Earlier this year, the U. S. Department of Labor (DOL) published their final prohibited transaction exemption regarding investment advice for ERISA plans and IRAs (PTE 2020-02). This exemption is currently effective but allowed for a transition period ending 12/20/2021 for Firms to comply.
The DOL recently announced a temporary enforcement policy on the new rule. After listening to the feedback of many financial institutions that doing an off-cycle, mass mailing is very cost prohibitive, they agreed to extend the implementation start date to January 31, 2022. The DOL will not pursue claims against investment advice fiduciaries who are working diligently, and in good faith, to comply with the Impartial Conduct Standards (i.e., best interest, reasonable compensation, and without misleading statements) for transactions exempted in PTE 2020-02. This will allow broker-dealers and RIAs to notify their retirement plan and IRA customers of their fiduciary status as a statement stuffer with December or year-end statements.
Also, they will not enforce the specific documentation and disclosure requirements for rollovers in PTE 2020-02 through June 30, 2022. However, all other requirements of the exemption will be subject to full enforcement on February 1, 2022.
As a reminder, without an exemption, a fiduciary may not deal with the income or assets of a Plan or an IRA in his or her own interest or for his or her own account, and a fiduciary may not receive payments from any party dealing with the Plan or IRA in connection with a transaction involving assets of the Plan or IRA. Basically, receiving any payment for advice is a conflict of interest, and any conflict of interest equals a prohibited transaction.
For more detailed information regarding the new rule, please refer to our previous blog, IRAs and Prohibited Transactions, and PTE 2020-02. In addition, the DOL’s FAQs provide additional guidance on complying with PTE 2020-02.
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