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COLLECTED WISDOM™ on Participant and Investment Advice

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How to Navigate the New ERISA Fiduciary Advice Proposal

If you're confused and overwhelmed about the DOL's latest proposed rule defining who is an invest. advice fiduciary for purposes of the ERISA, you're not alone. But where does one begin, and how do they ensure they're not inadvertently tripped up? What, specifically, does it mean for retirement plan advisors, sponsors, and participants?

Source: Napa-net.org, November 2023

Are There Boogeymen in the New Fiduciary Proposal?

The author writes regarding the DOL's new fiduciary proposal that, "rumors abound, and some law firms (certainly those that represent the interests of those who would be newly subject to new regulations) have, to my read anyway, been inclined to see plenty of clouds in the silver linings -- and to characterize the new proposal as basically being a resurrection of the old one (to that end, the Halloween unveiling made for plenty of 'zombie' references) -- in the process imagining things that aren't actually 'there.'"

Source: Napa-net.org, November 2023

A Guide to the DOL's Retirement Security Rule Proposal

The DOL's new "retirement security rule" package is the latest chapter in an almost 15-year effort by the DOL to amend the five-part test in its 1975 regulation for determining whether a person is a "fiduciary" by providing invest. advice for a fee. Very generally speaking, the Proposed Rule would significantly expand the circumstances under which a person could be treated as providing invest. advice that is subject to ERISA's fiduciary standards.

Source: Erisapracticecenter.com, November 2023

DOL's Retirement Security Rule Muddies Definitional Waters

The White House and the DOL framed the new fiduciary rule as a narrowly tailored regulation necessary to protect consumers in light of changes to the retirement system over the past five decades. However, the new proposal is better viewed as a sweeping regulatory overhaul that would change how much of the retirement services industry interacts with plans, participants, and individual retirement account owners. In this article, Michael Kreps, Groom principal and chair of the firm's Retirement Services group, explores the DOL's proposed rule for defining a fiduciary and current opposition to the rule.

Source: Groom.com, November 2023

DOL Braces for Hostile Reception to Fiduciary Rule Rewrite

A top DOL official pushed back against criticism of a soon-to-be-released proposal that could expand federal benefits law's reach over retirement plan advisers who give investment advice for a fee, saying the regulations shouldn't be judged until they have been publicly unveiled.

Source: Wagnerlawgroup.com, September 2023

A Condensed History of the DOL's Fiduciary Rule

ERISA is less than one year away from turning 50. For nearly the entirety of those 50 years, it has defined fiduciary investment advice using a five-part test. Attempts in 2010 and 2016 to modify the 1975 regulation containing the definition were unsuccessful. Recently, the DOL sent a new proposed regulation to the Office of Management and Budget. Here is a condensed history of the DOL's Fiduciary Rule.

Source: Plansponsor.com, September 2023

DOL Sends New Fiduciary Rule to OMB

The DOL has sent a new, proposed fiduciary rule to the Office and Management and Budget for review. The text of the proposal is not yet public. OMB must first conduct an interagency review process. The proposal will then be returned to DOL and published in the Federal Register. The entire process can be completed in a matter of weeks, but it typically takes several months.

Source: Groom.com, September 2023

DOL Temporarily Extends Non-Enforcement Relief for Investment Advice Fiduciaries

On October 25, 2021, the DOL issued Field Assistance Bulletin 2021-02, temporarily extending its non-enforcement policy regarding certain rules applicable to fiduciaries who provide investment advice for 401k plans, per Prohibited Transaction Exemption 2020-02, released in December 2020. The temporary non-enforcement policy now extends generally through January 31, 2022; it was originally set to expire on December 20, 2021.

Source: Compliancedashboard.net, November 2021

Field Assistance Bulletin No. 2021-02

This document announces a temporary enforcement policy related to the Department of Labor's prohibited transaction exemption (PTE) 2020-02.

