February 23, 2021

Talking Through the DOL’s Proposed Prohibited Transaction Exemption, Episode 5: Producer and Carrier Options When a Rollover Recommendation Is Fiduciary Advice

On June 29, 2020, the Department of Labor (DOL) issued a proposed prohibited transaction exemption, filling the void left when the Fifth Circuit vacated the Obama-era 2016 DOL regulation in 2018. Now that we are past February 16, we know that the DOL — for now, at least — is sticking with the Trump guidance as to “fiduciary” status and the new class exemption. In this podcast episode, Faegre Drinker’s Jim Jorden and Brad Campbell discuss the DOL’s departure from the “Deseret” letter and what the new class exemption means for producers, carriers and intermediaries.

In this recording, Jim and Brad provide context, insight and actionable advice for stakeholders on the following questions (and more) related to the DOL’s proposed exemption.

  • Under what conditions is a rollover recommendation an ERISA fiduciary recommendation instead of a sales recommendation?
  • If and when a recommendation is deemed fiduciary, financial professionals must deal with two issues: the fiduciary standard of care and the prohibited transaction. The new exemption, PRE 2020-02, and existing exemptions like PTE 84-24, address the second issue, but what about the fiduciary standard of care? How should fiduciaries approach the documentation of these recommendations?
  • There is debate as to whether to use the new class exemption PTE 2020-02 modeled on the Securities and Exchange Commission’s (SEC) Regulation Best Interest or the traditional PTE 84-24 for annuity and insurance contracts. What should parties be thinking about as they consider which to use?
  • Is it fair to expect more action on this in the near future from the Biden DOL?

In our next podcast, we will get into potential litigation exposure that accompanies the new prohibited transaction exemption.

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