June 16, 2022

PLANADVISER Turns to Fred Reish and David Porteous for Insight on DOL’s Prohibited Transaction Exemption

In an article titled “Ready for PTE 2020-02 July 1 Enforcement?” PLANADVISER spoke to benefits and executive compensation partner Fred Reish and business litigation partner David Porteous about the Department of Labor’s (DOL) Prohibited Transaction Exemption (PTE) 2020-02, which has an enforcement date of July 1.

Reish noted that both larger broker-dealers and investment advisers have been working on PTE compliance and are ready for the July 1 requirements. “However, as you move down through the midsize and smaller broker-dealers and investment advisers, there are more issues,” he said. “Some are in compliance; some didn’t realize that the first set of conditions actually became applicable on February 1, and some either aren’t aware of these rules or don’t think that they apply to them.”

To avoid compliance problems, firms must have disclosures, policies and procedures, Reish emphasized. He urged firms to create a formal best-interest process for each type of covered recommendation that their advisers make. “And, for some recommendations, the DOL requires that the best-interest process include the review of certain information; for example, the plan-to-IRA rollover recommendation process must include evaluation of the retirement plan’s investments, services and expenses.”

Porteous explained that collecting actual benefit plan data to satisfy the documentation requirement for rollovers from a plan to an IRA is another challenge. He added that this data should be readily available as a result of the DOL mandating disclosure of plan-related information to the plan’s participants.

“But even interpreting that information or getting reliable benchmarks is difficult, depending upon the type and the size of the plan at issue,” said Porteous. “Large plan data, those with more than 100 participants, available on the full Form 5500, is easier to obtain than for smaller plans for which a Form 5500 SF or EZ may be filed but may not contain meaningful information for rollover purposes.”

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