Source: Dol.gov, October 2021

DOL Further Delays Enforcement of PTE 2020-02

The DOL has issued Field Assistance Bulletin No. 2021-02 to further delay enforcement of Prohibited Transaction Exemption 2020-02, which sets forth several requirements that financial institutions and investment professionals must satisfy when providing fiduciary investment advice, including advice to roll over a retirement plan account into an individual retirement account. The transition relief currently in effect was set to expire on December 20, 2021. Citing practical difficulties caused by the year-end timing, the DOL has extended its non-enforcement policy for compliance with PTE 2020-02 to January 31, 2022, for all requirements other than the specific documentation and disclosure requirements for rollover recommendations.

Source: Bradley.com, October 2021

Unpacking the latest DOL Fiduciary Investment Advice Rule

In December 2020, the DOL reinstated the five-part test and issued a revised interpretation of the definition of "investment advice" under ERISA. Additionally, a new prohibited transaction exemption was established. Then, in 2021, the DOL issued further guidance to clarify the rule changes.

Source: Fidelity.com, September 2021

DOL Fiduciary Rule 3.0: The Sprint to December 20

In the absence of further direction from DOL, it now has become incumbent on firms to accelerate their Rule 3.0 compliance project if the December 20 date is to be met, and in particular to implement PTE 2020-02 or an alternative solution if they are or may be serving as a fiduciary in rollover interactions.

Source: Eversheds-Sutherland.com, September 2021

DOL Exemption Impacts Investment Advice Fiduciaries

The DOL recently issued guidance concerning a new exemption under the prohibited transaction provisions of ERISA in connection with the provision of investment advice. PTE 2020-02, Improving Investment Advice for Workers & Retirees, became effective on February 16, 2021. On April 13, 2021, the DOL issued additional guidance, in FAQ format, to further explain the Exemption. In this article, the authors explain the significance of this new guidance.

Source: Mwe.com, July 2021

New DOL Prohibited Transaction Exemption Regulates Investment Advice Fiduciaries

On April 13, 2021, the DOL issued clarifying guidance for Prohibited Transaction Exemption 2020-02, Improving Investment Advice for Workers & Retirees, which became effective on February 16, 2021. The DOL guidance for investment advice providers comes in a series of 21 FAQs that address three main subjects reviewed here.

Source: Hallbenefitslaw.com, July 2021

The Line Between Education and Fiduciary Advice

Does the industry have a clear definition of what the DOL would consider investment education (not advice) in a 401k plan so that a financial advisor would not have to follow the requirements of Prohibited Transaction Exemption 2020-02?

Source: Napa-net.org, April 2021

Department of Labor Takes Another Look at Investment Advice

On June 29, 2020, the DOL proposed a prohibited transaction exemption called Improving Investment Advice for Workers & Retirees, which could have a substantial impact on the compliance operations of financial firms and their representatives. Possibly, the most significant development can be found in the preamble to the exemption. The DOL states that it will now interpret more broadly its long-standing regulation in defining investment advice.

Source: Groom.com, December 2020

New Fiduciary Rule Provides More Protection for Rollover Advice

The DOL's recently released fiduciary rule imposes higher standards on fiduciaries giving rollover advice. However, fewer advisors would be subject to a fiduciary standard than under the Obama administration's Fiduciary Rule. The new rule is similar to the SEC's Reg BI which recently became effective for retail accounts. Here's what would and would not change under the new standards for rollover advice.

Source: Penchecks.com, October 2020

The Emerging Patchwork of Fiduciary Investment Advice Regulation

2020 has seen several fiduciary and best interest advice regulations advance at both the federal and state levels. Firms subject to these regulations face challenges in dealing with rules that impose a host of new obligations, and that may overlap and conflict with one another. Eversheds Sutherland developed this chart to help firms take stock of the evolving framework and aid firms in putting the pieces together. This most recent version of the chart is updated to reflect the Labor Department's formal reinstatement and the new interpretation of its 1975 ERISA five-part fiduciary definition.

