommendations to retirement plan participants to roll their accounts from a plan to an individual retirement account (IRA) or annuity will generally be viewed as fiduciary advice under new Department of Labor (DOL) guidance.
First, the authors provide an overview of Prohibited Transaction Exemption (PTE) 2020-02. Then, they discuss considerations for investment professionals who make rollover recommendations, particularly where PTE 2020–02 differs from the SEC guidance on rollover recommendations.
In conclusion, the authors state that financial institutions must document the reasons that a rollover recommendation is in the best interest of the retirement investor and provide that documentation to the retirement investor.
Further, the authors note that the PTE’s conditions require that financial institutions adopt policies and procedures designed to ensure compliance with the Impartial Conduct Standards and that mitigate permitted conflicts of interest. They also recommend conducting and documenting an annual retrospective review of compliance.