New DOL Rollover Rules Kick In Friday. Are You Ready?

Which firms will need to comply with the July 1 deadline?

The PTE’s expanded definition of fiduciary advice for rollovers applies to everyone. However, the relief provided by the exemption is only available to broker-dealers, investment advisers, banks and trust companies, and insurance companies, and their agents and brokers. If any of those firms are using PTE 2020-02 for relief for rollover recommendations, they will need to begin providing the written specific reasons on July 1.

Where are firms in their compliance?

It varies. In my experience, most larger firms are well-prepared. However, some smaller firms may not be aware of the rule changes or may not understand the “specific reasons” requirements.

For example, some of the larger broker-dealers that I work with were prepared for this months ago. Some of the larger independent investment adviser firms have been prepared and are training their advisers on using the disclosures. However, my sense is that some smaller firms may inadvertently miss the date.

What are the biggest questions advisors/broker-dealers have about the July 1 compliance date?

The biggest “question” is knowing about the requirement. The second is understanding what is required. For example, the specific reasons need to be individualized to the particular participant or IRA owner. Generic reasons aren’t “specific.” As a result, the process to develop the specific reasons must be based on the needs and circumstances of the particular participant or IRA owner.

Another issue is that information about a retirement plan’s investments, services and expenses must be considered to evaluate the rollover recommendation. For example, if a plan offers a brokerage window, it may offer a very wide range of investments that a retirement investor would need. Or, if a plan offers a guaranteed income option, it may be able to meet the need of a participant for retirement income. The analysis needs to consider those investments and services. But that information may not be readily available.