Source: Eversheds-Sutherland.com, August 2020

DOL Take Three: Five-Part Test Officially Reinstated; Proposed Investment Advice Exemption

Just as broker-dealers and investment advisers finalized their initial implementation plans for the SEC Form CRS and Regulation Best Interest, the DOL announced a final rule and proposed class exemption as the next step in the now 10-year-long "DOL Fiduciary Rule" saga.

Source: Morganlewis.com, August 2020

DOL's New Fiduciary Investment Advice Package Presents Significant Compliance Risk

Investment advisers, broker-dealers, banks, insurance companies, and other financial services firms, which interface with ERISA-covered plans and IRAs, should especially take note. The provision of "investment advice" to ERISA-covered plans and IRAs triggers a need to comply with stringent fiduciary duties and a complex web of prohibited transaction rules (depending on the nature of the advice recipient).

Source: Fiduciarygovernanceblog.com, July 2020

DOL Proposes Exemption for Providing Investment Advice to Participants

The DOL has issued a notice of a proposed class exemption from certain prohibited transaction restrictions under ERISA and the Internal Revenue Code relating to the provision of investment advice to participants in retirement plans and individual retirement accounts and annuities. The proposal accompanies a technical amendment to conform DOL regulations to a 2018 Court of Appeals' decision that vacated the DOL's 2016 fiduciary rule.

Source: Bradley.com, July 2020

DOL Reinstates Five-Part Fiduciary Status Test and Proposes Class Exemption

The proposed exemption would create a pathway allowing investment advice fiduciaries under ERISA and the Internal Revenue Code to (i) receive compensation, including that which derives from rendering advice to roll over assets from employee benefit plans to IRAs, and (ii) engage in certain principal transactions that would otherwise violate the prohibited transaction provisions of ERISA and the Code. The proposed exemption would apply to registered investment advisers, broker-dealers, banks, insurance companies, and their employees, agents, and representatives who are investment advice fiduciaries.

Source: Wagnerlawgroup.com, July 2020

DOL Proposes a New Fiduciary Investment Advice Exemption

The DOL proposed a new exemption from the prohibited transaction provisions of ERISA in connection with the provision of investment advice. The proposed exemption is the DOL's response to the vacatur of its prior fiduciary rule and reflects its desire to harmonize its approach with that of the Securities and Exchange Commission.

Source: Groom.com, July 2020

DOL Proposes New Standard to Replace Vacated Fiduciary Rule

The DOL is proposing a new regulation to govern investment advice in retirement accounts to replace a rule that was vacated more than two years ago by a federal appeals court. The proposed regulation would provide exemptions under federal retirement law that would allow fiduciaries to receive compensation for advice that would otherwise be prohibited, such as third party payments, as long as they act in a retirement savers' best interests.

Source: Investmentnews.com (registration may be required), June 2020

DOL Unveils New Fiduciary Rule Proposal

The DOL has finally unveiled its much anticipated fiduciary rule, though it's a mixed bag and has a certain "back to the future" feel, along with some new implications for recordkeepers, Pooled Employer Plans, and rollover advice. Titled "Improving Investment Advice for Workers & Retirees," the proposal -- and it's just that at this point -- proposes a new prohibited transaction class exemption that would be available for investment advice fiduciaries.

Source: Asppa.org, June 2020

DOL Proposes Exemption, New Compensation for Fiduciaries

The DOL has proposed an exemption allowing investment professionals acting in their clients' best interest to receive compensation for advice that would otherwise be prohibited, such as rollover recommendations. Under ERISA, investment fiduciaries are generally prohibited from receiving compensation for transactions involving employee benefit plans and IRAs, according to the proposal. But the proposal released on Monday would change that.

Source: Ai-cio.com, June 2020

Department of Labor Proposes New Fiduciary Rule

The DOL said that it will propose a new fiduciary standard based on a temporary policy put in place after the 5th Circuit Court of Appeals vacated the DOL's previous rule in March 2018, and it will now allow investment advice fiduciaries to receive certain forms of compensation once prohibited. The proposal would also allow investment advice fiduciaries to give "more choices for retirement using Impartial Conduct Standards."

