An advisor asked: “I’m confused by the compliance deadlines for various provisions of Prohibited Transaction Exemption (PTE) 2020-02 related to providing investment advice to retirement investors. Can you summarize the enforcement deadlines, please?”
Highlights of Discussion
Absolutely; financial professionals and institutions that seek to comply with PTE 2020-02 must satisfy the following six steps by the dates indicated.
|PTE 2020-02 Requirements||DOL Enforcement Begins|
|1. Provide advice in accordance with the three “Impartial Conduct Standards,” which mandate that advice be given
· In the best interest of the retirement investor,
· At a reasonable price,
· Without any misleading statements.
|After January 31, 2022
Originally effective February 16, 2021, the DOL implemented a “nonenforcement policy” under DOL FAB 2018-02 Field Assistance Bulletin (FAB) 2018-02 until December 20, 2021, for those who diligently and in good faith complied with the Impartial Conduct Standards. FAB 2021-02 further extended the nonenforcement policy through January 31, 2022.
|2. Acknowledge in writing their fiduciary status under ERISA and the Internal Revenue Code;
3. Describe in writing the services to be provided and any material conflicts of interest that may exist;
4. Adopt policies and procedures prudently designed to ensure compliance with the Impartial Conduct Standards and that mitigate conflicts of interest;
5. Conduct an annual retrospective review of their compliance with the requirements and produce a written report that is certified by one of the financial institution’s senior executive officers;
|After January 31, 2022
Pursuant to FAB 2021-02, the DOL will not pursue cases against advisors and institutions utilizing PTE 2020-02, provided they make a good faith effort to follow the three Impartial Conduct Standards (see #1 above)
|6. FOR ROLLOVERS: If the advice involves a rollover recommendation, then
• Document the reasons that a rollover recommendation is in the best interest of the retirement investor; and
• Disclose the justification for the rollover in writing to the retirement investor.
|After June 30, 2022
Pursuant to FAB 2021-02, the DOL will not enforce the rollover documentation and disclosure requirements of PTE through June 30, 2022.
Financial professionals and organizations that seek relief under PTE 2020-02 should take note of the different enforcement deadlines that apply as a result of FAB 2021-02.