June 27, 2022

DOL Fiduciary Rule Timeline and Requirements

 

DOL Fiduciary Rule

Timeline & Requirements


The Department of Labor (“DOL”) adopted Prohibited Transaction Exemption 2020-02 (“PTE 2020-02”) on February 16, 2021, and included a non-enforcement period until February 1, 2022. PTE 2020-02 is called Improving Investment Advice for Workers and Retirees and expands the definition of advice covered under ERISA law to include recommendations about retirement plan rollovers and Individual Retirement Accounts (“IRAs”). Therefore, many advisors that once did not offer retirement plan advisory services are now subject to the ERISA fiduciary standard. Compliance with these standards are separated into two enforcement dates; February 1, 2022 and July 1, 2022. These requirements and standards are outlined below.

What Investment Advice is Covered Under PTE 2020-02? Investment advice to take a distribution from an ERISA sponsored plan or to roll over the assets to an Individual Retirement Accounts (“IRAs”), or investment advice regarding other similar transactions including rollovers from one ERISA Plan to another, one IRA to another IRA, or from one type of account to another account.

FEBRUARY 1, 2022 - ACTION REQUIRED: 

All advisors that provide investment advice covered under PTE 2020-02 are required to comply with the following effective February 1, 2022.

1. Written Acknowledgment of Fiduciary Status and Disclosure of Conflicts: Advisors are required to ensure clients are provided with a written acknowledgment of their fiduciary status and disclosure of the material conflicts of interest when providing investment advice to accounts covered under PTE 2020-02 (as defined above).

PLEASE NOTE: AdvisorAssist has created a one-page ERISA Fiduciary Disclosure and Acknowledgement Form to provide adequate disclosure to clients. Please contact us for additional information.

2. Implementation of Policies and Procedures: Advisors who provide transactional investment advice to accounts covered under PTE 2020-02 are required to adopt policies and procedures to mitigate or eliminate conflicts. 

PLEASE NOTE:  AdvisorAssist has developed PTE 2020-02 Policies and Procedures for advisors to implement immediately which can be made available upon request.

3. Annual Reporting and Certification of Compliance: On an at least annual basis, advisors must conduct a retrospective review that is reasonably designed to assist the firm in detecting and preventing violations of and achieving compliance with the impartial conduct standards.

PLEASE NOTE: AdvisorAssist has created a Rollover Log within AdvisorCloud360®, our proprietary compliance technology, to help capture the necessary information and aid in the annual reporting and review process

JULY 1, 2022 - ACTION REQUIRED: 
While we recommend that you implement the full scope of the rule as soon as possible, all advisors that provide investment advice covered under PTE 2020-02 are required to comply with the following effective July 1, 2022. 

1. Due Diligence Disclosure and Documentation: Advisors are required to conduct due diligence and retain written documentation of the specific reasons that any recommendation to roll over assets (whether from an ERISA plan to an IRA, from one IRA to another IRA, or from one type of account to another (e.g. commission-based account to fee-based account) is in the best interest of the client.

PLEASE NOTE:  AdvisorAssist has created a PTE 2020-02 Due Diligence and Checklist that is available upon request.


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