Source: 401kspecialistmag.com, June 2020

SEC and DOL Working Together on Retirement Advice Rules

The SEC Package provides guidance broadly on the standards of care owed by registered investment advisers and broker-dealers. The SEC Package also imposes new disclosure requirements. In light of recent regulatory focus (including the DOL's) vacated 2016 fiduciary rule on individual retirement accounts and rollovers from ERISA covered plans to IRAs, in particular, this article discusses how the SEC Package may impact recommendations and investment advice in the retirement savings space.

Source: Groom.com, September 2019

Survey Highlight the Power of Financial Advice

Voya has released new research that examines Americans' retirement preparation efforts. The results also identify ways that working with a financial advisor can help Americans make wiser, more-informed decisions. The transition into retirement involves various financial, emotional and social choices, and a financial advisor can act as a sounding board, helping his or her clients make pivotal decisions and setting them on the right path toward success.

Source: Voya.com, November 2018

New Evidence on the Demand for Advice Within Retirement Plans

Using participant-level data from TIAA, this study sheds new light on demand for advice within retirement plans. In addition to examining how demand varies based on participant demographics, the authors explore how demand is affected by default investment options and the means by which advice is offered.

Source: Tiaainstitute.org, December 2017

Recordkeepers Gear Up for Advice Role

Several large recordkeepers are expanding their fiduciary duties by providing more advice to defined contribution clients in response to the Department of Labor's conflict-of-interest rule that is slated to take effect in April.

Source: Pionline.com, January 2017

New Evidence on the Demand for Advice Within Retirement Plans

This 13-page paper uses participant-level data from TIAA to shed new light on the demand for advice within retirement plans. In addition to documenting how demand for advice varies over time and across different groups of participants, it take initial steps to determine how demand for advice interacts with reliance on default investment options.

Source: Tiaainstitute.org, December 2016

Robos Set Their Sights on Retirement Plan Providers

It is no surprise that the retirement industry -- with entrenched players and complex arrangements between multiple vendors for services like fund lineups, administration and record-keeping -- is proving difficult for the "robos" to disrupt. Recent announcements, however, hint that these alternative retirement plan providers may be gaining traction.

Source: Corporateinsight.com, December 2016

Robo Advisors: Looking Beyond the Low-Cost Service

Results of a new study from Loring Ward comparing the portfolios from the top five robo-advisors to a benchmark portfolio with several decades of measurable performance reveal that while the robo-advisor portfolios are very well diversified, they also contain construction gaps that should not be present in well-constructed portfolios.

Source: Advisorinsightsblog.com, December 2016

DC Plans Shifting From One-Size-Fits-All to One-On-One Retirement Advice

Up until now, one-size-fits-all 401k retirement plans have been the main strategy. However, it appears that 401k plan sponsors are starting to reconsider this approach. This year, Cogent has found evidence of increasing interest among plan sponsors in adding new forms of advice.

Source: Marketstrategies.com, July 2016

DOL Encourages 401k Participant Education

The widely anticipated final fiduciary rule from the DOL is here. As expected, the rule broadly expands the definition of fiduciary investment advice, but also provides welcome flexibility for providing general education materials to participants without triggering fiduciary liability. That flexibility is welcome news given employers' interest in and demand for holistic financial wellness

Source: Manning-Napier.com, May 2016

Perspective on the DOL's Final Rule on Fiduciary Advice

While details of the long and complex rule are still under review, Vanguard believes the DOL took significant steps to simplify, clarify, and streamline earlier proposed provisions.

Source: Vanguard.com, April 2016

Department of Labor Finalizes Rule to Address Conflicts of Interest in Retirement Advice

This is a Department of Labor piece reviewing the final version of the 'Conflict of Interest' rule. Topics include, what is covered investment advice under the rule, what is not covered investment advice under the rule, Best Interest Contract, and applicability date.

Source: Dol.gov, April 2016

Delivering Investment Advice: Key Differences between 403(b) vs. 401k Plans

Asset allocation models raise a whole different set of issues for the 403(b) investment adviser. This is because investments in 403(b) plans do not enjoy the same exemptions from securities laws, as do 401k plan investments.

Source: Ntsa-net.org, October 2015

Robo-Advisors: A Closer Look

Robo-advisors have been touted by the DOL as a source of investment advice that can benefit retirement investors by minimizing costs and avoiding conflicts of interest. This paper examines whether robo-advisors in fact provide personal investment advice, minimize costs, and are free from conflicts of interest. Based on a detailed review of user agreements for three leading robo-advisors, this paper concludes that robo-advisors do not live up to the DOL's acclaim.

Source: Ssrn.com, October 2015

Department of Labor's Proposal to Define "Investment Advice"

The DOL intends to use the proposed definition of "investment advice," addition of a "best interest contract" exemption, and changes to current exemptions to more substantially extend its authority over IRAs. As a result, virtually all sales and marketing activities in connection with IRAs will be "investment advice" and subject to the prohibited transaction provisions. The purpose of this article is to explain how the DOL proposes to accomplish this.

Source: Groom.com, September 2015

Analysis: Impact of the DOL's Fiduciary Proposal on Participant Investment Advice

The proposal will have a significant impact on broker-dealers. It will be difficult for advisors to avoid fiduciary status when assisting participants with investment decisions. Where broker-dealers receive variable/indirect compensation on the basis of advisor recommendations, all of the available PT exemptions are highly nuanced and challenging to satisfy. Otherwise, broker-dealers will need to re-examine their advisors' practices carefully to ensure that they are providing only investment education, or develop other strategies to avoid PTs.

Source: Drinkerbiddle.com, July 2015

DC Managed Accounts: Shining a Spotlight on Investment Advice

Managed account and automated advice services have made significant inroads in DC plans. However, plan sponsors often have had limited or insufficient information to evaluate and monitor automated advice engines, despite having fiduciary responsibility over advice provided to participants. Article offers some simple investigative strategies to make more thorough evaluations, potentially improving participant outcomes and reducing fiduciary risk.

Source: Pimco.com, February 2015

Fewer Plans Offering Investment Advice

According to Plansponsor.com's 2014 Defined Contribution Survey, the percentage of plans offering investment advice slipped lower over the past year, with most of that decline coming at the expense of advisors.

Source: Napa-net.org, February 2015

Speakers Say Liability Can Be Minimized When Giving Participants Investment Advice

Pension plan trustees can offer participants much-needed individual investment advice in their participant-directed accounts without undue fear of liability, speakers said during a conference.

Source: Bna.com, March 2014

Investment Education or Investment Advice: Which Are You Providing?

How do you know if you are giving investment education or investment advice? In Interpretive Bulletin 96-1, The Department of Labor has given some of the best guidance on determining the difference between the two. Here is a summary of the most important points.

Source: 401khelpcenter.com, May 2010.

Advisory Opinion 2001-09A; SunAmerica

This is commonly called the SunAmerica opinion and deals with how financial services firms can provide asset allocation advice. It was issued before the Pension Protection Act of 2006 was passed by Congress.

Source: U.S. Department of Labor, December 2001.

Interpretive Bulletin 96-1; Participant Investment Education

This interpretive bulletin sets forth the views of the Department of Labor (the Department) concerning the circumstances under which the provision of investment-related information to participants and beneficiaries in participant-directed individual account pension plans will not constitute the rendering of "investment advice" under ERISA. This guidance is intended to assist plan sponsors, service providers, participants and beneficiaries in determining when activities designed to educate and assist participants and beneficiaries in making informed investment decisions will not cause persons engaged in such activities to become fiduciaries with respect to a plan by virtue of providing "investment advice" to plan participants and beneficiaries for a fee or other compensation.

Source: U.S. Department of Labor, September 2003.

Investment Advice and Fiduciary Liability

Fiduciary liability continues to be the primary reason most plan sponsors don't provide plan participants with investment advice, but are these concerns justified? Located on: 401khelpcenter.com, April 2004.

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